G.R. No. 122156 February 3, 1997 MANILA PRINCE HOTEL petitioner, vs.

GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL, respondents. BELLOSILLO, J.: The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos, 1 is in oked by petitioner in its bid to acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing, respondents maintain that the provision is not self-executing but requires an implementing legislation for its enforcement. Corollarily, they ask whether the 51% shares form part of the national economy and patrimony covered by the protective mantle of the Constitution. The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to the privatization program of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding 30% to 51% of the issued and outstanding shares of respondent MHC. The winning bidder, or the eventual "strategic partner," is to provide management expertise and/or an international marketing/reservation system, and financial support to strengthen the profitability and performance of the Manila Hotel. 2 In a close bidding held on 18 September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITTSheraton as its hotel operator, which bid for the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner. Pertinent provisions of the bidding rules prepared by respondent GSIS state I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC 1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS will instead offer the Block of Shares to the other Qualified Bidders: a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract, International Marketing/Reservation System Contract or other type of contract specified by the Highest Bidder in its strategic plan for the Manila Hotel. . . . b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS .... K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions are met: a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to November 3, 1995); and b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/OGCC (Office of the Government Corporate Counsel) are obtained. 3 Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the execution of the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September 1995 matched the bid price of P44.00 per share tendered by Renong Berhad. 4 In a subsequent letter dated 10 October 1995 petitioner sent a manager's check issued by Philtrust Bank for Thirty-three Million Pesos (P33.000.000.00) as Bid Security to match the bid of the Malaysian Group, Messrs. Renong Berhad . . . 5 which respondent GSIS refused to accept.
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On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On 18 October 1995 the Court issued a temporary restraining order enjoining respondents from perfecting and consummating the sale to the Malaysian firm. On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it by the First Division. The case was then set for oral arguments with former Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae. In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the Manila Hotel has been identified with the Filipino nation and has practically become a historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos who believed in the nobility and sacredness of independence and its power and capacity to release the full potential of the Filipino people. To all intents and purposes, it has become a part of the national patrimony. 6 Petitioner also argues that since 51% of the shares of the MHC carries with it the ownership of the business of the hotel which is owned by respondent GSIS, a governmentowned and controlled corporation, the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of the national economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies. 7 It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business also unquestionably part of the national economy petitioner should be preferred after it has matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share. 8 Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution is merely a statement of principle and policy since it is not a self-executing provision and requires implementing legislation(s) . . . Thus, for the said provision to Operate, there must be existing laws "to lay down conditions under which business may be done." 9 Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national patrimony which only refers to lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while petitioner speaks of the guests who have slept in the hotel and the events that have transpired therein which make the hotel historic, these alone do not make the hotel fall under the patrimony of the nation. What is more, the mandate of the Constitution is addressed to the State, not to respondent GSIS which possesses a personality of its own separate and distinct from the Philippines as a State. Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision invoked is still inapplicable since what is being sold is only 51% of the outstanding shares of the corporation, not the hotel building nor the land upon which the building stands. Certainly, 51% of the equity of the MHC cannot be considered part of the national patrimony. Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution, petitioner should have questioned it right from the beginning and not after it had lost in the bidding. Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share, is misplaced. Respondents postulate that the privilege of submitting a matching bid has not yet arisen since it only takes place if for any reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a matching bid is

premature since Renong Berhad could still very well be awarded the block of shares and the condition giving rise to the exercise of the privilege to submit a matching bid had not yet taken place. Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did abuse its discretion it was not so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. Similarly, the petition for mandamus should fail as petitioner has no clear legal right to what it demands and respondents do not have an imperative duty to perform the act required of them by petitioner. We now resolve. A constitution is a system of fundamental laws for the governance and administration of a nation. It is supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the fundamental and paramount law of the nation. 10 It prescribes the permanent framework of a system of government, assigns to the different departments their respective powers and duties, and establishes certain fixed principles on which government is founded. The fundamental conception in other words is that it is a supreme law to which all other laws must conform and in accordance with which all private rights must be determined and all public authority administered. 11 Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the constitution that law or contract whether promulgated by the legislative or by the executive branch or entered into by private persons for private purposes is null and void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and contract. Admittedly, some constitutions are merely declarations of policies and principles. Their provisions command the legislature to enact laws and carry out the purposes of the framers who merely establish an outline of government providing for the different departments of the governmental machinery and securing certain fundamental and inalienable rights of citizens. 12 A provision which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-executing. But a provision which is complete in itself and becomes operative without the aid of supplementary or enabling legislation, or that which supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is self-executing if the nature and extent of the right conferred and the liability imposed are fixed by the constitution itself, so that they can be determined by an examination and construction of its terms, and there is no language indicating that the subject is referred to the legislature for action. 13 As against constitutions of the past, modern constitutions have been generally drafted upon a different principle and have often become in effect extensive codes of laws intended to operate directly upon the people in a manner similar to that of statutory enactments, and the function of constitutional conventions has evolved into one more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self-executing If the constitutional provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. 14 This can be cataclysmic. That is why the prevailing view is, as it has always been, that . . . in case of doubt, the Constitution should be considered self-executing rather than nonself-executing . . . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. 15 Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not selfexecuting, as they quote from discussions on the floor of the 1986 Constitutional Commission MR. RODRIGO. Madam President, I am asking this question as the Chairman of the Committee on Style. If the wording of "PREFERENCE" is given to QUALIFIED
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FILIPINOS," can it be understood as a preference to qualified Filipinos vis-a-vis Filipinos who are not qualified. So, why do we not make it clear? To qualified Filipinos as against aliens? THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word "QUALIFIED?". MR. RODRIGO. No, no, but say definitely "TO QUALIFIED FILIPINOS" as against whom? As against aliens or over aliens? MR. NOLLEDO. Madam President, I think that is understood. We use the word "QUALIFIED" because the existing laws or prospective laws will always lay down conditions under which business may be done. For example, qualifications on the setting up of other financial structures, et cetera (emphasis supplied by respondents) MR. RODRIGO. It is just a matter of style. MR. NOLLEDO Yes, 16 Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear that it is non-self-executing but simply for purposes of style. But, certainly, the legislature is not precluded from enacting other further laws to enforce the constitutional provision so long as the contemplated statute squares with the Constitution. Minor details may be left to the legislature without impairing the self-executing nature of constitutional provisions. In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of powers directly granted by the constitution, further the operation of such a provision, prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of the rights secured or the determination thereof, or place reasonable safeguards around the exercise of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the violation of a self-executing constitutional provision does not render such a provision ineffective in the absence of such legislation. The omission from a constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an indication that it was not intended to be self-executing. The rule is that a self-executing provision of the constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in harmony with the constitution, further the exercise of constitutional right and make it more available. 17 Subsequent legislation however does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable. Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied from the tenor of the first and third paragraphs of the same section which undoubtedly are not selfexecuting. 18 The argument is flawed. If the first and third paragraphs are not self-executing because Congress is still to enact measures to encourage the formation and operation of enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and exercise authority over foreign investments within its national jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph can only be self-executing as it does not by its language require any legislation in order to give preference to qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and patrimony. A constitutional provision may be selfexecuting in one part and non-self-executing in another. 19 Even the cases cited by respondents holding that certain constitutional provisions are merely statements of principles and policies, which are basically not self-executing and only placed in the Constitution as moral incentives to legislation, not as judicially enforceable rights are simply not in point. Basco v. Philippine Amusements and Gaming Corporation 20 speaks of constitutional provisions on personal dignity, 21 the sanctity of family life, 22 the vital role of the youth in nation-building 23 the promotion of social justice, 24 and the values of education. 25 Tolentino v. Secretary of Finance 26 refers to the constitutional provisions on social justice and human rights 27 and on education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites provisions on the promotion of general welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-building 32 and the promotion of total human liberation and development.

A reading of these provisions indeed clearly shows that they are not judicially enforceable constitutional rights but merely guidelines for legislation. The very terms of the provisions manifest that they are only principles upon which the legislations must be based. Res ipsa loquitur. On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not require any legislation to put it in operation. It is per se judicially enforceable When our Constitution mandates that [i]n the grant of rights, privileges, and concessions covering national economy and patrimony, the State shall give preference to qualified Filipinos, it means just that qualified Filipinos shall be preferred. And when our Constitution declares that a right exists in certain specified circumstances an action may be maintained to enforce such right notwithstanding the absence of any legislation on the subject; consequently, if there is no statute especially enacted to enforce such constitutional right, such right enforces itself by its own inherent potency and puissance, and from which all legislations must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium. As regards our national patrimony, a member of the 1986 Constitutional Commission 34 explains The patrimony of the Nation that should be conserved and developed refers not only to out rich natural resources but also to the cultural heritage of out race. It also refers to our intelligence in arts, sciences and letters. Therefore, we should develop not only our lands, forests, mines and other natural resources but also the mental ability or faculty of our people. We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage. 35 When the Constitution speaks of national patrimony, it refers not only to the natural resources of the Philippines, as the Constitution could have very well used the term natural resources, but also to the cultural heritage of the Filipinos. Manila Hotel has become a landmark a living testimonial of Philippine heritage. While it was restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly Filipino, Formerly a concourse for the elite, it has since then become the venue of various significant events which have shaped Philippine history. It was called the Cultural Center of the 1930's. It was the site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the Official Guest House of the Philippine Government. it plays host to dignitaries and official visitors who are accorded the traditional Philippine hospitality. 36 The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of a City. 37 During World War II the hotel was converted by the Japanese Military Administration into a military headquarters. When the American forces returned to recapture Manila the hotel was selected by the Japanese together with Intramuros as the two (2) places fro their final stand. Thereafter, in the 1950's and 1960's, the hotel became the center of political activities, playing host to almost every political convention. In 1970 the hotel reopened after a renovation and reaped numerous international recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986 the hotel was the site of a failed coup d' etat where an aspirant for vice-president was "proclaimed" President of the Philippine Republic. For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity associated with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has become part of our national economy and patrimony. For sure, 51% of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority and controlling stock, so that anyone who acquires or owns the 51% will have actual control and management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain respondents' claim that the Filipino First Policy provision is not applicable since what is being sold is only 51% of the outstanding shares of the corporation, not the Hotel building nor the land upon which the building stands. 38
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The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution also includes corporations at least 60% of which is owned by Filipinos. This is very clear from the proceedings of the 1986 Constitutional Commission THE PRESIDENT. Commissioner Davide is recognized. MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the amendment would consist in substituting the words "QUALIFIED FILIPINOS" with the following: "CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS. xxx xxx xxx MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not give it preference? MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a corporation wholly owned by Filipino citizens? MR. MONSOD. At least 60 percent, Madam President. MR. DAVIDE. Is that the intention? MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference should only be 100-percent Filipino. MR: DAVIDE. I want to get that meaning clear because "QUALIFIED FILIPINOS" may refer only to individuals and not to juridical personalities or entities. MR. MONSOD. We agree, Madam President. 39 xxx xxx xxx MR. RODRIGO. Before we vote, may I request that the amendment be read again. MR. NOLLEDO. The amendment will read: "IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS." And the word "Filipinos" here, as intended by the proponents, will include not only individual Filipinos but also Filipino-controlled entities or entities fully-controlled by Filipinos. 40 The phrase preference to qualified Filipinos was explained thus MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate his amendment so that I can ask a question. MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS." MR FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino enterprise is also qualified, will the Filipino enterprise still be given a preference? MR. NOLLEDO. Obviously. MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will the Filipino still be preferred? MR. NOLLEDO. The answer is "yes." MR. FOZ. Thank you, 41 Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
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MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL THE STATE SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called "Filipino First" policy. That means that Filipinos should be given preference in the grant of concessions, privileges and rights covering the national patrimony. 42 The exchange of views in the sessions of the Constitutional Commission regarding the subject provision was still further clarified by Commissioner Nolledo 43 Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic concerns. It is better known as the FILIPINO FIRST Policy . . . This provision was never found in previous Constitutions . . . . The term "qualified Filipinos" simply means that preference shall be given to those citizens who can make a viable contribution to the common good, because of credible competence and efficiency. It certainly does NOT mandate the pampering and preferential treatment to Filipino citizens or organizations that are incompetent or inefficient, since such an indiscriminate preference would be counter productive and inimical to the common good. In the granting of economic rights, privileges, and concessions, when a choice has to be made between a "qualified foreigner" end a "qualified Filipino," the latter shall be chosen over the former." Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance with its own guidelines so that the sole inference here is that petitioner has been found to be possessed of proven management expertise in the hotel industry, or it has significant equity ownership in another hotel company, or it has an overall management and marketing proficiency to successfully operate the Manila Hotel. 44 The penchant to try to whittle away the mandate of the Constitution by arguing that the subject provision is not self-executory and requires implementing legislation is quite disturbing. The attempt to violate a clear constitutional provision by the government itself is only too distressing. To adopt such a line of reasoning is to renounce the duty to ensure faithfulness to the Constitution. For, even some of the provisions of the Constitution which evidently need implementing legislation have juridical life of their own and can be the source of a judicial remedy. We cannot simply afford the government a defense that arises out of the failure to enact further enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional government is apt The executive department has a constitutional duty to implement laws, including the Constitution, even before Congress acts provided that there are discoverable legal standards for executive action. When the executive acts, it must be guided by its own understanding of the constitutional command and of applicable laws. The responsibility for reading and understanding the Constitution and the laws is not the sole prerogative of Congress. If it were, the executive would have to ask Congress, or perhaps the Court, for an interpretation every time the executive is confronted by a constitutional command. That is not how constitutional government operates. 45 Respondents further argue that the constitutional provision is addressed to the State, not to respondent GSIS which by itself possesses a separate and distinct personality. This argument again is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried out with the prior approval of the State acting through respondent Committee on Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents GSIS and MHC a "state action." In constitutional jurisprudence, the acts of persons distinct from the government are considered "state action" covered by the Constitution (1) when the activity it engages in is a "public
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function;" (2) when the government is so significantly involved with the private actor as to make the government responsible for his action; and, (3) when the government has approved or authorized the action. It is evident that the act of respondent GSIS in selling 51% of its share in respondent MHC comes under the second and third categories of "state action." Without doubt therefore the transaction. although entered into by respondent GSIS, is in fact a transaction of the State and therefore subject to the constitutional command. 46 When the Constitution addresses the State it refers not only to the people but also to the government as elements of the State. After all, government is composed of three (3) divisions of power legislative, executive and judicial. Accordingly, a constitutional mandate directed to the State is correspondingly directed to the three(3) branches of government. It is undeniable that in this case the subject constitutional injunction is addressed among others to the Executive Department and respondent GSIS, a government instrumentality deriving its authority from the State. It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning bidder. The bidding rules expressly provide that the highest bidder shall only be declared the winning bidder after it has negotiated and executed the necessary contracts, and secured the requisite approvals. Since the "Filipino First Policy provision of the Constitution bestows preference on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder will be declared the winning bidder. Resultantly, respondents are not bound to make the award yet, nor are they under obligation to enter into one with the highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates of the 1987 Constitution the provisions of which are presumed to be known to all the bidders and other interested parties. Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified for being violative of the Constitution. It is a basic principle in constitutional law that all laws and contracts must conform with the fundamental law of the land. Those which violate the Constitution lose their reason for being. Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share. 47 Certainly, the constitutional mandate itself is reason enough not to award the block of shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself. In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the grant of rights, privileges and concessions covering the national economy and patrimony, thereby exceeding the bid of a Filipino, there is no question that the Filipino will have to be allowed to match the bid of the foreign entity. And if the Filipino matches the bid of a foreign firm the award should go to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision of the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the bidding rules, the constitutional fiat is, omnipresent to be simply disregarded. To ignore it would be to sanction a perilous skirting of the basic law. This Court does not discount the apprehension that this policy may discourage foreign investors. But the Constitution and laws of the Philippines are understood to be always open to public scrutiny. These are given factors which investors must consider when venturing into business in a foreign jurisdiction. Any person therefore desiring to do business in the Philippines or with any of its agencies or instrumentalities is presumed to know his rights and obligations under the Constitution and the laws of the forum. The argument of respondents that petitioner is now estopped from questioning the sale to Renong Berhad since petitioner was well aware from the beginning that a foreigner could participate in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to match the highest bid tendered by the foreign entity. In the case before us, while petitioner was already

preferred at the inception of the bidding because of the constitutional mandate, petitioner had not yet matched the bid offered by Renong Berhad. Thus it did not have the right or personality then to compel respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of the foreign firm and the apparent disregard by respondent GSIS of petitioner's matching bid did the latter have a cause of action. Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award has been finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino group willing to match the bid of the foreign group is to insist that government be treated as any other ordinary market player, and bound by its mistakes or gross errors of judgment, regardless of the consequences to the Filipino people. The miscomprehension of the Constitution is regrettable. Thus we would rather remedy the indiscretion while there is still an opportunity to do so than let the government develop the habit of forgetting that the Constitution lays down the basic conditions and parameters for its actions. Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block of shares of MHC and to execute the necessary agreements and documents to effect the sale in accordance not only with the bidding guidelines and procedures but with the Constitution as well. The refusal of respondent GSIS to execute the corresponding documents with petitioner as provided in the bidding rules after the latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of discretion. The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution not merely to be used as a guideline for future legislation but primarily to be enforced; so must it be enforced. This Court as the ultimate guardian of the Constitution will never shun, under any reasonable circumstance, the duty of upholding the majesty of the Constitution which it is tasked to defend. It is worth emphasizing that it is not the intention of this Court to impede and diminish, much less undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes more business opportunities but avowedly sanctions the preference for Filipinos whenever such preference is ordained by the Constitution. The position of the Court on this matter could have not been more appropriately articulated by Chief Justice Narvasa As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of the legislature or the executive about the wisdom and feasibility of legislation economic in nature, the Supreme Court has not been spared criticism for decisions perceived as obstacles to economic progress and development . . . in connection with a temporary injunction issued by the Court's First Division against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were published in a major daily to the effect that injunction "again demonstrates that the Philippine legal system can be a major obstacle to doing business here. Let it be stated for the record once again that while it is no business of the Court to intervene in contracts of the kind referred to or set itself up as the judge of whether they are viable or attainable, it is its bounden duty to make sure that they do not violate the Constitution or the laws, or are not adopted or implemented with grave abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism. 48 Privatization of a business asset for purposes of enhancing its business viability and preventing further losses, regardless of the character of the asset, should not take precedence over non-material values. A commercial, nay even a budgetary, objective should not be pursued at the expense of national pride and dignity. For the Constitution enshrines higher and nobler non-material values. Indeed, the Court will always defer to the Constitution in the proper governance of a free society; after all, there is nothing so sacrosanct in any economic policy as to draw itself beyond judicial review when the Constitution is involved. 49
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Nationalism is inherent, in the very concept of the Philippines being a democratic and republican state, with sovereignty residing in the Filipino people and from whom all government authority emanates. In nationalism, the happiness and welfare of the people must be the goal. The nation-state can have no higher purpose. Any interpretation of any constitutional provision must adhere to such basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot override the demands of nationalism. 50 The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest bidder solely for the sake of privatization. We are not talking about an ordinary piece of property in a commercial district. We are talking about a historic relic that has hosted many of the most important events in the short history of the Philippines as a nation. We are talking about a hotel where heads of states would prefer to be housed as a strong manifestation of their desire to cloak the dignity of the highest state function to their official visits to the Philippines. Thus the Manila Hotel has played and continues to play a significant role as an authentic repository of twentieth century Philippine history and culture. In this sense, it has become truly a reflection of the Filipino soul a place with a history of grandeur; a most historical setting that has played a part in the shaping of a country. 51 This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the historical landmark this Grand Old Dame of hotels in Asia to a total stranger. For, indeed, the conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less than mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nation's soul for some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from a qualified Filipino, can be gained by the Filipinos Manila Hotel and all that it stands for is sold to a nonFilipino? How much of national pride will vanish if the nation's cultural heritage is entrusted to a foreign entity? On the other hand, how much dignity will be preserved and realized if the national patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This is the plain and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of being the elderly watchman of the nation, will continue to respect and protect the sanctity of the Constitution. WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per share and thereafter to execute the necessary clearances and to do such other acts and deeds as may be necessary for purpose. SO ORDERED. Regalado, Davide, Jr., Romero, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.

G.R. No. 134015 July 19, 1999 JUAN DOMINO, petitioner, vs. COMMISSION ON ELECTIONS, NARCISO Ra. GRAFILO, JR., EDDY B. JAVA, JUAN P. BAYONITO, JR., ROSARIO SAMSON and DIONISIO P. LIM, SR., respondent, LUCILLE CHIONGBIAN-SOLON, intervenor. DAVIDE, JR., CJ.: Challenged in this case for certiorari with a prayer for preliminary injunction are the Resolution of 6 May 1998 1 of the Second Division of the Commission on Elections (hereafter COMELEC), declaring petitioner Juan Domino (hereafter DOMINO) disqualified as candidate for representative of the Lone Legislative District of the Province of Sarangani in the 11 May 1998 elections, and the Decision of 29 May 1998 2 of the COMELEC en banc denying DOMINO's motion for reconsideration. The antecedents are not disputed.1wphi1.nt On 25 March 1998, DOMINO filed his certificate of candidacy for the position of Representative of the Lone Legislative District of the Province of Sarangani indicating in item nine (9) of his certificate that he had resided in the constituency where he seeks to be elected for one (1) year and two (2) months immediately preceding the election. 3 On 30 March 1998, private respondents Narciso Ra. Grafilo, Jr., Eddy B. Java, Juan P. Bayonito, Jr., Rosario Samson and Dionisio P. Lim, Sr., fied with the COMELEC a Petition to Deny Due Course to or Cancel Certificate of Candidacy, which was docketed as SPA No. 98-022 and assigned to the Second Division of the COMELEC. Private respondents alleged that DOMINO, contrary to his declaration in the certificate of candidacy, is not a resident, much less a registered voter, of the province of Sarangani where he seeks election. To substantiate their allegations, private respondents presented the following evidence: 1. Annex "A" the Certificate of Candidacy of respondent for the position of Congressman of the Lone District of the Province of Sarangani filed with the Office of the Provincial Election Supervisor of Sarangani on March 25, 1998, where in item 4 thereof he wrote his date of birth as December 5, 1953; in item 9, he claims he have resided in the constituency where he seeks election for one (1) year and two (2) months; and, in item 10, that he is registered voter of Precinct No. 14A-1, Barangay Poblacion, Alabel, Sarangani; 2. Annex "B" Voter's Registration Record with SN 31326504 dated June 22, 1997 indicating respondent's registration at Precinct No. 4400-A, Old Balara, Quezon City; 3. Annex "C" Respondent's Community Tax Certificate No. 11132214C dated January 15, 1997; 4. Annex "D" Certified true copy of the letter of Herson D. Dema-ala, Deputy Provincial & Municipal Treasurer of Alabel, Sarangani, dated February 26, 1998, addressed to Mr. Conrado G. Butil, which reads: In connection with your letter of even date, we are furnishing you herewith certified xerox copy of the triplicate copy of COMMUNITY TAX CERTIFICATE NO. 11132214C in the name of Juan Domino. Furthermore, Community Tax Certificate No. 11132212C of the same stub was issued to Carlito Engcong on September 5, 1997, while Certificate No. 11132213C was also issued to Mr. Juan Domino but was cancelled and serial no. 11132215C was issued in the name of Marianita Letigio on September 8, 1997. 5. Annex "E" The triplicate copy of the Community Tax Certificate No. 11132214C in the name of Juan Domino dated September 5, 1997;
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6. Annex "F" Copy of the letter of Provincial Treasurer Lourdes P. Riego dated March 2, 1998 addressed to Mr. Herson D. Dema-ala, Deputy Provincial Treasurer and Municipal Treasurer of Alabel, Sarangani, which states: For easy reference, kindly turn-over to the undersigned for safekeeping, the stub of Community Tax Certificate containing Nos. 11132201C-11132250C issued to you on June 13, 1997 and paid under Official Receipt No. 7854744. Upon request of Congressman James L. Chiongbian. 7. Annex "G" Certificate of Candidacy of respondent for the position of Congressman in the 3rd District of Quezon City for the 1995 elections filed with the Office of the Regional Election Director, National Capital Region, on March 17, 1995, where, in item 4 thereof, he wrote his birth date as December 22, 1953; in item 8 thereof his "residence in the constituency where I seek to be elected immediately preceding the election" as 3 years and 5 months; and, in item 9, that he is a registered voter of Precinct No. 182, Barangay Balara, Quezon City; 8. Annex "H" a copy of the APPLICATION FOR TRANSFER OF REGISTRATION RECORDS DUE TO CHANGE OF RESIDENCE of respondent dated August 30, 1997 addressed to and received by Election Officer Mantil Alim, Alabel, Sarangani, on September 22, 1997, stating among others, that "[T]he undersigned's previous residence is at 24 Bonifacio Street, Ayala Heights, Quezon City, III District, Quezon City; wherein he is a registered voter" and "that for business and residence purposes, the undersigned has transferred and conducts his business and reside at Barangay Poblacion, Alabel, Province of Sarangani prior to this application;" 9. Annex "I" Copy of the SWORN APPLICATION FOR OF CANCELLATION OF THE VOTER'S [TRANSFER OF] PREVIOUS REGISTRATION of respondent subscribed and sworn to on 22 October 1997 before Election Officer Mantil Allim at Alabel, Sarangani. 4 For his defense, DOMINO maintains that he had complied with the one-year residence requirement and that he has been residing in Sarangani since January 1997. In support of the said contention, DOMINO presented before the COMELEC the following exhibits, to wit: 1. Annex "1" Copy of the Contract of Lease between Nora Dacaldacal as Lessor and Administrator of the properties of deceased spouses Maximo and Remedios Dacaldacal and respondent as Lessee executed on January 15, 1997, subscribed and sworn to before Notary Public Johnny P. Landero; 2. Annex "2" Copy of the Extra-Judicial Settlement of Estate with Absolute Deed of sale executed by and between the heirs of deceased spouses Maximo and Remedios Dacaldacal, namely: Maria Lourdes, Jupiter and Beberlie and the respondent on November 4, 1997, subscribed and sworn to before Notary Public Jose A. Alegario; 3. Annex "3" True Carbon Xerox copy of the Decision dated January 19, 1998, of the Metropolitan Trial Court of Metro Manila, Branch 35, Quezon City, in Election Case NO. 725 captioned as "In the Matter of the Petition for the Exclusion from the List of voters of Precinct No. 4400-A Brgy. Old Balara, Quezon City, Spouses Juan and Zorayda Domino, Petitioners, -versus- Elmer M. Kayanan, Election Officer, Quezon City, District III, and the Board of Election Inspectors of Precinct No. 4400-A, Old Balara, Quezon City, Respondents." The dispositive portion of which reads: 1. Declaring the registration of petitioners as voters of Precinct No. 4400-A, Barangay Old Balara, in District III Quezon City as completely erroneous as petitioners were no longer residents of Quezon City but of Alabel, Sarangani where they have been residing since December 1996;

