PCAB v. Central Mindanao Construction MPC [G.R. No. 242296, July 31, 2024]

 CASE DIGEST

PCAB v. Central Mindanao Construction MPC

[G.R. No. 242296, July 31, 2024]

FIRST DIVISION, ZALAMEDA, J.

 

Administrative Rule-Making; Ultra Vires Administrative Issuances; Presidential Approval; Construction Cooperatives; State Policy on Cooperatives 

An administrative agency may issue rules and regulations only within the authority granted by its enabling law. Where the enabling statute expressly requires presidential approval before administrative rules become effective, compliance with such requirement is mandatory. Any administrative issuance promulgated without the required approval, particularly one that enlarges, restricts, or modifies the law by imposing qualifications not contemplated by Congress, is an ultra vires act and is void. Administrative agencies cannot amend, supplant, or curtail statutory rights through subordinate legislation. Likewise, statutes governing cooperatives must be liberally construed in favor of promoting and protecting cooperatives in accordance with the Constitution and the Philippine Cooperative Code.

 

Central Mindanao Construction Multi-Purpose Cooperative (CMCM Cooperative) is a duly registered service multi-purpose cooperative under the Cooperative Development Authority (CDA). Since 1997, it had been issued successive contractor's licenses by the Philippine Contractors Accreditation Board (PCAB), authorizing it to engage in construction activities, particularly low-cost housing and similar projects. 

On December 6, 2011, PCAB adopted Board Resolution No. 915, Series of 2011, declaring that cooperatives would no longer be granted or allowed to renew contractor's licenses unless they first converted themselves into business corporations. The resolution was based on PCAB's view that Republic Act No. 9520 (Philippine Cooperative Code of 2008) did not expressly authorize cooperatives to engage in construction contracting. Licensed cooperatives were granted only until contractor fiscal year 2012–2013 to renew their licenses, after which conversion into corporations became a mandatory prerequisite for renewal. 

Because of the resolution, CMCM Cooperative stood to lose its contractor's license and consequently its construction business. It filed before the Regional Trial Court an action for declaratory relief and injunction seeking the nullification of Board Resolution No. 915. It argued that the resolution violated the Constitution and the Cooperative Code by compelling cooperatives to abandon their juridical nature as cooperatives in order to continue engaging in construction contracting. 

The RTC ruled in favor of CMCM Cooperative and enjoined the implementation of Board Resolution No. 915, holding that under Section 5 of Republic Act No. 4566 (Contractors' License Law), rules and regulations issued by PCAB require the approval of the President before becoming effective. Since PCAB failed to prove that the President approved the resolution, its implementation was premature. 

PCAB appealed to the Court of Appeals. The CA dismissed the appeal because it raised only pure questions of law, which should have been elevated directly to the Supreme Court through a petition for review on certiorari under Rule 45. PCAB thereafter filed the present petition before the Supreme Court. 

 

Issue No. 1: Whether the Court of Appeals correctly dismissed PCAB's appeal for raising only questions of law.

YES. The Supreme Court held that the Court of Appeals correctly dismissed the appeal pursuant to Rule 50, Section 2 of the Rules of Court. The only issue raised by PCAB was the legal validity of Board Resolution No. 915 and whether presidential approval was necessary before its implementation. Since resolution of the case required only the interpretation of law and involved no factual dispute, the proper remedy was a petition for review on certiorari directly before the Supreme Court under Rule 45, not an ordinary appeal to the Court of Appeals. 

 

Issue No. 2: Whether Board Resolution No. 915 required prior approval of the President before it could become effective.

YES. The Court ruled that Section 5 of Republic Act No. 4566 expressly requires presidential approval before any rule or regulation issued by PCAB to carry out the provisions of the Contractors' License Law may become effective. The statute provides that PCAB "may, with the approval of the President of the Philippines, issue such rules and regulations as may be necessary to carry out the provisions of the Act." Board Resolution No. 915 clearly regulated the qualifications for the issuance and renewal of contractor's licenses. Although denominated as a board resolution, its substance constituted an administrative regulation implementing Republic Act No. 4566. Consequently, presidential approval was indispensable before it could acquire legal effect. 

 

Issue No. 3: Whether the form of the issuance—as a board resolution instead of implementing rules and regulations—dispensed with the requirement of presidential approval.

