China Banking Corporation vs. Members of the Board of Trustees, HDMF

An administrative agency's implementing rules cannot impose conditions more stringent than those contemplated by the enabling statute; where the law uses "and/or," the disjunctive "or" must be given effect, meaning that either alternative alone suffices. The HDMF Board exceeded its rule-making power by requiring employers to have both a superior provident/retirement plan and a superior housing plan for waiver from Fund coverage, when Section 19 of P.D. No. 1752 used "and/or," signifying that either plan alone was sufficient.

Petitioners China Banking Corporation (CBC) and CBC Properties and Computer Center Inc. (CBC-PCCI) are employers covered by the Social Security System and were previously granted certificates of waiver from Home Development Mutual Fund (HDMF or Pag-IBIG Fund) coverage on the basis of their "Superior Retirement Plan" pursuant to Section 19 of P.D. No. 1752, the Home Development Mutual Fund Law of 1980. That provision allows employers with existing provident and/or employee-housing plans to register for annual certification of waiver or suspension from Fund coverage. In June 1994, Republic Act No. 7742 amended P.D. No. 1752 and authorized the HDMF Board of Trustees to promulgate implementing rules. The HDMF Board thereafter issued amendments and guidelines that changed the waiver requirement from the existence of either a superior provident/retirement plan or a superior housing plan to the concurrence of both.

Petitioners China Banking Corporation (CBC) and CBC Properties and Computer Center Inc. (CBC-PCCI) are employers who were granted by the Home Development Mutual Fund (HDMF) certificates of waiver dated July 7, 1995 and January 19, 1996, respectively, covering specified periods, for the reason of having a "Superior Retirement Plan" pursuant to Section 19 of P.D. No. 1752, the Home Development Mutual Fund Law of 1980. That provision allows employers with their own existing provident and/or employee-housing plans to register for annual certification of waiver or suspension from coverage or participation in the Fund. The Home Development Mutual Fund, otherwise known as the Pag-IBIG Fund, was created by P.D. No. 1530 and later made a body corporate by P.D. No. 1752, which mandated coverage upon all employers covered by the SSS and GSIS.

In June 1994, Republic Act No. 7742 was approved, amending P.D. No. 1752. Section 5 of R.A. No. 7742 directed the HDMF Board of Trustees to promulgate implementing rules within sixty days from approval. Pursuant to that authority, the Board promulgated the Implementing Rules and Regulations of R.A. No. 7742, published on August 1, 1994. Rule VII thereof, as originally promulgated, provided separate sections for waiver based on an existing provident or retirement plan (Section 1) and waiver based on an existing housing plan (Section 2), treating each as an independent ground for exemption.

Subsequently, at its Special Board Meeting on September 1, 1995, the HDMF Board adopted Amendments to the Implementing Rules. As amended, Rule VII consolidated the two sections into a single provision requiring that any employer must have a plan providing both provident/retirement and housing benefits, existing as of December 14, 1980, with both aspects superior to those offered by the Fund, to qualify for waiver or suspension of coverage. On October 23, 1995, the Board issued HDMF Circular No. 124-B, the Revised Guidelines and Procedure for Filing Application for Waiver or Suspension of Fund Coverage, which reiterated and detailed the requirement that an employer must have both a superior retirement/provident plan and a superior housing plan.

When petitioners CBC and CBC-PCCI applied for renewal of waiver of Fund coverage for the year 1996, their applications were disapproved on identical grounds: that the retirement plan was not superior to the Pag-IBIG Fund, and that the amended IRR required that a company must have both a retirement/provident plan and a housing plan superior to Pag-IBIG Funds to qualify for waiver. Petitioners thereafter filed a petition for certiorari and prohibition before the Regional Trial Court of Makati, seeking to annul and declare void the Amendment and the Guidelines for having been issued in excess of jurisdiction and with grave abuse of discretion, alleging that by requiring both plans the HDMF Board exceeded its rule-making power. The trial court granted the respondent's Motion to Dismiss by Order dated October 10, 1997, holding that certiorari would not lie as a substitute for a lost appeal, and denied reconsideration by Order dated December 19, 1997.

• Validity of the Challenged Issuances: Petitioners contended that they did not question the HDMF Board's power to issue rules and regulations implementing P.D. No. 1752 and Section 5 of R.A. No. 7742, but rather that the subject Amendment and Guidelines should be set aside and declared null and void for being irrevocably inconsistent with the enabling law, which requires as a pre-condition for exemption the existence of either a superior provident (retirement) plan or a superior housing plan, and not the concurrence of both.
• Propriety of Certiorari: Petitioners claimed that certiorari was the proper remedy because what was being questioned was not the denial of their application for renewal of waiver, which was admittedly quasi-judicial in nature, but rather the validity of the Amendment and Guidelines, which were a "patent nullity"; hence, the doctrine of exhaustion of administrative remedies did not apply.
• Error of the Court a Quo: Petitioners argued that the trial court erred in appreciating the issue by mistakenly noting that petitioners were contesting the authority of respondent to issue rules, and in observing that the matters being assailed were the denial of their application for waiver, thereby concluding that appeal was the proper remedy.