2. Declaring this erroneous registration of petitioners in Quezon City as done in good faith due to an honest mistake caused by circumstances beyond their control and without any fault of petitioners; 3. Approving the transfer of registration of voters of petitioners from Precint No. 4400-A of Barangay Old Balara, Quezon City to Precinct No. 14A1 of Barangay Poblacion of Alabel, Sarangani; and 4. Ordering the respondents to immediately transfer and forward all the election/voter's registration records of the petitioners in Quezon City to the Election Officer, the Election Registration Board and other Comelec Offices of Alabel, Sarangani where the petitioners are obviously qualified to excercise their respective rights of suffrage. 4. Annex "4" Copy of the Application for Transfer of Registration Records due to Change of Residence addressed to Mantil Alim, COMELEC Registrar, Alabel, Sarangani, dated August 30, 1997. 5. Annex "5" Certified True Copy of the Notice of Approval of Application, the roster of applications for registration approved by the Election Registration Board on October 20, 1997, showing the spouses Juan and Zorayda Bailon Domino listed as numbers 111 and 112 both under Precinct No. 14A1, the last two names in the slate indicated as transferees without VRR numbers and their application dated August 30, 1997 and September 30, 1997, respectively. 6. Annex "6" same as Annex "5" 7. Annex "6-a" Copy of the Sworn Application for Cancellation of Voter's Previous Registration (Annex "I", Petition); 8. Annex "7" Copy of claim card in the name of respondent showing his VRR No. 31326504 dated October 20, 1997 as a registered voter of Precinct No. 14A1, Barangay Poblacion, Alabel, Sarangani; 9. Annex "7-a" Certification dated April 16, 1998, issued by Atty. Elmer M. Kayanan, Election Officer IV, District III, Quezon City, which reads: This is to certify that the spouses JUAN and ZORAYDA DOMINO are no longer registered voters of District III, Quezon City. Their registration records (VRR) were transferred and are now in the possession of the Election Officer of Alabel, Sarangani. This certification is being issued upon the request of Mr. JUAN DOMINO. 10. Annex "8" Affidavit of Nora Dacaldacal and Maria Lourdes Dacaldacal stating the circumstances and incidents detailing their alleged acquaintance with respondent. 11. Annexes "8-a", "8-b", "8-c" and "8-d" Copies of the uniform affidavits of witness Myrna Dalaguit, Hilario Fuentes, Coraminda Lomibao and Elena V. Piodos subscribed and sworn to before Notary Public Bonifacio F. Doria, Jr., on April 18, 1998, embodying their alleged personal knowledge of respondent's residency in Alabel, Sarangani; 12. Annex "8-e" A certification dated April 20, 1998, subscribed and sworn to before Notary Public Bonifacio, containing a listing of the names of fifty-five (55) residents of Alabel, Sarangani, declaring and certifying under oath that they personally know the respondent as a permanent resident of Alabel, Sarangani since January 1997 up to present; 13. Annexes "9", "9-a" and "9-b" Copies of Individual Income Tax Return for the year 1997, BIR form 2316 and W-2, respectively, of respondent; and,
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14. Annex "10" The affidavit of respondent reciting the chronology of events and circumstances leading to his relocation to the Municipality of Alabel, Sarangani, appending Annexes "A", "B", "C", "D", "D-1", "E", "F", "G" with sub-markings "G-1" and "G-2" and "H" his CTC No. 111`32214C dated September 5, 1997, which are the same as Annexes "1", "2", "4", "5", "6-a", "3", "7", "9" with sub-markings "9-a" and "9-b" except Annex "H". 5 On 6 May 1998, the COMELEC 2nd Division promulgated a resolution declaring DOMINO disqualified as candidate for the position of representative of the lone district of Sarangani for lack of the one-year residence requirement and likewise ordered the cancellation of his certificate of candidacy, on the basis of the following findings: What militates against respondent's claim that he has met the residency requirement for the position sought is his own Voter's Registration Record No. 31326504 dated June 22, 1997 [Annex "B", Petition] and his address indicated as 24 Bonifacio St., Ayala Heights, Old Balara, Quezon City. This evidence, standing alone, negates all his protestations that he established residence at Barangay Poblacion, Alabel, Sarangani, as early as January 1997. It is highly improbable, nay incredible, for respondent who previously ran for the same position in the 3rd Legislative District of Quezon City during the elections of 1995 to unwittingly forget the residency requirement for the office sought. Counting, therefore, from the day after June 22, 1997 when respondent registered at Precinct No. 4400-A, up to and until the day of the elections on May 11, 1998, respondent clearly lacks the one (1) year residency requirement provided for candidates for Member of the House of Representatives under Section 6, Article VI of the Constitution. All told, petitioner's evidence conspire to attest to respondent's lack of residence in the constituency where he seeks election and while it may be conceded that he is a registered voter as contemplated under Section 12 of R.A. 8189, he lacks the qualification to run for the position of Congressman for the Lone District of the Province of Sarangani. 6 On 11 May 1998, the day of the election, the COMELEC issued Supplemental Omnibus Resolution No. 3046, ordering that the votes cast for DOMINO be counted but to suspend the proclamation if winning, considering that the Resolution disqualifying him as candidate had not yet become final and executory. 7 The result of the election, per Statement of Votes certified by the Chairman of the Provincial Board of Canvassers, 8 shows that DOMINO garnered the highest number of votes over his opponents for the position of Congressman of the Province of Sarangani. On 15 May 1998, DOMINO filed a motion for reconsideration of the Resolution dated 6 May 1998, which was denied by the COMELEC en banc in its decision dated 29 May 1998. Hence, the present Petition for Certiorari with prayer for Preliminary Mandatory Injunction alleging, in the main, that the COMELEC committed grave abuse of discretion amounting to excess or lack of jurisdiction when it ruled that he did not meet the one-year residence requirement. On 14 July 1998, acting on DOMINO's Motion for Issuance of Temporary Restraining Order, the Court directed the parties to maintain the status quo prevailing at the time of the filing of the instant petition. 9 On 15 September 1998, Lucille L. Chiongbian-Solon, (hereafter INTERVENOR), the candidate receiving the second highest number of votes, was allowed by the Court to Intervene. 10 INTERVENOR in her Motion for Leave to Intervene and in her Comment in Intervention 11 is asking the Court to uphold the disqualification of petitioner Juan Domino and to proclaim her as the duly elected representative of Sarangani in the 11 May 1998 elections. Before us DOMINO raised the following issues for resolution, to wit: a. Whether or not the judgment of the Metropolitan Trial Court of Quezon City declaring petitioner as resident of Sarangani and not of Quezon City is final, conclusive and binding upon the whole world, including the Commission on Elections.

b. Whether or not petitioner herein has resided in the subject congressional district for at least one (1) year immediately preceding the May 11, 1998 elections; and c. Whether or not respondent COMELEC has jurisdiction over the petition a quo for the disqualification of petitioner. 12 The first issue. The contention of DOMINO that the decision of the Metropolitan Trial Court of Quezon City in the exclusion proceedings declaring him a resident of the Province of Sarangani and not of Quezon City is final and conclusive upon the COMELEC cannot be sustained. The COMELEC has jurisdiction as provided in Sec. 78, Art. IX of the Omnibus Election Code, over a petition to deny due course to or cancel certificate of candidacy. In the exercise of the said jurisdiction, it is within the competence of the COMELEC to determine whether false representation as to material facts was made in the certificate of candidacy, that will include, among others, the residence of the candidate. The determination of the Metropolitan Trial Court of Quezon City in the exclusion proceedings as to the right of DOMINO to be included or excluded from the list of voters in the precinct within its territorial jurisdicton, does not preclude the COMELEC, in the determination of DOMINO's qualification as a candidate, to pass upon the issue of compliance with the residency requirement. The proceedings for the exclusion or inclusion of voters in the list of voters are summary in character. Thus, the factual findings of the trial court and its resultant conclusions in the exclusion proceedings on matters other than the right to vote in the precinct within its territorial jurisdiction are not conclusive upon the COMELEC. Although the court in inclusion or exclusion proceedings may pass upon any question necessary to decide the issue raised including the questions of citizenship and residence of the challenged voter, the authority to order the inclusion in or exclusion from the list of voters necessarily caries with it the power to inquire into and settle all matters essential to the exercise of said authority. However, except for the right to remain in the list of voters or for being excluded therefrom for the particular election in relation to which the proceedings had been held, a decision in an exclusion or inclusion proceeding, even if final and unappealable, does not acquire the nature of res judicata. 13 In this sense, it does not operate as a bar to any future action that a party may take concerning the subject passed upon in the proceeding. 14 Thus, a decision in an exclusion proceeding would neither be conclusive on the voter's political status, nor bar subsequent proceedings on his right to be registered as a voter in any other election. 15 Thus, in Tan Cohon v. Election Registrar 16 we ruled that: . . . It is made clear that even as it is here held that the order of the City Court in question has become final, the same does not constitute res adjudicata as to any of the matters therein contained. It is ridiculous to suppose that such an important and intricate matter of citizenship may be passed upon and determined with finality in such a summary and peremptory proceeding as that of inclusion and exclusion of persons in the registry list of voters. Even if the City Court had granted appellant's petition for inclusion in the permanent list of voters on the allegation that she is a Filipino citizen qualified to vote, her alleged Filipino citizenship would still have been left open to question. Moreover, the Metropolitan Trial Court of Quezon City in its 18 January decision exceeded its jurisdiction when it declared DOMINO a resident of the Province of Sarangani, approved and ordered the transfer of his voter's registration from Precinct No. 4400-A of Barangay Old Balara, Quezon City to precinct 14A1 of Barangay Poblacion, Alabel, Sarangani. It is not within the competence of the trial court, in an exclusion proceedings, to declare the challenged voter a resident of another municipality. The jurisdiction of the lower court over exclusion cases is limited only to determining the right of voter to remain in the list of voters or to declare that the challenged voter is not qualified to vote in the precint in which he is registered, specifying the ground of the voter's disqualification. The trial court has no power to order the change or transfer of registration from one place of residence to another for it is the function
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of the election Registration Board as provided under Section 12 of R.A. No. 8189. 17 The only effect of the decision of the lower court excluding the challenged voter from the list of voters, is for the Election Registration Board, upon receipt of the final decision, to remove the voter's registration record from the corresponding book of voters, enter the order of exclusion therein, and thereafter place the record in the inactive file. 18 Finally, the application of the rule on res judicata is unavailing. Identity of parties, subject matter and cause of action are indispensable requirements for the application of said doctrine. Neither herein Private Respondents nor INTERVENOR, is a party in the exclusion proceedings. The Petition for Exclusion was filed by DOMINDO himself and his wife, praying that he and his wife be excluded from the Voter's List on the ground of erroneous registration while the Petition to Deny Due Course to or Cancel Certificate of Candidacy was filed by private respondents against DOMINO for alleged false representation in his certificate of candidacy. For the decision to be a basis for the dismissal by reason of res judicata, it is essential that there must be between the first and the second action identity of parties, identity of subject matter and identity of causes of action. 19 In the present case, the aforesaid essential requisites are not present. In the case of Nuval v. Guray, et al., 20 the Supreme Court in resolving a similar issue ruled that: The question to be solved under the first assignment of error is whether or not the judgment rendered in the case of the petition for the exclusion of Norberto Guray's name from the election list of Luna, is res judicata, so as to prevent the institution and prosecution of an action in quo warranto, which is now before us. The procedure prescribed by section 437 of the Administrative Code, as amended by Act No. 3387, is of a summary character and the judgment rendered therein is not appealable except when the petition is tried before the justice of the peace of the capital or the circuit judge, in which case it may be appealed to the judge of first instance, with whom said two lower judges have concurrent jurisdiction. The petition for exclusion was presented by Gregorio Nuval in his dual capacity as qualified voter of the municipality of Luna, and as a duly registered candidate for the office of president of said municipality, against Norberto Guray as a registered voter in the election list of said municipality. The present proceeding of quo warranto was interposed by Gregorio Nuval in his capacity as a registered candidate voted for the office of municipal president of Luna, against Norberto Guray, as an elected candidate for the same office. Therefore, there is no identity of parties in the two cases, since it is not enough that there be an identity of persons, but there must be an identity of capacities in which said persons litigate. (Art. 1259 of the Civil Code; Bowler vs. Estate of Alvarez, 23 Phil., 561; 34 Corpus Juris, p. 756, par. 1165) In said case of the petition for the exclusion, the object of the litigation, or the litigious matter was the exclusion of Norberto Guray as a voter from the election list of the municipality of Luna, while in the present que warranto proceeding, the object of the litigation, or the litigious matter is his exclusion or expulsion from the office to which he has been elected. Neither does there exist, then, any identity in the object of the litigation, or the litigious matter. In said case of the petition for exclusion, the cause of action was that Norberto Guray had not the six months' legal residence in the municipality of Luna to be a qualified voter thereof, while in the present proceeding of quo warranto, the cause of action is that Norberto Guray has not the one year's legal residence required for eligibility to the office of municipal president of Luna. Neither does there exist therefore, identity of causes of action. In order that res judicata may exist the following are necessary: (a) identity of parties; (b) identity of things; and (c) identity of issues (Aquino v. Director of Lands, 39 Phil. 850). And as in the case of the petition for excluision and in the present quo warranto

proceeding, as there is no identity of parties, or of things or litigious matter, or of issues or causes of action, there is no res judicata. The Second Issue. Was DOMINO a resident of the Province of Sarangani for at least one year immediately preceding the 11 May 1998 election as stated in his certificate of candidacy? We hold in the negative. It is doctrinally settled that the term "residence," as used in the law prescribing the qualifications for suffrage and for elective office, means the same thing as "domicile," which imports not only an intention to reside in a fixed place but also personal presence in that place, coupled with conduct indicative of such intention. 21 "Domicile" denotes a fixed permanent residence to which, whenever absent for business, pleasure, or some other reasons, one intends to return. 22 "Domicile" is a question of intention and circumstances. In the consideration of circumstances, three rules must be borne in mind, namely: (1) that a man must have a residence or domicile somewhere; (2) when once established it remains until a new one is acquired; and (3) a man can have but one residence or domicile at a time. 23 Records show that petitioner's domicile of origin was Candon, Ilocos Sur 24 and that sometime in 1991, he acquired a new domicile of choice at 24 Bonifacio St. Ayala Heights, Old Balara, Quezon City, as shown by his certificate of candidacy for the position of representative of the 3rd District of Quezon City in the May 1995 election. Petitioner is now claiming that he had effectively abandoned his "residence" in Quezon City and has established a new "domicile" of choice at the Province of Sarangani. A person's "domicile" once established is considered to continue and will not be deemed lost until a new one is established. 25 To successfully effect a change of domicile one must demonstrate an actual removal or an actual change of domicile; a bona fide intention of abandoning the former place of residence and establishing a new one and definite acts which correspond with the purpose. 26 In other words, there must basically be animus manendi coupled with animus non revertendi. The purpose to remain in or at the domicile of choice must be for an indefinite period of time; the change of residence must be voluntary; and the residence at the place chosen for the new domicile must be actual. 27 It is the contention of petitioner that his actual physical presence in Alabel, Sarangani since December 1996 was sufficiently established by the lease of a house and lot located therein in January 1997 and by the affidavits and certifications under oath of the residents of that place that they have seen petitioner and his family residing in their locality. While this may be so, actual and physical is not in itself sufficient to show that from said date he had transferred his residence in that place. To establish a new domicile of choice, personal presence in the place must be coupled with conduct indicative of that intention. While "residence" simply requires bodily presence in a given place, "domicile" requires not only such bodily presence in that place but also a declared and probable intent to make it one's fixed and permanent place of abode, one's home. 28 As a general rule, the principal elements of domicile, physical presence in the locality involved and intention to adopt it as a domicile, must concur in order to establish a new domicile. No change of domicile will result if either of these elements is absent. Intention to acquire a domicile without actual residence in the locality does not result in acquisition of domicile, nor does the fact of physical presence without intention. 29 The lease contract entered into sometime in January 1997, does not adequately support a change of domicile. The lease contract may be indicative of DOMINO's intention to reside in Sarangani but it does not engender the kind of permanency required to prove abandonment of one's original domicile. The mere absence of individual from his permanent residence, no matter how long, without the intention to abandon it does not result in loss or change of domicile. 30 Thus the date of the contract of lease of a house and lot located in the province of
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Sarangani, i.e., 15 January 1997, cannot be used, in the absence of other circumstances, as the reckoning period of the one-year residence requirement. Further, Domino's lack of intention to abandon his residence in Quezon City is further strengthened by his act of registering as voter in one of the precincts in Quezon City. While voting is not conclusive of residence, it does give rise to a strong presumption of residence especially in this case where DOMINO registered in his former barangay. Exercising the right of election franchise is a deliberate public assertion of the fact of residence, and is said to have decided preponderance in a doubtful case upon the place the elector claims as, or believes to be, his residence. 31 The fact that a party continously voted in a particular locality is a strong factor in assisting to determine the status of his domicile. 32 His claim that his registration in Quezon City was erroneous and was caused by events over which he had no control cannot be sustained. The general registration of voters for purposes of the May 1998 elections was scheduled for two (2) consecutive weekends, viz.: June 14, 15, 21, and 22. 33 While, Domino's intention to establish residence in Sarangani can be gleaned from the fact that be bought the house he was renting on November 4, 1997, that he sought cancellation of his previous registration in Qezon City on 22 October 1997, 34 and that he applied for transfer of registration from Quezon City to Sarangani by reason of change of residence on 30 August 1997, 35 DOMINO still falls short of the one year residency requirement under the Constitution. In showing compliance with the residency requirement, both intent and actual presence in the district one intends to represent must satisfy the length of time prescribed by the fundamental law. 36 Domino's failure to do so rendered him ineligible and his election to office null and void. 37 The Third Issue. DOMINO's contention that the COMELEC has no jurisdiction in the present petition is bereft of merit. As previously mentioned, the COMELEC, under Sec. 78, Art. IX of the Omnibus Election Code, has jurisdiction over a petition to deny due course to or cancel certificate of candidacy. Such jurisdiction continues even after election, if for any reason no final judgment of disqualification is rendered before the election, and the candidate facing disqualification is voted for and receives the highest number of votes 38 and provided further that the winning candidate has not been proclaimed or has taken his oath of office. 39 It has been repeatedly held in a number of cases, that the House of Representatives Electoral Tribunal's sole and exclusive jurisdiction over all contests relating to the election, returns and qualifications of members of Congress as provided under Section 17 of Article VI of the Constitution begins only after a candidate has become a member of the House of Representatives. 40 The fact of obtaining the highest number of votes in an election does not automatically vest the position in the winning candidate. 41 A candidate must be proclaimed and must have taken his oath of office before he can be considered a member of the House of Representatives. In the instant case, DOMINO was not proclaimed as Congressman-elect of the Lone Congressional District of the Province of Sarangani by reason of a Supplemental Omnibus Resolution issued by the COMELEC on the day of the election ordering the suspension of DOMINO's proclamation should he obtain the winning number of votes. This resolution was issued by the COMELEC in view of the nonfinality of its 6 May 1998 resolution disqualifying DOMINO as candidate for the position. Cosidering that DOMINO has not been proclaimed as Congressman-elect in the Lone Congressional District of the Province of Sarangani he cannot be deemed a member of the House of Representatives. Hence, it is the COMELEC and not the Electoral Tribunal which has jurisdiction over the issue of his ineligibility as a candidate. 42 Issue raised by INTERVENOR. After finding that DOMINO is disqualified as candidate for the position of representative of the province of Sarangani, may INTERVENOR, as the candidate who received the next highest number of votes, be proclaimed as the winning candidate?

It is now settled doctrine that the candidate who obtains the second highest number of votes may not be proclaimed winner in case the winning candidate is disqualified. 43 In every election, the people's choice is the paramount consideration and their expressed will must, at all times, be given effect. When the majority speaks and elects into office a candidate by giving the highest number of votes cast in the election for that office, no one can be declared elected in his place. 44 It would be extremely repugnant to the basic concept of the constitutionally guaranteed right to suffrage if a candidate who has not acquired the majority or plurality of votes is proclaimed a winner and imposed as the representative of a constituency, the majority of which have positively declared through their ballots that they do not choose him. 45 To simplistically assume that the second placer would have received the other votes would be to substitute our judgment for the mind of the voters. He could not be considered the first among qualified candidates because in a field which excludes the qualified candidate, the conditions would have substantially changed. 46 Sound policy dictates that public elective offices are filled by those who have received the highest number of votes cast in the election for that office, and it is fundamental idea in all republican forms of government that no one can be declared elected and no measure can be declared carried unless he or it receives a majority or plurality of the legal votes cast in the election. 47 The effect of a decision declaring a person ineligible to hold an office is only that the election fails entirely, that the wreath of victory cannot be transferred 48 from the disqualified winner to the repudiated loser because the law then as now only authorizes a declaration of election in favor of the person who has obtained a plurality of votes 49 and does not entitle the candidate receiving the next highest number of votes to be declared elected. In such case, the electors have failed to make a choice and the election is a nullity. 50 To allow the defeated and repudiated candidate to take over the elective position despite his rejection by the electorate is to disenfranchise the electorate without any fault on their part and to undermine the importance and meaning of democracy and the people's right to elect officials of their choice. 51 INTERVENOR's plea that the votes cast in favor of DOMINO be considered stray votes cannot be sustained. INTERVENOR's reliance on the opinion made in the Labo, Jr. case 52 to wit: if the electorate, fully aware in fact and in law of a candidate's disqualification so as to bring such awareness within the realm of notoriety, would nevertheless cast their votes in favor of the ineligible candidate, the electorate may be said to have waived the validity and efficacy of their votes by notoriously misapplying their franchise or throwing away their votes, in which case, the eligible candidate obtaining the next higher number of votes may be deemed elected, is misplaced. Contrary to the claim of INTERVENOR, petitioner was not notoriously known by the public as an ineligible candidate. Although the resolution declaring him ineligible as candidate was rendered before the election, however, the same is not yet final and executory. In fact, it was no less than the COMELEC in its Supplemental Omnibus Resolution No. 3046 that allowed DOMINO to be voted for the office and ordered that the votes cast for him be counted as the Resolution declaring him ineligible has not yet attained finality. Thus the votes cast for DOMINO are presumed to have been cast in the sincere belief that he was a qualified candidate, without any intention to misapply their franchise. Thus, said votes can not be treated as stray, void, or meaningless. 53 WHEREFORE, the instant petition is DISMISSED. The resolution dated 6 May 1998 of the COMELEC 2nd Division and the decision dated 29 May 1998 of the COMELEC En Banc, are hereby AFFIRMED.1wphi1.nt SO ORDERED. Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Buena, Gonzaga-Reyes and Santiago, JJ., concur. Panganiban J., In the result; please see separate opinion. Quisumbing, J., In the result, only insofar or Petitioner Domino is adjudged disqualified.
10

Purisima and Pardo JJ., took no part.

G.R. No. 161872 April 13, 2004 REV. ELLY CHAVEZ PAMATONG, ESQUIRE, petitioner, vs. COMMISSION ON ELECTIONS, respondent. RESOLUTION TINGA, J.: Petitioner Rev. Elly Velez Pamatong filed his Certificate of Candidacy for President on December 17, 2003. Respondent Commission on Elections (COMELEC) refused to give due course to petitioners Certificate of Candidacy in its Resolution No. 6558 dated January 17, 2004. The decision, however, was not unanimous since Commissioners Luzviminda G. Tancangco and Mehol K. Sadain voted to include petitioner as they believed he had parties or movements to back up his candidacy. On January 15, 2004, petitioner moved for reconsideration of Resolution No. 6558. Petitioners Motion for Reconsideration was docketed as SPP (MP) No. 04-001. The COMELEC, acting on petitioners Motion for Reconsideration and on similar motions filed by other aspirants for national elective positions, denied the same under the aegis of Omnibus Resolution No. 6604 dated February 11, 2004. The COMELEC declared petitioner and thirty-five (35) others nuisance candidates who could not wage a nationwide campaign and/or are not nominated by a political party or are not supported by a registered political party with a national constituency. Commissioner Sadain maintained his vote for petitioner. By then, Commissioner Tancangco had retired. In this Petition For Writ of Certiorari, petitioner seeks to reverse the resolutions which were allegedly rendered in violation of his right to "equal access to opportunities for public service" under Section 26, Article II of the 1987 Constitution,1 by limiting the number of qualified candidates only to those who can afford to wage a nationwide campaign and/or are nominated by political parties. In so doing, petitioner argues that the COMELEC indirectly amended the constitutional provisions on the electoral process and limited the power of the sovereign people to choose their leaders. The COMELEC supposedly erred in disqualifying him since he is the most qualified among all the presidential candidates, i.e., he possesses all the constitutional and legal qualifications for the office of the president, he is capable of waging a national campaign since he has numerous national organizations under his leadership, he also has the capacity to wage an international campaign since he has practiced law in other countries, and he has a platform of government. Petitioner likewise attacks the validity of the form for the Certificate of Candidacy prepared by the COMELEC. Petitioner claims that the form does not provide clear and reasonable guidelines for determining the qualifications of candidates since it does not ask for the ca ndidates biodata and his program of government. First, the constitutional and legal dimensions involved. Implicit in the petitioners invocation of the constitutional provision ensuring "equal access to opportunities for public office" is the claim that there is a constitutional right to run for or hold public office and, particularly in his case, to seek the presidency. There is none. What is recognized is merely a privilege subject to limitations imposed by law. Section 26, Article II of the Constitution neither bestows such a right nor elevates the privilege to the level of an enforceable right. There is nothing in the plain language of the provision which suggests such a thrust or justifies an interpretation of the sort. The "equal access" provision is a subsumed part of Article II of the Constitution, entitled "Declaration of Principles and State Policies." The provisions under the Article are generally considered not selfexecuting,2 and there is no plausible reason for according a different treatment to the "equal access" provision. Like the rest of the policies enumerated in Article II, the provision does not contain any judicially enforceable constitutional right but merely specifies a guideline for legislative or executive action.3 The disregard of the provision does not give rise to any cause of action before the courts.4

An inquiry into the intent of the framers5 produces the same determination that the provision is not selfexecutory. The original wording of the present Section 26, Article II had read, "The State shall broaden opportunities to public office and prohibit public dynasties."6 Commissioner (now Chief Justice) Hilario Davide, Jr. successfully brought forth an amendment that changed the word "broaden" to the phrase "ensure equal access," and the substitution of the word "office" to "service." He explained his proposal in this wise: I changed the word "broaden" to "ENSURE EQUAL ACCESS TO" because what is important would be equal access to the opportunity. If you broaden, it would necessarily mean that the government would be mandated to create as many offices as are possible to accommodate as many people as are also possible. That is the meaning of broadening opportunities to public service. So, in order that we should not mandate the State to make the government the number one employer and to limit offices only to what may be necessary and expedient yet offering equal opportunities to access to it, I change the word "broaden."7 (emphasis supplied) Obviously, the provision is not intended to compel the State to enact positive measures that would accommodate as many people as possible into public office. The approval of the "Davide amendment" indicates the design of the framers to cast the provision as simply enunciatory of a desired policy objective and not reflective of the imposition of a clear State burden. Moreover, the provision as written leaves much to be desired if it is to be regarded as the source of positive rights. It is difficult to interpret the clause as operative in the absence of legislation since its effective means and reach are not properly defined. Broadly written, the myriad of claims that can be subsumed under this rubric appear to be entirely open-ended.8 Words and phrases such as "equal access," "opportunities," and "public service" are susceptible to countless interpretations owing to their inherent impreciseness. Certainly, it was not the intention of the framers to inflict on the people an operative but amorphous foundation from which innately unenforceable rights may be sourced. As earlier noted, the privilege of equal access to opportunities to public office may be subjected to limitations. Some valid limitations specifically on the privilege to seek elective office are found in the provisions9 of the Omnibus Election Code on "Nuisance Candidates" and COMELEC Resolution No. 645210 dated December 10, 2002 outlining the instances wherein the COMELEC may motu proprio refuse to give due course to or cancel a Certificate of Candidacy. As long as the limitations apply to everybody equally without discrimination, however, the equal access clause is not violated. Equality is not sacrificed as long as the burdens engendered by the limitations are meant to be borne by any one who is minded to file a certificate of candidacy. In the case at bar, there is no showing that any person is exempt from the limitations or the burdens which they create. Significantly, petitioner does not challenge the constitutionality or validity of Section 69 of the Omnibus Election Code and COMELEC Resolution No. 6452 dated 10 December 2003. Thus, their presumed validity stands and has to be accorded due weight. Clearly, therefore, petitioners reliance on the equal access clause in Section 26, Article II of the Constitution is misplaced. The rationale behind the prohibition against nuisance candidates and the disqualification of candidates who have not evinced a bona fide intention to run for office is easy to divine. The State has a compelling interest to ensure that its electoral exercises are rational, objective, and orderly. Towards this end, the State takes into account the practical considerations in conducting elections. Inevitably, the greater the number of candidates, the greater the opportunities for logistical confusion, not to mention the increased allocation of time and resources in preparation for the election. These practical difficulties should, of course, never exempt the State from the conduct of a mandated electoral exercise. At the same time, remedial actions should be available to alleviate these logistical hardships, whenever necessary and proper. Ultimately, a disorderly election is not merely a textbook example of inefficiency, but a rot that erodes faith in our democratic institutions. As the United States Supreme Court held:
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[T]here is surely an important state interest in requiring some preliminary showing of a significant modicum of support before printing the name of a political organization and its candidates on the ballot the interest, if no other, in avoiding confusion, deception and even frustration of the democratic [process].11 The COMELEC itself recognized these practical considerations when it promulgated Resolution No. 6558 on 17 January 2004, adopting the study Memorandum of its Law Department dated 11 January 2004. As observed in the COMELECs Comment: There is a need to limit the number of candidates especially in the case of candidates for national positions because the election process becomes a mockery even if those who cannot clearly wage a national campaign are allowed to run. Their names would have to be printed in the Certified List of Candidates, Voters Information Sheet and the Official Ballots. These would entail additional costs to the government. For the official ballots in automated counting and canvassing of votes, an additional page would amount to more or less FOUR HUNDRED FIFTY MILLION PESOS (P450,000,000.00). xxx[I]t serves no practical purpose to allow those candidates to continue if they cannot wage a decent campaign enough to project the prospect of winning, no matter how slim.12 The preparation of ballots is but one aspect that would be affected by allowance of "nuisance candidates" to run in the elections. Our election laws provide various entitlements for candidates for public office, such as watchers in every polling place,13 watchers in the board of canvassers,14 or even the receipt of electoral contributions.15 Moreover, there are election rules and regulations the formulations of which are dependent on the number of candidates in a given election. Given these considerations, the ignominious nature of a nuisance candidacy becomes even more galling. The organization of an election with bona fide candidates standing is onerous enough. To add into the mix candidates with no serious intentions or capabilities to run a viable campaign would actually impair the electoral process. This is not to mention the candidacies which are palpably ridiculous so as to constitute a one-note joke. The poll body would be bogged by irrelevant minutiae covering every step of the electoral process, most probably posed at the instance of these nuisance candidates. It would be a senseless sacrifice on the part of the State. Owing to the superior interest in ensuring a credible and orderly election, the State could exclude nuisance candidates and need not indulge in, as the song goes, "their trips to the moon on gossamer wings." The Omnibus Election Code and COMELEC Resolution No. 6452 are cognizant of the compelling State interest to ensure orderly and credible elections by excising impediments thereto, such as nuisance candidacies that distract and detract from the larger purpose. The COMELEC is mandated by the Constitution with the administration of elections16 and endowed with considerable latitude in adopting means and methods that will ensure the promotion of free, orderly and honest elections.17 Moreover, the Constitution guarantees that only bona fide candidates for public office shall be free from any form of harassment and discrimination.18 The determination of bona fide candidates is governed by the statutes, and the concept, to our mind is, satisfactorily defined in the Omnibus Election Code. Now, the needed factual premises. However valid the law and the COMELEC issuance involved are, their proper application in the case of the petitioner cannot be tested and reviewed by this Court on the basis of what is now before it. The assailed resolutions of the COMELEC do not direct the Court to the evidence which it considered in determining that petitioner was a nuisance candidate. This precludes the Court from reviewing at this instance whether the COMELEC committed grave abuse of discretion in disqualifying petitioner, since such a review would necessarily take into account the matters which the COMELEC considered in arriving at its decisions. Petitioner has submitted to this Court mere photocopies of various documents purportedly evincing his credentials as an eligible candidate for the presidency. Yet this Court, not being a trier of facts, can not
12

properly pass upon the reproductions as evidence at this level. Neither the COMELEC nor the Solicitor General appended any document to their respective Comments. The question of whether a candidate is a nuisance candidate or not is both legal and factual. The basis of the factual determination is not before this Court. Thus, the remand of this case for the reception of further evidence is in order. A word of caution is in order. What is at stake is petitioners aspiration and offer to serve in the government. It deserves not a cursory treatment but a hearing which conforms to the requirements of due process. As to petitioners attacks on the validity of the form for the certificate of candidacy, suffice it to say that the form strictly complies with Section 74 of the Omnibus Election Code. This provision specifically enumerates what a certificate of candidacy should contain, with the required information tending to show that the candidate possesses the minimum qualifications for the position aspired for as established by the Constitution and other election laws. IN VIEW OF THE FOREGOING, COMELEC Case No. SPP (MP) No. 04-001 is hereby remanded to the COMELEC for the reception of further evidence, to determine the question on whether petitioner Elly Velez Lao Pamatong is a nuisance candidate as contemplated in Section 69 of the Omnibus Election Code. The COMELEC is directed to hold and complete the reception of evidence and report its findings to this Court with deliberate dispatch. SO ORDERED. Davide, Jr., Puno, Vitug*, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna, JJ., concur.

