[G.R. No. 111953.

December 12, 1997]

HON. RENATO C. CORONA, in his capacity as Assistant Secretary for Legal Affairs, HON. JESUS B. GARCIA, as Acting Secretary,
DOTC and ROGELIO A. DAYAN, in his capacity as General Manager of Philippine Ports Authority, vs. UNITED HARBOR PILOTS
ASSOCIATION OF THE PHILIPPINES and MANILA PILOTS ASSOCIATION,

ISSUE: In issuing Administrative Order No., limiting the term of appointment of harbor pilots to one year subject to yearly
renewal or cancellation, did the Philippine Ports Authority (PPA) violate respondents right to exercise their profession and
their right to due process of law?

RULING: YES

It is readily apparent that PPA-AO No. 04-92 unduly restricts the right of harbor pilots to enjoy their profession before their
compulsory retirement. In the past, they enjoyed a measure of security knowing that after passing five examinations and
undergoing years of on-the-job training, they would have a license which they could use until their retirement, unless sooner
revoked by the PPA for mental or physical unfitness. Under the new issuance, they have to contend with an annual
cancellation of their license which can be temporary or permanent depending on the outcome of their performance
evaluation. Veteran pilots and neophytes alike are suddenly confronted with one-year terms which ipso facto expire at the
end of that period. Renewal of their license is now dependent on a rigid evaluation of performance which is conducted only
after the license has already been cancelled. Hence, the use of the term renewal. It is this pre-evaluation cancellation which
primarily makes PPA-AO No. 04-92 unreasonable and constitutionally infirm. In a real sense, it is a deprivation of property
without due process of law.

The Court notes that PPA-AO No. 04-92 and PPA-MO No. 08-92 are already covered by PPA-AO No. 03-85, which is still
operational. Respondents are correct in pointing out that PPA-AO No. 04-92 is a surplusage and, therefore, an unnecessary
enactment. PPA-AO 03-85 is a comprehensive order setting forth the Rules and Regulations Governing Pilotage Services, the
Conduct of Pilots and Pilotage Fees in Philippine Ports. It provides, inter alia, for the qualification, appointment, performance
evaluation, disciplining and removal of harbor pilots - matters which are duplicated in PPA-AO No. 04-92 and its
implementing memorandum order. Since it adds nothing new or substantial, PPA-AO No. 04-92 must be struck down.

Section 1 of the Bill of Rights lays down what is known as the due process clause of the Constitution, viz.:

SECTION 1. No person shall be deprived of life, liberty, or property without due process of law, x x x.

In order to fall within the aegis of this provision, two conditions must concur, namely, that there is a deprivation and that
such deprivation is done without proper observance of due process. When one speaks of due process of law, however, a
distinction must be made between matters of procedure and matters of substance.

procedural due process refers to the method or manner by which the law is enforced, while substantive due process
requires that the law itself, not merely the procedures by which the law would be enforced, is fair, reasonable, and just.

PPA-AO No. 04-92 must be examined in light of this distinction.

Respondents argue that due process was not observed in the adoption of PPA-AO No. 04-92 allegedly because no hearing
was conducted whereby relevant government agencies and the pilots themselves could ventilate their views. They are
obviously referring to the procedural aspect of the enactment. As long as a party was given the opportunity to defend his
interests in due course, he cannot be said to have been denied due process of law, for this opportunity to be heard is the
very essence of due process. Moreover, this constitutional mandate is deemed satisfied if a person is granted an opportunity
to seek reconsideration of the action or ruling complained of.

In the case at bar, respondents questioned PPA-AO No. 04-92 no less than four times before the matter was finally elevated
to this Tribunal. Their arguments on this score, however, fail to persuade. While respondents emphasize that the Philippine
Coast Guard, which issues the licenses of pilots after administering the pilots examinations, was not consulted, the facts
show that the MARINA, which took over the licensing function of the Philippine Coast Guard, was duly represented in the
Board of Directors of the PPA. Thus, petitioners correctly argued that, there being no matters of naval defense involved in
the issuance of the administrative order, the Philippine Coast Guard need not be consulted. Neither does the fact that the
pilots themselves were not consulted in any way taint the validity of the administrative order. As a general rule, notice and
hearing, as the fundamental requirements of procedural due process, are essential only when an administrative body
exercises its quasi-judicial function. In the performance of its executive or legislative functions, such as issuing rules and
regulations, an administrative body need not comply with the requirements of notice and hearing.