• No Pure Question of Law: Respondents contended that there was no question of law involved, as the interpretation of the phrase "and/or" was not purely a legal question and was susceptible of administrative determination.
• Quasi-Judicial Function: Respondents argued that in denying petitioners' application for waiver of coverage, the Board was exercising its quasi-judicial function, and its findings were generally accorded not only respect but even finality.
• Consistency with Enabling Law: Respondents maintained that the Amendment and the Guidelines were consistent with the enabling law, which was a piece of social legislation intended for both a savings generation and a house-building program.
• Interpretation of "and/or": Respondents claimed that the use of the words "and/or" in Section 19 of P.D. No. 1752, being "diametrically opposed in meaning," could only be used interchangeably and not together, and the option of making it either both or any one belonged to the Board of Trustees, which had the authority to issue rules and regulations for the effective implementation of the Pag-IBIG Fund Law.

• Propriety of Certiorari: Whether certiorari was the proper remedy to question the validity of the HDMF Amendment and Circular No. 124-B, notwithstanding the availability of an appeal from the denial of the waiver applications.
• Scope of Rule-Making Power: Whether the HDMF Board exceeded its rule-making authority by requiring, as a condition for waiver or suspension from Fund coverage, the existence of both a superior provident/retirement plan and a superior housing plan, when Section 19 of P.D. No. 1752 used the phrase "provident and/or employee-housing plans."

• Propriety of Certiorari: Yes. Certiorari was an appropriate remedy to question the validity of the challenged issuances of the HDMF, which were alleged to have been issued with grave abuse of discretion amounting to lack of jurisdiction; the rule on exhaustion of administrative remedies did not apply where the question was purely legal or the controverted act was patently illegal.
• Scope of Rule-Making Power: Yes. The HDMF Board exceeded its rule-making authority. Section 19 of P.D. No. 1752, by using "and/or," contemplated that the existence of either a superior provident plan or a superior housing plan was sufficient for waiver; requiring both plans impermissibly expanded the statutory requirements.

• Propriety of Certiorari: The trial court erred in ruling that petitioners should have exhausted their remedy of appeal from the orders denying their application for waiver to the Board of Trustees and thereafter to the Court of Appeals. Petitioners sought to annul or declare null and void the questioned Amendment and Guidelines, not merely the denial of their application. Certiorari is an appropriate remedy to question the validity of administrative issuances alleged to have been issued with grave abuse of discretion amounting to lack of jurisdiction. Among the accepted exceptions to the rule on exhaustion of administrative remedies are: (1) where the question in dispute is purely a legal one; and (2) where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction. Moreover, while certiorari may not be used as a substitute for a lost appeal, this rule should not be strictly enforced if the petition is genuinely meritorious, as rigid application of the rules that would frustrate substantial justice or bar the vindication of a legitimate grievance justifies exemption from the operation of the rules.

• Scope of Rule-Making Power: The controversy centered on the legal signification of the words "and/or" in Section 19 of P.D. No. 1752. The term "and/or" means that effect shall be given to both the conjunctive "and" and the disjunctive "or," or that one word or the other may be taken accordingly as one or the other will best effectuate the purpose intended by the legislature. It is used to avoid a construction which, by the use of "or" alone, would exclude the combination of several alternatives, or by the use of "and" alone, would exclude the efficacy of any one alternative standing alone. From the language of the enabling law, Section 19 intended that an employer with a provident plan or an employee housing plan superior to that of the Fund may obtain exemption from coverage. Paragraph (a) of Section 19 requires for annual certification of waiver that the features of the "plan or plans" are superior to the Fund, plainly contemplating that the existence of either plan is sufficient basis for exemption; the concurrence of both plans is more than sufficient but not required. By removing the disjunctive "or" in the implementing rules, the respondent Board exceeded its authority. Administrative regulations adopted under legislative authority must be in harmony with the provisions of the law and cannot extend the law itself. The rule-making power must be confined to details for regulating the mode of proceeding to carry into effect the law as enacted; it cannot be extended to amending or expanding statutory requirements or to embracing matters not covered by the statute. While requiring both plans might strengthen the Fund, the basic law must prevail as the embodiment of legislative purpose, and implementing rules cannot go beyond its terms and provisions.

