G.R. No.

L-34526 August 9, 1988

HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWIN RIVERS PLANTATION, INC. and
MARSMAN & CO., INC., for themselves and in behalf of other persons and entities similarly situated,
petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent.

PARAS, J.:

This is a petition for certiorari and prohibition which seeks: (1) to declare Monetary Board Resolution
No. 1995, series of 1971, as null and void; (2) to prohibit the Central Bank from collecting the
stabilization tax on banana exports shipped during the period January 1, 1972 to June 30, 1982; and
(3) a refund of the amount collected as stabilization tax from the Central Bank.

The facts of this case as culled from the records are as follows:

Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation, Inc. and Marsman Plantation
(Manifestation, Rollo, P. 18), collectively referred to herein as petitioners, are domestic corporations
duly organized and existing under the laws of the Philippines, all of which are engaged in the
production and exportation of bananas in and from Mindanao.

Owing to the difficulty of determining the exchange rate of the peso to the dollar because of the
floating rate and the promulgation of Central Bank Circular No. 289 which imposes an 80% retention
scheme on all dollar earners, Congress passed Republic Act No. 6125 entitled "an act imposing
STABILIZATION TAX ON CONSIGNMENTS ABROAD TO ACCELERATE THE ECONOMIC
DEVELOPMENT OF THE PHILIPPINES AND FOR OTHER PURPOSES," approved and made
effective on May 1, 1970 (Comment on Petition, Rollo, p, 32), to eliminate the necessity for said
circular and to stabilize the peso. Among others, it provides as follows:

SECTION 1. There shall be imposed, assessed and collected a stabilization tax on the gross F.O.B.
peso proceeds, based on the rate of exchange prevailing at the time of receipt of such proceeds,
whether partial or total, of any exportation of the following products in accordance with the following
schedule:

a. In the case of logs, copra, centrifugal sugar, and copper ore and concentrates:

Ten per centum of the F.O.B. peso proceeds of exports received on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy one;

Eight per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred seventy-two;

Six per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred seventy- three; and

Four per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy-three to June thirty, nineteen hundred seventy-four.

b. In the case of molasses, coconut oil, dessicated coconut, iron ore and concentrates, chromite ore
and concentrates, copra meal or cake, unmanufactured abaca, unmanufactured tobacco, veneer core
and sheets, plywood (including plywood panels faced with plastics), lumber, canned pineapples, and
bunker fuel oil;

Eight per centum of the F.O.B. peso proceeds of exports shipped on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy-one;
Six per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen hundred
seventy one to June thirty nineteen hundred seventy- two;

Four per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen hundred
seventy-two to June thirty nineteen hundred seventy-three; and

Two per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen hundred
seventy three to June thirty nineteen hundred seventy-four.

Any export product the aggregate annual F.O.B. value of which shall exceed five million United States
dollars in any one calendar year during the effectivity of this Act shall likewise be subject to the rates
of tax in force during the fiscal years following its reaching the said aggregate value. (Emphasis
supplied).

During the first nine (9) months of calendar year 1971, the total banana export amounted to an annual
aggregate F.O.B. value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding the aggregate F.O.B.
value of five million United States Dollar, bringing it within the ambit of Republic Act No. 6125.
Consequently, the banana industry was in a dilemma as to when the stabilization tax was to become
due and collectible from it and under what schedule of Section 1 (b) of Republic Act 6125 should said
tax be collected. Accordingly, petitioners through their counsel, by letter dated November 5, 1971,
sought the authoritative pronouncement of the Central Bank (herein referred to as respondent),
therein advancing the opinion that the stabilization tax does not become due and collectible from the
petitioners until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the exports shipped
from July 1, 1972 to June 30,1973. Replying by letter dated December 17,1971 (Rollo, p. 11), the
Central Bank called attention to Monetary Board Resolution No. 1995 dated December 3, 1971 which
clarified that:

1) For exports of bananas shipped during the period from January 1, 1972 to June 30, 1972; the
stabilization tax shall be at the rate of 6%;

2) For exports of bananas shipped during the period from July 1, 1972 to June 30, 1973, the
stabilization tax shall be at the rate of 4%; and

3) For exports of bananas shipped during the period from July 1, 1973, to June 30, 1974, the
stabilization tax shall be at the rate of 2%."

Contending that said Board Resolution No. 1995 was manifestly contrary to the legislative intent,
petitioners sought a reconsideration of said Board Resolution by letter dated December 27, 1971
(Rollo, p. 12) which request for reconsideration was denied by the respondent, also by letter dated
January 20, 1972 (Rollo, p. 24). With the denial of petitioners' request for reconsideration, respondent
thru its agent Bank, Rizal Commercial Banking Corporation has been collecting from the petitioners
who have been forced to pay under protest, such stabilization tax.

Petitioners view respondent's act as a clear violation of the provision of Republic Act No. 6125, and
as an act in excess of its jurisdiction, hence, this petition.

The sole issue in this case is whether or not respondent acted with grave abuse of discretion
amounting to lack of jurisdiction when it issued Monetary Board Resolution No. 1995, series of 1971
which in effect reaffirmed Central Bank Circular No. 309, enacted pursuant to Monetary Board
Resolution No. 1179.

There is here no dispute that the banana industry is liable to pay the stabilization tax prescribed under
Republic Act No. 1995, it being the admission of both parties, that the Industry has indeed reached
and for the first time in the calendar year 1971, a total banana export exceeding the aggregate annual
F.O.B. value of five million United States dollars. The crux of the controversy, however, is the manner
of implementation of Republic Act No. 6125.

Section 1 of R.A. 6125 clearly provides as follows:

An export product the aggregate annual F.O.B. value of which shall exceed five million US dollars in
any one calendar year during the effectivity of the act shall likewise be subject to the rates of tax in
force during the fiscal year following its reaching the said aggregate value."

Petitioners contend that the stabilization tax to be collected from the banana industry does not
become due and collectible until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the
export shipped from July 1, 1972 to June 30,1973. They further contend that respondent gave
retroactive effect to the law (RA 6125) by ruling in Monetary Board Resolution No. 1995 dated
December 3, 1 971, that the export stabilization tax on banana industry would start to accrue on
January 1, 1972 at the rate of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971 to
June 30, 1972 (Rollo, pp. 3-4).

Respondent, on the other hand, contends that the aforecited provision of RA 6125 merely prescribes
the rates that may be imposed but does not provide when the tax shall be collected and makes no
reference to any definite fixed period when the tax shall begin to be collected (Rollo, pp. 77-78).

There is merit in this petition.

In the very nature of things, in many cases it becomes impracticable for the legislative department of
the Government to provide general regulations for the various and varying details for the
management of a particular department of the Government. It therefore becomes convenient for the
legislative department of the government, by law, in a most general way, to provide for the conduct,
control, and management of the work of the particular department of the government; to authorize
certain persons, in charge of the management and control of such department (United States v.
Tupasi Molina, 29 Phil. 119 [19141).

Such is the case in RA 6125, which provided in its Section 6, as follows:

All rules and regulations for the purpose of carrying out the provisions of the act shall be promulgated
by the Central Bank of the Philippines and shall take effect fifteen days after publication in three
newspapers of general circulation throughout the Philippines, one of which shall be in the national
language.

Such regulations have uniformly been held to have the force of law, whenever they are found to be in
consonance and in harmony with the general purposes and objects of the law. Such regulations once
established and found to be in conformity with the general purposes of the law, are just as binding
upon all the parties, as if the regulation had been written in the original law itself (29 Phil. 119, Ibid).
Upon the other hand, should the regulation conflict with the law, the validity of the regulation cannot
be sustained (Director of Forestry vs. Muroz 23 SCRA 1183).

Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179 which
contained the rules and regulations for the implementation of said provision which Board resolution
was subsequently embodied in Central Bank Circular No. 309, dated August 10, 1970 (duly published
in the Official Gazette, Vol. 66, No. 34, August 24, 1940, p. 7855 and in three newspapers of general
circulation throughout the Philippines namely, the Manila Times, Manila Chronicle and Manila Daily
Bulletin). Section 3 of Central Bank Circular No. 309, "provides that the stabilization tax shall begin to
apply on January first following the calendar year during which such export products shall have
reached the aggregate annual F.O.B. value of more than $5 million and the applicable tax rates shall
be the rates prescribed in schedule (b) of Section 1 of RA No. 6125 for the fiscal year following the
reaching of the said aggregate value." Central Bank Circular No. 309 was subsequently reaffirmed in
Monetary Board Resolution No. 1995 herein assailed by petitioners for being null and void (Rollo, pp.
97- 98).