G.R. No. 167324 July 17, 2007 TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION, RESEARCH INSTITUTE FOR TROPICAL MEDICINE EMPLOYEES ASSOCIATION, NATIONAL ORTHOPEDIC WORKERS UNION, DR. JOSE R. REYES MEMORIAL HOSPITAL EMPLOYEES UNION, SAN LAZARO HOSPITAL EMPLOYEES ASSOCIATION, ALLIANCE OF HEALTH WORKERS, INC., HEALTH ALLIANCE FOR DEMOCRACY, COUNCIL FOR HEALTH DEVELOPMENT, NETWORK OPPOSED TO PRIVATIZATION, COMMUNITY MEDICINE DEVELOPMENT FOUNDATION INC., PHILIPPINE SOCIETY OF SANITARY ENGINEERS INC., KILUSANG MAYO UNO, GABRIELA, KILUSANG MAGBUBUKID NG PILIPINAS, KALIPUNAN NG DAMAYAN NG MGA MARALITA, ELSA O. GUEVARRA, ARCADIO B. GONZALES, JOSE G. GALANG, DOMINGO P. MANAY, TITO P. ESTEVES, EDUARDO P. GALOPE, REMEDIOS M. YSMAEL, ALFREDO BACUATA, EDGARDO J. DAMICOG, REMEDIOS M. MALTU AND REMEGIO S. MERCADO, Petitioners, vs. THE COURT OF APPEALS, EXECUTIVE SECRETARY ALBERTO G. ROMULO, SECRETARY OF HEALTH MANUEL M. DAYRIT, SECRETARY OF BUDGET AND MANAGEMENT EMILIA T. BONCODIN, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,1 promulgated by the Court of Appeals on 26 November 2004, denying a petition for the nullification of the Health Sector Reform Agenda (HSRA) Philippines 1999-2004 of the Department of Health (DOH); and Executive Order No. 102, "Redirecting the Functions and Operations of the Department of Health," which was issued by then President Joseph Ejercito Estrada on 24 May 1999. Prior hereto, petitioners originally filed a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the 1997 Revised Rules of Civil Procedure before the Supreme Court on 15 August 2001. However, the Supreme Court, in a Resolution dated 29 August 2001, referred the petition to the Court of Appeals for appropriate action. HEALTH SECTOR REFORM AGENDA (HSRA) In 1999, the DOH launched the HSRA, a reform agenda developed by the HSRA Technical Working Group after a series of workshops and analyses with inputs from several consultants, program managers and technical staff possessing the adequate expertise and experience in the health sector. It provided for five general areas of reform: (1) to provide fiscal autonomy to government hospitals; (2) secure funding for priority public health programs; (3) promote the development of local health systems and ensure its effective performance; (4) strengthen the capacities of health regulatory agencies; and (5) expand the coverage of the National Health Insurance Program (NHIP).2 Petitioners questioned the first reform agenda involving the fiscal autonomy of government hospitals, particularly the collection of socialized user fees and the corporate restructuring of government hospitals. The said provision under the HSRA reads: Provide fiscal autonomy to government hospitals. Government hospitals must be allowed to collect socialized user fees so they can reduce the dependence on direct subsidies from the government. Their critical capacities like diagnostic equipment, laboratory facilities and medical staff capability must be upgraded to effectively exercise fiscal autonomy. Such investment must be cognizant of complimentary capacity provided by public-private networks. Moreover such capacities will allow government hospitals to supplement priority public health programs. Appropriate institutional arrangement must be introduced such as allowing them autonomy towards converting them into government corporations without compromising their social responsibilities. As a result, government hospitals are expected to be more competitive and responsive to health needs.
13

Petitioners also assailed the issuance of a draft administrative order issued by the DOH, dated 5 January 2001, entitled "Guidelines and Procedure in the Implementation of the Corporate Restructuring of Selected DOH Hospitals to Achieve Fiscal Autonomy, and Managerial Flexibility to Start by January 2001;"3 and Administrative Order No. 172 of the DOH, entitled "Policies and Guidelines on the Private Practice of Medical and Paramedical Professionals in Government Health Facilities,"4 dated 9 January 2001, for imposing an added burden to indigent Filipinos, who cannot afford to pay for medicine and medical services.5 Petitioners alleged that the implementation of the aforementioned reforms had resulted in making free medicine and free medical services inaccessible to economically disadvantaged Filipinos. Thus, they alleged that the HSRA is void for being in violation of the following constitutional provisions:6 ART. III, SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the law. ART II, SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for the enjoyment of all the people of the blessings of democracy. ART II, SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. ART II, SEC. 10. The State shall promote social justice in all phases of national development. ART II, SEC. 11. The State values the dignity of every human person and guarantees full respect for human rights. ART II, SEC. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual, intellectual and social well-being x x x. ART II, SEC. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. ART XV, SEC. 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its solidarity and actively promote its total development. ART XV, SEC. 3. The State shall defend: xxxx (2) the right of children to assistance, including proper care and nutrition, and special protection from all forms of neglect, abuse, cruelty, exploitation and other conditions prejudicial to their development. xxxx ART XIII, SEC. 14. The State shall protect working women by providing safe and healthful working conditions, taking into account their maternal functions, and such facilities and opportunities that will enhance their welfare and enable them to realize their full potential in the service of the nation. ART II, SEC. 15. The State shall protect and promote the right to health of the people and instill health consciousness among them. ART XIII, SEC. 11. The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all people at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled, women, and children. The State shall endeavor to provide free medical care to paupers. EXECUTIVE ORDER NO. 102 On 24 May 1999, then President Joseph Ejercito Estrada issued Executive Order No. 102, entitled "Redirecting the Functions and Operations of the Department of Health," which provided for the changes in the roles, functions, and organizational processes of the DOH. Under the assailed executive order, the DOH refocused its mandate from being the sole provider of health services to being a provider of

specific health services and technical assistance, as a result of the devolution of basic services to local government units. The provisions for the streamlining of the DOH and the deployment of DOH personnel to regional offices and hospitals read: Sec. 4. Preparation of a Rationalization and Streamlining Plan. In view of the functional and operational redirection in the DOH, and to effect efficiency and effectiveness in its activities, the Department shall prepare a Rationalization and Streamlining Plan (RSP) which shall be the basis of the intended changes. The RSP shall contain the following: a) the specific shift in policy directions, functions, programs and activities/strategies; b) the structural and organizational shift, stating the specific functions and activities by organizational unit and the relationship of each units; c) the staffing shift, highlighting and itemizing the existing filled and unfilled positions; and d) the resource allocation shift, specifying the effects of the streamline set-up on the agency budgetary allocation and indicating where possible, savings have been generated. The RSP shall [be] submitted to the Department of Budget and Management for approval before the corresponding shifts shall be affected (sic) by the DOH Secretary. Sec. 5. Redeployment of Personnel. The redeployment of officials and other personnel on the basis of the approved RSP shall not result in diminution in rank and compensation of existing personnel. It shall take into account all pertinent Civil Service laws and rules. Section 6. Funding. The financial resources needed to implement the Rationalization and Streamlining Plan shall be taken from funds available in the DOH, provided that the total requirements for the implementation of the revised staffing pattern shall not exceed available funds for Personnel Services. Section 7. Separation Benefits. Personnel who opt to be separated from the service as a consequence of the implementation of this Executive Order shall be entitled to the benefits under existing laws. In the case of those who are not covered by existing laws, they shall be entitled to separation benefits equivalent to one month basic salary for every year of service or proportionate share thereof in addition to the terminal fee benefits to which he/she is entitled under existing laws. Executive Order No. 102 was enacted pursuant to Section 17 of the Local Government Code (Republic Act No. 7160), which provided for the devolution to the local government units of basic services and facilities, as well as specific health-related functions and responsibilities.7 Petitioners contended that a law, such as Executive Order No. 102, which effects the reorganization of the DOH, should be enacted by Congress in the exercise of its legislative function. They argued that Executive Order No. 102 is void, having been issued in excess of the Presidents authority.8 Moreover, petitioners averred that the implementation of the Rationalization and Streamlining Plan (RSP) was not in accordance with law. The RSP was allegedly implemented even before the Department of Budget and Management (DBM) approved it. They also maintained that the Office of the President should have issued an administrative order to carry out the streamlining, but that it failed to do so.9 Furthermore, petitioners Elsa O. Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata and Edgardo J. Damicog, all DOH employees, assailed the validity of Executive Order No. 102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the inconvenience of having to travel a longer distance to get to their new place of work, while other DOH employees had to relocate to far-flung areas.10 Petitioners also pointed out several errors in the implementation of the RSP. Certain employees allegedly suffered diminution of compensation,11 while others were supposedly assigned to positions for which they were neither qualified nor suited.12 In addition, new employees were purportedly hired by the DOH and appointed to positions for which they were not qualified, despite the fact that the objective of the ongoing streamlining was to cut back on costs.13 It was also averred that DOH employees were
14

deployed or transferred even during the three-month period before the national and local elections in May 2001,14 in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public Health Workers."15 Petitioners, however, failed to identify the DOH employees referred to above, much less include them as parties to the petition. The Court of Appeals denied the petition due to a number of procedural defects, which proved fatal: 1) Petitioners failed to show capacity or authority to sign the certification of non-forum shopping and the verification; 2) Petitioners failed to show any particularized interest for bringing the suit, nor any direct or personal injury sustained or were in the immediate danger of sustaining; 3) the Petition, brought before the Supreme Court on 15 August 1999, was filed out of time, or beyond 60 days from the time the reorganization methods were implemented in 2000; and 4) certiorari, Prohibition and Mandamus will not lie where the President, in issuing the assailed Executive Order, was not acting as a tribunal, board or officer exercising judicial or quasi-judicial functions. In resolving the substantial issues of the case, the Court of Appeals ruled that the HSRA cannot be declared void for violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II; Section 1 of Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3(2) of Article XV, all of the 1987 Constitution, which directly or indirectly pertain to the duty of the State to protect and promote the peoples right to health and wellbeing. It reasoned that the aforementioned provisions of the Constitution are not self-executing; they are not judicially enforceable constitutional rights and can only provide guidelines for legislation. Moreover, the Court of Appeals held that the petitioners assertion that Executive Order No. 102 is detrimental to the health of the people cannot be made a justiciable issue. The question of whether the HSRA will bring about the development or disintegration of the health sector is within the realm of the political department. Furthermore, the Court of Appeals decreed that the President was empowered to issue Executive Order No. 102, in accordance with Section 17 Article VII of the 1987 Constitution. It also declared that the DOH did not implement Executive Order No. 102 in bad faith or with grave abuse of discretion, as alleged by the petitioners, as the DOH issued Department Circular No. 275-C, Series of 2000, which created the different committees tasked with the implementation of the RSP, only after both the DBM and Presidential Committee on Effective Governance (PCEG) approved the RSP on 8 July 2000 and 17 July 2000, respectively.1avvphi1 Petitioners filed with the Court of Appeals a Motion for Reconsideration of the Decision rendered on 26 November 2004, but the same was denied in a Resolution dated 7 March 2005. Hence, the present petition, where the following issues are raised: I. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT ANY QUESTION ON THE WISDOM AND EFFICACY OF THE HEALTH SECTOR REFORM AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT THE CONSTITUTIONAL PROVISIONS PROTECTING THE HEALTH OF THE FILIPINO PEOPLE ARE NOT JUDICIALLY ENFORCEABLE; II. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT PETITIONERS COMPLAINT THAT EXECUTIVE ORDER NO. 102 IS DETRIMENTAL TO THE FILIPINO IS LIKEWISE NOT A JUSTICIABLE CONTROVERSY AND THAT THE PRESIDENT HAS THE AUTHORITY TO ISSUE SAID ORDER; AND III. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN UPHOLDING TECHNICALITIES OVER AND ABOVE THE ISSUES OF TRANSCENDENTAL IMPORTANCE RAISED IN THE PETITION BELOW. 16 The Court finds the present petition to be without merit.

Petitioners allege that the HSRA should be declared void, since it runs counter to the aspiration and ideals of the Filipino people as embodied in the Constitution.17 They claim that the HSRAs policies of fiscal autonomy, income generation, and revenue enhancement violate Sections 5, 9, 10, 11, 13, 15 and 18 of Article II, Section 1 of Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3 of Article XV of the 1987 Constitution. Such policies allegedly resulted in making inaccessible free medicine and free medical services. This contention is unfounded. As a general rule, the provisions of the Constitution are considered self-executing, and do not require future legislation for their enforcement. For if they are not treated as self-executing, the mandate of the fundamental law can be easily nullified by the inaction of Congress.18 However, some provisions have already been categorically declared by this Court as non self-executing. In Tanada v. Angara,19 the Court specifically set apart the sections found under Article II of the 1987 Constitution as non self-executing and ruled that such broad principles need legislative enactments before they can be implemented: By its very title, Article II of the Constitution is a "declaration of principles and state policies." x x x. These principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. In Basco v. Philippine Amusement and Gaming Corporation,20 this Court declared that Sections 11, 12, and 13 of Article II; Section 13 of Article XIII; and Section 2 of Article XIV of the 1987 Constitution are not self-executing provisions. In Tolentino v. Secretary of Finance,21 the Court referred to Section 1 of Article XIII and Section 2 of Article XIV of the Constitution as moral incentives to legislation, not as judicially enforceable rights. These provisions, which merely lay down a general principle, are distinguished from other constitutional provisions as non self-executing and, therefore, cannot give rise to a cause of action in the courts; they do not embody judicially enforceable constitutional rights.22 Some of the constitutional provisions invoked in the present case were taken from Article II of the Constitution -- specifically, Sections 5, 9, 10, 11, 13, 15 and 18 -- the provisions of which the Court categorically ruled to be non self-executing in the aforecited case of Taada v. Angara.23 Moreover, the records are devoid of any explanation of how the HSRA supposedly violated the equal protection and due process clauses that are embodied in Section 1 of Article III of the Constitution. There were no allegations of discrimination or of the lack of due process in connection with the HSRA. Since they failed to substantiate how these constitutional guarantees were breached, petitioners are unsuccessful in establishing the relevance of this provision to the petition, and consequently, in annulling the HSRA. In the remaining provisions, Sections 11 and 14 of Article XIII and Sections 1 and 3 of Article XV, the State accords recognition to the protection of working women and the provision for safe and healthful working conditions; to the adoption of an integrated and comprehensive approach to health; to the Filipino family; and to the right of children to assistance and special protection, including proper care and nutrition. Like the provisions that were declared as non self-executory in the cases of Basco v. Philippine Amusement and Gaming Corporation24 and Tolentino v. Secretary of Finance,25 they are mere statements of principles and policies. As such, they are mere directives addressed to the executive and the legislative departments. If unheeded, the remedy will not lie with the courts; but rather, the electorates displeasure may be manifested in their votes. The rationale for this is given by Justice Dante Tinga in his Separate Opinion in the case of Agabon v. National Labor Relations Commission26 : x x x However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of the ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. x x x Subsequent legislation is still needed to define the parameters of these guaranteed
15

rights. x x x Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. The HSRA cannot be nullified based solely on petitioners bare allegations that it violates the general principles expressed in the non self-executing provisions they cite herein. There are two reasons for denying a cause of action to an alleged infringement of broad constitutional principles: basic considerations of due process and the limitations of judicial power.27 Petitioners also claim that Executive Order No. 102 is void on the ground that it was issued by the President in excess of his authority. They maintain that the structural and functional reorganization of the DOH is an exercise of legislative functions, which the President usurped when he issued Executive Order No. 102.28 This line of argument is without basis. This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct the reorganization of government entities under the Executive Department.29 This is also sanctioned under the Constitution, as well as other statutes. Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the Administrative Code of 1987 reads: SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions: (1) Restructure the internal organization of the Office of the President Proper, including the immediate offices, the Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing consolidating or merging units thereof or transferring functions from one unit to another; (2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments or Agencies; and (3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the President from other Departments or agencies. In Domingo v. Zamora,30 this Court explained the rationale behind the Presidents continuing authority under the Administrative Code to reorganize the administrative structure of the Office of the President. The law grants the President the power to reorganize the Office of the President in recognition of the recurring need of every President to reorganize his or her office "to achieve simplicity, economy and efficiency." To remain effective and efficient, it must be capable of being shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out presidential directives and policies. The Administrative Code provides that the Office of the President consists of the Office of the President Proper and the agencies under it.31 The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of the Administrative Code: Sec. 23. The Agencies under the Office of the President.The agencies under the Office of the President refer to those offices placed under the chairmanship of the President, those under the supervision and control of the President, those under the administrative supervision of the Office of the President, those attached to it for policy and program coordination, and those that are not placed by law or order creating them under any specific department. (Emphasis provided.) Section 2(4) of the Introductory Provisions of the Administrative Code defines the term "agency of the government" as follows:

Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. Furthermore, the DOH is among the cabinet-level departments enumerated under Book IV of the Administrative Code, mainly tasked with the functional distribution of the work of the President.32 Indubitably, the DOH is an agency which is under the supervision and control of the President and, thus, part of the Office of the President. Consequently, Section 31, Book III, Chapter 10 of the Administrative Code, granting the President the continued authority to reorganize the Office of the President, extends to the DOH. The power of the President to reorganize the executive department is likewise recognized in general appropriations laws. As early as 1993, Sections 48 and 62 of Republic Act No. 7645, the "General Appropriations Act for Fiscal Year 1993," already contained a provision stating that: Sec. 48. Scaling Down and Phase Out of Activities Within the Executive Branch.The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out, or abolished, subject to civil service rules and regulations. x x x. Actual scaling down, phasing out, or abolition of activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. (Emphasis provided.) Sec. 62. Unauthorized Organizational Changes. Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organizational structures and be funded form appropriations by this Act. Again, in the year when Executive Order No. 102 was issued, "The General Appropriations Act of Fiscal Year 1999" (Republic Act No. 8745) conceded to the President the power to make any changes in any of the key positions and organizational units in the executive department thus: Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act. Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did not usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the Presidents constitutional power of control over the executive department, supported by the provisions of the Administrative Code, recognized by other statutes, and consistently affirmed by this Court. Petitioners also pointed out several flaws in the implementation of Executive Order No. 102, particularly the RSP. However, these contentions are without merit and are insufficient to invalidate the executive order. The RSP was allegedly implemented even before the DBM approved it. The facts show otherwise. It was only after the DBM approved the Notice of Organization, Staffing and Compensation Action on 8 July 2000,33 and after the Presidential Committee on Effective Governance (PCEG) issued on 17 July 2000 Memorandum Circular No. 62,34 approving the RSP, that then DOH Secretary Alberto G. Romualdez issued on 28 July 2000 Department Circular No. 275-C, Series of 2000,35 creating the different committees to implement the RSP. Petitioners also maintain that the Office of the President should have issued an administrative order to carry out the streamlining, but that it failed to do so. Such objection cannot be given any weight considering that the acts of the DOH Secretary, as an alter ego of the President, are presumed to be the acts of the President. The members of the Cabinet are subject at all times to the disposition of the President since they are merely his alter egos.36 Thus, their acts, performed and promulgated in the regular course of business, are, unless disapproved by the President, presumptively acts of the
16

President.37 Significantly, the acts of the DOH Secretary were clearly authorized by the President, who, thru the PCEG, issued the aforementioned Memorandum Circular No. 62, sanctioning the implementation of the RSP. Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata, and Edgardo Damicog, all DOH employees, assailed the validity of Executive Order No. 102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the inconvenience of having to travel a longer distance to get to their new place of work, while other DOH employees had to relocate to far-flung areas. In several cases, this Court regarded reorganizations of government units or departments as valid, for so long as they are pursued in good faiththat is, for the purpose of economy or to make bureaucracy more efficient.38 On the other hand, if the reorganization is done for the purpose of defeating security of tenure or for ill-motivated political purposes, any abolition of position would be invalid. None of these circumstances are applicable since none of the petitioners were removed from public service, nor did they identify any action taken by the DOH that would unquestionably result in their dismissal. The reorganization that was pursued in the present case was made in good faith. The RSP was clearly designed to improve the efficiency of the department and to implement the provisions of the Local Government Code on the devolution of health services to local governments. While this Court recognizes the inconvenience suffered by public servants in their deployment to distant areas, the executive departments finding of a need to make health services available to these areas and to make delivery of health services more efficient and more compelling is far from being unreasonable or arbitrary, a determination which is well within its authority. In all, this Court finds petitioners contentions to be insufficient to invalidate Executive Order No. 102. Without identifying the DOH employees concerned, much less including them as parties to the petition, petitioners went on identifying several errors in the implementation of Executive Order No. 102. First, they alleged that unidentified DOH employees suffered from a diminution of compensation by virtue of the provision on Salaries and Benefits found in Department Circular No. 312, Series of 2000, issued on 23 October 2000, which reads: 2. Any employee who was matched to a position with lower salary grade (SG) shall not suffer a reduction in salary except where his/her current salary is higher than the maximum step of the SG of the new position, in which case he/she shall be paid the salary corresponding to the maximum step of the SG of the new position. RATA shall no longer be received, if employee was matched to a Non-Division Chief Position. Incidentally, the petition shows that none of the petitioners, who are working in the DOH, were entitled to receive RATA at the time the petition was filed. Nor was it alleged that they suffered any diminution of compensation. Secondly, it was claimed that certain unnamed DOH employees were matched with unidentified positions for which they were supposedly neither qualified nor suited. New employees, again unnamed and not included as parties, were hired by the DOH and appointed to unidentified positions for which they were purportedly not qualified, despite the fact that the objective of the ongoing streamlining was to cut back on costs. Lastly, unspecified DOH employees were deployed or transferred during the three-month period before the national and local elections in May 2001, in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public Health Workers." Petitioners allegations are too general and unsubstantiated by the records for the Court to pass upon. The persons involved are not identified, details of their appointments and transfers such as position, salary grade, and the date they were appointed - are not given; and the circumstances which attended the alleged violations are not specified. Even granting that these alleged errors were adequately proven by the petitioners, they would still not invalidate Executive Order No. 102. Any serious legal errors in laying down the compensation of the DOH employees concerned can only invalidate the pertinent provisions of Department Circular No. 312, Series of 2000. Likewise, any questionable appointments or transfers are properly addressed by an appeal process provided under Administrative Order No. 94, series of 2000;39 and if the appeal is

meritorious, such appointment or transfer may be invalidated. The validity of Executive Order No. 102 would, nevertheless, remain unaffected. Settled is the rule that courts are not at liberty to declare statutes invalid, although they may be abused or misabused, and may afford an opportunity for abuse in the manner of application. The validity of a statute or ordinance is to be determined from its general purpose and its efficiency to accomplish the end desired, not from its effects in a particular case.40 In a number of cases,41 the Court upheld the standing of citizens who filed suits, wherein the "transcendental importance" of the constitutional question justified the granting of relief. In spite of these rulings, the Court, in Domingo v. Carague,42 dismissed the petition when petitioners therein failed to show any present substantial interest. It demonstrated how even in the cases in which the Court declared that the matter of the case was of transcendental importance, the petitioners must be able to assert substantial interest. Present substantial interest, which will enable a party to question the validity of the law, requires that a party sustained or will sustain direct injury as a result of its enforcement.43 It is distinguished from a mere expectancy or future, contingent, subordinate, or inconsequential interest.44 In the same way, the Court, in Telecommunications & Broadcast Attorneys of the Philippines, Inc. v. Comelec,45 ruled that a citizen is allowed to raise a constitutional question only when he can show that he has personally suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action. This case likewise stressed that the rule on constitutional questions which are of transcendental importance cannot be invoked where a partys substantive claim is without merit. Thus, a partys standing is determined by the substantive merit of his case or a preliminary estimate thereof. After a careful scrutiny of the petitioners substantive claims, this Court finds that the petitioners miserably failed to show any merit to their claims. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 26 November 2004, declaring both the HSRA and Executive Order No. 102 as valid. No costs. SO ORDERED.

