ADAMSON & ADAMSON, INC., PETITIONER, VS. HON. AUGUSTO M. AMORES, JOHNSON & JOHNSON [PHILIPPINES], INC. AND THE BOARD OF INVESTMENTS, RESPONDENTS.

Adamson versus Amores

The Case

This is a petition for certiorari brought by Adamson and Adamson, Incorporated against the Honorable Augusto Amores, Johnson and Johnson Philippines, Incorporated, and the Board of Investments. Adamson, a domestic manufacturer of hygienic and related products, complains that the Board of Investments decided against it without according it procedural due process, and that the trial court compounded the error by relying on that administrative decision and by quashing the subpoena through which Adamson hoped to prove the irregularity. The case matters because it fixes the measure of due process owed by administrative tribunals exercising quasi-judicial powers, and because it teaches that a party who is given the opportunity to be heard and does not use it cannot later cry denial of due process.

Procedural History

Adamson filed with the Board of Investments a petition praying that Johnson be ordered to stop and desist from manufacturing, distributing, and selling disposable diapers, sanitary feminine tampons, and absorbent cotton, and to recall those products from the market. The Board, through a letter signed by its Governor, dismissed the petition, finding that the questioned activities constituted expansion in the same line of business in which Johnson was actually and lawfully engaged as of the effectivity of the Foreign Investment Act, and that they were financed by internally generated funds and therefore needed no prior Board approval.

Adamson then filed in the Court of First Instance of Manila a petition for judicial relief under the Foreign Investment Act. The trial court gave the petition due course, issued a temporary restraining order, and after hearing denied the prayer for a writ of preliminary injunction and dissolved the restraining order. It found no extreme urgency, held that the grant of the writ would prejudge the case, and ruled that Johnson needed no prior authorization because it was already engaged in the same line of business before the law took effect. It also found that Adamson's right to due process was respected at the Board hearing.

On reconsideration, the trial court allowed the introduction of new evidence, and Adamson requested subpoenas directed to Governor Bautista and Director Ascaño, together with the entire Board files of both companies. Johnson moved to quash, and the Board joined the motion. The trial court granted the motion to quash. Adamson then came to the Supreme Court on certiorari with a prayer for a preliminary injunction. Although the petition was filed before the trial court could resolve the motion for reconsideration and was therefore, strictly speaking, premature, the Court opted to rule on the issues to facilitate the final disposition of the case below.

Facts

Adamson was organized in April 1954 and has since been engaged in the manufacture, sale, and exportation of absorbent cotton wool products, surgical dressings, bandages, medicinal and pharmaceutical products, chemicals, sanitary towels, and other articles. Johnson was organized in February 1956 to manufacture, import, export, buy, sell, and deal in pharmaceutical drugs, toiletry, hygiene products, and related products. Because it was not yet a Philippine national under the Investment Incentives Act, Adamson applied for certificates of authority under the Foreign Investment Act, and the Board granted them in May 1973 and November 1974. Adamson held those certificates until it became a Philippine national in January 1979. Johnson, on the other hand, has remained a foreign corporation.

Sometime in 1979, after acquiring new machinery, Johnson commenced the manufacture and marketing of disposable diapers. In the first quarter of 1980, it manufactured sanitary feminine tampons and absorbent cotton. Adamson alleged that Johnson had expanded into areas in which it was not licensed and in which it was not actually engaged as of the effectivity of the two laws, without first obtaining certificates of authority after prior publication and posting of notices; that the expanded field was already being adequately exploited by Philippine nationals; and that the expansion would cause it irreparable injury. It therefore asked the Board to order Johnson to stop and desist and to recall its products from the market.

The Board set the petition for hearing on May 14, 1980, and notice was sent to the parties. At that hearing, both sides argued and presented their views and evidence, and the parties were asked to submit memoranda within fifteen days. Adamson later moved that further hearings be scheduled for the reception of evidence on the merits, but the Board denied the motion, noting that both parties had been afforded every opportunity to discuss the facts and issues and that another hearing had in fact been conducted in September 1980. The Board then dismissed the petition by letter dated October 21, 1980.