In its comment (Rollo, p. 40), respondent argues that the request for authoritative pronouncement of
petitioners was made because there was no express provision in Section 1 of RA 6125 which
categorically states, when the stabilization tax shall begin to accrue on those aggregate annual
F.O.B. values exceeding five (5) million United States dollars in any one calendar year during the
effectivity of said act. For which reason, the law itself authorized it under Section 7 to promulgate
rules and regulations to carry out the provisions of said law.

In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached the aggregate
annual F.O.B. value of US $5 million in August 1971, the stabilization tax on banana should be
imposed only on July 1, 1972, the fiscal year following the calendar year during which the industry
attained the $5 million mark. Their argument finds support in the very language of the law and upon
congressional record where a clarification on the applicability of the law was categorically made by
the then Senator Aytona who stated that the tax shall be applicable only after the $5 million aggregate
value is reached, making such tax prospective in application and for a period of one year- referring to
the fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearly such clarification was
indicative of the legislative intent. Further, they argue that respondent bank through the Monetary
Board clearly overstepped RA 6125 which empowered it to promulgate rules and regulations for the
purpose of carrying out the provisions of said act, because while Section 1 of the law authorizes it to
levy a stabilization tax on petitioners only in the fiscal year following their reaching the aggregate
annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to June 30, 1973, at a tax
rate of 4% of the F.O.B. peso proceeds, respondent in gross violation of the law, instead issued
Resolution No. 1995 which impose a 6% stabilization tax for the calendar year January 1, 1972 to
June 30, 1972, which obviously is in excess of its jurisdiction. It was further argued that in directing its
agent bank to collect the stabilization tax in accordance with Monetary Board Resolution No. 1995, it
acted whimsically and capriciously. (Rollo, p. 155).

It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be the product of
grave abuse of discretion but rather the result of respondent's overzealous desire to carry into effect
the provisions of RA 6125, it is evident that the Board acted beyond its authority under the law and
the Constitution. Hence, the petition for certiorari and prohibition in the case at bar, is proper.

Moreover, there is no dispute that in case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails because said rule or regulation cannot
go beyond the terms and provisions of the basic law (People vs. Lim, 108 Phil. 1091). Rules that
subvert the statute cannot be sanctioned (University of Sto. Tomas v. Board of Tax Appeals, 93 Phil.
376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who
can trace their competence to act to the fundamental law itself, a public official must locate to the
statute relied upon a grant of power before he can exercise it. Department zeal may not be permitted
to outrun the authority conferred by statute (Radio Communications of the Philippines, Inc. v.
Santiago L-29236, August 21, 1974, 58 SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-
46158, November 28,1986,146 SCRA 120,130).

PREMISES CONSIDERED, this petition is hereby GRANTED.

SO ORDERED.

Tayug Rural Bank v. Central Bank G.R. No. L-46158 November 28, 1986
Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated January
6, 1971 rendered by the Court of First Instance of Manila, Branch III in Civil Case No. 76920, the
decretal portion of which states as follows:

WHEREFORE, judgment is rendered for the plaintiff on the complaint and the defendant is ordered to
further credit the plaintiff the amounts collected as 10% penalty in the sum of P19,335.88 or up to July
15, 1969 and to refrain from collecting the said 10% penalty on the remaining past due loans of
plaintiff with the defendant.

With respect to defendant's counterclaim, judgment is hereby rendered against the plaintiff and the
defendant is ordered to pay the Central Bank of the Philippines the outstanding balance of its past
overdue accounts in the sum of P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per
annum with respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-1/2%
per annum with respect to the promissory notes (Annexes 1-f to 1-i of the Answer). From this amount
shall be deducted the sum of P19,335.88 collected as 10% penalty.

The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are as
follows:

Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During the
period from December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans from Defendant-
Appellant, Central Bank of the Philippines, by way of rediscounting, at the rate of 1/2 of 1% per
annum from 1962 to March 28, 1963 and thereafter at the rate of 2-1/2% per anum. The loans,
amounting to P813,000.00 as of July 30, 1963, were all covered by corresponding promissory notes
prescribing the terms and conditions of the aforesaid loans (Record on Appea, pp. 15-53). As of July
15, 1969, the outstanding balance was P 444,809.45 (Record on Appeal, p. 56).

On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued
Memorandum Circular No. DLC-8, informing all rural banks that an additional penalty interest rate of
ten per cent (10%) per annum would be assessed on all past due loans beginning January 4, 1965.
Said Memorandum Circular was actually enforced on all rural banks effective July 4, 1965.

On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila,
Branch III, to recover the 10% penalty imposed by Appellant amounting to P16,874.97, as of
September 27, 1968 and to restrain Appellant from continuing the imposition of the penalty. Appellant
filed a counterclaim for the outstanding balance and overdue accounts of Appellee in the total amount
of P444,809.45 plus accrued interest and penalty at 10% per annum on the outstanding balance until
full payment. (Record on Appeal, p. 13). Appellant justified the imposition of the penalty by way of
affirmative and special defenses, stating that it was legally imposed under the provisions of Section
147 and 148 of the Rules and Regulations Governing Rural Banks promulgated by the Monetary
Board on September 5, 1958, under authority of Section 3 of Republic Act No. 720, as amended
(Record on Appeal, p. 8, Affirmative and Special Defenses Nos. 2 and 3).

In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim, denying
Appellant's allegations stating that if Appellee has any unpaid obligations with Appellant, it was due to
the latter's fault on account of its flexible and double standard policy in the granting of rediscounting
privileges to Appellee and its subsequent arbitrary and illegal imposition of the 10% penalty (Record
on Appeal, p. 57). In its Memorandum filed on November 11, 1970, Appellee also asserts that
Appellant had no basis to impose the penalty interest inasmuch as the promissory notes covering the
loans executed by Appellee in favor of Appellants do not provide for penalty interest rate of 10% per
annum on just due loans beginning January 4, 1965 (Record on Appeal p. 96).

The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been raised
in the pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in its favor. (Rollo,
p. 34).

Appellant appealed the decision of the trial court to the Court of Appeals, for determination of
questions of facts and of law. However, in its decision promulgated April 13, 1977, the Court of
Appeals, finding no controverted facts and taking note of the statement of the lower court in its pre-
trial Order dated March 3, 1970 that only a legal question has been raised in the pleadings, (Record
on Appeal, p. 61), ruled that the resolution of the appeal will solely depend on the legal issue of
whether or not the Monetary Board had authority to authorize Appellant Central Bank to impose a
penalty rate of 10% per annum on past due loans of rural banks which had failed to pay their
accounts on time and ordered the certification of this case to this Court for proper determination
(Rollo, pp. 34-35).

On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In the
resolution of May 20, 1977, the First Division of this Court, ordered the case docketed and as already
stated declared the same submitted for decision (Rollo, p. 38).

In its Brief, Appellant assigns the following errors:

I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF THE
MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF RURAL BANKS
ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN THE PROMISSORY NOTES.

II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE PENALTY IS
AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT DUE PROCESS.

III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF FOR
10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED THEREIN.

It is undisputed that no penal clause has been included in the promissory notes. For this reason, the
trial court is of the view that Memorandum Circular DLC-8 issued on December 23, 1964 prescribing
retroactive effect on all past due loans, impairs the obligation of contract and deprives the plaintiff of
its property without due process of law. (Record on Appel, p. 40).

On the other hand appellant without opposing appellee's right against impairment of contracts,
contends that when the promissory notes were signed by appellee, it was chargeable with knowledge
of Sections 147 and 148 of the rules and regulations authorizing the Central Bank to impose
additional reasonable penalties, which became part of the agreement. (ibid).

Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank can
validly impose the 10% penalty on Appellee's past overdue loans beginning July 4, 1965, by virtue of
Memorandum Circular No. DLC-8 dated December 23, 1964.

The answer is in the negative.

Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans and
Credit on December 23, 1964, reads as follows:

Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in consonance with
Section 147 and 148 of the Rules and Regulations Governing Rural Banks concerning the
responsibility of a rural bank to remit immediately to the Central Bank payments received on papers
rediscounted with the latter including the loan value of rediscounted papers as they mature, and to
liquidate fully its maturing loan obligations with the Central Bank, personal checks, for purposes of
repayment, shall considered only after such personal checks shall have been honored at clearing.

In addition, rural banks which shall default in their loan obligations, thus incurring past due accounts
with the Central Bank, shall be assessed an additional penalty interest rate of ten per cent (10%) per
annum on such past due accounts with the Central Bank over and above the customary interest
rate(s) at which such loans were originally secured from the Central Bank. (Record on Appeal, p.
135).
The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of the
Rules and Regulations Governing Rural Banks of the Philippines approved on September 5, 1958,
which provide:

Section 147. Duty of Rural Bank to turn over payment received for papers discounted or used for
collateral. — A Rural Bank receiving any payment on account of papers discounted or used for
collateral must turn the same over to the creditor bank before the close of the banking day next
following the receipt of payment, as long as the aggregate discounting on loan amount is not fully
paid, unless the Rural Bank substitutes the same with another eligible paper with at least the same or
earlier maturity and the same or greater value.