ANTONIO M. SERRANO, Petitioner, vs. Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents. DECISION AUSTRIA-MARTINEZ, J.: For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings have built houses, provided health care, equipped schools and planted the seeds of businesses. They have woven together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic human link between cultures, societies and economies. Yet, only recently have we begun to understand not only how much international migration impacts development, but how smart public policies can magnify this effect. United Nations Secretary-General Ban Ki-Moon Global Forum on Migration and Development Brussels, July 10, 20071 For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. 8042,2 to wit: Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. x x x x (Emphasis and underscoring supplied) does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of equal protection and denies them due process. By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause, entreating this Court to declare the subject clause unconstitutional. Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms and conditions: Duration of contract Position Basic monthly salary Hours of work Overtime 12 months Chief Officer US$1,400.00 48.0 hours per week US$700.00 per month 7.00 days per month5

G.R. No. 167614

March 24, 2009 Vacation leave with pay

17

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of respondents that he would be made Chief Officer by the end of April 1998.6 Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8 Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days. Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as follows: May 27/31, 1998 (5 days) incl. Leave pay June 01/30, 1998 July 01/31, 1998 August 01/31, 1998 Sept. 01/30, 1998 Oct. 01/31, 1998 Nov. 01/30, 1998 Dec. 01/31, 1998 Jan. 01/31, 1999 Feb. 01/28, 1999 Mar. 1/19, 1999 (19 days) incl. leave pay US$ 413.90

---------------------------------------------------------------------------------------------TOTAL CLAIM US$ 26,442.7311

2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 1,640.00

-------------------------------------------------------------------------------25,382.23 Amount adjusted to chief mate's salary (March 19/31, 1998 to April 1/30, 1998) + 1,060.5010

as well as moral and exemplary damages and attorney's fees. The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him monetary benefits, to wit: WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months of the unexpired portion of the aforesaid contract of employment.1avvphi1 The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee under this Decision. The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit. All other claims are hereby DISMISSED. SO ORDERED.13 (Emphasis supplied) In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay = US$2,590.00/compensation per month."14 Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed. Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18 In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit: WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment the following: 1. Three (3) months salary $1,400 x 3
18

US$4,200.00

2. Salary differential US$4,245.00 3. 10% Attorneys fees TOTAL

45.00

424.50 US$4,669.50

The other findings are affirmed. SO ORDERED.19 The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the award of overtime pay, which should be proven to have been actually performed, and for vacation leave pay."20 Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject clause.21 The NLRC denied the motion.22 Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner. In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25 His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the following grounds: I The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired portion of his contract of employment instead of limiting it to three (3) months II In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months. III Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract since under the contract they form part of his salary.28 On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he intends to make use of the monetary award for his medical treatment and medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the same time, praying that the constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the petition mindful of the extreme importance of the constitutional question raised therein. On the first and second issues The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal. Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his employment contract or a total of US$4,200.00. Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00.31 The Arguments of Petitioner Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two groups;33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino workers, whether deployed locally or overseas.35 Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected OFWs.36 Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied) Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of their employees. As petitioner puts it: In terms of practical application, the local employers are not limited to the amount of backwages they have to give their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more than three (3) months.38
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Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and other emoluments he is entitled to under his fixed-period employment contract.39 The Arguments of Respondents In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was when he filed an appeal before the NLRC.40 The Arguments of the Solicitor General The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon by the parties.42 Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of the Constitution.45 Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions."46 The Court's Ruling The Court sustains petitioner on the first and second issues. When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case,50 otherwise the Court will dismiss the case or decide the same on some other ground.51 Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three months only as provided under the subject clause. The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court, such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve
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the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its function in the present case is limited to determining questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision. The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment contract, and not just for a period of three months, strikes at the very core of the subject clause. Thus, the stage is all set for the determination of the constitutionality of the subject clause. Does the subject clause violate Section 10, Article III of the Constitution on non-impairment of contracts? The answer is in the negative. Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his employment and the fixed salary package he will receive57 is not tenable. Section 10, Article III of the Constitution provides: No law impairing the obligation of contracts shall be passed. The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,58 and cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions are read into contracts and deemed a part thereof.60 Thus, the nonimpairment clause under Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto. As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998 employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042. But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61 Police power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people are generally applicable not only to future contracts but even to those already in existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote public welfare.62 Does the subject clause violate Section 1, Article III of the Constitution, and Section 18, Article II and Section 3, Article XIII on labor as a protected sector? The answer is in the affirmative. Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the equal protection of the law. Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to place of deployment, full protection of their rights and welfare. To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances.65 Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.66 There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally related to serving a legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the government must show that the challenged classification serves an important state interest and that the classification is at least substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest.72 Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications 73 based on race74 or gender75 but not when the classification is drawn along income categories.76 It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit: Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice. Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support many of our decisions. We should not place undue and fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments. We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be
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deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others. xxxx Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial intervention. Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality. Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. xxxx Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be given deferential treatment. But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the actor. xxxx In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing higher and better education and opportunities for career advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist of people whose status and rank in life are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real economic and financial need for the adjustment . This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs. Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at two levels: First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more; Second, among OFWs with employment contracts of more than one year; and Third, OFWs vis--vis local workers with fixed-period employment; OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit: A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at least one (1) year or more. This is evident from the words "for every year of the unexpired term" which follows the words "salaries x x x for three months." To follow petitioners thinking that private respondent is entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the words employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis supplied) In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his salaries for the remaining 8 months and 6 days of his contract. Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One was Asian Center for Career and Employment System and Services v. National Labor Relations Commission (Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract, but was dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit: Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.82 Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of four and one-half months of her contract. The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
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TABLE As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired portion of their contracts. The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were awarded their salaries for only 3 months. To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount. The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself: TABLE

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their employment contracts. The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired contracts fall short of one year. Among OFWs With Employment Contracts of More Than One Year Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the accuracy of the Marsaman interpretation. The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be no occasion for such unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise, whatever would be

the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months for every year of the unexpired term, whichever is less" shall apply is not the length of the original contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the original contract period be more than one year. Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for three months only. To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion. OFWs vis--vis Local Workers With Fixed-Period Employment As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term employment.107 The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce (1888),108 to wit: Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of said contract until the termination of the period agreed upon. Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the provisions contained in the following articles. In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment. There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides: Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence. Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed employees for the entire unexpired portion of their employment contracts. While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
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Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.) Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so as to apply the provision to local workers who are employed for a time certain although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held: The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other employment of the same kind in the same community, for the purpose of reducing the damages resulting from such wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is the amount which he would be entitled to had he continued in such employment until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied) On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already in effect.118 More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-period employment contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the same ruling in Anderson v. National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut short in the second month was declared entitled to his salaries for the remaining 10 months of his contract. In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the least restrictive means. What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for which some individual liberties must give way, such as the public interest in safeguarding health or maintaining medical standards,126 or in maintaining access to information on matters of public concern.127 In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause may possibly serve. The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in "termination pay."128 The OSG explained further: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042. This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions.129 (Emphasis supplied) However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state interest sought to be served by the subject clause. The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the underlying reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause. On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit: Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of the complaint, the claim arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other forms of damages. The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be joint and several. Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if applicable, to satisfy any such compromise or voluntary settlement
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shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null and void. Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the responsible officials to any or all of the following penalties: (1) The salary of any such official who fails to render his decision or resolution within the prescribed period shall be, or caused to be, withheld until the said official complies therewith; (2) Suspension for not more than ninety (90) days; or (3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years. Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such official may have incurred under other existing laws or rules and regulations as a consequence of violating the provisions of this paragraph. But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims. A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause. In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that would justify the perpetuation of the discrimination against OFWs under the subject clause. Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected. There can never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same burden on another sector, especially when the favored sector is composed of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea that private business interest can be elevated to the level of a compelling state interest is odious. Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without infringing on the constitutional rights of OFWs. The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring foreign employers. Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement agencies in enforcing the solidary liability of their foreign principals. Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and other OFWs to equal protection.1avvphi1 Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the subject clause from the lone perspective that the clause directly violates state policy on labor under Section 3,131 Article XIII of the Constitution. While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3

thereof, the nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has described to be not self-actuating: Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as selfexecuting in the sense that these are automatically acknowledged and observed without need for any enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their enforceability.135 (Emphasis added) Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor. It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same to strict judicial scrutiny. The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal protection clause, has no life or force of its own as elucidated in Agabon. Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid governmental purpose.136 The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing governmental purpose for the subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under Section 1,137 Article III of the Constitution. The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042. On the Third Issue Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his monetary award, because these are fixed benefits that have been stipulated into his contract. Petitioner is mistaken. The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any work "performed" on designated rest days and holidays. By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138 However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v. National Labor Relations Commission, to wit: The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such benefit must first be established. In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the same is given during the actual service of the seamen. WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month. No costs. SO ORDERED.

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G.R. No. 196271 October 18, 2011 DATU MICHAEL ABAS KIDA, in his personal capacity, and in representation of MAGUINDANAO FEDERATION OF AUTONOMOUS IRRIGATORS ASSOCIATION, INC., HADJI MUHMINA J. USMAN, JOHN ANTHONY L. LIM, JAMILON T. ODIN, ASRIN TIMBOL JAIYARI, MUJIB M. KALANG, ALIH AL-SAIDI J. SAPI-E, KESSAR DAMSIE ABDIL, and BASSAM ALUH SAUPI, Petitioners, vs. SENATE OF THE PHILIPPINES, represented by its President JUAN PONCE ENRILE, HOUSE OF REPRESENTATIVES, thru SPEAKER FELICIANO BELMONTE, COMMISSION ON ELECTIONS, thru its Chairman, SIXTO BRILLANTES, JR., PAQUITO OCHOA, JR., Office of the President Executive Secretary, FLORENCIO ABAD, JR., Secretary of Budget, and ROBERTO TAN, Treasurer of the Philippines, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 196305 BASARI D. MAPUPUNO, Petitioner, vs. SIXTO BRILLANTES, in his capacity as Chairman of the Commission on Elections, FLORENCIO ABAD, JR. in his capacity as Secretary of the Department of Budget and Management, PACQUITO OCHOA, JR., in his capacity as Executive Secretary, JUAN PONCE ENRILE, in his capacity as Senate President, and FELICIANO BELMONTE, in his capacity as Speaker of the House of Representatives, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 197221 REP. EDCEL C. LAGMAN, Petitioner, vs. PAQUITO N. OCHOA, JR., in his capacity as the Executive Secretary, and the COMMISSION ON ELECTIONS, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 197280 ALMARIM CENTI TILLAH, DATU CASAN CONDING CANA, and PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN (PDP-LABAN), Petitioners, vs. THE COMMISSION ON ELECTIONS, through its Chairman, SIXTO BRILLANTES, JR., HON. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary, HON. FLORENCIO B. ABAD, JR., in his capacity as Secretary of the Department of Budget and Management, and HON. ROBERTO B. TAN, in his capacity as Treasurer of the Philippines, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 197282 ATTY. ROMULO B. MACALINTAL, Petitioner, vs. COMMISSION ON ELECTIONS and THE OFFICE OF THE PRESIDENT, through EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 197392 LUIS "BAROK" BIRAOGO, Petitioner, vs. THE COMMISSION ON ELECTIONS and EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., Respondents.
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x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 197454 JACINTO V. PARAS, Petitioner, vs. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., and the COMMISSION ON ELECTIONS, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x MINORITY RIGHTS FORUM, PHILIPPINES, INC., Respondents-Intervenor. DECISION BRION, J.: On June 30, 2011, Republic Act (RA) No. 10153, entitled "An Act Providing for the Synchronization of the Elections in the Autonomous Region in Muslim Mindanao (ARMM) with the National and Local Elections and for Other Purposes" was enacted. The law reset the ARMM elections from the 8th of August 2011, to the second Monday of May 2013 and every three (3) years thereafter, to coincide with the countrys regular national and local elections. The law as well granted the President the power to "appoint officers-in-charge (OICs) for the Office of the Regional Governor, the Regional Vice-Governor, and the Members of the Regional Legislative Assembly, who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office." Even before its formal passage, the bills that became RA No. 10153 already spawned petitions against their validity; House Bill No. 4146 and Senate Bill No. 2756 were challenged in petitions filed with this Court. These petitions multiplied after RA No. 10153 was passed. Factual Antecedents The State, through Sections 15 to 22, Article X of the 1987 Constitution, mandated the creation of autonomous regions in Muslim Mindanao and the Cordilleras. Section 15 states: Section 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines. Section 18 of the Article, on the other hand, directed Congress to enact an organic act for these autonomous regions to concretely carry into effect the granted autonomy. Section 18. The Congress shall enact an organic act for each autonomous region with the assistance and participation of the regional consultative commission composed of representatives appointed by the President from a list of nominees from multisectoral bodies. The organic act shall define the basic structure of government for the region consisting of the executive department and legislative assembly, both of which shall be elective and representative of the constituent political units. The organic acts shall likewise provide for special courts with personal, family and property law jurisdiction consistent with the provisions of this Constitution and national laws. The creation of the autonomous region shall be effective when approved by a majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and geographic areas voting favorably in such plebiscite shall be included in the autonomous region. On August 1, 1989 or two years after the effectivity of the 1987 Constitution, Congress acted through Republic Act (RA) No. 6734 entitled "An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao." A plebiscite was held on November 6, 1990 as required by Section 18(2), Article X of RA No. 6734, thus fully establishing the Autonomous Region of Muslim Mindanao (ARMM). The initially assenting provinces were Lanao del Sur, Maguindanao, Sulu and Tawi-tawi. RA No. 6734 scheduled the

first regular elections for the regional officials of the ARMM on a date not earlier than 60 days nor later than 90 days after its ratification. RA No. 9054 (entitled "An Act to Strengthen and Expand the Organic Act for the Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic Act No. 6734, entitled An Act Providing for the Autonomous Region in Muslim Mindanao, as Amended") was the next legislative act passed. This law provided further refinement in the basic ARMM structure first defined in the original organic act, and reset the regular elections for the ARMM regional officials to the second Monday of September 2001. Congress passed the next law affecting ARMM RA No. 91401 - on June 22, 2001. This law reset the first regular elections originally scheduled under RA No. 9054, to November 26, 2001. It likewise set the plebiscite to ratify RA No. 9054 to not later than August 15, 2001. RA No. 9054 was ratified in a plebiscite held on August 14, 2001. The province of Basilan and Marawi City voted to join ARMM on the same date. RA No. 93332 was subsequently passed by Congress to reset the ARMM regional elections to the 2nd Monday of August 2005, and on the same date every 3 years thereafter. Unlike RA No. 6734 and RA No. 9054, RA No. 9333 was not ratified in a plebiscite. Pursuant to RA No. 9333, the next ARMM regional elections should have been held on August 8, 2011. COMELEC had begun preparations for these elections and had accepted certificates of candidacies for the various regional offices to be elected. But on June 30, 2011, RA No. 10153 was enacted, resetting the ARMM elections to May 2013, to coincide with the regular national and local elections of the country. RA No. 10153 originated in the House of Representatives as House Bill (HB) No. 4146, seeking the postponement of the ARMM elections scheduled on August 8, 2011. On March 22, 2011, the House of Representatives passed HB No. 4146, with one hundred ninety one (191) Members voting in its favor. After the Senate received HB No. 4146, it adopted its own version, Senate Bill No. 2756 (SB No. 2756), on June 6, 2011. Thirteen (13) Senators voted favorably for its passage. On June 7, 2011, the House of Representative concurred with the Senate amendments, and on June 30, 2011, the President signed RA No. 10153 into law. As mentioned, the early challenge to RA No. 10153 came through a petition filed with this Court G.R. No. 1962713 - assailing the constitutionality of both HB No. 4146 and SB No. 2756, and challenging the validity of RA No. 9333 as well for non-compliance with the constitutional plebiscite requirement. Thereafter, petitioner Basari Mapupuno in G.R. No. 196305 filed another petition4 also assailing the validity of RA No. 9333. With the enactment into law of RA No. 10153, the COMELEC stopped its preparations for the ARMM elections. The law gave rise as well to the filing of the following petitions against its constitutionality: a) Petition for Certiorari and Prohibition5 filed by Rep. Edcel Lagman as a member of the House of Representatives against Paquito Ochoa, Jr. (in his capacity as the Executive Secretary) and the COMELEC, docketed as G.R. No. 197221; b) Petition for Mandamus and Prohibition6 filed by Atty. Romulo Macalintal as a taxpayer against the COMELEC, docketed as G.R. No. 197282; c) Petition for Certiorari and Mandamus, Injunction and Preliminary Injunction7 filed by Louis "Barok" Biraogo against the COMELEC and Executive Secretary Paquito N. Ochoa, Jr., docketed as G.R. No. 197392; and d) Petition for Certiorari and Mandamus8 filed by Jacinto Paras as a member of the House of Representatives against Executive Secretary Paquito Ochoa, Jr. and the COMELEC, docketed as G.R. No. 197454. Petitioners Alamarim Centi Tillah and Datu Casan Conding Cana as registered voters from the ARMM, with the Partido Demokratiko Pilipino Lakas ng Bayan (a political party with candidates in the ARMM regional elections scheduled for August 8, 2011), also filed a Petition for Prohibition and Mandamus9
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against the COMELEC, docketed as G.R. No. 197280, to assail the constitutionality of RA No. 9140, RA No. 9333 and RA No. 10153. Subsequently, Anak Mindanao Party-List, Minority Rights Forum Philippines, Inc. and Bangsamoro Solidarity Movement filed their own Motion for Leave to Admit their Motion for Intervention and Comment-in-Intervention dated July 18, 2011. On July 26, 2011, the Court granted the motion. In the same Resolution, the Court ordered the consolidation of all the petitions relating to the constitutionality of HB No. 4146, SB No. 2756, RA No. 9333, and RA No. 10153. Oral arguments were held on August 9, 2011 and August 16, 2011. Thereafter, the parties were instructed to submit their respective memoranda within twenty (20) days. On September 13, 2011, the Court issued a temporary restraining order enjoining the implementation of RA No. 10153 and ordering the incumbent elective officials of ARMM to continue to perform their functions should these cases not be decided by the end of their term on September 30, 2011. The Arguments The petitioners assailing RA No. 9140, RA No. 9333 and RA No. 10153 assert that these laws amend RA No. 9054 and thus, have to comply with the supermajority vote and plebiscite requirements prescribed under Sections 1 and 3, Article XVII of RA No. 9094 in order to become effective. The petitions assailing RA No. 10153 further maintain that it is unconstitutional for its failure to comply with the three-reading requirement of Section 26(2), Article VI of the Constitution. Also cited as grounds are the alleged violations of the right of suffrage of the people of ARMM, as well as the failure to adhere to the "elective and representative" character of the executive and legislative departments of the ARMM. Lastly, the petitioners challenged the grant to the President of the power to appoint OICs to undertake the functions of the elective ARMM officials until the officials elected under the May 2013 regular elections shall have assumed office. Corrolarily, they also argue that the power of appointment also gave the President the power of control over the ARMM, in complete violation of Section 16, Article X of the Constitution. The Issues From the parties submissions, the following issues were recognized and argued by the parties in the oral arguments of August 9 and 16, 2011: I. Whether the 1987 Constitution mandates the synchronization of elections II. Whether the passage of RA No. 10153 violates Section 26(2), Article VI of the 1987 Constitution III. Whether the passage of RA No. 10153 requires a supermajority vote and plebiscite A. Does the postponement of the ARMM regular elections constitute an amendment to Section 7, Article XVIII of RA No. 9054? B. Does the requirement of a supermajority vote for amendments or revisions to RA No. 9054 violate Section 1 and Section 16(2), Article VI of the 1987 Constitution and the corollary doctrine on irrepealable laws? C. Does the requirement of a plebiscite apply only in the creation of autonomous regions under paragraph 2, Section 18, Article X of the 1987 Constitution? IV. Whether RA No. 10153 violates the autonomy granted to the ARMM V. Whether the grant of the power to appoint OICs violates: A. Section 15, Article X of the 1987 Constitution B. Section 16, Article X of the 1987 Constitution C. Section 18, Article X of the 1987 Constitution VI. Whether the proposal to hold special elections is constitutional and legal. We shall discuss these issues in the order they are presented above.

OUR RULING We resolve to DISMISS the petitions and thereby UPHOLD the constitutionality of RA No. 10153 in toto. I. Synchronization as a recognized constitutional mandate The respondent Office of the Solicitor General (OSG) argues that the Constitution mandates synchronization, and in support of this position, cites Sections 1, 2 and 5, Article XVIII (Transitory Provisions) of the 1987 Constitution, which provides: Section 1. The first elections of Members of the Congress under this Constitution shall be held on the second Monday of May, 1987. The first local elections shall be held on a date to be determined by the President, which may be simultaneous with the election of the Members of the Congress. It shall include the election of all Members of the city or municipal councils in the Metropolitan Manila area. Section 2. The Senators, Members of the House of Representatives and the local officials first elected under this Constitution shall serve until noon of June 30, 1992. Of the Senators elected in the election in 1992, the first twelve obtaining the highest number of votes shall serve for six year and the remaining twelve for three years. xxx Section 5. The six-year term of the incumbent President and Vice President elected in the February 7, 1986 election is, for purposes of synchronization of elections, hereby extended to noon of June 30, 1992. The first regular elections for President and Vice-President under this Constitution shall be held on the second Monday of May, 1992. We agree with this position. While the Constitution does not expressly state that Congress has to synchronize national and local elections, the clear intent towards this objective can be gleaned from the Transitory Provisions (Article XVIII) of the Constitution,10 which show the extent to which the Constitutional Commission, by deliberately making adjustments to the terms of the incumbent officials, sought to attain synchronization of elections.11 The objective behind setting a common termination date for all elective officials, done among others through the shortening the terms of the twelve winning senators with the least number of votes, is to synchronize the holding of all future elections whether national or local to once every three years.12 This intention finds full support in the discussions during the Constitutional Commission deliberations.13 These Constitutional Commission exchanges, read with the provisions of the Transitory Provisions of the Constitution, all serve as patent indicators of the constitutional mandate to hold synchronized national and local elections, starting the second Monday of May, 1992 and for all the following elections. This Court was not left behind in recognizing the synchronization of the national and local elections as a constitutional mandate. In Osmea v. Commission on Elections,14 we explained: It is clear from the aforequoted provisions of the 1987 Constitution that the terms of office of Senators, Members of the House of Representatives, the local officials, the President and the Vice-President have been synchronized to end on the same hour, date and year noon of June 30, 1992. It is likewise evident from the wording of the above-mentioned Sections that the term of synchronization is used synonymously as the phrase holding simultaneously since this is the precise intent in terminating their Office Tenure on the same day or occasion. This common termination date will synchronize future elections to once every three years (Bernas, the Constitution of the Republic of the Philippines, Vol. II, p. 605). That the election for Senators, Members of the House of Representatives and the local officials (under Sec. 2, Art. XVIII) will have to be synchronized with the election for President and Vice President (under
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Sec. 5, Art. XVIII) is likewise evident from the x x x records of the proceedings in the Constitutional Commission. [Emphasis supplied.] Although called regional elections, the ARMM elections should be included among the elections to be synchronized as it is a "local" election based on the wording and structure of the Constitution.1avvphil A basic rule in constitutional construction is that the words used should be understood in the sense that they have in common use and given their ordinary meaning, except when technical terms are employed, in which case the significance thus attached to them prevails.15 As this Court explained in People v. Derilo,16 "[a]s the Constitution is not primarily a lawyers document, its language should be understood in the sense that it may have in common. Its words should be given their ordinary meaning except where technical terms are employed." Understood in its ordinary sense, the word "local" refers to something that primarily serves the needs of a particular limited district, often a community or minor political subdivision.17 Regional elections in the ARMM for the positions of governor, vice-governor and regional assembly representatives obviously fall within this classification, since they pertain to the elected officials who will serve within the limited region of ARMM. From the perspective of the Constitution, autonomous regions are considered one of the forms of local governments, as evident from Article X of the Constitution entitled "Local Government." Autonomous regions are established and discussed under Sections 15 to 21 of this Article the article wholly devoted to Local Government. That an autonomous region is considered a form of local government is also reflected in Section 1, Article X of the Constitution, which provides: Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao, and the Cordilleras as hereinafter provided. Thus, we find the contention that the synchronization mandated by the Constitution does not include the regional elections of the ARMM unmeritorious. We shall refer to synchronization in the course of our discussions below, as this concept permeates the consideration of the various issues posed in this case and must be recalled time and again for its complete resolution. II. The Presidents Certification on the Urgency of RA No. 10153 The petitioners in G.R. No. 197280 also challenge the validity of RA No. 10153 for its alleged failure to comply with Section 26(2), Article VI of the Constitution18 which provides that before bills passed by either the House or the Senate can become laws, they must pass through three readings on separate days. The exception is when the President certifies to the necessity of the bills immediate enactment. The Court, in Tolentino v. Secretary of Finance,19 explained the effect of the Presidents certification of necessity in the following manner: The presidential certification dispensed with the requirement not only of printing but also that of reading the bill on separate days. The phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, Section 26[2] qualifies the two stated conditions before a bill can become a law: [i] the bill has passed three readings on separate days and [ii] it has been printed in its final form and distributed three days before it is finally approved. xxx That upon the certification of a bill by the President, the requirement of three readings on separate days and of printing and distribution can be dispensed with is supported by the weight of legislative practice. For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation with the Senate version, became Republic Act No. 5440, was passed on second and third readings in the House of Representatives on the same day [May 14, 1968] after the bill had been certified by the President as urgent. In the present case, the records show that the President wrote to the Speaker of the House of Representatives to certify the necessity of the immediate enactment of a law synchronizing the ARMM

elections with the national and local elections.20 Following our Tolentino ruling, the Presidents certification exempted both the House and the Senate from having to comply with the three separate readings requirement. On the follow-up contention that no necessity existed for the immediate enactment of these bills since there was no public calamity or emergency that had to be met, again we hark back to our ruling in Tolentino: The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of martial law Art. VII, Section 18, or the existence of a national emergency justifying the delegation of extraordinary powers to the President under Art. VI, Section 23(2) is subject to judicial review because basic rights of individuals may be of hazard. But the factual basis of presidential certification of bills, which involves doing away with procedural requirements designed to insure that bills are duly considered by members of Congress, certainly should elicit a different standard of review. [Emphasis supplied.] The House of Representatives and the Senate in the exercise of their legislative discretion gave full recognition to the Presidents certification and promptly enacted RA No. 10153. Under the circumstances, nothing short of grave abuse of discretion on the part of the two houses of Congress can justify our intrusion under our power of judicial review.21 The petitioners, however, failed to provide us with any cause or justification for this course of action. Hence, while the judicial department and this Court are not bound by the acceptance of the President's certification by both the House of Representatives and the Senate, prudent exercise of our powers and respect due our co-equal branches of government in matters committed to them by the Constitution, caution a stay of the judicial hand.22 In any case, despite the Presidents certification, the two-fold purpose that underlies the requirement for three readings on separate days of every bill must always be observed to enable our legislators and other parties interested in pending bills to intelligently respond to them. Specifically, the purpose with respect to Members of Congress is: (1) to inform the legislators of the matters they shall vote on and (2) to give them notice that a measure is in progress through the enactment process.23 We find, based on the records of the deliberations on the law, that both advocates and the opponents of the proposed measure had sufficient opportunities to present their views. In this light, no reason exists to nullify RA No. 10153 on the cited ground. III. A. RA No. 9333 and RA No. 10153 are not amendments to RA No. 9054 The effectivity of RA No. 9333 and RA No. 10153 has also been challenged because they did not comply with Sections 1 and 3, Article XVII of RA No. 9054 in amending this law. These provisions require: Section 1. Consistent with the provisions of the Constitution, this Organic Act may be reamended or revised by the Congress of the Philippines upon a vote of two-thirds (2/3) of the Members of the House of Representatives and of the Senate voting separately. Section 3. Any amendment to or revision of this Organic Act shall become effective only when approved by a majority of the vote cast in a plebiscite called for the purpose, which shall be held not earlier than sixty (60) days or later than ninety (90) days after the approval of such amendment or revision. We find no merit in this contention. In the first place, neither RA No. 9333 nor RA No. 10153 amends RA No. 9054. As an examination of these laws will show, RA No. 9054 only provides for the schedule of the first ARMM elections and does not fix the date of the regular elections. A need therefore existed for the Congress to fix the date of the subsequent ARMM regular elections, which it did by enacting RA No. 9333 and thereafter, RA No. 10153. Obviously, these subsequent laws RA No. 9333 and RA No. 10153 cannot be considered amendments to RA No. 9054 as they did not change or revise any provision in the latter law; they merely
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filled in a gap in RA No. 9054 or supplemented the law by providing the date of the subsequent regular elections. This view that Congress thought it best to leave the determination of the date of succeeding ARMM elections to legislative discretion finds support in ARMMs recent history. To recall, RA No. 10153 is not the first law passed that rescheduled the ARMM elections. The First Organic Act RA No. 6734 not only did not fix the date of the subsequent elections; it did not even fix the specific date of the first ARMM elections,24 leaving the date to be fixed in another legislative enactment. Consequently, RA No. 7647,25 RA No. 8176,26 RA No. 8746,27 RA No. 8753,28 and RA No. 901229 were all enacted by Congress to fix the dates of the ARMM elections. Since these laws did not change or modify any part or provision of RA No. 6734, they were not amendments to this latter law. Consequently, there was no need to submit them to any plebiscite for ratification. The Second Organic Act RA No. 9054 which lapsed into law on March 31, 2001, provided that the first elections would be held on the second Monday of September 2001. Thereafter, Congress passed RA No. 914030 to reset the date of the ARMM elections. Significantly, while RA No. 9140 also scheduled the plebiscite for the ratification of the Second Organic Act (RA No. 9054), the new date of the ARMM regional elections fixed in RA No. 9140 was not among the provisions ratified in the plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333,31 which further reset the date of the ARMM regional elections. Again, this law was not ratified through a plebiscite. From these legislative actions, we see the clear intention of Congress to treat the laws which fix the date of the subsequent ARMM elections as separate and distinct from the Organic Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3, Article XVII of RA No. 9054. III. B. Supermajority voting requirement unconstitutional for giving RA No. 9054 the character of an irrepealable law Even assuming that RA No. 9333 and RA No. 10153 did in fact amend RA No. 9054, the supermajority (2/3) voting requirement required under Section 1, Article XVII of RA No. 905432 has to be struck down for giving RA No. 9054 the character of an irrepealable law by requiring more than what the Constitution demands. Section 16(2), Article VI of the Constitution provides that a "majority of each House shall constitute a quorum to do business." In other words, as long as majority of the members of the House of Representatives or the Senate are present, these bodies have the quorum needed to conduct business and hold session. Within a quorum, a vote of majority is generally sufficient to enact laws or approve acts. In contrast, Section 1, Article XVII of RA No. 9054 requires a vote of no less than two-thirds (2/3) of the Members of the House of Representatives and of the Senate, voting separately, in order to effectively amend RA No. 9054. Clearly, this 2/3 voting requirement is higher than what the Constitution requires for the passage of bills, and served to restrain the plenary powers of Congress to amend, revise or repeal the laws it had passed. The Courts pronouncement in City of Davao v. GSIS33 on this subject best explains the basis and reason for the unconstitutionality: Moreover, it would be noxious anathema to democratic principles for a legislative body to have the ability to bind the actions of future legislative body, considering that both assemblies are regarded with equal footing, exercising as they do the same plenary powers. Perpetual infallibility is not one of the attributes desired in a legislative body, and a legislature which attempts to forestall future amendments or repeals of its enactments labors under delusions of omniscience. xxx A state legislature has a plenary law-making power over all subjects, whether pertaining to persons or things, within its territorial jurisdiction, either to introduce new laws or repeal the old, unless prohibited expressly or by implication by the federal constitution or limited or restrained by its own. It cannot bind

