G.R. No. 111953 December 12, 1997
HON. RENATO C. CORONA, in his capacity as Assistant Secretary for Legal Affairs, HON. JESUS B. GARCIA, in his capacity as Acting Secretary, Department of Transportation and Communications, and ROGELIO A. DAYAN, in his capacity as General Manager of Philippine Ports Authority, petitioners, vs. UNITED HARBOR PILOTS ASSOCIATION OF THE PHILIPPINES and MANILA PILOTS ASSOCIATION, respondents.

FACTS

The Philippine Ports Authority (PPA), pursuant to its charter (P.D. No. 857), promulgated PPA-AO-03-85, which governed pilotage services and mandated that aspiring pilots must hold licenses, undergo training, and, upon satisfactory performance, be given permanent and regular appointments by the PPA to exercise harbor pilotage until age 70, unless sooner removed for unfitness. Harbor pilots were required to organize into associations, which invested in equipment. Subsequently, PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-92 on July 15, 1992, which declared that all existing regular appointments would be valid only until December 31, 1992, and that future appointments would be for a term of one year subject to yearly renewal or cancellation after a rigid performance evaluation. The respondents, pilot associations, questioned this order before the Department of Transportation and Communication (DOTC) and later the Office of the President (OP), but their appeals were dismissed. They then filed a petition before the Regional Trial Court (RTC) of Manila, which declared PPA-AO No. 04-92 and its implementing orders null and void, ruling that the PPA acted with grave abuse of discretion. The petitioners elevated the case to the Supreme Court.

ISSUE

Whether the issuance of PPA Administrative Order No. 04-92, limiting the term of appointment of harbor pilots to one year subject to yearly renewal or cancellation, violated the respondents’ right to exercise their profession and their right to due process of law.

RULING

The Supreme Court dismissed the petition and affirmed the RTC decision. The Court held that PPA-AO No. 04-92 was issued in stark disregard of the respondents’ right against deprivation of property without due process of law. The Court distinguished between procedural and substantive due process. On procedural due process, the Court found that the issuance of the administrative order, being a legislative/executive function, did not require prior notice and hearing, and the respondents were given ample opportunity to question the order through multiple administrative and judicial appeals. However, on substantive due process, the Court ruled that the one-year term limit was an unreasonable and arbitrary exercise of the PPA’s regulatory power. The Court emphasized that a pilot’s license is a property right, and the permanent appointments granted under the prior rules had created a vested right to exercise their profession until age 70, subject only to removal for cause. The new system of annual appointments based on a rigid evaluation introduced uncertainty and effectively converted a permanent position into a temporary one, which was an unreasonable impairment of the pilots’ property rights. The Court concluded that the order was not a valid regulation but a withdrawal of a vested right without substantive due process.