A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso facto lose its
right to the rediscounting or loan period, without prejudice to the Central Bank imposing additional
reasonable penalties, including curtailment or withdrawal of financial assistance.

Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A Rural Bank
becomes in default upon the expiration of the maturity period of its note, or that of the papers
discounted or used as collateral, without the necessity of demand.

A Rural Bank incurring default, or in any other manner, violating any of the stipulations in its note,
shall suffer the consequences provided in the second paragraph of the preceding section. (Record on
Appeal, p. 136.)

The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55 O.G.,
on June 13, 1959, pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-discount
their loan papers with the Central Bank at 2-1/2% interest per annum and in turn lend the money to
the public at 12% interest per annum (Defendant's Reply to Plaintiff's Memorandum, Record on
Appeal, p. 130).

Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the Monetary
Board has adopted the set of Rules and Regulations Governing Rural Banks. It reads:

SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall
formulate the necessary rules and regulations governing the establishment and operatives of Rural
Banks for the purpose of providing adequate credit facilities to small farmers and merchants, or to
cooperatives of such farmers or merchants and to supervise the operation of such banks.

The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules and
Regulations Governing Rural Banks, that is, on Appellant's authority to extend loans to Rural Banks
by way of rediscounting is Section 13 of R.A. 720, as amended, which provides:

SEC. 13. In an emergency or when a financial crisis is imminent the Central Bank may give a loan to
any Rural Bank against assets of the Rural Bank which may be considered acceptable by a
concurrent vote of at least, five members of the Monetary Board.

In normal times, the Central Bank may re-discount against papers evidencing a loan granted by a
Rural Bank to any of its customers which can be liquefied within a period of two hundred and seventy
days: PROVIDED, HOWEVER, That for the purpose of implementing a nationwide program of
agricultural and industrial development, Rural Banks are hereby authorized under such terms and
conditions as the Central Bank shall prescribe to borrow on a medium or long term basis, funds that
the Central Bank or any other government financing institutions shall borrow from the International
Bank for Reconstruction and Development or other international or foreign lending institutions for the
specific purpose of financing the above stated agricultural and industrial program. Repayment of
loans obtained by the Central Bank of the Philippines or any other government financing institution
from said foreign lending institutions under this section shall be guaranteed by the Republic of the
Philippines.
As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks, the
same is spelled-out under Section 10 of R.A. 720, as follows:

SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the
Central Bank as herein indicated, shall consist in placing limits to the maximum credit allowed any
individual borrower; in prescribing the interest rate; in determining the loan period and loan
procedure; in indicating the manner in which technical assistance shall be extended to Rural Banks;
in imposing a uniform accounting system and manner of keeping the accounts and records of the
Rural Banks; in undertaking regular credit examination of the Rural Banks: in instituting periodic
surveys of loan and lending procedures, audits, test check of cash and other transactions of the Rural
Banks; in conducting training courses for personnel of Rural Banks; and, in general in supervising the
business operation of the Rural Banks.

Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of
R.A. 720 for that matter, is the monetary Board authorized to mete out on rural banks an additional
penalty rate on their past due accounts with Appellant. As correctly stated by the trial court, while the
Monetary Board possesses broad supervisory powers, nonetheless, the retroactive imposition of
administrative penalties cannot be taken as a measure supervisory in character. (Record on Appeal,
p. 141).

Administrative rules and regulations have the force and effect of law (Valerio v. Hon. Secretary of
Agriculture and Natural Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz, 15 SCRA
638; R.B. Industrial Development Company, Ltd. v. Enage, 24 SCRA 365; Director of Forestry v.
Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the Philippines, 70 SCRA 570).

There are, however, limitations to the rule-making power of administrative agencies. A rule shaped
out by jurisprudence is that when Congress authorizes promulgation of administrative rules and
regulations to implement given legislation, all that is required is that the regulation be not in
contradiction with it, but conform to the standards that the law prescribes (Director of Forestry v.
Munoz, 23 SCRA 1183). The rule delineating the extent of the binding force to be given to
administrative rules and regulations was explained by the Court in Teoxon v. Member of the Board of
Administrators (33 SCRA 588), thus: "The recognition of the power of administrative officials to
promulgate rules in the implementation of the statute, as necessarily limited to what is provided for in
the legislative enactment, may be found as early as 1908 in the case of United States v. Barrias (11
Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v. Santos (63 Phil. 300), in
1951 Chinese Flour Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in 1962 Victorias
Milling Co., Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that
"A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its
scope is within the statute granted by the legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom ...." On the other hand, "administrative interpretation of the
law is at best merely advisory, for it is the courts that finally determine what the law means." Indeed, it
cannot be otherwise as the Constitution limits the authority of the President, in whom all executive
power resides, to take care that the laws be faithfully executed. No lesser administrative, executive
office, or agency then can, contrary to the express language of the Constitution, assert for itself a
more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There
must be strict compliance with the legislative enactment. The rule has prevailed over the years, the
latest restatement of which was made by the Court in the case of Bautista v. Junio (L-50908, January
31, 1984, 127 SCRA 342).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law,
the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of
the basic law (People v. Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned
(University of St. Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans
Administration, 51 SCRA 340). Except for constitutional officials who can trace their competence to
act to the fundamental law itself, a public official must locate in the statute relied upon a grant of
power before he can exercise it. Department zeal may not be permitted to outrun the authority
conferred by statute (Radio Communications of the Philippines, Inc. v. Santiago, L-29236, August 21,
1974, 58 SCRA 493).
When promulgated in pursuance of the procedure or authority conferred upon the administrative
agency by law, the rules and regulations partake of the nature of a statute, and compliance therewith
may be enforced by a penal sanction provided in the law (Victorias Milling Co., Inc. v. Social Security
Commission, 114 Phil. 555; People v. Maceren, L-32166, October 18, 1977, 79 SCRA 462; Daza v.
Republic, L-43276, September 28, 1984, 132 SCRA 267). Conversely, the rule is likewise clear.
Hence an administrative agency cannot impose a penalty not so provided in the law authorizing the
promulgation of the rules and regulations, much less one that is applied retroactively.

The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23, 1964
to include the penal clause, as follows:

In the event that this note becomes past due, the undersigned shall pay a penalty at the rate of _____
per cent ( ) per annum on such past due account over and above the interest rate at which such loan
was originally secured from the Central Bank.

Such clause was not a part of the promissory notes executed by Appellee to secure its loans.
Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of the contractual
obligation of rural banks securing loans from the Central Bank, after December 23, 1964. Thus, while
there is now a basis for the imposition of the 10% penalty rate on overdue accounts of rural banks,
there was none during the period that Appellee contracted its loans from Appellant, the last of which
loan was on July 30, 1963. Surely, the rule cannot be given retroactive effect.

Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970,
revoked its Resolution No. 1813, dated December 18, 1964 imposing the questioned 10% per annum
penalty rate on past due loans of rural banks and amended sub-paragraph (a), Section 10 of the
existing guidelines governing rural banks' applications for a loan or rediscount, dated May 7, 1969
(Folder of Exhibits, p. 19). As stated by the trial court, this move on the part of the Monetary Board
clearly shows an admission that it has no power to impose the 10% penalty interest through its rules
and regulations but only through the terms and conditions of the promissory notes executed by the
borrowing rural banks. Appellant evidently hoped that the defect could be adequately accomplished
by the revision of DLC Form No. 11.

The contention that Appellant is entitled to the 10% cost of collection in case of suit and should
therefore, have been awarded the same by the court below, is well taken. It is provided in all the
promissory notes signed by Appellee that in case of suit for the collection of the amount of the note or
any unpaid balance thereof, the Appellee Rural Bank shall pay the Central Bank of the Philippines a
sum equivalent to ten (10%) per cent of the amount unpaid not in any case less than five hundred
(P500.00) pesos as attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed
to come to Court seeking redress for an wrong done against it and then be allowed to renege on its
corresponding obligations.

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

SO ORDERED.
Makati Stock Exchange v. SEC G.R. No. L-23004 June 30, 1965

Hermenegildo B. Reyes for petitioner.

Office of the Solicitor General for respondent Securities and Exchange Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange.

BENGZON, C.J.:

This is a review of the resolution of the Securities and Exchange Commission which would deny the
Makati Stock Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for
trading on its board, securities already listed in the Manila Stock Exchange.

Objecting to the requirement, Makati Stock Exchange, Inc. contends that the Commission has no
power to impose it and that, anyway, it is illegal, discriminatory and unjust.