itself or its successors by enacting irrepealable laws except when so restrained. Every legislative body may modify or abolish the acts passed by itself or its predecessors. This power of repeal may be exercised at the same session at which the original act was passed; and even while a bill is in its progress and before it becomes a law. This legislature cannot bind a future legislature to a particular mode of repeal. It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent legislation upon existing statutes.34 (Emphasis ours.) Thus, while a supermajority is not a total ban against a repeal, it is a limitation in excess of what the Constitution requires on the passage of bills and is constitutionally obnoxious because it significantly constricts the future legislators room for action and flexibility. III. C. Section 3, Article XVII of RA No. 9054 excessively enlarged the plebiscite requirement found in Section 18, Article X of the Constitution The requirements of RA No. 9054 not only required an unwarranted supermajority, but enlarged as well the plebiscite requirement, as embodied in its Section 3, Article XVII of that Act. As we did on the supermajority requirement, we find the enlargement of the plebiscite requirement required under Section 18, Article X of the Constitution to be excessive to point of absurdity and, hence, a violation of the Constitution. Section 18, Article X of the Constitution states that the plebiscite is required only for the creation of autonomous regions and for determining which provinces, cities and geographic areas will be included in the autonomous regions. While the settled rule is that amendments to the Organic Act have to comply with the plebiscite requirement in order to become effective,35 questions on the extent of the matters requiring ratification may unavoidably arise because of the seemingly general terms of the Constitution and the obvious absurdity that would result if a plebiscite were to be required for every statutory amendment. Section 18, Article X of the Constitution plainly states that "The creation of the autonomous region shall be effective when approved by the majority of the votes case by the constituent units in a plebiscite called for the purpose." With these wordings as standard, we interpret the requirement to mean that only amendments to, or revisions of, the Organic Act constitutionally-essential to the creation of autonomous regions i.e., those aspects specifically mentioned in the Constitution which Congress must provide for in the Organic Act require ratification through a plebiscite. These amendments to the Organic Act are those that relate to: (a) the basic structure of the regional government; (b) the regions judicial system, i.e., the special courts with personal, family, and property law jurisdiction; and, (c) the grant and extent of the legislative powers constitutionally conceded to the regional government under Section 20, Article X of the Constitution.36 The date of the ARMM elections does not fall under any of the matters that the Constitution specifically mandated Congress to provide for in the Organic Act. Therefore, even assuming that the supermajority votes and the plebiscite requirements are valid, any change in the date of elections cannot be construed as a substantial amendment of the Organic Act that would require compliance with these requirements. IV. The synchronization issue As we discussed above, synchronization of national and local elections is a constitutional mandate that Congress must provide for and this synchronization must include the ARMM elections. On this point, an existing law in fact already exists RA No. 7166 as the forerunner of the current RA No. 10153. RA No. 7166 already provides for the synchronization of local elections with the national and congressional elections. Thus, what RA No. 10153 provides is an old matter for local governments (with the exception of barangay and Sanggunian Kabataan elections where the terms are not constitutionally provided) and is technically a reiteration of what is already reflected in the law, given that regional elections are in reality local elections by express constitutional recognition.37 To achieve synchronization, Congress necessarily has to reconcile the schedule of the ARMMs regular elections (which should have been held in August 2011 based on RA No. 9333) with the fixed schedule of the national and local elections (fixed by RA No. 7166 to be held in May 2013).
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During the oral arguments, the Court identified the three options open to Congress in order to resolve this problem. These options are: (1) to allow the elective officials in the ARMM to remain in office in a hold over capacity, pursuant to Section 7(1), Article VII of RA No. 9054, until those elected in the synchronized elections assume office;38 (2) to hold special elections in the ARMM, with the terms of those elected to expire when those elected in the synchronized elections assume office; or (3) to authorize the President to appoint OICs, pursuant to Section 3 of RA No. 10153, also until those elected in the synchronized elections assume office. As will be abundantly clear in the discussion below, Congress, in choosing to grant the President the power to appoint OICs, chose the correct option and passed RA No. 10153 as a completely valid law. V. The Constitutionality of RA No. 10153 A. Basic Underlying Premises To fully appreciate the available options, certain underlying material premises must be fully understood. The first is the extent of the powers of Congress to legislate; the second is the constitutional mandate for the synchronization of elections; and the third is on the concept of autonomy as recognized and established under the 1987 Constitution. The grant of legislative power to Congress is broad, general and comprehensive.39 The legislative body possesses plenary power for all purposes of civil government.40 Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it elsewhere.41 Except as limited by the Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to all matters of general concern or common interest.42 The constitutional limitations on legislative power are either express or implied. The express limitations are generally provided in some provisions of the Declaration of Principles and State Policies (Article 2) and in the provisions Bill of Rights (Article 3). Other constitutional provisions (such as the initiative and referendum clause of Article 6, Sections 1 and 32, and the autonomy provisions of Article X) provide their own express limitations. The implied limitations are found "in the evident purpose which was in view and the circumstances and historical events which led to the enactment of the particular provision as a part of organic law."43 The constitutional provisions on autonomy specifically, Sections 15 to 21 of Article X of the Constitution constitute express limitations on legislative power as they define autonomy, its requirements and its parameters, thus limiting what is otherwise the unlimited power of Congress to legislate on the governance of the autonomous region. Of particular relevance to the issues of the present case are the limitations posed by the prescribed basic structure of government i.e., that the government must have an executive department and a legislative assembly, both of which must be elective and representative of the constituent political units; national government, too, must not encroach on the legislative powers granted under Section 20, Article X. Conversely and as expressly reflected in Section 17, Article X, "all powers and functions not granted by this Constitution or by law to the autonomous regions shall be vested in the National Government." The totality of Sections 15 to 21 of Article X should likewise serve as a standard that Congress must observe in dealing with legislation touching on the affairs of the autonomous regions. The terms of these sections leave no doubt on what the Constitution intends the idea of self-rule or self-government, in particular, the power to legislate on a wide array of social, economic and administrative matters. But equally clear under these provisions are the permeating principles of national sovereignty and the territorial integrity of the Republic, as expressed in the above-quoted Section 17 and in Section 15.44 In other words, the Constitution and the supporting jurisprudence, as they now stand, reject the notion of imperium et imperio45 in the relationship between the national and the regional governments. In relation with synchronization, both autonomy and the synchronization of national and local elections are recognized and established constitutional mandates, with one being as compelling as the other. If their compelling force differs at all, the difference is in their coverage; synchronization operates on and

affects the whole country, while regional autonomy as the term suggests directly carries a narrower regional effect although its national effect cannot be discounted. These underlying basic concepts characterize the powers and limitations of Congress when it acted on RA No. 10153. To succinctly describe the legal situation that faced Congress then, its decision to synchronize the regional elections with the national, congressional and all other local elections (save for barangay and sangguniang kabataan elections) left it with the problem of how to provide the ARMM with governance in the intervening period between the expiration of the term of those elected in August 2008 and the assumption to office twenty-one (21) months away of those who will win in the synchronized elections on May 13, 2013. The problem, in other words, was for interim measures for this period, consistent with the terms of the Constitution and its established supporting jurisprudence, and with the respect due to the concept of autonomy. Interim measures, to be sure, is not a strange phenomenon in the Philippine legal landscape. The Constitutions Transitory Provisions themselves collectively provide measures for transition from the old constitution to the new46 and for the introduction of new concepts.47 As previously mentioned, the adjustment of elective terms and of elections towards the goal of synchronization first transpired under the Transitory Provisions. The adjustments, however, failed to look far enough or deeply enough, particularly into the problems that synchronizing regional autonomous elections would entail; thus, the present problem is with us today. The creation of local government units also represents instances when interim measures are required. In the creation of Quezon del Sur48 and Dinagat Islands,49 the creating statutes authorized the President to appoint an interim governor, vice-governor and members of the sangguniang panlalawigan although these positions are essentially elective in character; the appointive officials were to serve until a new set of provincial officials shall have been elected and qualified.50 A similar authority to appoint is provided in the transition of a local government from a sub-province to a province.51 In all these, the need for interim measures is dictated by necessity; out-of-the-way arrangements and approaches were adopted or used in order to adjust to the goal or objective in sight in a manner that does not do violence to the Constitution and to reasonably accepted norms. Under these limitations, the choice of measures was a question of wisdom left to congressional discretion. To return to the underlying basic concepts, these concepts shall serve as the guideposts and markers in our discussion of the options available to Congress to address the problems brought about by the synchronization of the ARMM elections, properly understood as interim measures that Congress had to provide. The proper understanding of the options as interim measures assume prime materiality as it is under these terms that the passage of RA No. 10153 should be measured, i.e., given the constitutional objective of synchronization that cannot legally be faulted, did Congress gravely abuse its discretion or violate the Constitution when it addressed through RA No. 10153 the concomitant problems that the adjustment of elections necessarily brought with it? B. Holdover Option is Unconstitutional We rule out the first option holdover for those who were elected in executive and legislative positions in the ARMM during the 2008-2011 term as an option that Congress could have chosen because a holdover violates Section 8, Article X of the Constitution. This provision states: Section 8. The term of office of elective local officials, except barangay officials, which shall be determined by law, shall be three years and no such official shall serve for more than three consecutive terms. [emphases ours] Since elective ARMM officials are local officials, they are covered and bound by the three-year term limit prescribed by the Constitution; they cannot extend their term through a holdover. As this Court put in Osmea v. COMELEC:52 It is not competent for the legislature to extend the term of officers by providing that they shall hold over until their successors are elected and qualified where the constitution has in effect or by clear implication prescribed the term and when the Constitution fixes the day on which the official term shall begin, there
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is no legislative authority to continue the office beyond that period, even though the successors fail to qualify within the time. In American Jurisprudence it has been stated as follows: "It has been broadly stated that the legislature cannot, by an act postponing the election to fill an office the term of which is limited by the Constitution, extend the term of the incumbent beyond the period as limited by the Constitution." [Emphasis ours.] Independently of the Osmea ruling, the primacy of the Constitution as the supreme law of the land dictates that where the Constitution has itself made a determination or given its mandate, then the matters so determined or mandated should be respected until the Constitution itself is changed by amendment or repeal through the applicable constitutional process. A necessary corollary is that none of the three branches of government can deviate from the constitutional mandate except only as the Constitution itself may allow.53 If at all, Congress may only pass legislation filing in details to fully operationalize the constitutional command or to implement it by legislation if it is non-self-executing; this Court, on the other hand, may only interpret the mandate if an interpretation is appropriate and called for.54 In the case of the terms of local officials, their term has been fixed clearly and unequivocally, allowing no room for any implementing legislation with respect to the fixed term itself and no vagueness that would allow an interpretation from this Court. Thus, the term of three years for local officials should stay at three (3) years as fixed by the Constitution and cannot be extended by holdover by Congress. If it will be claimed that the holdover period is effectively another term mandated by Congress, the net result is for Congress to create a new term and to appoint the occupant for the new term. This view like the extension of the elective term is constitutionally infirm because Congress cannot do indirectly what it cannot do directly, i.e., to act in a way that would effectively extend the term of the incumbents. Indeed, if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.55 Congress cannot also create a new term and effectively appoint the occupant of the position for the new term. This is effectively an act of appointment by Congress and an unconstitutional intrusion into the constitutional appointment power of the President.56 Hence, holdover whichever way it is viewed is a constitutionally infirm option that Congress could not have undertaken. Jurisprudence, of course, is not without examples of cases where the question of holdover was brought before, and given the imprimatur of approval by, this Court. The present case though differs significantly from past cases with contrary rulings, particularly from Sambarani v. COMELEC,57 Adap v. Comelec,58 and Montesclaros v. Comelec,59 where the Court ruled that the elective officials could hold on to their positions in a hold over capacity. All these past cases refer to elective barangay or sangguniang kabataan officials whose terms of office are not explicitly provided for in the Constitution; the present case, on the other hand, refers to local elective officials the ARMM Governor, the ARMM Vice-Governor, and the members of the Regional Legislative Assembly whose terms fall within the three-year term limit set by Section 8, Article X of the Constitution. Because of their constitutionally limited term, Congress cannot legislate an extension beyond the term for which they were originally elected. Even assuming that holdover is constitutionally permissible, and there had been statutory basis for it (namely Section 7, Article VII of RA No. 9054) in the past,60 we have to remember that the rule of holdover can only apply as an available option where no express or implied legislative intent to the contrary exists; it cannot apply where such contrary intent is evident.61 Congress, in passing RA No. 10153, made it explicitly clear that it had the intention of suppressing the holdover rule that prevailed under RA No. 9054 by completely removing this provision. The deletion is a policy decision that is wholly within the discretion of Congress to make in the exercise of its plenary legislative powers; this Court cannot pass upon questions of wisdom, justice or expediency of legislation,62 except where an attendant unconstitutionality or grave abuse of discretion results. C. The COMELEC has no authority to order special elections

Another option proposed by the petitioner in G.R. No. 197282 is for this Court to compel COMELEC to immediately conduct special elections pursuant to Section 5 and 6 of Batas Pambansa Bilang (BP) 881. The power to fix the date of elections is essentially legislative in nature, as evident from, and exemplified by, the following provisions of the Constitution: Section 8, Article VI, applicable to the legislature, provides: Section 8. Unless otherwise provided by law, the regular election of the Senators and the Members of the House of Representatives shall be held on the second Monday of May. [Emphasis ours] Section 4(3), Article VII, with the same tenor but applicable solely to the President and Vice-President, states: xxxx Section 4. xxx Unless otherwise provided by law, the regular election for President and Vice-President shall be held on the second Monday of May. [Emphasis ours] while Section 3, Article X, on local government, provides: Section 3. The Congress shall enact a local government code which shall provide for xxx the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials[.] [Emphases ours] These provisions support the conclusion that no elections may be held on any other date for the positions of President, Vice President, Members of Congress and local officials, except when so provided by another Act of Congress, or upon orders of a body or officer to whom Congress may have delegated either the power or the authority to ascertain or fill in the details in the execution of that power.63 Notably, Congress has acted on the ARMM elections by postponing the scheduled August 2011 elections and setting another date May 13, 2011 for regional elections synchronized with the presidential, congressional and other local elections. By so doing, Congress itself has made a policy decision in the exercise of its legislative wisdom that it shall not call special elections as an adjustment measure in synchronizing the ARMM elections with the other elections. After Congress has so acted, neither the Executive nor the Judiciary can act to the contrary by ordering special elections instead at the call of the COMELEC. This Court, particularly, cannot make this call without thereby supplanting the legislative decision and effectively legislating. To be sure, the Court is not without the power to declare an act of Congress null and void for being unconstitutional or for having been exercised in grave abuse of discretion.64 But our power rests on very narrow ground and is merely to annul a contravening act of Congress; it is not to supplant the decision of Congress nor to mandate what Congress itself should have done in the exercise of its legislative powers. Thus, contrary to what the petition in G.R. No. 197282 urges, we cannot compel COMELEC to call for special elections. Furthermore, we have to bear in mind that the constitutional power of the COMELEC, in contrast with the power of Congress to call for, and to set the date of, elections, is limited to enforcing and administering all laws and regulations relative to the conduct of an election.65 Statutorily, COMELEC has no power to call for the holding of special elections unless pursuant to a specific statutory grant. True, Congress did grant, via Sections 5 and 6 of BP 881, COMELEC with the power to postpone elections to another date. However, this power is limited to, and can only be exercised within, the specific terms and circumstances provided for in the law. We quote: Section 5. Postponement of election. - When for any serious cause such as violence, terrorism, loss or destruction of election paraphernalia or records, force majeure, and other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision, the Commission, motu proprio or upon a verified petition by any interested party, and after due notice and hearing, whereby all interested parties are afforded equal opportunity to be heard, shall postpone the election therein to a date which should be reasonably close to the date of the election not
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held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause for such postponement or suspension of the election or failure to elect. Section 6. Failure of election. - If, on account of force majeure, violence, terrorism, fraud, or other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof, such election results in a failure to elect, and in any of such cases the failure or suspension of election would affect the result of the election, the Commission shall, on the basis of a verified petition by any interested party and after due notice and hearing, call for the holding or continuation of the election not held, suspended or which resulted in a failure to elect on a date reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause of such postponement or suspension of the election or failure to elect. [Emphasis ours] A close reading of Section 5 of BP 881 reveals that it is meant to address instances where elections have already been scheduled to take place but have to be postponed because of (a) violence, (b) terrorism, (c) loss or destruction of election paraphernalia or records, (d) force majeure, and (e) other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision. Under the principle of ejusdem generis, the term "analogous causes" will be restricted to those unforeseen or unexpected events that prevent the holding of the scheduled elections. These "analogous causes" are further defined by the phrase "of such nature that the holding of a free, orderly and honest election should become impossible." Similarly, Section 6 of BP 881 applies only to those situations where elections have already been scheduled but do not take place because of (a) force majeure, (b) violence, (c) terrorism, (d) fraud, or (e) other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof, such election results in a failure to elect. As in Section 5 of BP 881, Section 6 addresses instances where the elections do not occur or had to be suspended because of unexpected and unforeseen circumstances. In the present case, the postponement of the ARMM elections is by law i.e., by congressional policy and is pursuant to the constitutional mandate of synchronization of national and local elections. By no stretch of the imagination can these reasons be given the same character as the circumstances contemplated by Section 5 or Section 6 of BP 881, which all pertain to extralegal causes that obstruct the holding of elections. Courts, to be sure, cannot enlarge the scope of a statute under the guise of interpretation, nor include situations not provided nor intended by the lawmakers.66 Clearly, neither Section 5 nor Section 6 of BP 881 can apply to the present case and this Court has absolutely no legal basis to compel the COMELEC to hold special elections. D. The Court has no power to shorten the terms of elective officials Even assuming that it is legally permissible for the Court to compel the COMELEC to hold special elections, no legal basis likewise exists to rule that the newly elected ARMM officials shall hold office only until the ARMM officials elected in the synchronized elections shall have assumed office. In the first place, the Court is not empowered to adjust the terms of elective officials. Based on the Constitution, the power to fix the term of office of elective officials, which can be exercised only in the case of barangay officials,67 is specifically given to Congress. Even Congress itself may be denied such power, as shown when the Constitution shortened the terms of twelve Senators obtaining the least votes,68 and extended the terms of the President and the Vice-President69 in order to synchronize elections; Congress was not granted this same power. The settled rule is that terms fixed by the Constitution cannot be changed by mere statute.70 More particularly, not even Congress and certainly not this Court, has the authority to fix the terms of elective local officials in the ARMM for less, or more,

than the constitutionally mandated three years71 as this tinkering would directly contravene Section 8, Article X of the Constitution as we ruled in Osmena. Thus, in the same way that the term of elective ARMM officials cannot be extended through a holdover, the term cannot be shortened by putting an expiration date earlier than the three (3) years that the Constitution itself commands. This is what will happen a term of less than two years if a call for special elections shall prevail. In sum, while synchronization is achieved, the result is at the cost of a violation of an express provision of the Constitution. Neither we nor Congress can opt to shorten the tenure of those officials to be elected in the ARMM elections instead of acting on their term (where the "term" means the time during which the officer may claim to hold office as of right and fixes the interval after which the several incumbents shall succeed one another, while the "tenure" represents the term during which the incumbent actually holds the office).72 As with the fixing of the elective term, neither Congress nor the Court has any legal basis to shorten the tenure of elective ARMM officials. They would commit an unconstitutional act and gravely abuse their discretion if they do so. E. The Presidents Power to Appoint OICs The above considerations leave only Congress chosen interim measure RA No. 10153 and the appointment by the President of OICs to govern the ARMM during the pre-synchronization period pursuant to Sections 3, 4 and 5 of this law as the only measure that Congress can make. This choice itself, however, should be examined for any attendant constitutional infirmity. At the outset, the power to appoint is essentially executive in nature, and the limitations on or qualifications to the exercise of this power should be strictly construed; these limitations or qualifications must be clearly stated in order to be recognized.73 The appointing power is embodied in Section 16, Article VII of the Constitution, which states: Section 16. The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads of the executive departments, ambassadors, other public ministers and consuls or officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution. He shall also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint. The Congress may, by law, vest the appointment of other officers lower in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards. [emphasis ours] This provision classifies into four groups the officers that the President can appoint. These are: First, the heads of the executive departments; ambassadors; other public ministers and consuls; officers of the Armed Forces of the Philippines, from the rank of colonel or naval captain; and other officers whose appointments are vested in the President in this Constitution; Second, all other officers of the government whose appointments are not otherwise provided for by law; Third, those whom the President may be authorized by law to appoint; and Fourth, officers lower in rank whose appointments the Congress may by law vest in the President alone.74 Since the Presidents authority to appoint OICs emanates from RA No. 10153, it falls under the third group of officials that the President can appoint pursuant to Section 16, Article VII of the Constitution. Thus, the assailed law facially rests on clear constitutional basis. If at all, the gravest challenge posed by the petitions to the authority to appoint OICs under Section 3 of RA No. 10153 is the assertion that the Constitution requires that the ARMM executive and legislative officials to be "elective and representative of the constituent political units." This requirement indeed is an express limitation whose non-observance in the assailed law leaves the appointment of OICs constitutionally defective.
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After fully examining the issue, we hold that this alleged constitutional problem is more apparent than real and becomes very real only if RA No. 10153 were to be mistakenly read as a law that changes the elective and representative character of ARMM positions. RA No. 10153, however, does not in any way amend what the organic law of the ARMM (RA No. 9054) sets outs in terms of structure of governance. What RA No. 10153 in fact only does is to "appoint officers-in-charge for the Office of the Regional Governor, Regional Vice Governor and Members of the Regional Legislative Assembly who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office." This power is far different from appointing elective ARMM officials for the abbreviated term ending on the assumption to office of the officials elected in the May 2013 elections. As we have already established in our discussion of the supermajority and plebiscite requirements, the legal reality is that RA No. 10153 did not amend RA No. 9054. RA No. 10153, in fact, provides only for synchronization of elections and for the interim measures that must in the meanwhile prevail. And this is how RA No. 10153 should be read in the manner it was written and based on its unambiguous facial terms.75 Aside from its order for synchronization, it is purely and simply an interim measure responding to the adjustments that the synchronization requires. Thus, the appropriate question to ask is whether the interim measure is an unreasonable move for Congress to adopt, given the legal situation that the synchronization unavoidably brought with it. In more concrete terms and based on the above considerations, given the plain unconstitutionality of providing for a holdover and the unavailability of constitutional possibilities for lengthening or shortening the term of the elected ARMM officials, is the choice of the Presidents power to appoint for a fixed and specific period as an interim measure, and as allowed under Section 16, Article VII of the Constitution an unconstitutional or unreasonable choice for Congress to make? Admittedly, the grant of the power to the President under other situations or where the power of appointment would extend beyond the adjustment period for synchronization would be to foster a government that is not "democratic and republican." For then, the peoples right to choose the leaders to govern them may be said to be systemically withdrawn to the point of fostering an undemocratic regime. This is the grant that would frontally breach the "elective and representative" governance requirement of Section 18, Article X of the Constitution. But this conclusion would not be true under the very limited circumstances contemplated in RA No. 10153 where the period is fixed and, more importantly, the terms of governance both under Section 18, Article X of the Constitution and RA No. 9054 will not systemically be touched nor affected at all. To repeat what has previously been said, RA No. 9054 will govern unchanged and continuously, with full effect in accordance with the Constitution, save only for the interim and temporary measures that synchronization of elections requires. Viewed from another perspective, synchronization will temporarily disrupt the election process in a local community, the ARMM, as well as the communitys choice of leaders, but this will take place under a situation of necessity and as an interim measure in the manner that interim measures have been adopted and used in the creation of local government units76 and the adjustments of sub-provinces to the status of provinces.77 These measures, too, are used in light of the wider national demand for the synchronization of elections (considered vis--vis the regional interests involved). The adoption of these measures, in other words, is no different from the exercise by Congress of the inherent police power of the State, where one of the essential tests is the reasonableness of the interim measure taken in light of the given circumstances. Furthermore, the "representative" character of the chosen leaders need not necessarily be affected by the appointment of OICs as this requirement is really a function of the appointment process; only the "elective" aspect shall be supplanted by the appointment of OICs. In this regard, RA No. 10153 significantly seeks to address concerns arising from the appointments by providing, under Sections 3, 4 and 5 of the assailed law, concrete terms in the Appointment of OIC, the Manner and Procedure of Appointing OICs, and their Qualifications.

Based on these considerations, we hold that RA No. 10153 viewed in its proper context is a law that is not violative of the Constitution (specifically, its autonomy provisions), and one that is reasonable as well under the circumstances. VI. Other Constitutional Concerns Outside of the above concerns, it has been argued during the oral arguments that upholding the constitutionality of RA No. 10153 would set a dangerous precedent of giving the President the power to cancel elections anywhere in the country, thus allowing him to replace elective officials with OICs. This claim apparently misunderstands that an across-the-board cancellation of elections is a matter for Congress, not for the President, to address. It is a power that falls within the powers of Congress in the exercise of its legislative powers. Even Congress, as discussed above, is limited in what it can legislatively undertake with respect to elections. If RA No. 10153 cancelled the regular August 2011 elections, it was for a very specific and limited purpose the synchronization of elections. It was a temporary means to a lasting end the synchronization of elections. Thus, RA No. 10153 and the support that the Court gives this legislation are likewise clear and specific, and cannot be transferred or applied to any other cause for the cancellation of elections. Any other localized cancellation of elections and call for special elections can occur only in accordance with the power already delegated by Congress to the COMELEC, as above discussed. Given that the incumbent ARMM elective officials cannot continue to act in a holdover capacity upon the expiration of their terms, and this Court cannot compel the COMELEC to conduct special elections, the Court now has to deal with the dilemma of a vacuum in governance in the ARMM. To emphasize the dire situation a vacuum brings, it should not be forgotten that a period of 21 months or close to 2 years intervenes from the time that the incumbent ARMM elective officials terms expired and the time the new ARMM elective officials begin their terms in 2013. As the lessons of our Mindanao history past and current teach us, many developments, some of them critical and adverse, can transpire in the countrys Muslim areas in this span of time in the way they transpired in the past.78 Thus, it would be reckless to assume that the presence of an acting ARMM Governor, an acting Vice-Governor and a fully functioning Regional Legislative Assembly can be done away with even temporarily. To our mind, the appointment of OICs under the present circumstances is an absolute necessity. Significantly, the grant to the President of the power to appoint OICs to undertake the functions of the elective members of the Regional Legislative Assembly is neither novel nor innovative. We hark back to our earlier pronouncement in Menzon v. Petilla, etc., et al.:79 It may be noted that under Commonwealth Act No. 588 and the Revised Administrative Code of 1987, the President is empowered to make temporary appointments in certain public offices, in case of any vacancy that may occur. Albeit both laws deal only with the filling of vacancies in appointive positions. However, in the absence of any contrary provision in the Local Government Code and in the best interest of public service, we see no cogent reason why the procedure thus outlined by the two laws may not be similarly applied in the present case. The respondents contend that the provincial board is the correct appointing power. This argument has no merit. As between the President who has supervision over local governments as provided by law and the members of the board who are junior to the vicegovernor, we have no problem ruling in favor of the President, until the law provides otherwise. A vacancy creates an anomalous situation and finds no approbation under the law for it deprives the constituents of their right of representation and governance in their own local government. In a republican form of government, the majority rules through their chosen few, and if one of them is incapacitated or absent, etc., the management of governmental affairs is, to that extent, may be hampered. Necessarily, there will be a consequent delay in the delivery of basic services to the people of Leyte if the Governor or the Vice-Governor is missing.80 (Emphasis ours.)

