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

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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.

 

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Re: In the Matter of Clarification of Exemption from Payment of All Court and Sheriff’s Fees of Cooperatives Duly Registered [A.M. No. 12-2-03-0, March 13, 2012]

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Re: In the Matter of Clarification of Exemption from Payment of All Court and Sheriff’s Fees of Cooperatives Duly Registered

 [A.M. No. 12-2-03-0, March 13, 2012]

EN BANC, PEREZ, J.

 

Cooperatives; Court and Sheriff’s Fees; Rule 141; Judicial Rule-Making Power; Fiscal Autonomy of the Judiciary

 

The statutory exemption granted to cooperatives under Republic Act No. 6938, as amended by Republic Act No. 9520, cannot exempt cooperatives from the payment of legal fees imposed under Rule 141 of the Rules of Court. The authority to promulgate rules on pleading, practice, and procedure—including the imposition, assessment, and collection of legal fees—is vested exclusively in the Supreme Court under Article VIII, Section 5(5) of the 1987 Constitution. Any legislative grant of exemption that diminishes legal fees collected under Rule 141 impairs the Judiciary's constitutionally guaranteed fiscal autonomy and is therefore constitutionally infirm. 

 

Perpetual Help Community Cooperative (PHCCI), a cooperative duly registered under Republic Act No. 9520, filed a petition before the Supreme Court requesting the issuance of an order clarifying and implementing the statutory exemption of cooperatives from the payment of court and sheriff's fees. 

PHCCI relied on Section 6, Article 61 of Republic Act No. 9520, which substantially reproduced the exemption previously granted under Article 62(6) of Republic Act No. 6938. The provision exempts cooperatives from the payment of all court and sheriff's fees payable to the Philippine Government in connection with actions brought under the Cooperative Code or actions instituted by the Cooperative Development Authority to enforce obligations contracted in favor of cooperatives. 

PHCCI alleged that despite this statutory exemption and previous Supreme Court issuances, including A.M. No. 03-4-01-0 and Office of the Court Administrator Circular No. 44-2007, trial courts continued to assess filing fees and other legal fees against cooperatives whenever they instituted judicial actions. It cited its experience before the Municipal Trial Court in Cities of Dumaguete City, where the Executive Judge declined to implement the claimed exemption and advised that the matter be brought before the Supreme Court for a definitive ruling of nationwide application. 

The petition thus squarely presented the question of whether cooperatives remained exempt from the payment of legal fees under Rule 141 of the Rules of Court notwithstanding Republic Act No. 9520. 

 

Whether or not cooperatives duly registered under Republic Act No. 9520 remain exempt from the payment of legal fees and court fees under Rule 141 of the Rules of Court.

NO. The Supreme Court denied the petition and categorically ruled that cooperatives are no longer exempt from the payment of legal fees imposed under Rule 141. 

The Court first clarified that the "court fees" referred to in Republic Act No. 9520 encompass the legal fees imposed under Rule 141, including filing fees, docket fees, appeal fees, mediation fees, sheriff's fees, stenographer's fees, and commissioners' fees. More significantly, the Court held that subsequent jurisprudence had superseded the earlier recognition of statutory exemptions. It relied principally on Re: Petition for Recognition of the Exemption of the Government Service Insurance System (GSIS) from Payment of Legal Fees (A.M. No. 08-2-01-0), where the Court declared that the assessment and collection of legal fees form part of the Supreme Court's constitutional authority to promulgate rules concerning pleading, practice, and procedure. Since the 1987 Constitution removed Congress' former power to repeal, alter, or supplement procedural rules promulgated by the Court, legislative enactments purporting to exempt particular entities from legal fees imposed under Rule 141 may no longer prevail over the Rules of Court. 

The Court likewise reiterated its earlier ruling in Baguio Market Vendors Multi-Purpose Cooperative v. Cabato-Cortes, where it rejected a cooperative's claim of exemption from legal fees in an extrajudicial foreclosure proceeding, and its subsequent Resolution involving the National Power Corporation, where similar legislative exemptions from legal fees were likewise denied. These decisions consistently recognized that the constitutional allocation of powers prevents Congress from modifying procedural rules governing the assessment of legal fees. 