• Scope of Administrative Rule-Making Power — Administrative regulations adopted under legislative authority must be in harmony with the provisions of the law and should be solely for the purpose of carrying into effect its general provisions. The law itself cannot be extended by such regulations. An administrative agency cannot amend an act of Congress. The rule-making power must be confined to details for regulating the mode of proceeding to carry into effect the law as enacted; it cannot be extended to amending or expanding statutory requirements or to embracing matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. In this case, the HDMF Board exceeded its authority by requiring both a superior provident/retirement plan and a superior housing plan for waiver, when the enabling statute used "and/or," signifying that either plan alone sufficed.

• Interpretation of "and/or" in Statutes — The term "and/or" means that effect shall be given to both the conjunctive "and" and the disjunctive "or," or that one word or the other may be taken accordingly as one or the other will best effectuate the purpose intended by the legislature as gathered from the whole statute. It is used to avoid a construction which, by the use of "or" alone, would exclude the combination of several alternatives, or by the use of "and" alone, would exclude the efficacy of any one alternative standing alone. The intention of the legislature in using "and/or" is that "and" and "or" are to be used interchangeably. Applied here, "provident and/or employee-housing plans" meant that either a provident plan or a housing plan, or both, was sufficient for waiver.

• Exceptions to Exhaustion of Administrative Remedies — Among the accepted exceptions to the rule on exhaustion of administrative remedies are: (1) where the question in dispute is purely a legal one; and (2) where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction. Additionally, certiorari may not be used as a substitute for a lost appeal, but this rule should not be strictly enforced if the petition is genuinely meritorious; where rigid application of the rules would frustrate substantial justice or bar the vindication of a legitimate grievance, courts are justified in exempting a particular case from the operation of the rules.

• "Department zeal may not be permitted to outrun the authority conferred by statute." — This formulation, cited from Radio Communication of the Philippines vs. Santiago, encapsulates the principle that administrative agencies cannot exceed the scope of their delegated authority, however well-intentioned their regulations may be.

• "It is well settled that the rules and regulations which are the product of a delegated power to create new or additional legal provisions that have effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency." — This passage states the controlling doctrine on the limits of administrative rule-making power, anchoring the Court's invalidation of the HDMF Board's requirement of both plans.

• "The rule making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned." — This passage defines the boundary between permissible rule-making and impermissible statutory amendment by administrative agencies, and is the ratio for declaring the HDMF Amendment and Circular No. 124-B null and void.

• People vs. Macarens, 79 SCRA 450 — Cited for the principle that administrative regulations adopted under legislative authority must be in harmony with the provisions of the law and cannot extend the law itself; an administrative agency cannot amend an act of Congress.
• Radio Communication of the Philippines vs. Santiago, 58 SCRA 493 — Cited for the maxim that "Department zeal may not be permitted to outrun the authority conferred by statute."
• Tañada vs. Angara, 272 SCRA 18 — Cited in support of the proposition that certiorari is an appropriate remedy to question the validity of administrative issuances alleged to have been issued with grave abuse of discretion amounting to lack of jurisdiction.
• Alindao vs. Joson, 264 SCRA 211 — Cited for the exceptions to the rule on exhaustion of administrative remedies, specifically where the question is purely legal or the controverted act is patently illegal or performed without jurisdiction.
• Dela Paz vs. Panis, 245 SCRA 242 — Cited for the principle that certiorari as a remedy may not be used as a substitute for a lost appeal, but this rule should not be strictly enforced if the petition is genuinely meritorious.
• Victoria Milling Co., Inc. vs. Social Security Commission, 114 Phil. 555 — Cited through Davis Administrative Law for the doctrine that administrative rules must be within the scope of statutory authority granted by the legislature.

• Section 19, P.D. No. 1752 (Home Development Mutual Fund Law of 1980) — Provides for waiver or suspension from coverage or participation in the Fund for employers with existing "provident and/or employee-housing plans," on the basis that the features of the "plan or plans" are superior to the Fund. The phrase "and/or" was held to mean that either a provident plan or a housing plan, or both, suffices for exemption; the HDMF Board's requirement of both plans was declared an impermissible expansion of this provision.
• Section 5, R.A. No. 7742 — Directs the HDMF Board of Trustees to promulgate rules and regulations necessary for the effective implementation of the Act within sixty days from approval. This provision was the source of the Board's rule-making authority, but that authority was held to be confined to carrying into effect the law as enacted and not to amending or expanding statutory requirements.
• Section 13, P.D. No. 1752 — Authorizes the Board to make and change needful rules and regulations for the effective administration of the Fund, including extension of coverage and waiver or suspension of coverage. This provision was acknowledged as the source of the Board's rule-making power, but was held not to authorize the Board to impose conditions beyond those contemplated by the statute.

Romero, Vitug, and Panganiban, JJ., concurred.