Under the law, no stock exchange may do business in the Philippines unless it is previously
registered with the Commission by filing a statement containing the information described in Sec. 17
of the Securities Act (Commonwealth Act 83, as amended).

It is assumed that the Commission may permit registration if the section is complied with; if not, it may
refuse. And there is now no question that the section has been complied with, or would be complied
with, except that the Makati Stock Exchange, upon challenging this particular requirement of the
Commission (rule against double listing) may be deemed to have shown inability or refusal to abide
by its rules, and thereby to have given ground for denying registration. [Sec. 17 (a) (1) and (d)].

Such rule provides: "... nor shall a security already listed in any securities exchange be listed anew in
any other securities exchange ... ."

The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is actually only
one securities exchange — The Manila Stock Exchange — that has been operating alone for the past
25 years; and all — or presumably all — available or worthwhile securities for trading in the market
are now listed there. In effect, the Commission permits the Makati Stock Exchange, Inc., to deal only
with other securities. Which is tantamount to permitting a store to open provided it sells only those
goods not sold in other stores. And if there's only one existing store, 1 the result is a monopoly.

It is not farfetched to assert — as petitioner does that for all practical purposes, the Commission's
order or resolution would make it impossible for the Makati Stock Exchange to operate. So, its
"permission" amounted to a "prohibition."

Apparently, the Commission acted "in the public interest." Hence, it is pertinent to inquire whether the
Commission may "in the public interest" prohibit (or make impossible) the establishment of another
stock exchange (besides the Manila Stock Exchange), on the ground that the operation of two or
more exchanges adversely affects the public interest.

At first glance, the answer should be in the negative, because the law itself contemplated, and,
therefore, tacitly permitted or tolerated at least, the operation of two or more exchanges.
Wherever two or more exchanges exist, the Commission, by order, shall require and enforce
uniformity of trading regulations in and/or between said exchanges. [Emphasis Ours] (Sec. 28b-13,
Securities Act.)

In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific
War (p. 10, brief), when the Securities Act was approved or amended. (Respondent Commission
even admits that dual listing was practiced then.) So if the existence of more than one exchange were
contrary to public interest, it is strange that the Congress having from time to time enacted legislation
amending the Securities Act, 4 has not barred multiplicity of exchanges.

Forgetting for the moment the monopolistic aspect of the Commission's resolution, let us examine the
authority of the Commission to promulgate and implement the rule in question.

It is fundamental that an administrative officer has only such powers as are expressly granted to him
by the statute, and those necessarily implied in the exercise thereof.

In its brief and its resolution now subject to review, the Commission cites no provision expressly
supporting its rule. Nevertheless, it suggests that the power is "necessary for the execution of the
functions vested in it"; but it makes no explanation, perhaps relying on the reasons advanced in
support of its position that trading of the same securities in two or more stock exchanges, fails to give
protection to the investors, besides contravening public interest. (Of this, we shall treat later) .

On the legality of its rule, the Commission's argument is that: (a) it was approved by the Department
Head — before the War; and (b) it is not in conflict with the provisions of the Securities Act. In our
opinion, the approval of the Department, 5 by itself, adds no weight in a judicial litigation; and the test
is not whether the Act forbids the Commission from imposing a prohibition, but whether it empowers
the Commission to prohibit. No specific portion of the statute has been cited to uphold this power. It is
not found in sec. 28 (of the Securities Act), which is entitled "Powers (of the Commission) with
Respect to Exchanges and Securities." 6

According to many court precedents, the general power to "regulate" which the Commission has
(Sec. 33) does not imply authority to prohibit." 7

The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power
may be inferred from the express power of the Commission to suspend trading in a security, under
said sec. 28 which reads partly:

And if in its opinion, the public interest so requires, summarily to suspend trading in any registered
security on any securities exchange ... . (Sec. 28[3], Securities Act.)

However, the Commission has not acted — nor claimed to have acted — in pursuance of such
authority, for the simple reason that suspension under it may only be for ten days. Indeed, this
section, if applicable, precisely argues against the position of the Commission because the
"suspension," if it is, and as applied to Makati Stock Exchange, continues for an indefinite period, if
not forever; whereas this Section 28 authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one exchange only, but on all exchanges;
bearing in mind that suspension should be ordered "for the protection of investors" (first par., sec. 28)
in all exchanges, naturally, and if "the public interest so requires" [sec. 28(3)].

This brings up the Commission's principal conclusions underlying its determination viz.: (a) that the
establishment of another exchange in the environs of Manila would be inimical to the public interest;
and (b) that double or multiple listing of securities should be prohibited for the "protection of the
investors."

(a) Public Interest — Having already adverted to this aspect of the matter, and the emerging
monopoly of the Manila Stock Exchange, we may, at this juncture, emphasize that by restricting free
competition in the marketing of stocks, and depriving the public of the advantages thereof the
Commission all but permits what the law punishes as monopolies as "crimes against public interest."
8

"A stock exchange is essentially monopolistic," the Commission states in its resolution (p. 14-a,
Appendix, Brief for Petitioner). This reveals the basic foundation of the Commission's process of
reasoning. And yet, a few pages afterwards, it recalls the benefits to be derived "from the existence of
two or more exchanges," and the desirability of "a healthy and fair competition in the securities
market," even as it expresses the belief that "a fair field of competition among stock exchanges
should be encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall, in
effect, continue to be the only stock exchange in Manila or in the Philippines.

"Double listing of a security," explains the Commission, "divides the sellers and the buyers, thus
destroying the essence of a stock exchange as a two-way auction market for the securities, where all
the buyers and sellers in one geographical area converge in one defined place, and the bidders
compete with each other to purchase the security at the lowest possible price and those seeking to
sell it compete with each other to get the highest price therefor. In this sense, a stock exchange is
essentially monopolistic."

Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest
price where all the sellers assemble in only one place. The price there, in one sale, will tend to fix the
price for the succeeding, sales, and he has no chance to get a lower price except at another stock
exchange. Therefore, the arrangement desired by the Commission may, at most, be beneficial to
sellers of stock — not to buyers — although what applies to buyers should obtain equally as to sellers
(looking for higher prices). Besides, there is the brokerage fee which must be considered. Not to
mention the personality of the broker.

(b) Protection of investors. — At any rate, supposing the arrangement contemplated is beneficial to
investors (as the Commission says), it is to be doubted whether it is "necessary" for their "protection"
within the purview of the Securities Act. As the purpose of the Act is to give adequate and effective
protection to the investing public against fraudulent representations, or false promises and the
imposition of worthless ventures, 9 it is hard to see how the proposed concentration of the market has
a necessary bearing to the prevention of deceptive devices or unlawful practices. For it is not mere
semantics to declare that acts for the protection of investors are necessarily beneficial to them; but
not everything beneficial to them is necessary for their protection.

And yet, the Commission realizes that if there were two or more exchanges "the same security may
sell for more in one exchange and sell for less in the other. Variance in price of the same security
would be the rule ... ." Needless to add, the brokerage rates will also differ.

This, precisely, strengthens the objection to the Commission's ruling. Such difference in prices and
rates gives the buyer of shares alternative options, with the opportunity to invest at lower expense;
and the seller, to dispose at higher prices. Consequently, for the investors' benefit (protection is not
the word), quality of listing 10 should be permitted, nay, encouraged, and other exchanges allowed to
operate. The circumstance that some people "made a lot of money due to the difference in prices of
securities traded in the stock exchanges of Manila before the war" as the Commission noted,
furnishes no sufficient reason to let one exchange corner the market. If there was undue manipulation
or unfair advantage in exchange trading the Commission should have other means to correct the
specific abuses.

Granted that, as the Commission observes, "what the country needs is not another" market for
securities already listed on the Manila Stock Exchange, but "one that would focus its attention and
energies on the listing of new securities and thus effectively help in raising capital sorely needed by
our ... unlisted industries and enterprises."

Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and individual
liberty along channels leading to that economic desideratum. 11
The Legislature has specified the conditions under which a stock exchange may legally obtain a
permit (sec. 17, Securities Act); it is not for the Commission to impose others. If the existence of two
competing exchanges jeopardizes public interest — which is doubtful — let the Congress speak. 12
Undoubtedly, the opinion and recommendation of the Commission will be given weight by the
Legislature, in judging whether or not to restrict individual enterprise and business opportunities. But
until otherwise directed by law, the operation of exchanges should not be so regulated as practically
to create a monopoly by preventing the establishment of other stock exchanges and thereby
contravening:

(a) the organizers' (Makati's) Constitutional right to equality before the law;

(b) their guaranteed civil liberty to pursue any lawful employment or trade; and

(c) the investor's right to choose where to buy or to sell, and his privilege to select the brokers in his
employment. 13

And no extended elucidation is needed to conclude that for a licensing officer to deny license solely
on the basis of what he believes is best for the economy of the country may amount to regimentation
or, in this instance, the exercise of undelegated legislative powers and discretion.

Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the
officer in charge, he may not refuse to grant a license simply on the ground that a sufficient number of
licenses to serve the needs of the public have already been issued. (53 C.J.S. p. 636.)

Concerning res judicata. — Calling attention to the Commission's order of May 27, 1963, which
Makati Stock did not appeal, the Manila Stock Exchange pleads the doctrine of res judicata. 14 (The
order now reviewed is dated May 7, 1964.)

It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the
Commission, the latter, after making some inquiries, issued on May 27, 1963, an order reading as
follows.

Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the
organizers thereof are willing to abide by the foregoing conditions, they may file the proper application
for the registration and licensing of the said Exchange.

In that order, the Commission advanced the opinion that "it would permit the establishment and
operation of the proposed Makati Stock Exchange, provided ... it shall not list for trading on its board,
securities already listed in the Manila Stock Exchange ... ."

Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now,
Manila Stock insists on res judicata.

Why should Makati have appealed? It got the certificate of incorporation which it wanted. The
condition or proviso mentioned would only apply if and when it subsequently filed the application for
registration as stock exchange. It had not yet applied. It was not the time to question the condition; 15
Makati was still exploring the convenience of soliciting the permit to operate subject to that condition.
And it could have logically thought that, since the condition did not affect its articles of incorporation, it
should not appeal the order (of May 27, 1963) which after all, granted the certificate of incorporation
(corporate existence) it wanted at that time.

And when the Makati Stock Exchange finally found that it could not successfully operate with the
condition attached, it took the issue by the horns, and expressing its desire for registration and
license, it requested that the condition (against double listing) be dispensed with. The order of the
Commission denying, such request is dated May 7, 1964, and is now under, review.

Indeed, there can be no valid objection to the discussion of this issue of double listing now, 16
because even if the Makati Stock Exchange, Inc. may be held to have accepted the permission to
operate with the condition against double listing (for having failed to appeal the order of May 27,
1963), still it was not precluded from afterwards contesting 17 the validity of such condition or rule:

(1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to
contest the validity of any rule or regulation) to comply and to enforce so far as is within its powers,
compliance by its members, with the provisions of this Act, and any amendment thereto, and any rule
or regulation made or to be made thereunder. (See. 17-a-1, Securities Act [Emphasis Ours].)

Surely, this petition for review has suitably been coursed. And making reasonable allowances for the
presumption of regularity and validity of administrative action, we feel constrained to reach the
conclusion that the respondent Commission possesses no power to impose the condition of the rule,
which, additionally, results in discrimination and violation of constitutional rights.

ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such
condition. Costs shall be paid by the Manila Stock Exchange. So ordered.

G.R. No. 90482 August 5, 1991

DAVIDE, JR., J.:

This is an appeal by certiorari under Rule 45 of the Revised Rules of Court, with prayer for a
temporary restraining order or writ of preliminary injunction, filed on 25 October 1989 by the Office of
the Government Corporate Counsel (OGCC) in behalf of the Republic of the Philippines "acting
through the Sugar Regulatory Administration" (SRA) and the Republic Planters Bank (RPB) seeking
the review of the 13 October 1989 Decision of the Court of Appeals (15th Division) in CAGR No.
17188.
The assailed decision dismissed the petition for certiorari filed by Petitioners against herein public
respondents Judge and deputy sheriffs and private respondents for the nullification of the Orders of
respondent Judge of 13 March 1989, 21 March 1989 and 27 March 1989 in Civil Case No. 86-35880
of Branch 26 of the Regional Trial Court of Manila on the following grounds: (a) the funds upon which
the attorney's fees are sought to be executed now belong to the Republic of the Philippines due to
legal subrogation, (b) execution is not proper against the Republic which is not a party to the case, (c)
the issuance of a writ of execution would violate the Constitution since according to it no money shall
be paid out of the treasury except in pursuance to an appropriations made by law, and (d) execution
for attomey's fees is unwarranted.
Respondent Court of Appeals dismissed the petition for lack of merit principally because
(a) Under the compromise agreement petitioner (RPB) accepted the designation/appointment as
Trustee whose obligation is to pay; it received benefits by way of trustee's fees; it may not question
the right of private respondents to attorney's fees;
(b) Petitioner (SRA) may not lawfully bring an action on behalf of the Republic of the Philippines since
under Section 13 of Executive Order No. 18 dated 28 May 1986, which created it, it simply was to
take over the functions of the defunct PHILSUCOM; however, the latter was to remain a judicial entity
for three more years for the purpose of prosecuting and defending suits against it; hence it is
PHILSUCOM, being a party to the compromise agreement, which may properly contest the right of
private respondents to attomey's fees;
(c) The petition should have been filed through the Office of the Solicitor General OSG and not
through the (OGCC); neither the latter nor the (SRA) may lawfully represent the Government of the
Philippines in any suit or proceeding such as the present petition for administrative agencies may only
perform such powers and functions as may be authorized by the laws which created or gave them
existence; and
(d) The respondent judge did not commit any error of jurisdiction in issuing the questioned orders;
hence, the remedy should be appeal.
The facts which gave rise to said petition are summarized by the Court of Appeals as follows:
On May 16,1986, Republic Planters Bank (hereafter referred to as RPB), Zosimo Maravilla, Rosendo
de la Rama, Bibiano Sabino, Roberto Mascufiana and Ernesto Kramer "for themselves and in
representation of other sugar producers" filed a Complaint with the respondent court, RTC Branch 26,
docketed as C.C. 86-35880 "For Sum of Money and/or Delivery of Personal Property with Restraining
Order and/or Preliminary Injunction" against the Philippine Sugar Commission (PHILSUCOM) and the
National Sugar Trading Corporation (NASUTRA) with the prayer:
WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of this Honorable Court that, after
due hearing and trial, judgment be rendered in favor of Plaintiffs and against Defendants ordering
them to do the following:
1. To render a correct and faithful account of whatever amount of United States dollar
accounts/deposits in different banks, domestic and foreign, being held in agents and/or
representatives.
2. To render a correct and faithful inventory of all the physical sugar stocks for crop year 1984-85
presently remaining in the warehouses of the different sugar mills all over the country.
3. To deliver or remit to the Plaintiffs any and all United States dollar accounts/deposits in various
banks, domestic or foreign, held in the name of Defendants, their subsidiaries, conducts (sic), agents
and/or representatives.
4. To deliver the entire remaining physical sugar stocks corresponding to crop year 1984-85 presently
remaining in the warehouses of the different sugar mills all over the country in favor of Plaintiffs who
were unlawfully deprived of their possession and control by Defendants, to be applied and deducted
from Defendant's liability to Plaintiffs for the unaccounted sugar for crop year 1984-85.
5. To jointly and severally pay Plaintiffs-Producers all interests and penalties imposed by Assignee-
banks/creditors for accounts covered by unpaid sugar quedans for crop year 1984-85.
6. To jointly and severally pay Plaintiffs claims for moral, compensatory and exemplary damages in
such accounts to be determined in the course of the trial.
7. To jointly and severally pay for the attorney's fees of twenty percent (20%) based on the total
amount that may be recovered.
8. To jointly and severally pay for the costs and litigation expenses incurred by the Plaintiffs.
Plaintiffs likewise pray that, in order to prevent grave and irreparable injury, this Honorable Court shall
issue a writ of preliminary injunction enjoining and/or prohibiting the Defendants, their officers and/or
agents from transferring, releasing or in any manner disposing of all U.S. dollar deposits/accounts
held in the name of Defendants, its subsidiaries, conduits agents and/or representatives in the
different banks, domestic and foreign, including the physical sugar corresponding to crop year 1984-
85 presently remaining in the warehouses of the different sugar mills all over the country after
requiring the Plaintiffs to post a bond that may be determined by the Honorable Court to answer for
the damages in the event judgment will be rendered in Defendant's favor. Furthermore, Plaintiffs pray
that a Restraining Order be immediately issued for the purpose of enjoining the Defendants from
committing and/or proceeding with the foregoing acts, pending hearing of the application for a writ of
preliminary injunction.
Plaintiffs further pray for such other reliefs and remedies, just and equitable under the premises.
Before PHILSUCOM and NASUTRA could answer, a Compromise Agreement dated May 23, 1986
was submitted by the parties which the lower court approved and based on it, the Judgment dated
June 2,1986 (Annex "B", Petition, Id., pp. 22-36) was issued. A motion for the issuance of writ of
execution was filed (Annex "C", Petition, Id., pp, 37-50). PHILSUCOM and NASUTRA filed their
"Comment and Opposition (To Motion for Issuance of Writ of Execution)" (Annex D Petition, Id., pp.
51- 62). A Reply was filed by the plaintiffs (Annex "E", Id., pp. 63- 72) and a Rejoinder was also filed
by the defendants (Annex "E", Petition, Id., pp. 73-78). The lower court issued the Order dated March
13, 1989 which dismissed the separate petitions for relief from judgment filed by Franklin Fuentebella,
George Lacson, Fernando Ballesteros, and Antonio Lopez in one petition; Romeo Guanzon as sugar
producer and president of National Federation of Sugar Cane Planters; PASSI (Iloilo) Sugar Central,
Inc., represented by Romeo Villavicencio; the Independent Sugar Planters represented by Corazon
Sagimalet (In a Motion for Intervention which substituted as a Petition for Relief from Judgment); and
Zosimo Maravilla, Rosendo dela Rama and Bibiano Sabino (Annex "G", Petition, Id., pp. 79-98). This
Order dated March 13, 1989 (which as aforesaid, dismissed the petitions for relief from judgment) is
the first of the orders now being assailed.
On March 21, 1989, the lower court issued the second of the assailed orders which granted a second
motion to resolve a pending motion for issuance of a writ of execution and allowed the issuance of an
alias writ of execution in words, thus:
Let an alias writ of execution be issued for the final implementation of the Judgment on Compromise
Agreement, dated June 2, 1986, the only remaining provision of said judgment is the 10% attorney's
fees of counsels for the plaintiffs (Paragraph 12 sub-section Annex "H", Petition, Id., pp. 99-100).
Correspondingly, on that same date March 21, 1989, RTC Mala Deputy Sheriff Jaime K. del Rosario
issued a "Notice of Delivery of Money" asking the RPB to "pay in cash the 10% of P45,293,552.60 to
Attys. Roger Reyes, Ernesto Treyes, Jr. and Eutiquio Fudolin, Jr. ... immediately upon receipt of this
notice" (Annex "I", Petition, Id., p. 101).
And on March 27, 1989, the third of the questioned orders was issued by the lower court, in response
to the "Ex-Parte Motion to Require Officers of Trustee Republic Planters Bank to Deliver Amount
Subject of Alias Writ of Execution", requiring the officers of the RPB named therein to "appear before
the Court on March 29,1989 at 10:30 in the morning to explain why they should not be cited for
contempt of court for defying ... the alias writ of execution." (Annex "J", Petition, Id. pp. 102-103).
The instant petition was filed in this court on March 29, 1989, ...
Parenthetically, it may also be added that, as stated in paragraph 15 of the instant petition, the
producers and producer organizations who filed various petitions for relief from the judgment based
on the compromise agreement have appealed to the Court of Appeals the Order of 13 March 1989
denying their petitions.
In the instant petition petitioners limit their grounds to only two errors allegedly committed by
respondent Court of Appeals, namely: (a) it erred in holding that neither the OGCC nor the SRA can
represent the Government of the Philippines in the action before it and (b) it deviated from the
decision of the Ninth Division of said court in CAGR SP No. 11046 (Kramer, et al. vs. Hon. Doroteo,
Cañeba, et al. promulgated on 16 March 1987), which declared that there was no valid class suit and
the controversial compromise agreement did not extend to the 40,000 unnamed sugar producers.
In the resolution of 26 October 1989 We required respondents to comment on the petition and issued
a temporary restraining order directing respondent Judge to desist and refrain from further proceeding
in Civil Case No. 86-35880, entitled Republic Planters Bank, et al. vs. Philippine Sugar Commission,
et al.4
On 23 November 1989 petitioners filed a manifestation informing this Court that at 9:30 a.m. on 26
October 1989, private respondents, accompanied by respondents sheriff and a squad of police
Special Action Force, swooped upon RPB's Bacolod Branch and divested a teller of money from her
booth allegedly because the branch manager had instructed the bank personnel to close the bank
vault while the enforcement of the court order was being verified - with the head office in Manila; the
amount taken was P179,955.31; these acts were allegedly done by virtue of, among others, the
orders dated October 24 and 25, 1989 of respondent judge ordering the implementation of an alias
Writ of Execution dated 21 March 1989 and the Writ of Execution dated 21 March 1986; and claiming
that what was enforced was an expired writ.
In Our resolution of 5 December 1989 respondents were required to comment on this manifestation.6
After motions for extension of time to file their Comments on the petition, separately filed by the
private respondents and the Solicitor General for the public respondents, were granted, the former
ultimately filed their Comment on 20 December 1989.7 The Solicitor General filed his Comment on 4
January 1990.8
In his Comment the Solicitor General maintains that the SRA has no legal personality to file the
instant petition in the name of the Republic of the Philippines for under its charter, Executive Order
No. 18, the SRA is not vested with legal capacity to sue. He further argues that the SRA was not a
party to the court-approved compromise agreement in Civil Case No. 8635880 which provided for the
questioned 10% attorney's fees; PHILSUCOM and NASUTRA, which were parties thereto, did not file
any action to annul the compromise agreement; that while Executive Order No. 18 abolished the
PHILSUCOM, the latter's juridical personality was to continue for three (3) years, during which period
it may prosecute and defend suits against it; and that, finally, even if SRA has the capacity to sue, it
cannot still bring any action on behalf of the Republic of the Philippines as this can be done only by
the Office of the Solicitor General per Section 1 of P.D. No. 478.
The Solicitor General likewise stresses that the interest of the national government in this case is