Upon the other hand, it is also contended that the sole and exclusive right to the exercise of harbor pilotage by pilots is a
settled issue. Respondents aver that said right has become vested and can only be withdrawn or shortened by observing the
constitutional mandate of due process of law. Their argument has thus shifted from the procedural to one of substance. It is
here where PPA-AO No. 04-92 fails to meet the condition set by the organic law.

There is no dispute that pilotage as a profession has taken on the nature of a property right. Even petitioner Corona
recognized this when he stated in his decision that (t)he exercise of ones profession falls within the constitutional guarantee
against wrongful deprivation of, or interference with, property rights without due process. He merely expressed the opinion
that (i)n the limited context of this case, PPA-AO 04-92 does not constitute a wrongful interference with, let alone a wrongful
deprivation of, the property rights of those affected thereby, and that PPA-AO 04-92 does not forbid, but merely regulates,
the exercise by harbor pilots of their profession. As will be presently demonstrated, such supposition is gravely erroneous
and tends to perpetuate an administrative order which is not only unreasonable but also superfluous.

Pilotage, just like other professions, may be practiced only by duly licensed individuals. Licensure is the granting of license
especially to practice a profession. It is also the system of granting licenses (as for professional practice) in accordance with
established standards. A license is a right or permission granted by some competent authority to carry on a business or do
an act which, without such license, would be illegal.

Before harbor pilots can earn a license to practice their profession, they literally have to pass through the proverbial eye of a
needle by taking, not one but five examinations, each followed by actual training and practice.

Their license is granted in the form of an appointment which allows them to engage in pilotage until they retire at the age
70 years. This is a vested right. Under the terms of PPA-AO No. 04-92, (a)ll existing regular appointments which have been
previously issued by the Bureau of Customs or the PPA shall remain valid up to 31 December 1992 only, and (a)ll
appointments to harbor pilot positions in all pilotage districts shall, henceforth, be only for a term of one (1) year from date
of effectivity subject to renewal or cancellation by the Authority after conduct of a rigid evaluation of performance.

Finally, respondents insinuation that then PPA General Manager Dayan was responsible for the issuance of the questioned
administrative order may have some factual basis; after all, power and authority were vested in his office to propose rules
and regulations. The trial courts finding of animosity between him and private respondents might likewise have a grain of
truth. Yet the number of cases filed in court between private respondents and Dayan, including cases which have reached
this Court, cannot certainly be considered the primordial reason for the issuance of PPA-AO No. 04-92. In the absence of
proof to the contrary, Dayan should be presumed to have acted in accordance with law and the best of professional motives.
In any event, his actions are certainly always subject to scrutiny by higher administrative authorities.

WHEREFORE, the instant petition is hereby DISMISSED and the assailed decision of the court a quo dated September 6, 1993,
in Civil Case No. 93-65673 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.
XXXX

The PPA Pursuant to its power of control, regulation, and supervision of pilots and the pilotage profession, the PPA
promulgated PPA-AO-03-85 , which embodied the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots
and Pilotage Fees in Philippine Ports. These rules mandate, inter alia, that aspiring pilots must be holders of pilot licenses and
must train as probationary pilots in outports for three months and in the Port of Manila for four months. It is only after they
have achieved satisfactory performance that they are given permanent and regular appointments by the PPA itself to
exercise harbor pilotage until they reach the age of 70, unless sooner removed by reason of mental or physical unfitness by
the PPA General Manager. Harbor pilots in every harbor district are further required to organize themselves into pilot
associations which would make available such equipment as may be required by the PPA for effective pilotage services. In
view of this mandate, pilot associations invested in floating, communications, and office equipment. In fact, every new pilot
appointed by the PPA automatically becomes a member of a pilot association and is required to pay a proportionate
equivalent equity or capital before being allowed to assume his duties, as reimbursement to the association concerned of
the amount it paid to his predecessor.

Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-92 whose avowed policy was to instill
effective discipline and thereby afford better protection to the port users through the improvement of pilotage services. This
was implemented by providing therein that all existing regular appointments which have been previously issued either by the
Bureau of Customs or the PPA shall remain valid up to 31 December 1992 only and that all appointments to harbor pilot
positions in all pilotage districts shall, henceforth, be only for a term of one (1) year from date of effectivity subject to yearly
renewal or cancellation by the Authority after conduct of a rigid evaluation of performance.

respondents United Harbor Pilots Association and the Manila Pilots Association, questioned PPA-AO No. 04-92 before the
Department of Transportation and Communication, but they were informed by then DOTC Secretary Jesus B. Garcia that the
matter of reviewing, recalling or annulling PPAs administrative issuances lies exclusively with its Board of Directors as its
governing body.

the PPA issued Memorandum Order No. 08-92 which laid down the criteria or factors to be considered in the reappointment
of harbor pilots, viz.: (1) Qualifying Factors: safety record and physical/mental medical exam report and (2) Criteria for
Evaluation: promptness in servicing vessels, compliance with PPA Pilotage Guidelines, number of years as a harbor pilot,
average GRT of vessels serviced as pilot, awards/commendations as harbor pilot, and age.
Respondents reiterated their request for the suspension of the implementation of PPA-AO No. 04-92, but Secretary Garcia
insisted on his position that the matter was within the jurisdiction of the Board of Directors of the PPA. Compas appealed
this ruling to the Office of the President (OP), reiterating his arguments before the DOTC.

OP issued an order directing the PPA to hold in abeyance the implementation of PPA-AO No. 04-92. In its answer, the PPA
countered that said administrative order was issued in the exercise of its administrative control and supervision over harbor
pilots under Section 6-a (viii), Article IV of P. D. No. 857, as amended, and it, along with its implementing guidelines, was
intended to restore order in the ports and to improve the quality of port services.

the OP, through then Assistant Executive Secretary for Legal Affairs Renato C. Corona, dismissed the appeal/petition and
lifted the restraining order issued earlier. He concluded that PPA-AO No. 04-92 applied to all harbor pilots and, for all intents
and purposes, was not the act of Dayan, but of the PPA, which was merely implementing Section 6 of P.D. No. 857,
mandating it to control, regulate and supervise pilotage and conduct of pilots in any port district.

On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing memoranda and circulars,
Secretary Corona opined that:

The exercise of one’s profession falls within the constitutional guarantee against wrongful deprivation of, or interference
with, property rights without due process. In the limited context of this case, PPA-AO 04-92 does not constitute a wrongful
interference with, let alone a wrongful deprivation of, the property rights of those affected thereby. As may be noted, the
issuance aims no more than to improve pilotage services by limiting the appointment to harbor pilot positions to one year,
subject to renewal or cancellation after a rigid evaluation of the appointees performance.

PPA-AO 04-92 does not forbid, but merely regulates, the exercise by harbor pilots of their profession in PPAs jurisdictional
area.

Finally, as regards the alleged absence of ample prior consultation before the issuance of the administrative order, Secretary
Corona cited Section 26 of P.D. No. 857, which merely requires the PPA to consult with relevant Government agencies. Since
the PPA Board of Directors is composed of the Secretaries of the DOTC, the Department of Public Works and Highways, the
Department of Finance, and the Department of Environment and Natural Resources, as well as the Director-General of the
National Economic Development Agency, the Administrator of the Maritime Industry Authority (MARINA), and the private
sector representative who, due to his knowledge and expertise, was appointed by the President to the Board, he concluded
that the law has been sufficiently complied with by the PPA in issuing the assailed administrative order.

Consequently, respondents filed a petition for certiorari, prohibition and injunction with prayer for the issuance of a
temporary restraining order and damages, before the RTC Manila, the trial court rendered the following judgment:

WHEREFORE, for all the foregoing, this Court hereby rules that:

1. Respondents (herein petitioners) have acted in excess of jurisdiction and with grave abuse of discretion and in a
capricious, whimsical and arbitrary manner in promulgating PPA Administrative Order 04-92 including all its implementing
Memoranda, Circulars and Orders;

2. PPA Administrative Order 04-92 and its implementing Circulars and Orders are declared null and void;

3. The respondents are permanently enjoined from implementing PPA Administrative Order 04-92 and its implementing
Memoranda, Circulars and Orders.

The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized pilotage as a profession and,
therefore, a property right under Callanta v. Carnation Philippines, Inc. Thus, abbreviating the term within which that
privilege may be exercised would be an interference with the property rights of the harbor pilots. Consequently, any
withdrawal or alteration of such property right must be strictly made in accordance with the constitutional mandate of due
process of law. This was apparently not followed by the PPA when it did not conduct public hearings prior to the issuance of
PPA-AO No. 04-92; respondents allegedly learned about it only after its publication in the newspapers. From this decision,
petitioners elevated their case to this Court on certiorari.

PPA-AO No. 04-92 was issued in stark disregard of respondents right against deprivation of property without due process of
law. Consequently, the instant petition must be denied.