Accordingly, the Court declared that cooperatives may no longer invoke either Republic Act No. 6938 or Republic Act No. 9520 as a basis for exemption from the payment of legal fees imposed under Rule 141. To ensure uniform implementation nationwide, the Court directed the Office of the Court Administrator to issue a circular clarifying that cooperatives are not exempt from the payment of legal fees prescribed under the Rules of Court. Consequently, the petition of PHCCI was DENIED.

 


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Baguio Market Vendors MPC v. Hon. Iluminada Cabato-Cortes [G.R. No. 165922, February 26, 2010]

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Baguio Market Vendors MPC  v. Hon. Iluminada Cabato-Cortes

[G.R. No. 165922, February 26, 2010]

SECOND DIVISION, CARPIO, J.

 

Cooperatives; Exemption from Court and Sheriff’s Fees; Extrajudicial Foreclosure; Rule 141; Exclusive Rule-Making Power of the Supreme Court

 

The exemption from court and sheriff’s fees granted to cooperatives under Article 62(6) of Republic Act No. 6938 is limited to: (1) actions brought under the Cooperative Code; and (2) actions brought by the Cooperative Development Authority to enforce obligations in favor of cooperatives. It does not extend to a cooperative’s petition for extrajudicial foreclosure under Act No. 3135. Moreover, the imposition and regulation of legal fees form part of pleading, practice, and procedure, over which the Supreme Court has exclusive rule-making authority under the 1987 Constitution. Congress may no longer repeal, alter, or supplement such procedural rules.

 

Baguio Market Vendors Multi-Purpose Cooperative (BAMARVEMPCO) is a credit cooperative organized under Republic Act No. 6938, otherwise known as the Cooperative Code of the Philippines. In 2004, BAMARVEMPCO, acting as mortgagee, filed with the Clerk of Court of the Regional Trial Court of Baguio City a petition for the extrajudicial foreclosure of a real estate mortgage under Act No. 3135, as amended. Under Section 7(c), Rule 141 of the Rules of Court, petitions for extrajudicial foreclosure are subject to the payment of legal fees computed on the basis of the mortgagee’s claim. 

BAMARVEMPCO invoked Article 62(6) of Republic Act No. 6938 and claimed exemption from the payment of foreclosure fees. The provision exempts cooperatives from the payment of court and sheriff’s fees payable to the Philippine Government in connection with actions brought under the Cooperative Code or actions brought by the Cooperative Development Authority to enforce obligations contracted in favor of cooperatives. 

Executive Judge Iluminada Cabato-Cortes denied the request for exemption. She relied on Section 22, Rule 141, which exempts only the Republic of the Philippines, its agencies and instrumentalities, and certain actions instituted by local government treasurers or assessors. Since cooperatives were not included among the exempt entities, the trial court held that BAMARVEMPCO remained liable for the prescribed foreclosure fees. 

The Office of the Solicitor General supported BAMARVEMPCO’s position. It argued that Article 62(6), being substantive law, should prevail over Section 22, Rule 141, which it characterized as procedural. It also maintained that legal fees collected by the Judiciary remained fees payable to the Philippine Government because the Judiciary forms part of the government. 

The Court’s Office of the Chief Attorney opposed the petition. It maintained that the power to impose and regulate judicial fees is an exclusively judicial function under the 1987 Constitution and that Congress may no longer interfere with the Supreme Court’s rule-making authority over pleading, practice, and procedure. 

 

Whether or not BAMARVEMPCO’s petition for extrajudicial foreclosure was exempt from the payment of legal fees under Article 62(6) of Republic Act No. 6938.

NO. The Supreme Court denied the petition and held that Article 62(6) did not apply to BAMARVEMPCO’s extrajudicial foreclosure proceeding. The Court ruled that the exemption under Article 62(6) is expressly confined to two classes of actions:

1. actions brought under the Cooperative Code; and
2. actions brought by the Cooperative Development Authority to enforce the payment of obligations contracted in favor of cooperatives. 

BAMARVEMPCO’s petition did not fall under either category. The proceeding was not an action brought under Republic Act No. 6938 but a petition for extrajudicial foreclosure under Act No. 3135. Neither was it an action instituted by the Cooperative Development Authority on behalf of a cooperative. Thus, the statutory exemption could not be invoked.