NO. The Court emphasized that the substance, not the title, determines the nature of an administrative issuance. Regardless of whether PCAB denominated its issuance as a board resolution, memorandum, circular, or regulation, if it implements or carries out Republic Act No. 4566, it remains subject to the statutory requirement of presidential approval. Administrative agencies cannot evade statutory requirements simply by changing the nomenclature of their issuances. 

 

Issue No. 4: Whether Board Resolution No. 915 was valid despite the absence of presidential approval.

NO. The Court declared Board Resolution No. 915 null and void. PCAB admitted no evidence showing that the President approved the resolution. Since Section 5 of Republic Act No. 4566 expressly requires presidential approval before PCAB rules may be implemented, the absence of such approval rendered the resolution legally ineffective. The Court likewise noted that PCAB's own rules required confirmation by the Construction Industry Authority of the Philippines (CIAP), which was likewise absent. 

 

Issue No. 5: Whether Board Resolution No. 915 constituted an ultra vires administrative issuance.

YES. The Court held that the resolution was an illegal ultra vires act. Administrative agencies possess only those powers expressly granted by law. They cannot enlarge, amend, restrict, or modify the statute they are tasked to implement. By requiring licensed cooperatives to convert into corporations before they could continue engaging in construction contracting, PCAB imposed an entirely new qualification nowhere found in Republic Act No. 4566 or Republic Act No. 9520. Consequently, the resolution exceeded PCAB's delegated authority and was void ab initio. 

 

Issue No. 6: Whether PCAB may prohibit service cooperatives from engaging in construction contracting on the ground that Republic Act No. 9520 does not expressly recognize "construction cooperatives."

NO. The Court rejected PCAB's interpretation of Republic Act No. 9520. Article 23(e) of the Philippine Cooperative Code defines a service cooperative as one engaged in housing, labor, professional, communication, electric power, transportation, insurance, and "other services." The phrase "other services" is deliberately broad and does not limit the types of services which a cooperative may lawfully render. Construction contracting, particularly involving housing and infrastructure services rendered by a duly organized service cooperative, falls within this statutory authority. Thus, nothing in Republic Act No. 9520 prohibited CMCM Cooperative from engaging in construction activities. 

 

Issue No. 7: Whether Board Resolution No. 915 violated the constitutional policy of promoting and protecting cooperatives.

YES. The Court held that the resolution ran contrary to both the Constitution and the Philippine Cooperative Code.

The Constitution expressly encourages cooperatives as instruments of social justice and economic development under:

• Article II, Section 10;
• Article XII, Sections 1 and 15; and
• Article XIII, Section 2. 

Similarly, Republic Act No. 6938 and Republic Act No. 9520 embody the State policy of promoting the growth and viability of cooperatives.

By compelling cooperatives to abandon their cooperative identity and convert into corporations before engaging in construction activities, the resolution undermined this constitutional policy rather than advanced it. 

 

Issue No. 8: Whether administrative agencies may impose additional qualifications not found in the enabling statute.

NO. The Court reiterated that administrative agencies exercise only delegated legislative power. Their regulations must merely implement—not amend or supplement—the statute.

Administrative rules cannot:

• enlarge statutory requirements;
• impose additional qualifications;
• restrict rights granted by law; or
• modify legislative policy. 

Since neither Republic Act No. 4566 nor Republic Act No. 9520 required cooperatives to incorporate before engaging in construction contracting, PCAB could not validly create such requirement through subordinate legislation. 

 

Issue No. 9: Whether Board Resolution No. 915 could validly prohibit renewal of contractor's licenses previously granted to cooperatives.

NO. The Court ruled that PCAB could not deny renewal solely because an applicant remained organized as a cooperative. The resolution effectively deprived existing licensed cooperatives of their ability to continue their lawful business despite the absence of any statutory prohibition. Such restriction constituted an unauthorized limitation on rights already recognized by law. 

 

DISPOSITION

The Supreme Court DENIED the Petition and AFFIRMED the Decision of the Court of Appeals and, effectively, the judgment of the Regional Trial Court.

Accordingly:

1. PCAB Board Resolution No. 915, Series of 2011, was declared null and void.
2. PCAB was permanently enjoined from implementing the resolution.
3. Cooperatives may continue engaging in construction contracting without being compelled to convert into business corporations, absent any valid statutory prohibition.
4. The Court reaffirmed that administrative agencies cannot issue regulations beyond the authority granted by law and that rules requiring presidential approval cannot take effect without such approval.

 

CLICK HERE TO READ FULL TEXT