As in Menzon, leaving the positions of ARMM Governor, Vice Governor, and members of the Regional Legislative Assembly vacant for 21 months, or almost 2 years, would clearly cause disruptions and delays in the delivery of basic services to the people, in the proper management of the affairs of the regional government, and in responding to critical developments that may arise. When viewed in this context, allowing the President in the exercise of his constitutionally-recognized appointment power to appoint OICs is, in our judgment, a reasonable measure to take. B. Autonomy in the ARMM It is further argued that while synchronization may be constitutionally mandated, it cannot be used to defeat or to impede the autonomy that the Constitution granted to the ARMM. Phrased in this manner, one would presume that there exists a conflict between two recognized Constitutional mandates synchronization and regional autonomy such that it is necessary to choose one over the other. We find this to be an erroneous approach that violates a basic principle in constitutional construction ut magis valeat quam pereat: that the Constitution is to be interpreted as a whole,81 and one mandate should not be given importance over the other except where the primacy of one over the other is clear.82 We refer to the Courts declaration in Ang-Angco v. Castillo, et al.,83 thus: A provision of the constitution should not be construed in isolation from the rest. Rather, the constitution must be interpreted as a whole, and apparently, conflicting provisions should be reconciled and harmonized in a manner that may give to all of them full force and effect. [Emphasis supplied.] Synchronization is an interest that is as constitutionally entrenched as regional autonomy. They are interests that this Court should reconcile and give effect to, in the way that Congress did in RA No. 10153 which provides the measure to transit to synchronized regional elections with the least disturbance on the interests that must be respected. Particularly, regional autonomy will be respected instead of being sidelined, as the law does not in any way alter, change or modify its governing features, except in a very temporary manner and only as necessitated by the attendant circumstances. Elsewhere, it has also been argued that the ARMM elections should not be synchronized with the national and local elections in order to maintain the autonomy of the ARMM and insulate its own electoral processes from the rough and tumble of nationwide and local elections. This argument leaves us far from convinced of its merits. As heretofore mentioned and discussed, while autonomous regions are granted political autonomy, the framers of the Constitution never equated autonomy with independence. The ARMM as a regional entity thus continues to operate within the larger framework of the State and is still subject to the national policies set by the national government, save only for those specific areas reserved by the Constitution for regional autonomous determination. As reflected during the constitutional deliberations of the provisions on autonomous regions: Mr. Bennagen. xxx We do not see here a complete separation from the central government, but rather an efficient working relationship between the autonomous region and the central government. We see this as an effective partnership, not a separation. Mr. Romulo. Therefore, complete autonomy is not really thought of as complete independence. Mr. Ople. We define it as a measure of self-government within the larger political framework of the nation.84 [Emphasis supplied.] This exchange of course is fully and expressly reflected in the above-quoted Section 17, Article X of the Constitution, and by the express reservation under Section 1 of the same Article that autonomy shall be "within the framework of this Constitution and the national sovereignty as well as the territorial integrity of the Republic of the Philippines." Interestingly, the framers of the Constitution initially proposed to remove Section 17 of Article X, believing it to be unnecessary in light of the enumeration of powers granted to autonomous regions in Section 20, Article X of the Constitution. Upon further reflection, the framers decided to reinstate the provision in order to "make it clear, once and for all, that these are the limits of the powers of the
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autonomous government. Those not enumerated are actually to be exercised by the national government[.]"85 Of note is the Courts pronouncement in Pimentel, Jr. v. Hon. Aguirre86 which we quote: Under the Philippine concept of local autonomy, the national government has not completely relinquished all its powers over local governments, including autonomous regions. Only administrative powers over local affairs are delegated to political subdivisions. The purpose of the delegation is to make governance more directly responsive and effective at the local levels. In turn, economic, political and social development at the smaller political units are expected to propel social and economic growth and development. But to enable the country to develop as a whole, the programs and policies effected locally must be integrated and coordinated towards a common national goal. Thus, policy-setting for the entire country still lies in the President and Congress. [Emphasis ours.] In other words, the autonomy granted to the ARMM cannot be invoked to defeat national policies and concerns. Since the synchronization of elections is not just a regional concern but a national one, the ARMM is subject to it; the regional autonomy granted to the ARMM cannot be used to exempt the region from having to act in accordance with a national policy mandated by no less than the Constitution. Conclusion Congress acted within its powers and pursuant to a constitutional mandate the synchronization of national and local elections when it enacted RA No. 10153. This Court cannot question the manner by which Congress undertook this task; the Judiciary does not and cannot pass upon questions of wisdom, justice or expediency of legislation.87 As judges, we can only interpret and apply the law and, despite our doubts about its wisdom, cannot repeal or amend it.88 Nor can the Court presume to dictate the means by which Congress should address what is essentially a legislative problem. It is not within the Courts power to enlarge or abridge laws; otherwise, the Court will be guilty of usurping the exclusive prerogative of Congress.89 The petitioners, in asking this Court to compel COMELEC to hold special elections despite its lack of authority to do so, are essentially asking us to venture into the realm of judicial legislation, which is abhorrent to one of the most basic principles of a republican and democratic government the separation of powers. The petitioners allege, too, that we should act because Congress acted with grave abuse of discretion in enacting RA No. 10153. Grave abuse of discretion is such capricious and whimsical exercise of judgment that is patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law or to act at all in contemplation of the law as where the power is exercised in an arbitrary and despotic manner by reason of passion and hostility.90 We find that Congress, in passing RA No. 10153, acted strictly within its constitutional mandate. Given an array of choices, it acted within due constitutional bounds and with marked reasonableness in light of the necessary adjustments that synchronization demands. Congress, therefore, cannot be accused of any evasion of a positive duty or of a refusal to perform its duty. We thus find no reason to accord merit to the petitioners claims of grave abuse of discretion. On the general claim that RA No. 10153 is unconstitutional, we can only reiterate the established rule that every statute is presumed valid.91 Congress, thus, has in its favor the presumption of constitutionality of its acts, and the party challenging the validity of a statute has the onerous task of rebutting this presumption.92 Any reasonable doubt about the validity of the law should be resolved in favor of its constitutionality.93 As this Court declared in Garcia v. Executive Secretary:94 The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the other departments. The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted.95 [Emphasis ours.]
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Given the failure of the petitioners to rebut the presumption of constitutionality in favor of RA No. 10153, we must support and confirm its validity. WHEREFORE, premises considered, we DISMISS the consolidated petitions assailing the validity of RA No. 10153 for lack of merit, and UPHOLD the constitutionality of this law. We likewise LIFT the temporary restraining order we issued in our Resolution of September 13, 2011. No costs. SO ORDERED.

G.R. No. 196271 February 28, 2012 DATU MICHAEL ABAS KIDA, in his personal capacity, and in representation of MAGUINDANAO FEDERATION OF AUTONOMOUS IRRIGATORS ASSOCIATION, INC., HADJI MUHMINA J. USMAN, JOHN ANTHONY L. LIM, JAMILON T. ODIN, ASRIN TIMBOL JAIYARI, MUJIB M. KALANG, ALIH AL-SAIDI J. SAPI-E, KESSAR DAMSIE ABDIL, and BASSAM ALUH SAUPI, Petitioners, vs. SENATE OF THE PHILIPPINES, represented by its President JUAN PONCE ENRILE, HOUSE OF REPRESENTATIVES, thru SPEAKER FELICIANO BELMONTE, COMMISSION ON ELECTIONS, thru its Chairman, SIXTO BRILLANTES, JR., PAQUITO OCHOA, JR., Office of the President Executive Secretary, FLORENCIO ABAD, JR., Secretary of Budget, and ROBERTO TAN, Treasurer of the Philippines, Respondents. x-----------------------x G.R. No. 196305 BASARI D. MAPUPUNO, Petitioner, vs. SIXTO BRILLANTES, in his capacity as Chairman of the Commission on Elections, FLORENCIO ABAD, JR. in his capacity as Secretary of the Department of Budget and Management, PAQUITO OCHOA, JR., in his capacity as Executive Secretary, JUAN PONCE ENRILE, in his capacity as Senate President, and FELICIANO BELMONTE, in his capacity as Speaker of the House of Representatives, Respondents. x-----------------------x G.R. No. 197221 REP. EDCEL C. LAGMAN, Petitioner, vs. PAQUITO N. OCHOA, JR., in his capacity as the Executive Secretary, and the COMMISSION ON ELECTIONS, Respondents. x-----------------------x G.R. No. 197280 ALMARIM CENTI TILLAH, DATU CASAN CONDING CANA, and PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN (PDP-LABAN), Petitioners, vs. THE COMMISSION ON ELECTIONS, through its Chairman, SIXTO BRILLANTES, JR., HON. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary, HON. FLORENCIO B. ABAD, JR., in his capacity as Secretary of the Department of Budget and Management, and HON. ROBERTO B. TAN, in his capacity as Treasurer of the Philippines, Respondents. x-----------------------x G.R. No. 197282 ATTY. ROMULO B. MACALINTAL, Petitioner, vs. COMMISSION ON ELECTIONS and THE OFFICE OF THE PRESIDENT, through EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., Respondents. x-----------------------x G.R. No. 197392 LOUIS "BAROK" C. BIRAOGO, Petitioner, vs. THE COMMISSION ON ELECTIONS and EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., Respondents.
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x-----------------------x G.R. No. 197454 JACINTO V. PARAS, Petitioner, vs. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., and THE COMMISSION ON ELECTIONS, Respondents. MINORITY RIGHTS FORUM, PHILIPPINES, INC., Respondents-Intervenor. RESOLUTION BRION, J.: We resolve: (a) the motion for reconsideration filed by petitioners Datu Michael Abas Kida, et al. in G.R. No. 196271; (b) the motion for reconsideration filed by petitioner Rep. Edcel Lagman in G.R. No. 197221; (c) the ex abundante ad cautelam motion for reconsideration filed by petitioner Basari Mapupuno in G.R. No. 196305; (d) the motion for reconsideration filed by petitioner Atty. Romulo Macalintal in G.R. No. 197282; (e) the motion for reconsideration filed by petitioners Almarim Centi Tillah, Datu Casan Conding Cana and Partido Demokratiko Pilipino Lakas ng Bayan in G.R. No. 197280; (f) the manifestation and motion filed by petitioners Almarim Centi Tillah, et al. in G.R. No. 197280; and (g) the very urgent motion to issue clarificatory resolution that the temporary restraining order (TRO) is still existing and effective. These motions assail our Decision dated October 18, 2011, where we upheld the constitutionality of Republic Act (RA) No. 10153. Pursuant to the constitutional mandate of synchronization, RA No. 10153 postponed the regional elections in the Autonomous Region in Muslim Mindanao (ARMM) (which were scheduled to be held on the second Monday of August 2011) to the second Monday of May 2013 and recognized the Presidents power to appoint officers-in-charge (OICs) to temporarily assume these positions upon the expiration of the terms of the elected officials. The Motions for Reconsideration The petitioners in G.R. No. 196271 raise the following grounds in support of their motion: I. THE HONORABLE COURT ERRED IN CONCLUDING THAT THE ARMM ELECTIONS ARE LOCAL ELECTIONS, CONSIDERING THAT THE CONSTITUTION GIVES THE ARMM A SPECIAL STATUS AND IS SEPARATE AND DISTINCT FROM ORDINARY LOCAL GOVERNMENT UNITS. II. R.A. 10153 AND R.A. 9333 AMEND THE ORGANIC ACT. III. THE SUPERMAJORITY PROVISIONS OF THE ORGANIC ACT (R.A. 9054) ARE NOT IRREPEALABLE LAWS. IV. SECTION 3, ARTICLE XVII OF R.A. 9054 DOES NOT VIOLATE SECTION 18, ARTICLE X OF THE CONSTITUTION. V. BALANCE OF INTERESTS TILT IN FAVOR OF THE DEMOCRATIC PRINCIPLE[.]1 The petitioner in G.R. No. 197221 raises similar grounds, arguing that: I. THE ELECTIVE REGIONAL EXECUTIVE AND LEGISLATIVE OFFICIALS OF ARMM CANNOT BE CONSIDERED AS OR EQUATED WITH THE TRADITIONAL LOCAL GOVERNMENT OFFICIALS IN THE LOCAL GOVERNMENT UNITS (LGUs) BECAUSE (A) THERE IS NO EXPLICIT CONSTITUTIONAL PROVISION ON SUCH PARITY; AND (B) THE ARMM IS MORE SUPERIOR THAN LGUs IN STRUCTURE, POWERS AND AUTONOMY, AND CONSEQUENTLY IS A CLASS OF ITS OWN APART FROM TRADITIONAL LGUs. II. THE UNMISTAKABLE AND UNEQUIVOCAL CONSTITUTIONAL MANDATE FOR AN ELECTIVE AND REPRESENTATIVE EXECUTIVE DEPARTMENT AND LEGISLATIVE ASSEMBLY IN ARMM INDUBITABLY PRECLUDES THE APPOINTMENT BY THE PRESIDENT OF OFFICERS-IN-CHARGE (OICs), ALBEIT MOMENTARY OR TEMPORARY,

FOR THE POSITIONS OF ARMM GOVERNOR, VICE GOVERNOR AND MEMBERS OF THE REGIONAL ASSEMBLY. III. THE PRESIDENTS APPOINTING POWER IS LIMITED TO APPOINTIVE OFFICIALS AND DOES NOT EXTEND TO ELECTIVE OFFICIALS EVEN AS THE PRESIDENT IS ONLY VESTED WITH SUPERVISORY POWERS OVER THE ARMM, THEREBY NEGATING THE AWESOME POWER TO APPOINT AND REMOVE OICs OCCUPYING ELECTIVE POSITIONS. IV. THE CONSTITUTION DOES NOT PROSCRIBE THE HOLDOVER OF ARMM ELECTED OFFICIALS PENDING THE ELECTION AND QUALIFICATION OF THEIR SUCCESSORS. V. THE RULING IN OSMENA DOES NOT APPLY TO ARMM ELECTED OFFICIALS WHOSE TERMS OF OFFICE ARE NOT PROVIDED FOR BY THE CONSTITUTION BUT PRESCRIBED BY THE ORGANIC ACTS. VI. THE REQUIREMENT OF A SUPERMAJORITY OF VOTES IN THE HOUSE OF REPRESENTATIVES AND THE SENATE FOR THE VALIDITY OF A SUBSTANTIVE AMENDMENT OR REVISION OF THE ORGANIC ACTS DOES NOT IMPOSE AN IRREPEALABLE LAW. VII. THE REQUIREMENT OF A PLEBISCITE FOR THE EFFECTIVITY OF A SUBSTANTIVE AMENDMENT OR REVISION OF THE ORGANIC ACTS DOES NOT UNDULY EXPAND THE PLEBISCITE REQUIREMENT OF THE CONSTITUTION. VIII. SYNCHRONIZATION OF THE ARMM ELECTION WITH THE NATIONAL AND LOCAL ELECTIONS IS NOT MANDATED BY THE CONSTITUTION. IX. THE COMELEC HAS THE AUTHORITY TO HOLD AND CONDUCT SPECIAL ELECTIONS IN ARMM, AND THE ENACTMENT OF AN IMPROVIDENT AND UNCONSTITUTIONAL STATUTE IS AN ANALOGOUS CAUSE WARRANTING COMELECS HOLDING OF SPECIAL ELECTIONS.2 (italics supplied) The petitioner in G.R. No. 196305 further asserts that: I. BEFORE THE COURT MAY CONSTRUE OR INTERPRET A STATUTE, IT IS A CONDITION SINE QUA NON THAT THERE BE DOUBT OR AMBIGUITY IN ITS LANGUAGE. THE TRANSITORY PROVISIONS HOWEVER ARE CLEAR AND UNAMBIGUOUS: THEY REFER TO THE 1992 ELECTIONS AND TURN-OVER OF ELECTIVE OFFICIALS. IN THUS RECOGNIZING A SUPPOSED "INTENT" OF THE FRAMERS, AND APPLYING THE SAME TO ELECTIONS 20 YEARS AFTER, THE HONORABLE SUPREME COURT MAY HAVE VIOLATED THE FOREMOST RULE IN STATUTORY CONSTRUCTION. xxxx II. THE HONORABLE COURT SHOULD HAVE CONSIDERED THAT RA 9054, AN ORGANIC ACT, WAS COMPLETE IN ITSELF. HENCE, RA 10153 SHOULD BE CONSIDERED TO HAVE BEEN ENACTED PRECISELY TO AMEND RA 9054. xxxx III. THE HONORABLE COURT MAY HAVE COMMITTED A SERIOUS ERROR IN DECLARING THE 2/3 VOTING REQUIREMENT SET FORTH IN RA 9054 AS UNCONSTITUTIONAL. xxxx IV. THE HONORABLE COURT MAY HAVE COMMITTED A SERIOUS ERROR IN HOLDING THAT A PLEBISCITE IS NOT NECESSARY IN AMENDING THE ORGANIC ACT. xxxx
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V. THE HONORABLE COURT COMMITTED A SERIOUS ERROR IN DECLARING THE HOLD-OVER OF ARMM ELECTIVE OFFICIALS UNCONSTITUTIONAL. xxxx VI. THE HONORABLE COURT COMMITTED A SERIOUS ERROR IN UPHOLDING THE APPOINTMENT OF OFFICERS-IN-CHARGE.3 (italics and underscoring supplied) The petitioner in G.R. No. 197282 contends that: A. ASSUMING WITHOUT CONCEDING THAT THE APPOINTMENT OF OICs FOR THE REGIONAL GOVERNMENT OF THE ARMM IS NOT UNCONSTITUTIONAL TO BEGIN WITH, SUCH APPOINTMENT OF OIC REGIONAL OFFICIALS WILL CREATE A FUNDAMENTAL CHANGE IN THE BASIC STRUCTURE OF THE REGIONAL GOVERNMENT SUCH THAT R.A. NO. 10153 SHOULD HAVE BEEN SUBMITTED TO A PLEBISCITE IN THE ARMM FOR APPROVAL BY ITS PEOPLE, WHICH PLEBISCITE REQUIREMENT CANNOT BE CIRCUMVENTED BY SIMPLY CHARACTERIZING THE PROVISIONS OF R.A. NO. 10153 ON APPOINTMENT OF OICs AS AN "INTERIM MEASURE". B. THE HONORABLE COURT ERRED IN RULING THAT THE APPOINTMENT BY THE PRESIDENT OF OICs FOR THE ARMM REGIONAL GOVERNMENT IS NOT VIOLATIVE OF THE CONSTITUTION. C. THE HOLDOVER PRINCIPLE ADOPTED IN R.A. NO. 9054 DOES NOT VIOLATE THE CONSTITUTION, AND BEFORE THEIR SUCCESSORS ARE ELECTED IN EITHER AN ELECTION TO BE HELD AT THE SOONEST POSSIBLE TIME OR IN MAY 2013, THE SAID INCUMBENT ARMM REGIONAL OFFICIALS MAY VALIDLY CONTINUE FUNCTIONING AS SUCH IN A HOLDOVER CAPACITY IN ACCORDANCE WITH SECTION 7, ARTICLE VII OF R.A. NO. 9054. D. WITH THE CANCELLATION OF THE AUGUST 2011 ARMM ELECTIONS, SPECIAL ELECTIONS MUST IMMEDIATELY BE HELD FOR THE ELECTIVE REGIONAL OFFICIALS OF THE ARMM WHO SHALL SERVE UNTIL THEIR SUCCESSORS ARE ELECTED IN THE MAY 2013 SYNCHRONIZED ELECTIONS.4 Finally, the petitioners in G.R. No. 197280 argue that: a) the Constitutional mandate of synchronization does not apply to the ARMM elections; b) RA No. 10153 negates the basic principle of republican democracy which, by constitutional mandate, guides the governance of the Republic; c) RA No. 10153 amends the Organic Act (RA No. 9054) and, thus, has to comply with the 2/3 vote from the House of Representatives and the Senate, voting separately, and be ratified in a plebiscite; d) if the choice is between elective officials continuing to hold their offices even after their terms are over and non-elective individuals getting into the vacant elective positions by appointment as OICs, the holdover option is the better choice; e) the President only has the power of supervision over autonomous regions, which does not include the power to appoint OICs to take the place of ARMM elective officials; and f) it would be better to hold the ARMM elections separately from the national and local elections as this will make it easier for the authorities to implement election laws.

In essence, the Court is asked to resolve the following questions: (a) Does the Constitution mandate the synchronization of ARMM regional elections with national and local elections? (b) Does RA No. 10153 amend RA No. 9054? If so, does RA No. 10153 have to comply with the supermajority vote and plebiscite requirements? (c) Is the holdover provision in RA No. 9054 constitutional? (d) Does the COMELEC have the power to call for special elections in ARMM? (e) Does granting the President the power to appoint OICs violate the elective and representative nature of ARMM regional legislative and executive offices? (f) Does the appointment power granted to the President exceed the Presidents supervisory powers over autonomous regions? The Courts Ruling We deny the motions for lack of merit. Synchronization mandate includes ARMM elections The Court was unanimous in holding that the Constitution mandates the synchronization of national and local elections. While the Constitution does not expressly instruct Congress to synchronize the national and local elections, the intention can be inferred from the following provisions of the Transitory Provisions (Article XVIII) of the Constitution, which state: Section 1. The first elections of Members of the Congress under this Constitution shall be held on the second Monday of May, 1987. The first local elections shall be held on a date to be determined by the President, which may be simultaneous with the election of the Members of the Congress. It shall include the election of all Members of the city or municipal councils in the Metropolitan Manila area. Section 2. The Senators, Members of the House of Representatives, and the local officials first elected under this Constitution shall serve until noon of June 30, 1992. Of the Senators elected in the elections in 1992, the first twelve obtaining the highest number of votes shall serve for six years and the remaining twelve for three years. xxxx Section 5. The six-year term of the incumbent President and Vice-President elected in the February 7, 1986 election is, for purposes of synchronization of elections, hereby extended to noon of June 30, 1992. The first regular elections for the President and Vice-President under this Constitution shall be held on the second Monday of May, 1992. To fully appreciate the constitutional intent behind these provisions, we refer to the discussions of the Constitutional Commission: MR. MAAMBONG. For purposes of identification, I will now read a section which we will temporarily indicate as Section 14. It reads: "THE SENATORS, MEMBERS OF THE HOUSE OF REPRESENTATIVES AND THE LOCAL OFFICIALS ELECTED IN THE FIRST ELECTION SHALL SERVE FOR FIVE YEARS, TO EXPIRE AT NOON OF JUNE 1992." This was presented by Commissioner Davide, so may we ask that Commissioner Davide be recognized. THE PRESIDING OFFICER (Mr. Rodrigo). Commissioner Davide is recognized. MR. DAVIDE. Before going to the proposed amendment, I would only state that in view of the action taken by the Commission on Section 2 earlier, I am formulating a new proposal. It will read as follows: "THE SENATORS, MEMBERS OF THE HOUSE OF REPRESENTATIVES AND THE LOCAL
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OFFICIALS FIRST ELECTED UNDER THIS CONSTITUTION SHALL SERVE UNTIL NOON OF JUNE 30, 1992." I proposed this because of the proposed section of the Article on Transitory Provisions giving a term to the incumbent President and Vice-President until 1992. Necessarily then, since the term provided by the Commission for Members of the Lower House and for local officials is three years, if there will be an election in 1987, the next election for said officers will be in 1990, and it would be very close to 1992. We could never attain, subsequently, any synchronization of election which is once every three years. So under my proposal we will be able to begin actual synchronization in 1992, and consequently, we should not have a local election or an election for Members of the Lower House in 1990 for them to be able to complete their term of three years each. And if we also stagger the Senate, upon the first election it will result in an election in 1993 for the Senate alone, and there will be an election for 12 Senators in 1990. But for the remaining 12 who will be elected in 1987, if their term is for six years, their election will be in 1993. So, consequently we will have elections in 1990, in 1992 and in 1993. The later election will be limited to only 12 Senators and of course to the local officials and the Members of the Lower House. But, definitely, thereafter we can never have an election once every three years, therefore defeating the very purpose of the Commission when we adopted the term of six years for the President and another six years for the Senators with the possibility of staggering with 12 to serve for six years and 12 for three years insofar as the first Senators are concerned. And so my proposal is the only way to effect the first synchronized election which would mean, necessarily, a bonus of two years to the Members of the Lower House and a bonus of two years to the local elective officials. THE PRESIDING OFFICER (Mr. Rodrigo). What does the committee say? MR. DE CASTRO. Mr. Presiding Officer. THE PRESIDING OFFICER (Mr. Rodrigo). Commissioner de Castro is recognized. MR. DE CASTRO. Thank you. During the discussion on the legislative and the synchronization of elections, I was the one who proposed that in order to synchronize the elections every three years, which the body approved the first national and local officials to be elected in 1987 shall continue in office for five years, the same thing the Honorable Davide is now proposing. That means they will all serve until 1992, assuming that the term of the President will be for six years and continue beginning in 1986. So from 1992, we will again have national, local and presidential elections. This time, in 1992, the President shall have a term until 1998 and the first 12 Senators will serve until 1998, while the next 12 shall serve until 1995, and then the local officials elected in 1992 will serve until 1995. From then on, we shall have an election every three years. So, I will say that the proposition of Commissioner Davide is in order, if we have to synchronize our elections every three years which was already approved by the body. Thank you, Mr. Presiding Officer. xxxx MR. GUINGONA. What will be synchronized, therefore, is the election of the incumbent President and Vice-President in 1992. MR. DAVIDE. Yes. MR. GUINGONA. Not the reverse. Will the committee not synchronize the election of the Senators and local officials with the election of the President? MR. DAVIDE. It works both ways, Mr. Presiding Officer. The attempt here is on the assumption that the provision of the Transitory Provisions on the term of the incumbent President and Vice-President would really end in 1992. MR. GUINGONA. Yes.

