The Supreme Court ruled that the Home Development Mutual Fund (HDMF) exceeded its authority by requiring employers to have both provident/retirement and housing plans to be exempt from Pag-IBIG Fund coverage. This decision reaffirms that administrative agencies cannot impose stricter conditions than those outlined in the enabling law. It ensures that employers with superior retirement or housing plans, as initially intended by law, can still be exempt, preventing undue burdens and upholding the original legislative intent. The ruling safeguards employers’ rights while reinforcing the principle that implementing rules must remain consistent with the law they seek to enforce.

The ‘And/Or’ Predicament: Can Implementing Rules Redefine Statutory Exemptions?

This case revolves around Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles (PETITIONER), a law firm, and the Home Development Mutual Fund (HDMF). PETITIONER sought exemption from Pag-IBIG Fund coverage due to its superior retirement plan, as allowed under Section 19 of Presidential Decree (P.D.) No. 1752, amended by Republic Act (R.A.) No. 7742. However, the HDMF denied the application based on its amended rules requiring both a provident/retirement and a housing plan for exemption. The central legal question is whether the HDMF’s amendments validly imposed a stricter condition than the original law intended, which used the term “and/or,” suggesting either plan could suffice for exemption. This dispute highlights the balance between an administrative agency’s rule-making power and the need to adhere to the legislative intent of the enabling statute.

The HDMF Board of Trustees, exercising its rule-making power under Section 5 of R.A. No. 7742, issued Board Resolution No. 1011, Series of 1995, amending the implementing rules. This amendment stipulated that for a company to be entitled to a waiver or suspension of Fund coverage, it must have a plan providing for both provident/retirement and housing benefits superior to those provided under the Pag-IBIG Fund. This requirement contrasted with the original provision in P.D. No. 1752, as amended, which used the term “and/or,” implying that either a superior retirement or housing plan could suffice for exemption. The HDMF argued that this change was necessary to clarify the confusion created by the use of “and/or” in the law.

PETITIONER contested the HDMF’s denial of its application, asserting that the 1995 Amendments were inconsistent with the enabling law. They argued that P.D. No. 1752, as amended by R.A. No. 7742, merely required either a superior provident/retirement plan or a superior housing plan for exemption, not the concurrence of both. Citing Section 19 of P.D. No. 1752, PETITIONER claimed its superior provident plan entitled it to exemption. The law firm also challenged the 1996 Amendment that abolished the exemption granted by Section 19, arguing that such a repeal involved legislative power, which could not be delegated to the HDMF.

The Court of Appeals upheld the HDMF’s position, stating that the coverage under the Home Development Mutual Fund was mandatory and that the amendments to the implementing rules were valid. The appellate court reasoned that the HDMF Board of Trustees was authorized to promulgate rules and regulations concerning the extension, waiver, or suspension of coverage under the Pag-IBIG Fund. However, the Supreme Court reversed this decision, siding with PETITIONER. The Court emphasized that administrative agencies’ rule-making power is limited and that implementing rules cannot contradict the enabling law.

The Supreme Court referenced its earlier decision in China Banking Corp. v. The Members of the Board of Trustees of the HDMF, which directly addressed the validity of the 1995 Amendments. In that case, the Court declared Section 1 of Rule VII of the Amendments to the Rules and Regulations Implementing R.A. No. 7742, and HDMF Circular No. 124-B, null and void. These provisions required employers to have both a provident/retirement plan and a housing plan superior to the benefits offered by the Fund to qualify for a waiver or suspension of Fund coverage. The Court clarified the legal meaning of “and/or,” stating that it should be interpreted in its ordinary signification, meaning either or both.

The Court further elaborated on the interpretation of “and/or”, quoting:

“The term and/or’ means that the 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. The term is used to avoid a construction which by the use of the disjunctive “or” alone will exclude the combination of several of the alternatives or by the use of the conjunctive “and” will exclude the efficacy of any one of the alternatives standing alone.”

Based on this interpretation, the Court concluded that Section 19 of P.D. No. 1752 intended that an employer with either a superior provident plan or an employee housing plan could obtain exemption from coverage. The Court noted that if the law had intended that the employer should have both plans, it would have used the word “and” instead of “and/or”. The Court found that the HDMF Board, by removing the disjunctive word “or” in the implementing rules, had exceeded its authority.

The Supreme Court acknowledged the HDMF Board’s rule-making power under Section 5 of R.A. No. 7742 and Section 13 of P.D. No. 1752. However, it reiterated the principle that administrative rules and regulations must be within the scope of the statutory authority granted by the legislature to the administrative agency. The regulation must be germane to the objects and purposes of the law and conform to the standards prescribed by law. In this case, the Court found that the HDMF Board’s requirement for both provident/retirement and housing benefits effectively amended Section 19 of P.D. No. 1752.

The Court stated:

In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of the 1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that employers should have both provident/retirement and housing benefits for all its employees in order to qualify for exemption from the Fund, it effectively amended Section 19 of P.D. No. 1752. And when the Board subsequently abolished that exemption through the 1996 Amendments, it repealed Section 19 of P.D. No. 1752. Such amendment and subsequent repeal of Section 19 are both invalid, as they are not within the delegated power of the Board. The HDMF cannot, in the exercise of its rule-making power, issue a regulation not consistent with the law it seeks to apply. Indeed, administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry out. Only Congress can repeal or amend the law.

While acknowledging that the requirement of having both plans to qualify for an exemption, as well as the abolition of the exemption, could enhance the interest of the working group and strengthen the Home Development Mutual Fund, the Court emphasized that the basic law should prevail. The Court cautioned that a department’s zeal may not outrun the authority conferred by the statute.

The Supreme Court’s decision in this case underscores the importance of adhering to the legislative intent of a statute when administrative agencies exercise their rule-making power. Agencies must ensure that their implementing rules and regulations are consistent with the enabling law and do not impose stricter conditions than those explicitly outlined in the statute. This principle safeguards the rights of individuals and entities affected by administrative regulations and maintains the balance of power between the legislative and executive branches of government.

FAQs

In conclusion, the Supreme Court’s decision in Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles v. Home Development Mutual Fund serves as a crucial reminder of the limits of administrative rule-making power. The ruling reinforces the principle that implementing rules must remain consistent with the enabling law and cannot impose stricter conditions than those explicitly outlined in the statute. This decision protects the rights of employers and upholds the legislative intent behind employee benefit exemptions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles vs. Home Development Mutual Fund, G.R. No. 131082, June 19, 2000