The Court emphasized that exemptions must be applied strictly according to the terms of the law. Since the language of Article 62(6) was specific and limited, it could not be expanded to include all judicial or quasi-judicial proceedings initiated by cooperatives. 

The Supreme Court further discussed the constitutional allocation of rule-making powers. Article VIII, Section 5(5) of the 1987 Constitution removed Congress’ authority to repeal, alter, or supplement procedural rules promulgated by the Supreme Court. Consequently, the power to issue rules concerning pleading, practice, procedure, and legal fees became the exclusive domain of the Judiciary. 

Thus, even assuming that Article 62(6) of the Cooperative Code (RA 9520) could be interpreted broadly as exempting cooperatives from legal fees, such legislative exemption could not override Rule 141 insofar as it concerns court fees imposed pursuant to the Supreme Court’s exclusive constitutional authority. 

The Court rejected the distinction drawn by the trial court regarding whether the fees accrued to the National Treasury or to a special fund. The decisive point was not the destination of the fees but the nature of legal fees as an integral component of judicial procedure governed by the Supreme Court’s constitutional rule-making power. 

Accordingly, the Supreme Court DENIED the petition and AFFIRMED the Orders of the Executive Judge of the Regional Trial Court of Baguio City requiring BAMARVEMPCO to pay the prescribed extrajudicial foreclosure fees.




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Dumaguete Cathedral Credit Cooperative v. CIR [G.R. No. 182722, January 22, 2010]

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Dumaguete Cathedral Credit Cooperative v. CIR

[G.R. No. 182722, January 22, 2010]

SECOND DIVISION, DEL CASTILLO, J

 

Cooperatives; Final Withholding Tax; Interest on Members’ Savings and Time Deposits; Preferential Tax Treatment; Liberal Construction in Favor of Cooperatives and Their Members

 

A duly registered cooperative is not required to withhold the 20% final tax on interest paid on the savings and time deposits of its members. Such deposits are neither currency bank deposits nor deposit substitutes contemplated under Section 24(B)(1) of the National Internal Revenue Code. The preferential tax treatment granted to cooperatives extends to their members and must be liberally construed in their favor, consistent with the State policy of fostering cooperatives as instruments of social justice and economic development. 

 

Dumaguete Cathedral Credit Cooperative (DCCCO) is a credit cooperative duly registered with and regulated by the Cooperative Development Authority. It was established to increase the income and purchasing power of its members, encourage savings and thrift, mobilize capital, and extend loans to members for provident and productive purposes.

In November 2001, the Bureau of Internal Revenue authorized an examination of DCCCO’s books of accounts and accounting records for all internal revenue taxes covering taxable years 1999 and 2000. The audit resulted in the issuance of pre-assessment notices for deficiency withholding taxes involving, among others, the honoraria and per diems of the cooperative’s Board of Directors, security and janitorial services, legal and professional fees, commissions, and interest paid on the savings and time deposits of its members. 

DCCCO agreed to pay the withholding taxes relating to the honoraria, compensation, security and janitorial services, commissions, and professional fees. It subsequently availed itself of the BIR’s Voluntary Assessment and Abatement Program and paid the corresponding amounts. It disputed, however, the assessment relating to the interest on its members’ savings and time deposits. 

On April 24, 2003, the BIR issued formal demand letters and assessment notices requiring DCCCO to pay deficiency withholding taxes, inclusive of penalties, amounting to approximately ₱1.489 million for 1999 and ₱1.463 million for 2000. DCCCO protested the assessments before the Commissioner of Internal Revenue. When the Commissioner failed to act within the prescribed 180-day period, DCCCO filed a Petition for Review before the Court of Tax Appeals. 

The CTA First Division partially granted the petition. It cancelled the assessments relating to the honoraria, per diems, security and janitorial services, commissions, and professional fees, but affirmed the assessments for deficiency withholding taxes on interest paid on the members’ savings and time deposits. It ordered DCCCO to pay ₱1,280,145.89 for 1999 and ₱1,357,881.14 for 2000, plus 20% delinquency interest. 