confined only to the amount remaining in RPB subject to legal subrogation; the judgment on the
compromise agreement had long become final and executory; and that no reversible error was
committed by respondent judge and respondent Court of Appeals.
Private respondents assert that the SRA and RPB do not have the legal authority to sue for and in
behalf of the Republic of the Philippines. In respect to the former, their conclusion is supported by
almost the same arguments as that asserted by the Solicitor General. As regards the RPB, they
maintain that it "is a government-controlled corporation engaged in the banking business with
corporate powers vested in a Board of Directors," hence, it is "legally untenable for such a banking
institution, even assuming that it is government-controlled, to initiate suits for and in behalf of the
Republic of the Philippines." p.171, Rollo). They further argued that petitioners have no legal
personality to initiate the instant petition for (a) SRA is not a party in the case before the trial court;
the only reason why it became involved was because of the contempt proceedings initiated by private
respondents against SRA's Arsenio Yulo, Carlos Ledesma and Bibiano Sabino for issuing Sugar
Orders No. 9 and 14; and that neither can it be presumed that SRA had substituted defendants
PHILSUCOM and the NASUTRA in the case as both continue to legally exist for the purpose of
prosecuting and defending suits in liquidation of its affairs; both did not file any petition for relief from
judgment questioning the validity of the judgment of the trial court approving the compromise
agreement; and that, moreover, RPB was a signatory to the Compromise Agreement as a Trustee
and, as such, it regarded itself as only a nominal party and in a series of pleadings it recognized the
final and executory nature of the decision approving the compromise agreement.
As to the second assigned error, private respondents pointed out that the Ninth Division of the Court
of Appeals did not rule in C.A.-G.R. No. 11046 that Civil Case No. 86-35880 before the trial court was
not a class suit, and whether or not it was a class suit was not an issue therein.
On 15 January 1990 petitioners filed a motion for leave to file consolidated reply, which We granted in
the resolution of 18 January 1990.9
On 18 January 1990 petitioners filed a Manifestation and Motion10 "wherein they informed the Court
that despite the temporary restraining order issued on 26 October 1989, respondent Judge, to whom
the Order was addressed, continued to hear the case, particularly on the whereabouts of 177,087.14
piculs of sugar for the crop year 1984-1985 allegedly stored in the different warehouses throughout
the country".
In the resolution of 30 January 199011 We required respondent judge to show cause why no
disciplinary action should be taken against her for failure to comply with the resolution of 26 October
1989 ordering her to refrain from further proceeding with Civil Case No. 86-35880 and to answer why
she should not be cited for contempt of court for such failure, within ten (10) days from notice.
On 8 March 1990 petitioners filed their Consolidated Reply to the Comment with Motion to Dismiss
filed by private respondents and the Comment of the Solicitor General.12
On 5 April 1990 private respondents filed a Rejoinder to the Consolidated Reply.13
On 16 April 1990 respondent judge, through the OSG, filed her Compliance as required by the
Resolution of 30 January 1990.14 She claims that she did not defy the temporary restraining order
issued by this Court on 26 October 1989 because the petitioners sought for the issuance of the
temporary restraining order to stop the enforcement of the decision of the respondent Court of
Appeals in CA GR No. 17188 dated October 13, 1989; hence, the temporary restraining order that
this Court issued "actually orders herein respondent judge to desist from enforcing the Decision of the
respondent Court of Appeals in CAGR No. 17188 which is the subject of the instant petition for
review". Consequently, she stresses, her 15 December 1989 order was not issued in defiance of the
restraining resolution; said order pertains exclusively to the whereabouts of the 177,087.14 piculs of
physical sugar for the crop year 1984-1985 and did not in any way attempt to enforce the questioned
decisions of the court a quo and the Court of Appeals to the prejudice of petitioner's right to appeal.
In Our resolution of 15 May 199015 We resolved to consider the comments of respondents as
Answers to the petition, give due course to the petition, require the parties to submit their respective
memoranda within thirty days from notice, and to note the compliance of respondent judge.
Petitioners filed their memorandum on 28 June 1990.16 Private respondents sent theirs by registered
mail on 22 August 1990 which this Court actually received on 8 September 1990.17 We shall now
take up the assigned errors.
I.
The Court of Appeals correctly ruled that petitioner Sugar Regulatory Administration may not lawfully
bring an action on behalf of the Republic of the Philippines and that the Office of the Government
Corporate Counsel does not have the authority to represent said petitioner in this case.
Executive Order No. 18, enacted on 28 May 1986 and which took effect immediately, abolished the
Philippine Sugar Commission (PHILSUCOM) and created the Sugar Regulatory Administration (SRA)
which shall be under the Office of the President. However, under the third paragraph of Section 13
thereof, the PHILSUCOM was allowed to continue as a juridical entity for three (3) years for the
purpose of prosecuting and defending suits by or against it and enabling it to settle and close its
affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of
continuing the functions for which it was established, under the supervision of the SRA.
Section 3 of said Executive Order enumerates the powers and functions of the SRA; but it does not
specifically include the power to represent the Republic of the Philippines in suits filed by or against it,
nor the power to sue and be sued although it has the power to "enter, make and execute routinary
contracts as may be necessary for or incidental to the attainment of its purposes between any
persons, firms, public or private, and the Government of the Philippines" and "[t]o do all such other
things, transact such other businesses and perform such functions directly or indirectly incidental or
conducive to the attainment of the purposes of the Sugar Regulatory Administration."18
Section 4 thereof provides for the governing board of the Administration, known as the Sugar Board,
which shall exercise "[a]ll the corporate powers" of the SRA. Its specific functions are enumerated in
Section 6; however, the enumeration does not include the power to represent the Republic of the
Philippines, although among such functions is "[t]o enter into contracts, transactions, or undertakings
of whatever nature which are necessary or incidental to its functions and objectives with any natural
or juridical persons and with any foreign government institutions, private corporations, partnership or
private individuals.19
It is apparent that its charter does not grant the SRA the power to represent the Republic of the
Philippines in suits filed by or against the latter.
It is a fundamental rule that an administrative agency has only such powers as are expressly granted
to it by law and those that are necessarily implied in the exercise thereof. (Guerzon vs Court of
Appeals, et al., 77707, August 8, 1988, 164 SCRA 182,189, citing Makati Stock Exchange, Inc. vs.
SEC, 14 SCRA 620, and Sy vs. Central Bank, 70 SCRA 570.)20
The SRA no doubt, is an administrative agency or body. An administrative agency is defined as "[a]
government body charged with administering and implementing particular legislation. Examples are
workers' compensation commissions ... and the like. ... The term 'agency' includes any department,
independent establishment, commission, administration, authority board or bureau ...21
The power to represent the Republic of the Philippines in any suit by or against it having been
withheld from SRA, it following that the latter cannot institute the instant petition and the petition in
C.A.-G.R. No. 17188 on behalf of the Republic of the Philippines.
This conclusion does not, however, mean that the SRA cannot sued and be sued. This power can be
implied from its powers to make and execute routinary contracts as may be necessary for or
incidental to the attainment of its purposes between any persons, firms public or private, and the
Government of the Philippines and to do all such other things, transact such other businesses and
perform such other functions directly or indirectly incidental or conducive to the attainment of the
purposes of the SRA and the powers of its governing board to enter into contracts, transactions, or
undertaking of whatever nature which are necessary or incidental to its functions and objectives with
any natural or juridical persons and with any foreign government institutions, private corporations,
partnership or private individuals.
The Court of Appeals also correctly ruled that the OGCC can represent neither the SRA nor the
Republic of the Philippines. We do not, however, share the view that only the Office of the Solicitor
General can represent the SRA.
The entry of appearance by the OGCC for the SRA was precipitated by the sudden turn-about of the
Office of the Solicitor General. Records show that the OSG eventually represented the PHILSUCOM,
NASUTRA and SRA in the trial court. However, on 29 January 1988 it filed a Manifestation dated
January 27, 1988 informing the court that its appearance in the case "is limited to the issues relating
only to the contempt proceedings against the public respondents and is not concerned with the other
issues raised by various parties in their petitions for relief".22 By reason thereof, the
Chairman/Administrator of SRA, Mr. Arsenio Yulo, Jr., sent a letter23 dated 6 April 1988 to the
Solicitor General, informing him that since the appearance of the OSG is limited and that it has taken
a different position, SRA's only alternative is to seek another representative and that much to its
regret, it is constrained to terminate OSG's services. He further informed the Solicitor General that the
case is being indorsed to the Office of the Government Corporate Counsel for appropriate legal action
pursuant to P.D. No. 478. There is, however, no showing that the OSG withdrew its appearance for
PHILSUCOM, NASUTRA or the SRA in the trial court. On the contrary, per its Manifestation dated 8
February 1990, and filed with this Court on 12 February 1990,24 it "has retained its appearance" "on
behalf of the Republic of the Philippines to recover whatever amount may be owing to the National
Treasury by virtue of legal subrogation."
Also on April 6,1988, SRA sent a letter25 to OGCC to engage its legal services to represent SRA as
successor agency of the PHILSUCOM in the case pending before the trial court.
The OGCC, availing of P.D. No. 1415, the law creating it, particularly Section 1 which, as quoted by it
on page 16 of the Petition,26 reads:
SECTION 1. The Office of the Government Corporate Counsel shall be the principal law office of all
government-owned and controlled corporations, including their subsidiaries except as may otherwise
be provided by their respective charters or authorized by the President (Emphasis supplied).
sent a letter to the Office of the President, "in essence, requesting for authority for OGCC to represent
SRA in the case before the trial court," This was favorably acted by Executive Secretary Catalino
Macaraig, Jr.27
Indeed, under Section 35, Chapter 12, Title III of Book IV of the Administrative Code of 1987
(Executive Order No. 292) the Solicitor General is the lawyer of the government, its agencies and
instrumentalities, and its officials or agents. Said Section reads as follows:
SECTION 35. Functions and Organization. — The Office of the Solicitor General shall represent the
Government of the Philippines, its agencies and instrumentalities and its officials and agents in any
litigation, proceeding, investigation or matter requiring the services of lawyers. When authorized by
the President or head of the office concerned, it shall also represent government-owned and
controlled corporations. The Office of the Solicitor General shall constitute the law office of the
Government and, as such, shall discharge duties requiring the services of lawyers. ... .
This is similar to subsection (1) of Section 1 of P.D. No. 478.
In Republic, et al. vs. Partisala et al. (G.R. No. 61997, 15 November 1982, 118 SCRA 370, 373), We