Issues

• Whether or not a Court of First Instance, for the purpose of denying a verified petition for preliminary injunction, may adopt a decision of an administrative agency rendered in violation of a party's constitutional right to procedural due process.
• Whether or not a party is entitled to establish by testimonial and documentary evidence the fact of such denial of due process.
• Whether or not Adamson was deprived of its right to procedural due process in the proceedings before the Board of Investments.

Applicable Provisions

Section 4 of the Foreign Investment Act, as applied by the Board and the trial court, governs the requirement of prior authority for a foreign firm to expand into another line of business. The decision refers to Section 4, Rule IV of the Rules and Regulations to Implement Republic Act Number 5455, which the trial court cited in holding that Johnson needed no prior authorization. The rule, as described in the decision, provides:

Section 4, Rule IV of the Rules and Regulations to Implement Republic Act No. 5455 provides that a foreign firm need not obtain prior authorization from the Board of Investments to engage in business activities in which it was actually engaged as of the effectivity of the law.

This provision bears on the case because it supplies the substantive test the Board applied when it dismissed Adamson's petition, and it frames the question of whether Johnson's activities were a mere continuation of its existing business.

Section 16 of the Investment Incentives Act is likewise invoked in the decision on the matter of stenographic notes. The Court notes that the provision, which provides for the keeping of records of proceedings, does not require the presence of stenographers at every hearing. The decision states:

Section 16 of Republic Act No. 5186 provides for the keeping of records of proceedings before the Board of Investments.

This provision bears on the case because Adamson argued that the absence of stenographers at the hearing violated its right to due process, and the Court rejected that argument.

Ruling

On the first issue, the Court held that the trial court did not err in relying on the Board's decision. The Court first laid down the standard: while administrative tribunals exercising quasi-judicial powers are free from the rigidity of certain procedural requirements, they are bound by law and practice to observe the fundamental and essential requirements of due process in justiciable cases presented before them. However, the standard of due process that must be met in administrative tribunals allows a certain latitude as long as the element of fairness is not ignored. Hence, there is no denial of due process where the records show that hearings were held with prior notice to adverse parties, and even in the absence of previous notice, there is no denial of procedural due process as long as the parties are given the opportunity to be heard.

On the second issue, the Court held that Adamson was not entitled to the relief it sought through the subpoena, because the very premise of its claim, that it was denied due process, was not established. The Court examined the minutes of the May 14, 1980 hearing and found that the proceeding was conducted for the purpose of hearing the arguments and receiving evidence of the parties to resolve the case expeditiously. The notice specified that the hearing was on the petition, although it also stated with particularity Adamson's prayer for a stop and desist order. It was immaterial that the notice was sent before Johnson filed its answer and before there was a joinder of issues, since the proceeding was before an administrative tribunal where technicalities observed in a regular court may be dispensed with.

On the third issue, the Court held that Adamson was not deprived of procedural due process. It was given the opportunity to present its case, including its prayer for a stop and desist order, and having been given that opportunity, it had only itself, or its counsel and officers who were present, to blame for its failure to do so. The Court also held that the hearing before a director of the Board rather than before the members of the board themselves did not violate due process, because the requirements of a fair hearing do not mandate that the actual taking of testimony or the presentation of evidence be before the same officer who will make the decision. Neither did the absence of stenographers affect the right to due process.

Doctrine

Administrative tribunals exercising quasi-judicial powers are not bound by the rigidity of procedural rules observed in regular courts, but they must observe the fundamental and essential requirements of due process. The standard of due process in administrative proceedings allows a certain latitude, provided the element of fairness is not ignored. There is no denial of due process where hearings are held with prior notice to the adverse party, and even without previous notice, there is no denial of procedural due process as long as the parties are given the opportunity to be heard. A party who is given that opportunity and fails to present its case cannot later claim that it was denied due process. The requirements of a fair hearing do not require that the taking of testimony be before the same officer who will decide the case, and the absence of stenographers does not by itself violate due process.

Disposition

The petition was dismissed, and the challenged orders of the trial court were upheld, with the result that Adamson did not obtain the relief it sought against Johnson and the Board of Investments.

Remember This

The one line to memorize is that administrative due process allows latitude as long as fairness is not ignored, and that the opportunity to be heard, once given, forecloses any later claim of denial. Examiners use this case to test the standard of due process in quasi-judicial bodies and the rule that a party who sleeps on its opportunity to present evidence cannot blame the tribunal.