The CTA En Banc affirmed. It ruled that Section 24(B)(1) of the NIRC, in relation to Revenue Regulations No. 2-98, imposed a 20% final tax on interest from currency bank deposits, deposit substitutes, trust funds, and “similar arrangements.” It considered the members’ deposits with DCCCO as falling within the phrase “similar arrangements,” thereby requiring the cooperative to withhold the final tax. 

DCCCO elevated the case to the Supreme Court. It argued that Section 24(B)(1) applied only to banking transactions and not to members’ deposits maintained with a cooperative. It relied on BIR Ruling No. 551-888 and BIR Ruling DA-591-2006, which declared that cooperatives were not required to withhold tax on interest paid on the savings and time deposits of their members. It further invoked the preferential tax treatment granted to cooperatives and their members under Republic Act No. 6938, as amended by Republic Act No. 9520. 

 

Whether or not DCCCO was liable for deficiency withholding taxes on the interest paid on the savings and time deposits of its members for taxable years 1999 and 2000, together with the corresponding delinquency interest.

NO. The Supreme Court granted the petition and held that DCCCO was not liable for the assessed deficiency withholding taxes and delinquency interest. 

The Court first sustained DCCCO’s reliance on BIR Ruling No. 551-888, which expressly declared that cooperatives are not required to withhold taxes on interest paid on the savings and time deposits of their members. The Court rejected the CTA’s interpretation that the ruling applied only when the members’ funds were deposited in a bank. Nothing in the language of the ruling imposed such a qualification. Instead, it categorically stated that because the interest contemplated by the tax provision referred to interest paid by banks on currency deposits and deposit substitutes, cooperatives were not the entities required to withhold the corresponding tax. 

This interpretation was reiterated in BIR Ruling DA-591-2006, which clarified that members’ deposits with cooperatives are neither currency bank deposits nor deposit substitutes. Consequently, the 20% final withholding tax under Sections 24(B)(1) and 27(D)(1) of the NIRC did not apply to the interest derived from such deposits. 

The Court emphasized that interpretations issued by administrative agencies tasked with implementing a law are entitled to great weight and consideration, unless they clearly conflict with the governing statute, the Constitution, or other laws. In this case, the BIR rulings were consistent with the constitutional and statutory policy favoring cooperatives.

The Court further ruled that Section 24(B)(1) of the NIRC must be read together with the Cooperative Code of the Philippines. Under Republic Act No. 6938, duly registered cooperatives that transact only with their members are exempt from government taxes and fees. Cooperatives transacting with both members and non-members are likewise not subject to tax on their transactions with members. 

Although the earlier Cooperative Code expressly referred to the exemption of cooperatives, the Court held that the exemption necessarily extended to their members. Cooperatives exist primarily for the benefit of their members, with the objective of increasing their income, savings, investments, and productivity. To limit the exemption solely to the cooperative entity while taxing the transactions of its members would defeat the very purpose of the cooperative system. 

The Court also noted that Republic Act No. 9520 expressly retained and clarified the exemption. Article 61 of the amended Cooperative Code provides that transactions of members with their cooperative shall not be subject to taxes and fees, including final taxes on members’ deposits. This amendment confirmed the prior administrative interpretation that Section 24(B)(1) of the NIRC did not apply to deposits maintained by cooperative members. 

The Court treated the amendment as legislative approval of the BIR’s long-standing interpretation. Under the principle of legislative approval of administrative construction by reenactment, the reenactment or amendment of a law substantially consistent with an existing executive interpretation indicates congressional adoption of that interpretation.

Finally, the Court invoked Article XII, Section 15 of the Constitution, which recognizes cooperatives as instruments of social justice and economic development. It likewise referred to the constitutional policy of promoting social justice and creating economic opportunities based on self-reliance. An interpretation exempting cooperative members from the final tax on their deposits was therefore more consistent with both the letter and spirit of the Constitution. 

Accordingly, the Supreme Court GRANTED the petition, REVERSED AND SET ASIDE the Decision and Resolution of the CTA En Banc, and CANCELLED the assessments for deficiency withholding taxes on the interest from the savings and time deposits of DCCCO’s members for taxable years 1999 and 2000, including the corresponding 20% delinquency interest.

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