ruled that only the Solicitor General can bring or defend actions on behalf of the Republic of the
Philippines and that, henceforth, actions filed in the name of the Republic if not initiated by the
Solicitor General will be summarily dismissed.
However, in Secretary Oscar Orbos vs. Civil Service Commission, et al., G.R. No. 92561, 12
September 1990,28 We stated:
In the discharge of this task, the Solicitor General must see to it that the best interest of the
government is upheld within the limits set by law. When confronted with a situation where one
government office takes an adverse position against another government agency, as in this case, the
Solicitor General should not refrain from performing his duty as the lawyer of the government. It is
incumbent upon him to present to the court what he considers should legally uphold the best interest
of the government although it may run counter to a client's position. In such an instance the
government office adversely affected by the position taken by the Solicitor General, if it still believes
in the merit of its case, may appear in its own behalf through its legal personnel or representative.
Consequently, the SRA need not be represented by the Office of the Solicitor General. It may appear
in its own behalf through its legal personnel or representative.
The question that logically crops up then is: May it be represented by the OGCC? Respondents hold
the negative view. Petitioners maintain otherwise, for the reason that pursuant to Section 1 of the
charter of the OGCC (P.D. No. 1415), as they quoted, the Office of the President, through the
Executive Secretary, has authorized it to represent the SRA. The specific basis for such authority is
the alleged portion of the exceptionary clause therein, reading "... or authorized by the President."
The words or authorized by the President are not found in the law. We are not aware of any law,
decree or executive order which amended Section 1 of P.D. No. 1415 by inserting therein said words.
Besides, even granting for the sake of argument that such words are written into the law, such
exception cannot confer upon the OGCC authority to represent the SRA. The exception simply
means that although the OGCC is the principal law office of all government-owned and controlled
corporations including their subsidiaries, the President may not allow it to act as lawyer for a specified
government-owned or controlled corporation or a subsidiary thereof. It will be noted that under
Section 1 of P.D. No. 478 the President may authorize the OSG to represent government-owned or
controlled corporations. In short, the exception limits, rather than expands, the authority of the OGCC.
Thus, the so-called approval by the Executive Secretary of the request of OGCC to represent the
SRA is based on an erroneous interpretation of the law.
In any case, even if we grant that there was such an exception, as well construed in the manner
urged by petitioners, it must be deemed, nevertheless, to have been repealed by the Administrative
Code of 1987. Section 10, Chapter 3, Title III, Book IV thereof on the Office of the Government
Corporate counsel does not contain the purported exception. It reads:
SECTION 10. Office of the Government Corporate Counsel. —The Office of the Government
Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or controlled
corporations, their subsidiaries, other corporate offsprings and government acquired asset
corporations and shall exercise control and supervision over all legal departments or divisions
maintained separately and such powers and functions as are now or may hereafter be provided by
law. In the exercise of such control or suspension, the Government Corporate Counsel shall
promulgate rules and regulations to effectively implement the objectives of the Office. ...
Since the SRA is neither a government-owned or controlled corporation nor a subsidiary thereof,
OGCC does not have the authority to represent it. As to who may represent it, the Orbos case29
provides the answer.
The case of the RPB is, however, different. It is admitted to be a government-owned corporation. The
OGCC can, therefore, legally represent RPB in actions filed by or against it. Unfortunately, this issue
was not categorically and expressly addressed by the Court of Appeals and has not been raised in
the petition. Anyway, even if We have to rule that OGCC's appearance for the RPB in the petition
before the Court of Appeals in CAGR No. 17188 was proper, the result would be the same dismissal
of the petition. As also correctly pointed out by the Court of Appeals, having received benefits by way
of trustee's fees, the RPB may not question the right of private respondents to attorney's fees; its only
obligation under the judgment based on compromise was to pay the attorney's fees from out of the
funds it held in trust.
II.
The second assigned error is without merit. Petitioners have misread the decision of the Court of
Appeals in CAGR SP No. 11046 (Ernesto Kramer, et al. vs. Hon. Doroteo Caneba et al. promulgated
on 16 March 1987).30 The case was a petition for certiorari and mandamus with a prayer for
preliminary injunction wherein petitioners principally prayed the Court to declare null and void the
order of respondent judge of 16 December 1986 and to order him to issue the writ of execution of the
judgment of 2 June 1986, require respondent NASUTRA to account and turn over to petitioners any
and all sales proceeds of 1984-1985 sugar from 2 June 1986 up to the present in favor of respondent
Trustee Bank RPB for proper distribution to petitioners, issue an order requiring respondent Trustee
Bank to distribute without delay all the sales proceeds of the 1984-1985 sugar in its possession in
accordance with the judgment of respondent court, and issue a restraining order/preliminary
injunction enjoining the SRA, its agents/representatives from implementing Sugar Order No. 9 dated
25 September 1986. Although in the body of the opinion a discussion was made on the matter of the
sufficiency of representation to make Civil Case No. 86-35880 a class suit, the resolution of the
petition was not in any way based thereon or influenced by it. As a matter of fact, the Court
categorically stated that it was premature to rule on that issue because of the pendency of the petition
for relief from judgment and interventions. The full disquisition of the Court of Appeals on this point
reads:
xxx xxx xxx
At the outset, let it be stated that the incidents which arose from the class suit before the respondent
court are predominantly related to the ten percent (10%) attorney's fees stipulated in the compromise
agreement approved by the respondent court in its June 2, 1986 judgment in favor of petitioner's
counsels Atty. Roger Z. Reyes, Ernesto L. Treyes, Jr. and Eutiquio M. Fudolin, Jr.
In the said class suit, only the five original plaintiffs and producers Zosimo Maravilla, for himself and
in representation of Rosendo dela Rama, Roberto Mascurafia and Bibiano Sabino per Special Power
of Attorney, and Ernesto Kramer represented by Atty. Roger Z. Reyes per Special Power of Attorney,
have authorized said Attys. Reyes, Treyes, Jr. and Fudolin, Jr. to represent them as counsel.
On page 18 of the instant petition, petitioners allege that there is no necessity to secure Special
Powers of Attorney from the unnamed parties in a class suit, and the failure of petitioners' counsel to
do so does not constitute fraud, the named parties having contest over the class suit.' By such
statement, petitioners and their counsels admit their lack of authority from the rest of the alleged
40,000 sugar producers to file the class suit and enter into the compromise agreement.
Section 12, Rule 3, Revised Rules of Court provides that in order that one or more may sue for the
benefit of others as a class suit, it is necessary that 'the court shall make sure that the parties actually
before it are sufficiently numerous and representative so that all interests are fully protected.
(Dimayuga, et al. vs. CIR, et al., G.R. No. L-1 0213, May 27, 1957).
For that matter, in the case below, therein plaintiffs Zosimo Maravilla, Rosendo dela Rama and
Bibiano Sabino filed with the respondent court a motion to partially annul decision and/or petition for
relief against the said ten (10%) percent attorney's fees on the allegation that they were deceived into
signing the compromise agreement believing, as was agreed upon during the negotiations, that the
ten (10%) percent of whatever would be collected would go to a trust fund for the benefit of the sugar
farmers and producers and not as attorney's fees. Also, petition, for relief was filed by thirteen other
alleged sugar producers principally on the ground that the compromise agreement entered into was
without their express authority by way of Special Power of Attorney and that the class suit was
unnecessary. Some of these sugar producers are the Association de Agricultores de la Region Oesta
de Batangas, Inc. (AAROB) with 742 members; the Samahang Mag-aasukal sa Kanluran Batangas
(SABA) with 4,000 members and Independent Sugar Farmers, Inc. with 200 members.
Here is a situation, as pointed out by respondent NASUTRA and SRA, where petitioners in filing the
class suit claim to represent 40,000 sugar producers all over the country and yet when some of these
producers filed petition for relief and interventions, petitioners 'disowned' them, stating that the other
sugar producers have no personality to intervene, not having been named parties to the class suit.
It should not be overlooked that the said sugar producers, although not named parties in the class
suit, are the very alleged persons represented in the class suit. They certainly have interests in the
subject matter of the controversy; in the contents of the compromise agreement.
The filing of petitions for relief from judgment has not been prohibited by B.P. 129. The remedy of
petitions for relief from judgment is still available when a judgment is rendered by an inferior court in a
case, and a party thereto, by fraud, accident, mistake or excusable negligence, has been unjustly
deprived of a hearing therein, or has been prevented from taking an appeal. Section 9, paragraph 2 of
BP 129 placing the original exclusive jurisdiction on the Court of Appeals to annul judgments of
Regional Trial Courts has no relation to (sic) all to the petition for relief provided for in Rule 38
because these two are completely different remedies.
The petitions for relief from judgment and interventions are still pending action by respondent
court.1âwphi1 In view thereof, it would be premature for this Court to resolve the issue of estoppel on
the part of the said sugar producers to question the pertinent portion of the judgment of compromise,
and fraud on the part of the counsels for petitioners therein. (Emphasis supplied).
IV.
Having disposed of the main issues, We shall now consider the motion of petitioners of 16 January
1990 to hold in contempt respondent Judge Corona Ibay-Somera for violating/defying the Temporary
Restraining Order issued by Us on 26 October 1989. They allegedly "continued to hear the case
particularly on the whereabouts of 177,087.14 piculs of sugar for the crop year 1984-1985 allegedly
stored in different warehouses throughout the country," and that she even further reset the hearing of
the case on January 19, 1990 notwithstanding the cautionary manifestation filed by petitioners during
the 15 December 1989 hearing that said continued hearing would be a violation of the TRO. In the
resolution of 26 October 1989, this Court specifically ordered respondent Judge to desist and refrain
from further proceeding in Civil Case No. 86-35880, entitled Republic Planters Bank, et al. vs.
Philippine Sugar Commission, et al.
In her Compliance, respondent judge explained that the TRO in question actually ordered her to
desist from enforcing the Decision of the respondent Court of Appeals in CAGR No. 17188, which is
the subject of the instant petition, and that her "only honest motivation "in making the inquiry is to see
to it that while the instant petition is pending ... , whatever funds may be owing to the Republic of the
Philippines is duly preserved and protected."
We find the explanation to be satisfactory. No malice attended the commission of the challenged act.
We accord to respondent judge good faith in her claimed desire to preserve and protect public funds.
Moreover, petitioners failed to show that the act in question caused any injury or damage to their
rights or interest.IN VIEW OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. Costs
against petitioners.