MR. DAVIDE. In other words, there will be a single election in 1992 for all, from the President up to the municipal officials.5 (emphases and underscoring ours) The framers of the Constitution could not have expressed their objective more clearly there was to be a single election in 1992 for all elective officials from the President down to the municipal officials. Significantly, the framers were even willing to temporarily lengthen or shorten the terms of elective officials in order to meet this objective, highlighting the importance of this constitutional mandate. We came to the same conclusion in Osmea v. Commission on Elections,6 where we unequivocally stated that "the Constitution has mandated synchronized national and local elections."7 Despite the length and verbosity of their motions, the petitioners have failed to convince us to deviate from this established ruling. Neither do we find any merit in the petitioners contention that the ARMM elections are not covered by the constitutional mandate of synchronization because the ARMM elections were not specifically mentioned in the above-quoted Transitory Provisions of the Constitution. That the ARMM elections were not expressly mentioned in the Transitory Provisions of the Constitution on synchronization cannot be interpreted to mean that the ARMM elections are not covered by the constitutional mandate of synchronization. We have to consider that the ARMM, as we now know it, had not yet been officially organized at the time the Constitution was enacted and ratified by the people. Keeping in mind that a constitution is not intended to provide merely for the exigencies of a few years but is to endure through generations for as long as it remains unaltered by the people as ultimate sovereign, a constitution should be construed in the light of what actually is a continuing instrument to govern not only the present but also the unfolding events of the indefinite future. Although the principles embodied in a constitution remain fixed and unchanged from the time of its adoption, a constitution must be construed as a dynamic process intended to stand for a great length of time, to be progressive and not static.8 To reiterate, Article X of the Constitution, entitled "Local Government," clearly shows the intention of the Constitution to classify autonomous regions, such as the ARMM, as local governments. We refer to Section 1 of this Article, which provides: Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as hereinafter provided. The inclusion of autonomous regions in the enumeration of political subdivisions of the State under the heading "Local Government" indicates quite clearly the constitutional intent to consider autonomous regions as one of the forms of local governments. That the Constitution mentions only the "national government" and the "local governments," and does not make a distinction between the "local government" and the "regional government," is particularly revealing, betraying as it does the intention of the framers of the Constitution to consider the autonomous regions not as separate forms of government, but as political units which, while having more powers and attributes than other local government units, still remain under the category of local governments. Since autonomous regions are classified as local governments, it follows that elections held in autonomous regions are also considered as local elections. The petitioners further argue that even assuming that the Constitution mandates the synchronization of elections, the ARMM elections are not covered by this mandate since they are regional elections and not local elections. In construing provisions of the Constitution, the first rule is verba legis, "that is, wherever possible, the words used in the Constitution must be given their ordinary meaning except where technical terms are employed."9 Applying this principle to determine the scope of "local elections," we refer to the meaning of the word "local," as understood in its ordinary sense. As defined in Websters Third New International Dictionary Unabridged, "local" refers to something "that primarily serves the needs of a particular limited
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district, often a community or minor political subdivision." Obviously, the ARMM elections, which are held within the confines of the autonomous region of Muslim Mindanao, fall within this definition. To be sure, the fact that the ARMM possesses more powers than other provinces, cities, or municipalities is not enough reason to treat the ARMM regional elections differently from the other local elections. Ubi lex non distinguit nec nos distinguire debemus. When the law does not distinguish, we must not distinguish.10 RA No. 10153 does not amend RA No. 9054 The petitioners are adamant that the provisions of RA No. 10153, in postponing the ARMM elections, amend RA No. 9054. We cannot agree with their position. A thorough reading of RA No. 9054 reveals that it fixes the schedule for only the first ARMM elections;11 it does not provide the date for the succeeding regular ARMM elections. In providing for the date of the regular ARMM elections, RA No. 9333 and RA No. 10153 clearly do not amend RA No. 9054 since these laws do not change or revise any provision in RA No. 9054. In fixing the date of the ARMM elections subsequent to the first election, RA No. 9333 and RA No. 10153 merely filled the gap left in RA No. 9054. We reiterate our previous observations: This view that Congress thought it best to leave the determination of the date of succeeding ARMM elections to legislative discretion finds support in ARMMs recent history. To recall, RA No. 10153 is not the first law passed that rescheduled the ARMM elections. The First Organic Act RA No. 6734 not only did not fix the date of the subsequent elections; it did not even fix the specific date of the first ARMM elections, leaving the date to be fixed in another legislative enactment. Consequently, RA No. 7647, RA No. 8176, RA No. 8746, RA No. 8753, and RA No. 9012 were all enacted by Congress to fix the dates of the ARMM elections. Since these laws did not change or modify any part or provision of RA No. 6734, they were not amendments to this latter law. Consequently, there was no need to submit them to any plebiscite for ratification. The Second Organic Act RA No. 9054 which lapsed into law on March 31, 2001, provided that the first elections would be held on the second Monday of September 2001. Thereafter, Congress passed RA No. 9140 to reset the date of the ARMM elections. Significantly, while RA No. 9140 also scheduled the plebiscite for the ratification of the Second Organic Act (RA No. 9054), the new date of the ARMM regional elections fixed in RA No. 9140 was not among the provisions ratified in the plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333, which further reset the date of the ARMM regional elections. Again, this law was not ratified through a plebiscite. From these legislative actions, we see the clear intention of Congress to treat the laws which fix the date of the subsequent ARMM elections as separate and distinct from the Organic Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3, Article XVII of RA No. 9054.12 (emphases supplied) The petitioner in G.R. No. 196305 contends, however, that there is no lacuna in RA No. 9054 as regards the date of the subsequent ARMM elections. In his estimation, it can be implied from the provisions of RA No. 9054 that the succeeding elections are to be held three years after the date of the first ARMM regional elections. We find this an erroneous assertion. Well-settled is the rule that the court may not, in the guise of interpretation, enlarge the scope of a statute and include therein situations not provided nor intended by the lawmakers. An omission at the time of enactment, whether careless or calculated, cannot be judicially supplied however later wisdom may recommend the inclusion.13 Courts are not authorized to insert into the law what they think should be in it or to supply what they think the legislature would have supplied if its attention had been called to the omission.14 Providing for lapses within the law falls within

the exclusive domain of the legislature, and courts, no matter how well-meaning, have no authority to intrude into this clearly delineated space. Since RA No. 10153 does not amend, but merely fills in the gap in RA No. 9054, there is no need for RA No. 10153 to comply with the amendment requirements set forth in Article XVII of RA No. 9054. Supermajority vote requirement makes RA No. 9054 an irrepealable law Even assuming that RA No. 10153 amends RA No. 9054, however, we have already established that the supermajority vote requirement set forth in Section 1, Article XVII of RA No. 905415 is unconstitutional for violating the principle that Congress cannot pass irrepealable laws. The power of the legislature to make laws includes the power to amend and repeal these laws. Where the legislature, by its own act, attempts to limit its power to amend or repeal laws, the Court has the duty to strike down such act for interfering with the plenary powers of Congress. As we explained in Duarte v. Dade:16 A state legislature has a plenary law-making power over all subjects, whether pertaining to persons or things, within its territorial jurisdiction, either to introduce new laws or repeal the old, unless prohibited expressly or by implication by the federal constitution or limited or restrained by its own. It cannot bind itself or its successors by enacting irrepealable laws except when so restrained. Every legislative body may modify or abolish the acts passed by itself or its predecessors. This power of repeal may be exercised at the same session at which the original act was passed; and even while a bill is in its progress and before it becomes a law. This legislature cannot bind a future legislature to a particular mode of repeal. It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent legislation upon existing statutes. [emphasis ours] Under our Constitution, each House of Congress has the power to approve bills by a mere majority vote, provided there is quorum.17 In requiring all laws which amend RA No. 9054 to comply with a higher voting requirement than the Constitution provides (2/3 vote), Congress, which enacted RA No. 9054, clearly violated the very principle which we sought to establish in Duarte. To reiterate, the act of one legislature is not binding upon, and cannot tie the hands of, future legislatures.18 We also highlight an important point raised by Justice Antonio T. Carpio in his dissenting opinion, where he stated: "Section 1, Article XVII of RA 9054 erects a high vote threshold for each House of Congress to surmount, effectively and unconstitutionally, taking RA 9054 beyond the reach of Congress amendatory powers. One Congress cannot limit or reduce the plenary legislative power of succeeding Congresses by requiring a higher vote threshold than what the Constitution requires to enact, amend or repeal laws. No law can be passed fixing such a higher vote threshold because Congress has no power, by ordinary legislation, to amend the Constitution."19 Plebiscite requirement in RA No. 9054 overly broad Similarly, we struck down the petitioners contention that the plebiscite requirement20 applies to all amendments of RA No. 9054 for being an unreasonable enlargement of the plebiscite requirement set forth in the Constitution. Section 18, Article X of the Constitution provides that "[t]he creation of the autonomous region shall be effective when approved by majority of the votes cast by the constituent units in a plebiscite called for the purpose[.]" We interpreted this to mean that only amendments to, or revisions of, the Organic Act constitutionally-essential to the creation of autonomous regions i.e., those aspects specifically mentioned in the Constitution which Congress must provide for in the Organic Act21 require ratification through a plebiscite. We stand by this interpretation. The petitioners argue that to require all amendments to RA No. 9054 to comply with the plebiscite requirement is to recognize that sovereignty resides primarily in the people. While we agree with the petitioners underlying premise that sovereignty ultimately resides with the people, we disagree that this legal reality necessitates compliance with the plebiscite requirement for all amendments to RA No. 9054. For if we were to go by the petitioners interpretation of Section 18, Article
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X of the Constitution that all amendments to the Organic Act have to undergo the plebiscite requirement before becoming effective, this would lead to impractical and illogical results hampering the ARMMs progress by impeding Congress from enacting laws that timely address problems as they arise in the region, as well as weighing down the ARMM government with the costs that unavoidably follow the holding of a plebiscite. Interestingly, the petitioner in G.R. No. 197282 posits that RA No. 10153, in giving the President the power to appoint OICs to take the place of the elective officials of the ARMM, creates a fundamental change in the basic structure of the government, and thus requires compliance with the plebiscite requirement embodied in RA No. 9054. Again, we disagree. The pertinent provision in this regard is Section 3 of RA No. 10153, which reads: Section 3. Appointment of Officers-in-Charge. The President shall appoint officers-in-charge for the Office of the Regional Governor, Regional Vice Governor and Members of the Regional Legislative Assembly who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office. We cannot see how the above-quoted provision has changed the basic structure of the ARMM regional government. On the contrary, this provision clearly preserves the basic structure of the ARMM regional government when it recognizes the offices of the ARMM regional government and directs the OICs who shall temporarily assume these offices to "perform the functions pertaining to the said offices." Unconstitutionality of the holdover provision The petitioners are one in defending the constitutionality of Section 7(1), Article VII of RA No. 9054, which allows the regional officials to remain in their positions in a holdover capacity. The petitioners essentially argue that the ARMM regional officials should be allowed to remain in their respective positions until the May 2013 elections since there is no specific provision in the Constitution which prohibits regional elective officials from performing their duties in a holdover capacity. The pertinent provision of the Constitution is Section 8, Article X which provides: Section 8. The term of office of elective local officials, except barangay officials, which shall be determined by law, shall be three years and no such official shall serve for more than three consecutive terms. [emphases ours] On the other hand, Section 7(1), Article VII of RA No. 9054 provides: Section 7. Terms of Office of Elective Regional Officials. (1) Terms of Office. The terms of office of the Regional Governor, Regional Vice Governor and members of the Regional Assembly shall be for a period of three (3) years, which shall begin at noon on the 30th day of September next following the day of the election and shall end at noon of the same date three (3) years thereafter. The incumbent elective officials of the autonomous region shall continue in effect until their successors are elected and qualified. The clear wording of Section 8, Article X of the Constitution expresses the intent of the framers of the Constitution to categorically set a limitation on the period within which all elective local officials can occupy their offices. We have already established that elective ARMM officials are also local officials; they are, thus, bound by the three-year term limit prescribed by the Constitution. It, therefore, becomes irrelevant that the Constitution does not expressly prohibit elective officials from acting in a holdover capacity. Short of amending the Constitution, Congress has no authority to extend the three-year term limit by inserting a holdover provision in RA No. 9054. Thus, the term of three years for local officials should stay at three (3) years, as fixed by the Constitution, and cannot be extended by holdover by Congress. Admittedly, we have, in the past, recognized the validity of holdover provisions in various laws. One significant difference between the present case and these past cases22 is that while these past cases all refer to elective barangay or sangguniang kabataan officials whose terms of office are not explicitly provided for in the Constitution, the present case refers to local elective officials - the ARMM Governor,

the ARMM Vice Governor, and the members of the Regional Legislative Assembly - whose terms fall within the three-year term limit set by Section 8, Article X of the Constitution. Even assuming that a holdover is constitutionally permissible, and there had been statutory basis for it (namely Section 7, Article VII of RA No. 9054), the rule of holdover can only apply as an available option where no express or implied legislative intent to the contrary exists; it cannot apply where such contrary intent is evident.23 Congress, in passing RA No. 10153 and removing the holdover option, has made it clear that it wants to suppress the holdover rule expressed in RA No. 9054. Congress, in the exercise of its plenary legislative powers, has clearly acted within its discretion when it deleted the holdover option, and this Court has no authority to question the wisdom of this decision, absent any evidence of unconstitutionality or grave abuse of discretion. It is for the legislature and the executive, and not this Court, to decide how to fill the vacancies in the ARMM regional government which arise from the legislature complying with the constitutional mandate of synchronization. COMELEC has no authority to hold special elections Neither do we find any merit in the contention that the Commission on Elections (COMELEC) is sufficiently empowered to set the date of special elections in the ARMM. To recall, the Constitution has merely empowered the COMELEC to enforce and administer all laws and regulations relative to the conduct of an election.24 Although the legislature, under the Omnibus Election Code (Batas Pambansa Bilang [BP] 881), has granted the COMELEC the power to postpone elections to another date, this power is confined to the specific terms and circumstances provided for in the law. Specifically, this power falls within the narrow confines of the following provisions: Section 5. Postponement of election. - When for any serious cause such as violence, terrorism, loss or destruction of election paraphernalia or records, force majeure, and other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision, the Commission, motu proprio or upon a verified petition by any interested party, and after due notice and hearing, whereby all interested parties are afforded equal opportunity to be heard, shall postpone the election therein to a date which should be reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause for such postponement or suspension of the election or failure to elect. Section 6. Failure of election. - If, on account of force majeure, violence, terrorism, fraud, or other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof, such election results in a failure to elect, and in any of such cases the failure or suspension of election would affect the result of the election, the Commission shall, on the basis of a verified petition by any interested party and after due notice and hearing, call for the holding or continuation of the election not held, suspended or which resulted in a failure to elect on a date reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause of such postponement or suspension of the election or failure to elect. [emphases and underscoring ours] As we have previously observed in our assailed decision, both Section 5 and Section 6 of BP 881 address instances where elections have already been scheduled to take place but do not occur or had to be suspended because of unexpected and unforeseen circumstances, such as violence, fraud, terrorism, and other analogous circumstances. In contrast, the ARMM elections were postponed by law, in furtherance of the constitutional mandate of synchronization of national and local elections. Obviously, this does not fall under any of the circumstances contemplated by Section 5 or Section 6 of BP 881.
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More importantly, RA No. 10153 has already fixed the date for the next ARMM elections and the COMELEC has no authority to set a different election date. Even assuming that the COMELEC has the authority to hold special elections, and this Court can compel the COMELEC to do so, there is still the problem of having to shorten the terms of the newly elected officials in order to synchronize the ARMM elections with the May 2013 national and local elections. Obviously, neither the Court nor the COMELEC has the authority to do this, amounting as it does to an amendment of Section 8, Article X of the Constitution, which limits the term of local officials to three years. Presidents authority to appoint OICs The petitioner in G.R. No. 197221 argues that the Presidents power to appoint pertains only to appointive positions and cannot extend to positions held by elective officials. The power to appoint has traditionally been recognized as executive in nature.25 Section 16, Article VII of the Constitution describes in broad strokes the extent of this power, thus: Section 16. The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads of the executive departments, ambassadors, other public ministers and consuls, or officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution. He shall also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint. The Congress may, by law, vest the appointment of other officers lower in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards. [emphasis ours] The 1935 Constitution contained a provision similar to the one quoted above. Section 10(3), Article VII of the 1935 Constitution provides: (3) The President shall nominate and with the consent of the Commission on Appointments, shall appoint the heads of the executive departments and bureaus, officers of the Army from the rank of colonel, of the Navy and Air Forces from the rank of captain or commander, and all other officers of the Government whose appointments are not herein otherwise provided for, and those whom he may be authorized by law to appoint; but the Congress may by law vest the appointment of inferior officers, in the President alone, in the courts, or in the heads of departments. [emphasis ours] The main distinction between the provision in the 1987 Constitution and its counterpart in the 1935 Constitution is the sentence construction; while in the 1935 Constitution, the various appointments the President can make are enumerated in a single sentence, the 1987 Constitution enumerates the various appointments the President is empowered to make and divides the enumeration in two sentences. The change in style is significant; in providing for this change, the framers of the 1987 Constitution clearly sought to make a distinction between the first group of presidential appointments and the second group of presidential appointments, as made evident in the following exchange: MR. FOZ. Madame President x x x I propose to put a period (.) after "captain" and x x x delete "and all" and substitute it with HE SHALL ALSO APPOINT ANY. MR. REGALADO. Madam President, the Committee accepts the proposed amendment because it makes it clear that those other officers mentioned therein do not have to be confirmed by the Commission on Appointments.26 The first group of presidential appointments, specified as the heads of the executive departments, ambassadors, other public ministers and consuls, or officers of the Armed Forces, and other officers whose appointments are vested in the President by the Constitution, pertains to the appointive officials who have to be confirmed by the Commission on Appointments. The second group of officials the President can appoint are "all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint."27 The second sentence acts as the "catch-all provision" for the Presidents appointment power,

in recognition of the fact that the power to appoint is essentially executive in nature.28 The wide latitude given to the President to appoint is further demonstrated by the recognition of the Presidents power to appoint officials whose appointments are not even provided for by law. In other words, where there are offices which have to be filled, but the law does not provide the process for filling them, the Constitution recognizes the power of the President to fill the office by appointment. Any limitation on or qualification to the exercise of the Presidents appointment power should be strictly construed and must be clearly stated in order to be recognized.29 Given that the President derives his power to appoint OICs in the ARMM regional government from law, it falls under the classification of presidential appointments covered by the second sentence of Section 16, Article VII of the Constitution; the Presidents appointment power thus rests on clear constitutional basis. The petitioners also jointly assert that RA No. 10153, in granting the President the power to appoint OICs in elective positions, violates Section 16, Article X of the Constitution,30 which merely grants the President the power of supervision over autonomous regions. This is an overly restrictive interpretation of the Presidents appointment power. There is no incompatibility between the Presidents power of supervision over local governments and autonomous regions, and the power granted to the President, within the specific confines of RA No. 10153, to appoint OICs. The power of supervision is defined as "the power of a superior officer to see to it that lower officers perform their functions in accordance with law."31 This is distinguished from the power of control or "the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter."32 The petitioners apprehension regarding the Presidents alleged power of control over the OICs is rooted in their belief that the Presidents appointment power includes the power to remove these officials at will. In this way, the petitioners foresee that the appointed OICs will be beholden to the President, and act as representatives of the President and not of the people. Section 3 of RA No. 10153 expressly contradicts the petitioners supposition. The provision states: Section 3. Appointment of Officers-in-Charge. The President shall appoint officers-in-charge for the Office of the Regional Governor, Regional Vice Governor and Members of the Regional Legislative Assembly who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office. The wording of the law is clear. Once the President has appointed the OICs for the offices of the Governor, Vice Governor and members of the Regional Legislative Assembly, these same officials will remain in office until they are replaced by the duly elected officials in the May 2013 elections. Nothing in this provision even hints that the President has the power to recall the appointments he already made. Clearly, the petitioners fears in this regard are more apparent than real. RA No. 10153 as an interim measure We reiterate once more the importance of considering RA No. 10153 not in a vacuum, but within the context it was enacted in. In the first place, Congress enacted RA No. 10153 primarily to heed the constitutional mandate to synchronize the ARMM regional elections with the national and local elections. To do this, Congress had to postpone the scheduled ARMM elections for another date, leaving it with the problem of how to provide the ARMM with governance in the intervening period, between the expiration of the term of those elected in August 2008 and the assumption to office twenty-one (21) months away of those who will win in the synchronized elections on May 13, 2013. In our assailed Decision, we already identified the three possible solutions open to Congress to address the problem created by synchronization (a) allow the incumbent officials to remain in office after the expiration of their terms in a holdover capacity; (b) call for special elections to be held, and shorten the terms of those to be elected so the next ARMM regional elections can be held on May 13, 2013; or (c) recognize that the President, in the exercise of his appointment powers and in line with his power of
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supervision over the ARMM, can appoint interim OICs to hold the vacated positions in the ARMM regional government upon the expiration of their terms. We have already established the unconstitutionality of the first two options, leaving us to consider the last available option. In this way, RA No. 10153 is in reality an interim measure, enacted to respond to the adjustment that synchronization requires. Given the context, we have to judge RA No. 10153 by the standard of reasonableness in responding to the challenges brought about by synchronizing the ARMM elections with the national and local elections. In other words, "given the plain unconstitutionality of providing for a holdover and the unavailability of constitutional possibilities for lengthening or shortening the term of the elected ARMM officials, is the choice of the Presidents power to appoint for a fixed and specific period as an interim measure, and as allowed under Section 16, Article VII of the Constitution an unconstitutional or unreasonable choice for Congress to make?"33 We admit that synchronization will temporarily disrupt the election process in a local community, the ARMM, as well as the communitys choice of leaders. However, we have to keep in mind that the adoption of this measure is a matter of necessity in order to comply with a mandate that the Constitution itself has set out for us. Moreover, the implementation of the provisions of RA No. 10153 as an interim measure is comparable to the interim measures traditionally practiced when, for instance, the President appoints officials holding elective offices upon the creation of new local government units. The grant to the President of the power to appoint OICs in place of the elective members of the Regional Legislative Assembly is neither novel nor innovative. The power granted to the President, via RA No. 10153, to appoint members of the Regional Legislative Assembly is comparable to the power granted by BP 881 (the Omnibus Election Code) to the President to fill any vacancy for any cause in the Regional Legislative Assembly (then called the Sangguniang Pampook).34 Executive is not bound by the principle of judicial courtesy The petitioners in G.R. No. 197280, in their Manifestation and Motion dated December 21, 2011, question the propriety of the appointment by the President of Mujiv Hataman as acting Governor and Bainon Karon as acting Vice Governor of the ARMM. They argue that since our previous decision was based on a close vote of 8-7, and given the numerous motions for reconsideration filed by the parties, the President, in recognition of the principle of judicial courtesy, should have refrained from implementing our decision until we have ruled with finality on this case. We find the petitioners reasoning specious. Firstly, the principle of judicial courtesy is based on the hierarchy of courts and applies only to lower courts in instances where, even if there is no writ of preliminary injunction or TRO issued by a higher court, it would be proper for a lower court to suspend its proceedings for practical and ethical considerations.35 In other words, the principle of "judicial courtesy" applies where there is a strong probability that the issues before the higher court would be rendered moot and moribund as a result of the continuation of the proceedings in the lower court or court of origin.36 Consequently, this principle cannot be applied to the President, who represents a co-equal branch of government. To suggest otherwise would be to disregard the principle of separation of powers, on which our whole system of government is founded upon. Secondly, the fact that our previous decision was based on a slim vote of 8-7 does not, and cannot, have the effect of making our ruling any less effective or binding. Regardless of how close the voting is, so long as there is concurrence of the majority of the members of the en banc who actually took part in the deliberations of the case,37 a decision garnering only 8 votes out of 15 members is still a decision of the Supreme Court en banc and must be respected as such. The petitioners are, therefore, not in any position to speculate that, based on the voting, "the probability exists that their motion for reconsideration may be granted."38 Similarly, the petitioner in G.R. No. 197282, in his Very Urgent Motion to Issue Clarificatory Resolution, argues that since motions for reconsideration were filed by the aggrieved parties challenging our October 18, 2011 decision in the present case, the TRO we initially issued on September 13, 2011

should remain subsisting and effective. He further argues that any attempt by the Executive to implement our October 18, 2011 decision pending resolution of the motions for reconsideration "borders on disrespect if not outright insolence"39 to this Court. In support of this theory, the petitioner cites Samad v. COMELEC,40 where the Court held that while it had already issued a decision lifting the TRO, the lifting of the TRO is not yet final and executory, and can also be the subject of a motion for reconsideration. The petitioner also cites the minute resolution issued by the Court in Tolentino v. Secretary of Finance,41 where the Court reproached the Commissioner of the Bureau of Internal Revenue for manifesting its intention to implement the decision of the Court, noting that the Court had not yet lifted the TRO previously issued.42 We agree with the petitioner that the lifting of a TRO can be included as a subject of a motion for reconsideration filed to assail our decision. It does not follow, however, that the TRO remains effective until after we have issued a final and executory decision, especially considering the clear wording of the dispositive portion of our October 18, 2011 decision, which states: WHEREFORE, premises considered, we DISMISS the consolidated petitions assailing the validity of RA No. 10153 for lack of merit, and UPHOLD the constitutionality of this law. We likewise LIFT the temporary restraining order we issued in our Resolution of September 13, 2011. No costs.43 (emphases ours) In this regard, we note an important distinction between Tolentino and the present case. While it may be true that Tolentino and the present case are similar in that, in both cases, the petitions assailing the challenged laws were dismissed by the Court, an examination of the dispositive portion of the decision in Tolentino reveals that the Court did not categorically lift the TRO. In sharp contrast, in the present case, we expressly lifted the TRO issued on September 13, 2011.1wphi1 There is, therefore, no legal impediment to prevent the President from exercising his authority to appoint an acting ARMM Governor and Vice Governor as specifically provided for in RA No. 10153. Conclusion As a final point, we wish to address the bleak picture that the petitioner in G.R. No. 197282 presents in his motion, that our Decision has virtually given the President the power and authority to appoint 672,416 OICs in the event that the elections of barangay and Sangguniang Kabataan officials are postponed or cancelled. We find this speculation nothing short of fear-mongering. This argument fails to take into consideration the unique factual and legal circumstances which led to the enactment of RA No. 10153. RA No. 10153 was passed in order to synchronize the ARMM elections with the national and local elections. In the course of synchronizing the ARMM elections with the national and local elections, Congress had to grant the President the power to appoint OICs in the ARMM, in light of the fact that: (a) holdover by the incumbent ARMM elective officials is legally impermissible; and (b) Congress cannot call for special elections and shorten the terms of elective local officials for less than three years. Unlike local officials, as the Constitution does not prescribe a term limit for barangay and Sangguniang Kabataan officials, there is no legal proscription which prevents these specific government officials from continuing in a holdover capacity should some exigency require the postponement of barangay or Sangguniang Kabataan elections. Clearly, these fears have neither legal nor factual basis to stand on. For the foregoing reasons, we deny the petitioners motions for reconsideration. WHEREFORE, premises considered, we DENY with FINALITY the motions for reconsideration for lack of merit and UPHOLD the constitutionality of RA No. 10153. SO ORDERED.

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G.R. No. L-45081 July 15, 1936 JOSE A. ANGARA, petitioner, vs. THE ELECTORAL COMMISSION, PEDRO YNSUA, MIGUEL CASTILLO, and DIONISIO C. MAYOR, respondents. Godofredo Reyes for petitioner. Office of the Solicitor General Hilado for respondent Electoral Commission. Pedro Ynsua in his own behalf. No appearance for other respondents. LAUREL, J.: This is an original action instituted in this court by the petitioner, Jose A. Angara, for the issuance of a writ of prohibition to restrain and prohibit the Electoral Commission, one of the respondents, from taking further cognizance of the protest filed by Pedro Ynsua, another respondent, against the election of said petitioner as member of the National Assembly for the first assembly district of the Province of Tayabas. The facts of this case as they appear in the petition and as admitted by the respondents are as follows: (1) That in the elections of September 17, 1935, the petitioner, Jose A. Angara, and the respondents, Pedro Ynsua, Miguel Castillo and Dionisio Mayor, were candidates voted for the position of member of the National Assembly for the first district of the Province of Tayabas; (2) That on October 7, 1935, the provincial board of canvassers, proclaimed the petitioner as member-elect of the National Assembly for the said district, for having received the most number of votes; (3) That on November 15, 1935, the petitioner took his oath of office; (4) That on December 3, 1935, the National Assembly in session assembled, passed the following resolution: [No. 8] RESOLUCION CONFIRMANDO LAS ACTAS DE AQUELLOS DIPUTADOS CONTRA QUIENES NO SE HA PRESENTADO PROTESTA. Se resuelve: Que las actas de eleccion de los Diputados contra quienes no se hubiere presentado debidamente una protesta antes de la adopcion de la presente resolucion sean, como por la presente, son aprobadas y confirmadas. Adoptada, 3 de diciembre, 1935. (5) That on December 8, 1935, the herein respondent Pedro Ynsua filed before the Electoral Commission a "Motion of Protest" against the election of the herein petitioner, Jose A. Angara, being the only protest filed after the passage of Resolutions No. 8 aforequoted, and praying, among other-things, that said respondent be declared elected member of the National Assembly for the first district of Tayabas, or that the election of said position be nullified; (6) That on December 9, 1935, the Electoral Commission adopted a resolution, paragraph 6 of which provides: 6. La Comision no considerara ninguna protesta que no se haya presentado en o antes de este dia. (7) That on December 20, 1935, the herein petitioner, Jose A. Angara, one of the respondents in the aforesaid protest, filed before the Electoral Commission a "Motion to Dismiss the Protest", alleging (a) that Resolution No. 8 of Dismiss the Protest", alleging (a) that Resolution No. 8 of the National Assembly was adopted in the legitimate exercise of its constitutional prerogative to prescribe the period during which protests against the election of its members should be presented; (b) that the aforesaid resolution has for its object, and is
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the accepted formula for, the limitation of said period; and (c) that the protest in question was filed out of the prescribed period; (8) That on December 27, 1935, the herein respondent, Pedro Ynsua, filed an "Answer to the Motion of Dismissal" alleging that there is no legal or constitutional provision barring the presentation of a protest against the election of a member of the National Assembly after confirmation; (9) That on December 31, 1935, the herein petitioner, Jose A. Angara, filed a "Reply" to the aforesaid "Answer to the Motion of Dismissal"; (10) That the case being submitted for decision, the Electoral Commission promulgated a resolution on January 23, 1936, denying herein petitioner's "Motion to Dismiss the Protest." The application of the petitioner sets forth the following grounds for the issuance of the writ prayed for: (a) That the Constitution confers exclusive jurisdiction upon the electoral Commission solely as regards the merits of contested elections to the National Assembly; (b) That the Constitution excludes from said jurisdiction the power to regulate the proceedings of said election contests, which power has been reserved to the Legislative Department of the Government or the National Assembly; (c) That like the Supreme Court and other courts created in pursuance of the Constitution, whose exclusive jurisdiction relates solely to deciding the merits of controversies submitted to them for decision and to matters involving their internal organization, the Electoral Commission can regulate its proceedings only if the National Assembly has not availed of its primary power to so regulate such proceedings; (d) That Resolution No. 8 of the National Assembly is, therefore, valid and should be respected and obeyed; (e) That under paragraph 13 of section 1 of the ordinance appended to the Constitution and paragraph 6 of article 7 of the Tydings-McDuffie Law (No. 127 of the 73rd Congress of the United States) as well as under section 1 and 3 (should be sections 1 and 2) of article VIII of the Constitution, this Supreme Court has jurisdiction to pass upon the fundamental question herein raised because it involves an interpretation of the Constitution of the Philippines. On February 25, 1936, the Solicitor-General appeared and filed an answer in behalf of the respondent Electoral Commission interposing the following special defenses: (a) That the Electoral Commission has been created by the Constitution as an instrumentality of the Legislative Department invested with the jurisdiction to decide "all contests relating to the election, returns, and qualifications of the members of the National Assembly"; that in adopting its resolution of December 9, 1935, fixing this date as the last day for the presentation of protests against the election of any member of the National Assembly, it acted within its jurisdiction and in the legitimate exercise of the implied powers granted it by the Constitution to adopt the rules and regulations essential to carry out the power and functions conferred upon the same by the fundamental law; that in adopting its resolution of January 23, 1936, overruling the motion of the petitioner to dismiss the election protest in question, and declaring itself with jurisdiction to take cognizance of said protest, it acted in the legitimate exercise of its quasi-judicial functions a an instrumentality of the Legislative Department of the Commonwealth Government, and hence said act is beyond the judicial cognizance or control of the Supreme Court; (b) That the resolution of the National Assembly of December 3, 1935, confirming the election of the members of the National Assembly against whom no protest had thus far been filed, could not and did not deprive the electoral Commission of its jurisdiction to take cognizance of election protests filed within the time that might be set by its own rules:

(c) That the Electoral Commission is a body invested with quasi-judicial functions, created by the Constitution as an instrumentality of the Legislative Department, and is not an "inferior tribunal, or corporation, or board, or person" within the purview of section 226 and 516 of the Code of Civil Procedure, against which prohibition would lie. The respondent Pedro Ynsua, in his turn, appeared and filed an answer in his own behalf on March 2, 1936, setting forth the following as his special defense: (a) That at the time of the approval of the rules of the Electoral Commission on December 9, 1935, there was no existing law fixing the period within which protests against the election of members of the National Assembly should be filed; that in fixing December 9, 1935, as the last day for the filing of protests against the election of members of the National Assembly, the Electoral Commission was exercising a power impliedly conferred upon it by the Constitution, by reason of its quasi-judicial attributes; (b) That said respondent presented his motion of protest before the Electoral Commission on December 9, 1935, the last day fixed by paragraph 6 of the rules of the said Electoral Commission; (c) That therefore the Electoral Commission acquired jurisdiction over the protest filed by said respondent and over the parties thereto, and the resolution of the Electoral Commission of January 23, 1936, denying petitioner's motion to dismiss said protest was an act within the jurisdiction of the said commission, and is not reviewable by means of a writ of prohibition; (d) That neither the law nor the Constitution requires confirmation by the National Assembly of the election of its members, and that such confirmation does not operate to limit the period within which protests should be filed as to deprive the Electoral Commission of jurisdiction over protest filed subsequent thereto; (e) That the Electoral Commission is an independent entity created by the Constitution, endowed with quasi-judicial functions, whose decision are final and unappealable; ( f ) That the electoral Commission, as a constitutional creation, is not an inferior tribunal, corporation, board or person, within the terms of sections 226 and 516 of the Code of Civil Procedure; and that neither under the provisions of sections 1 and 2 of article II (should be article VIII) of the Constitution and paragraph 13 of section 1 of the Ordinance appended thereto could it be subject in the exercise of its quasi-judicial functions to a writ of prohibition from the Supreme Court; (g) That paragraph 6 of article 7 of the Tydings-McDuffie Law (No. 127 of the 73rd Congress of the united States) has no application to the case at bar. The case was argued before us on March 13, 1936. Before it was submitted for decision, the petitioner prayed for the issuance of a preliminary writ of injunction against the respondent Electoral Commission which petition was denied "without passing upon the merits of the case" by resolution of this court of March 21, 1936. There was no appearance for the other respondents. The issues to be decided in the case at bar may be reduced to the following two principal propositions: 1. Has the Supreme Court jurisdiction over the Electoral Commission and the subject matter of the controversy upon the foregoing related facts, and in the affirmative, 2. Has the said Electoral Commission acted without or in excess of its jurisdiction in assuming to the cognizance of the protest filed the election of the herein petitioner notwithstanding the previous confirmation of such election by resolution of the National Assembly? We could perhaps dispose of this case by passing directly upon the merits of the controversy. However, the question of jurisdiction having been presented, we do not feel justified in evading the issue. Being a case prim impressionis, it would hardly be consistent with our sense of duty to overlook the broader aspect of the question and leave it undecided. Neither would we be doing justice to the industry and
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vehemence of counsel were we not to pass upon the question of jurisdiction squarely presented to our consideration. The separation of powers is a fundamental principle in our system of government. It obtains not through express provision but by actual division in our Constitution. Each department of the government has exclusive cognizance of matters within its jurisdiction, and is supreme within its own sphere. But it does not follow from the fact that the three powers are to be kept separate and distinct that the Constitution intended them to be absolutely unrestrained and independent of each other. The Constitution has provided for an elaborate system of checks and balances to secure coordination in the workings of the various departments of the government. For example, the Chief Executive under our Constitution is so far made a check on the legislative power that this assent is required in the enactment of laws. This, however, is subject to the further check that a bill may become a law notwithstanding the refusal of the President to approve it, by a vote of two-thirds or three-fourths, as the case may be, of the National Assembly. The President has also the right to convene the Assembly in special session whenever he chooses. On the other hand, the National Assembly operates as a check on the Executive in the sense that its consent through its Commission on Appointments is necessary in the appointments of certain officers; and the concurrence of a majority of all its members is essential to the conclusion of treaties. Furthermore, in its power to determine what courts other than the Supreme Court shall be established, to define their jurisdiction and to appropriate funds for their support, the National Assembly controls the judicial department to a certain extent. The Assembly also exercises the judicial power of trying impeachments. And the judiciary in turn, with the Supreme Court as the final arbiter, effectively checks the other departments in the exercise of its power to determine the law, and hence to declare executive and legislative acts void if violative of the Constitution. But in the main, the Constitution has blocked out with deft strokes and in bold lines, allotment of power to the executive, the legislative and the judicial departments of the government. The overlapping and interlacing of functions and duties between the several departments, however, sometimes makes it hard to say just where the one leaves off and the other begins. In times of social disquietude or political excitement, the great landmarks of the Constitution are apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is the only constitutional organ which can be called upon to determine the proper allocation of powers between the several departments and among the integral or constituent units thereof. As any human production, our Constitution is of course lacking perfection and perfectibility, but as much as it was within the power of our people, acting through their delegates to so provide, that instrument which is the expression of their sovereignty however limited, has established a republican government intended to operate and function as a harmonious whole, under a system of checks and balances, and subject to specific limitations and restrictions provided in the said instrument. The Constitution sets forth in no uncertain language the restrictions and limitations upon governmental powers and agencies. If these restrictions and limitations are transcended it would be inconceivable if the Constitution had not provided for a mechanism by which to direct the course of government along constitutional channels, for then the distribution of powers would be mere verbiage, the bill of rights mere expressions of sentiment, and the principles of good government mere political apothegms. Certainly, the limitation and restrictions embodied in our Constitution are real as they should be in any living constitution. In the United States where no express constitutional grant is found in their constitution, the possession of this moderating power of the courts, not to speak of its historical origin and development there, has been set at rest by popular acquiescence for a period of more than one and a half centuries. In our case, this moderating power is granted, if not expressly, by clear implication from section 2 of article VIII of our constitution. The Constitution is a definition of the powers of government. Who is to determine the nature, scope and extent of such powers? The Constitution itself has provided for the instrumentality of the judiciary as the rational way. And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to

determine conflicting claims of authority under the Constitution and to establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them. This is in truth all that is involved in what is termed "judicial supremacy" which properly is the power of judicial review under the Constitution. Even then, this power of judicial review is limited to actual cases and controversies to be exercised after full opportunity of argument by the parties, and limited further to the constitutional question raised or the very lis mota presented. Any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities. Narrowed as its function is in this manner, the judiciary does not pass upon questions of wisdom, justice or expediency of legislation. More than that, courts accord the presumption of constitutionality to legislative enactments, not only because the legislature is presumed to abide by the Constitution but also because the judiciary in the determination of actual cases and controversies must reflect the wisdom and justice of the people as expressed through their representatives in the executive and legislative departments of the governments of the government. But much as we might postulate on the internal checks of power provided in our Constitution, it ought not the less to be remembered that, in the language of James Madison, the system itself is not "the chief palladium of constitutional liberty . . . the people who are authors of this blessing must also be its guardians . . . their eyes must be ever ready to mark, their voice to pronounce . . . aggression on the authority of their constitution." In the Last and ultimate analysis, then, must the success of our government in the unfolding years to come be tested in the crucible of Filipino minds and hearts than in consultation rooms and court chambers. In the case at bar, the national Assembly has by resolution (No. 8) of December 3, 1935, confirmed the election of the herein petitioner to the said body. On the other hand, the Electoral Commission has by resolution adopted on December 9, 1935, fixed said date as the last day for the filing of protests against the election, returns and qualifications of members of the National Assembly, notwithstanding the previous confirmation made by the National Assembly as aforesaid. If, as contended by the petitioner, the resolution of the National Assembly has the effect of cutting off the power of the Electoral Commission to entertain protests against the election, returns and qualifications of members of the National Assembly, submitted after December 3, 1935, then the resolution of the Electoral Commission of December 9, 1935, is mere surplusage and had no effect. But, if, as contended by the respondents, the Electoral Commission has the sole power of regulating its proceedings to the exclusion of the National Assembly, then the resolution of December 9, 1935, by which the Electoral Commission fixed said date as the last day for filing protests against the election, returns and qualifications of members of the National Assembly, should be upheld. Here is then presented an actual controversy involving as it does a conflict of a grave constitutional nature between the National Assembly on the one hand, and the Electoral Commission on the other. From the very nature of the republican government established in our country in the light of American experience and of our own, upon the judicial department is thrown the solemn and inescapable obligation of interpreting the Constitution and defining constitutional boundaries. The Electoral Commission, as we shall have occasion to refer hereafter, is a constitutional organ, created for a specific purpose, namely to determine all contests relating to the election, returns and qualifications of the members of the National Assembly. Although the Electoral Commission may not be interfered with, when and while acting within the limits of its authority, it does not follow that it is beyond the reach of the constitutional mechanism adopted by the people and that it is not subject to constitutional restrictions. The Electoral Commission is not a separate department of the government, and even if it were, conflicting claims of authority under the fundamental law between department powers and agencies of the government are necessarily determined by the judiciary in justifiable and appropriate cases. Discarding the English type and other European types of constitutional government, the framers of our constitution adopted the American type where the written constitution is interpreted and given effect by the judicial department. In some countries which have declined to follow the American example, provisions have been inserted in their constitutions prohibiting the courts from exercising the power to interpret the fundamental law. This is taken as a recognition of what otherwise would be the rule that in
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the absence of direct prohibition courts are bound to assume what is logically their function. For instance, the Constitution of Poland of 1921, expressly provides that courts shall have no power to examine the validity of statutes (art. 81, chap. IV). The former Austrian Constitution contained a similar declaration. In countries whose constitutions are silent in this respect, courts have assumed this power. This is true in Norway, Greece, Australia and South Africa. Whereas, in Czechoslovakia (arts. 2 and 3, Preliminary Law to constitutional Charter of the Czechoslovak Republic, February 29, 1920) and Spain (arts. 121-123, Title IX, Constitutional of the Republic of 1931) especial constitutional courts are established to pass upon the validity of ordinary laws. In our case, the nature of the present controversy shows the necessity of a final constitutional arbiter to determine the conflict of authority between two agencies created by the Constitution. Were we to decline to take cognizance of the controversy, who will determine the conflict? And if the conflict were left undecided and undetermined, would not a void be thus created in our constitutional system which may be in the long run prove destructive of the entire framework? To ask these questions is to answer them. Natura vacuum abhorret, so must we avoid exhaustion in our constitutional system. Upon principle, reason and authority, we are clearly of the opinion that upon the admitted facts of the present case, this court has jurisdiction over the Electoral Commission and the subject mater of the present controversy for the purpose of determining the character, scope and extent of the constitutional grant to the Electoral Commission as "the sole judge of all contests relating to the election, returns and qualifications of the members of the National Assembly." Having disposed of the question of jurisdiction, we shall now proceed to pass upon the second proposition and determine whether the Electoral Commission has acted without or in excess of its jurisdiction in adopting its resolution of December 9, 1935, and in assuming to take cognizance of the protest filed against the election of the herein petitioner notwithstanding the previous confirmation thereof by the National Assembly on December 3, 1935. As able counsel for the petitioner has pointed out, the issue hinges on the interpretation of section 4 of Article VI of the Constitution which provides: "SEC. 4. There shall be an Electoral Commission composed of three Justice of the Supreme Court designated by the Chief Justice, and of six Members chosen by the National Assembly, three of whom shall be nominated by the party having the largest number of votes, and three by the party having the second largest number of votes therein. The senior Justice in the Commission shall be its Chairman. The Electoral Commission shall be the sole judge of all contests relating to the election, returns and qualifications of the members of the National Assembly." It is imperative, therefore, that we delve into the origin and history of this constitutional provision and inquire into the intention of its framers and the people who adopted it so that we may properly appreciate its full meaning, import and significance. The original provision regarding this subject in the Act of Congress of July 1, 1902 (sec. 7, par. 5) laying down the rule that "the assembly shall be the judge of the elections, returns, and qualifications of its members", was taken from clause 1 of section 5, Article I of the Constitution of the United States providing that "Each House shall be the Judge of the Elections, Returns, and Qualifications of its own Members, . . . ." The Act of Congress of August 29, 1916 (sec. 18, par. 1) modified this provision by the insertion of the word "sole" as follows: "That the Senate and House of Representatives, respectively, shall be the sole judges of the elections, returns, and qualifications of their elective members . . ." apparently in order to emphasize the exclusive the Legislative over the particular case s therein specified. This court has had occasion to characterize this grant of power to the Philippine Senate and House of Representatives, respectively, as "full, clear and complete" (Veloso vs. Boards of Canvassers of Leyte and Samar [1919], 39 Phil., 886, 888.) The first step towards the creation of an independent tribunal for the purpose of deciding contested elections to the legislature was taken by the sub-committee of five appointed by the Committee on Constitutional Guarantees of the Constitutional Convention, which sub-committee submitted a report on August 30, 1934, recommending the creation of a Tribunal of Constitutional Security empowered to hear legislature but also against the election of executive officers for whose election the vote of the whole nation is required, as well as to initiate impeachment proceedings against specified executive and judicial officer. For the purpose of hearing legislative protests, the tribunal was to be composed of three

justices designated by the Supreme Court and six members of the house of the legislature to which the contest corresponds, three members to be designed by the majority party and three by the minority, to be presided over by the Senior Justice unless the Chief Justice is also a member in which case the latter shall preside. The foregoing proposal was submitted by the Committee on Constitutional Guarantees to the Convention on September 15, 1934, with slight modifications consisting in the reduction of the legislative representation to four members, that is, two senators to be designated one each from the two major parties in the Senate and two representatives to be designated one each from the two major parties in the House of Representatives, and in awarding representation to the executive department in the persons of two representatives to be designated by the President. Meanwhile, the Committee on Legislative Power was also preparing its report. As submitted to the Convention on September 24, 1934 subsection 5, section 5, of the proposed Article on the Legislative Department, reads as follows: The elections, returns and qualifications of the members of either house and all cases contesting the election of any of their members shall be judged by an Electoral Commission, constituted, as to each House, by three members elected by the members of the party having the largest number of votes therein, three elected by the members of the party having the second largest number of votes, and as to its Chairman, one Justice of the Supreme Court designated by the Chief Justice. The idea of creating a Tribunal of Constitutional Security with comprehensive jurisdiction as proposed by the Committee on Constitutional Guarantees which was probably inspired by the Spanish plan (art. 121, Constitution of the Spanish Republic of 1931), was soon abandoned in favor of the proposition of the Committee on Legislative Power to create a similar body with reduced powers and with specific and limited jurisdiction, to be designated as a Electoral Commission. The Sponsorship Committee modified the proposal of the Committee on Legislative Power with respect to the composition of the Electoral Commission and made further changes in phraseology to suit the project of adopting a unicameral instead of a bicameral legislature. The draft as finally submitted to the Convention on October 26, 1934, reads as follows: (6) The elections, returns and qualifications of the Members of the National Assembly and all cases contesting the election of any of its Members shall be judged by an Electoral Commission, composed of three members elected by the party having the largest number of votes in the National Assembly, three elected by the members of the party having the second largest number of votes, and three justices of the Supreme Court designated by the Chief Justice, the Commission to be presided over by one of said justices. During the discussion of the amendment introduced by Delegates Labrador, Abordo, and others, proposing to strike out the whole subsection of the foregoing draft and inserting in lieu thereof the following: "The National Assembly shall be the soled and exclusive judge of the elections, returns, and qualifications of the Members", the following illuminating remarks were made on the floor of the Convention in its session of December 4, 1934, as to the scope of the said draft: xxx xxx xxx Mr. VENTURA. Mr. President, we have a doubt here as to the scope of the meaning of the first four lines, paragraph 6, page 11 of the draft, reading: "The elections, returns and qualifications of the Members of the National Assembly and all cases contesting the election of any of its Members shall be judged by an Electoral Commission, . . ." I should like to ask from the gentleman from Capiz whether the election and qualification of the member whose elections is not contested shall also be judged by the Electoral Commission. Mr. ROXAS. If there is no question about the election of the members, there is nothing to be judged; that is why the word "judge" is used to indicate a controversy. If there is no question about the election of a member, there is nothing to be submitted to the Electoral Commission and there is nothing to be determined.
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Mr. VENTURA. But does that carry the idea also that the Electoral Commission shall confirm also the election of those whose election is not contested? Mr. ROXAS. There is no need of confirmation. As the gentleman knows, the action of the House of Representatives confirming the election of its members is just a matter of the rules of the assembly. It is not constitutional. It is not necessary. After a man files his credentials that he has been elected, that is sufficient, unless his election is contested. Mr. VENTURA. But I do not believe that that is sufficient, as we have observed that for purposes of the auditor, in the matter of election of a member to a legislative body, because he will not authorize his pay. Mr. ROXAS. Well, what is the case with regards to the municipal president who is elected? What happens with regards to the councilors of a municipality? Does anybody confirm their election? The municipal council does this: it makes a canvass and proclaims in this case the municipal council proclaims who has been elected, and it ends there, unless there is a contest. It is the same case; there is no need on the part of the Electoral Commission unless there is a contest. The first clause refers to the case referred to by the gentleman from Cavite where one person tries to be elected in place of another who was declared elected. From example, in a case when the residence of the man who has been elected is in question, or in case the citizenship of the man who has been elected is in question. However, if the assembly desires to annul the power of the commission, it may do so by certain maneuvers upon its first meeting when the returns are submitted to the assembly. The purpose is to give to the Electoral Commission all the powers exercised by the assembly referring to the elections, returns and qualifications of the members. When there is no contest, there is nothing to be judged. Mr. VENTURA. Then it should be eliminated. Mr. ROXAS. But that is a different matter, I think Mr. Delegate. Mr. CINCO. Mr. President, I have a similar question as that propounded by the gentleman from Ilocos Norte when I arose a while ago. However I want to ask more questions from the delegate from Capiz. This paragraph 6 on page 11 of the draft cites cases contesting the election as separate from the first part of the sections which refers to elections, returns and qualifications. Mr. ROXAS. That is merely for the sake of clarity. In fact the cases of contested elections are already included in the phrase "the elections, returns and qualifications." This phrase "and contested elections" was inserted merely for the sake of clarity. Mr. CINCO. Under this paragraph, may not the Electoral Commission, at its own instance, refuse to confirm the elections of the members." Mr. ROXAS. I do not think so, unless there is a protest. Mr. LABRADOR. Mr. President, will the gentleman yield? THE PRESIDENT. The gentleman may yield, if he so desires. Mr. ROXAS. Willingly. Mr. LABRADOR. Does not the gentleman from Capiz believe that unless this power is granted to the assembly, the assembly on its own motion does not have the right to contest the election and qualification of its members? Mr. ROXAS. I have no doubt but that the gentleman is right. If this draft is retained as it is, even if two-thirds of the assembly believe that a member has not the qualifications provided by law, they cannot remove him for that reason. Mr. LABRADOR. So that the right to remove shall only be retained by the Electoral Commission.

Mr. ROXAS. By the assembly for misconduct. Mr. LABRADOR. I mean with respect to the qualifications of the members. Mr. ROXAS. Yes, by the Electoral Commission. Mr. LABRADOR. So that under this draft, no member of the assembly has the right to question the eligibility of its members? Mr. ROXAS. Before a member can question the eligibility, he must go to the Electoral Commission and make the question before the Electoral Commission. Mr. LABRADOR. So that the Electoral Commission shall decide whether the election is contested or not contested. Mr. ROXAS. Yes, sir: that is the purpose. Mr. PELAYO. Mr. President, I would like to be informed if the Electoral Commission has power and authority to pass upon the qualifications of the members of the National Assembly even though that question has not been raised. Mr. ROXAS. I have just said that they have no power, because they can only judge. In the same session, the first clause of the aforesaid draft reading "The election, returns and qualifications of the members of the National Assembly and" was eliminated by the Sponsorship Committee in response to an amendment introduced by Delegates Francisco, Ventura, Vinzons, Rafols, Lim, Mumar and others. In explaining the difference between the original draft and the draft as amended, Delegate Roxas speaking for the Sponsorship Committee said: xxx xxx xxx Sr. ROXAS. La diferencia, seor Presidente, consiste solamente en obviar la objecion apuntada por varios Delegados al efecto de que la primera clausula del draft que dice: "The elections, returns and qualifications of the members of the National Assembly" parece que da a la Comision Electoral la facultad de determinar tambien la eleccion de los miembros que no ha sido protestados y para obviar esa dificultad, creemos que la enmienda tien razon en ese sentido, si enmendamos el draft, de tal modo que se lea como sigue: "All cases contesting the election", de modo que los jueces de la Comision Electoral se limitaran solamente a los casos en que haya habido protesta contra las actas." Before the amendment of Delegate Labrador was voted upon the following interpellation also took place: El Sr. CONEJERO. Antes de votarse la enmienda, quisiera El Sr. PRESIDENTE. Que dice el Comite? El Sr. ROXAS. Con mucho gusto. El Sr. CONEJERO. Tal como esta el draft, dando tres miembros a la mayoria, y otros tres a la minoria y tres a la Corte Suprema, no cree Su Seoria que esto equivale practicamente a dejar el asunto a los miembros del Tribunal Supremo? El Sr. ROXAS. Si y no. Creemos que si el tribunal o la Commission esta constituido en esa forma, tanto los miembros de la mayoria como los de la minoria asi como los miembros de la Corte Suprema consideraran la cuestion sobre la base de sus meritos, sabiendo que el partidismo no es suficiente para dar el triunfo. El Sr. CONEJERO. Cree Su Seoria que en un caso como ese, podriamos hacer que tanto los de la mayoria como los de la minoria prescindieran del partidismo? El Sr. ROXAS. Creo que si, porque el partidismo no les daria el triunfo. xxx xxx xxx The amendment introduced by Delegates Labrador, Abordo and others seeking to restore the power to decide contests relating to the election, returns and qualifications of members of the National Assembly to the National Assembly itself, was defeated by a vote of ninety-eight (98) against fifty-six (56).
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In the same session of December 4, 1934, Delegate Cruz (C.) sought to amend the draft by reducing the representation of the minority party and the Supreme Court in the Electoral Commission to two members each, so as to accord more representation to the majority party. The Convention rejected this amendment by a vote of seventy-six (76) against forty-six (46), thus maintaining the non-partisan character of the commission. As approved on January 31, 1935, the draft was made to read as follows: (6) All cases contesting the elections, returns and qualifications of the Members of the National Assembly shall be judged by an Electoral Commission, composed of three members elected by the party having the largest number of votes in the National Assembly, three elected by the members of the party having the second largest number of votes, and three justices of the Supreme Court designated by the Chief Justice, the Commission to be presided over by one of said justices. The Style Committee to which the draft was submitted revised it as follows: SEC. 4. There shall be an Electoral Commission composed of three Justices of the Supreme Court designated by the Chief Justice, and of six Members chosen by the National Assembly, three of whom shall be nominated by the party having the largest number of votes, and three by the party having the second largest number of votes therein. The senior Justice in the Commission shall be its chairman. The Electoral Commission shall be the sole judge of the election, returns, and qualifications of the Members of the National Assembly. When the foregoing draft was submitted for approval on February 8, 1935, the Style Committee, through President Recto, to effectuate the original intention of the Convention, agreed to insert the phrase "All contests relating to" between the phrase "judge of" and the words "the elections", which was accordingly accepted by the Convention. The transfer of the power of determining the election, returns and qualifications of the members of the legislature long lodged in the legislative body, to an independent, impartial and non-partisan tribunal, is by no means a mere experiment in the science of government. Cushing, in his Law and Practice of Legislative Assemblies (ninth edition, chapter VI, pages 57, 58), gives a vivid account of the "scandalously notorious" canvassing of votes by political parties in the disposition of contests by the House of Commons in the following passages which are partly quoted by the petitioner in his printed memorandum of March 14, 1936: 153. From the time when the commons established their right to be the exclusive judges of the elections, returns, and qualifications of their members, until the year 1770, two modes of proceeding prevailed, in the determination of controverted elections, and rights of membership. One of the standing committees appointed at the commencement of each session, was denominated the committee of privileges and elections, whose functions was to hear and investigate all questions of this description which might be referred to them, and to report their proceedings, with their opinion thereupon, to the house, from time to time. When an election petition was referred to this committee they heard the parties and their witnesses and other evidence, and made a report of all the evidence, together with their opinion thereupon, in the form of resolutions, which were considered and agreed or disagreed to by the house. The other mode of proceeding was by a hearing at the bar of the house itself. When this court was adopted, the case was heard and decided by the house, in substantially the same manner as by a committee. The committee of privileges and elections although a select committee. The committee of privileges and elections although a select committee was usually what is called an open one; that is to say, in order to constitute the committee, a quorum of the members named was required to be present, but all the members of the house were at liberty to attend the committee and vote if they pleased. 154. With the growth of political parties in parliament questions relating to the right of membership gradually assumed a political character; so that for many years previous to the

year 1770, controverted elections had been tried and determined by the house of commons, as mere party questions, upon which the strength of contending factions might be tested. Thus, for Example, in 1741, Sir Robert Walpole, after repeated attacks upon his government, resigned his office in consequence of an adverse vote upon the Chippenham election. Mr. Hatsell remarks, of the trial of election cases, as conducted under this system, that "Every principle of decency and justice were notoriously and openly prostituted, from whence the younger part of the house were insensibly, but too successfully, induced to adopt the same licentious conduct in more serious matters, and in questions of higher importance to the public welfare." Mr. George Grenville, a distinguished member of the house of commons, undertook to propose a remedy for the evil, and, on the 7th of March, 1770, obtained the unanimous leave of the house to bring in a bill, "to regulate the trial of controverted elections, or returns of members to serve in parliament." In his speech to explain his plan, on the motion for leave, Mr. Grenville alluded to the existing practice in the following terms: "Instead of trusting to the merits of their respective causes, the principal dependence of both parties is their private interest among us; and it is scandalously notorious that we are as earnestly canvassed to attend in favor of the opposite sides, as if we were wholly self-elective, and not bound to act by the principles of justice, but by the discretionary impulse of our own inclinations; nay, it is well known, that in every contested election, many members of this house, who are ultimately to judge in a kind of judicial capacity between the competitors, enlist themselves as parties in the contention, and take upon themselves the partial management of the very business, upon which they should determine with the strictest impartiality." 155. It was to put an end to the practices thus described, that Mr. Grenville brought in a bill which met with the approbation of both houses, and received the royal assent on the 12th of April, 1770. This was the celebrated law since known by the name of the Grenville Act; of which Mr. Hatsell declares, that it "was one of the nobles works, for the honor of the house of commons, and the security of the constitution, that was ever devised by any minister or statesman." It is probable, that the magnitude of the evil, or the apparent success of the remedy, may have led many of the contemporaries of the measure to the information of a judgement, which was not acquiesced in by some of the leading statesmen of the day, and has not been entirely confirmed by subsequent experience. The bill was objected to by Lord North, Mr. De Grey, afterwards chief justice of the common pleas, Mr. Ellis, Mr. Dyson, who had been clerk of the house, and Mr. Charles James Fox, chiefly on the ground, that the introduction of the new system was an essential alteration of the constitution of parliament, and a total abrogation of one of the most important rights and jurisdictions of the house of commons. As early as 1868, the House of Commons in England solved the problem of insuring the non-partisan settlement of the controverted elections of its members by abdicating its prerogative to two judges of the King's Bench of the High Court of Justice selected from a rota in accordance with rules of court made for the purpose. Having proved successful, the practice has become imbedded in English jurisprudence (Parliamentary Elections Act, 1868 [31 & 32 Vict. c. 125] as amended by Parliamentary Elections and Corrupt Practices Act. 1879 [42 & 43 Vict. c. 75], s. 2; Corrupt and Illegal Practices Preventions Act, 1883 [46 & 47 Vict. c. 51;, s. 70; Expiring Laws Continuance Act, 1911 [1 & 2 Geo. 5, c. 22]; Laws of England, vol. XII, p. 408, vol. XXI, p. 787). In the Dominion of Canada, election contests which were originally heard by the Committee of the House of Commons, are since 1922 tried in the courts. Likewise, in the Commonwealth of Australia, election contests which were originally determined by each house, are since 1922 tried in the High Court. In Hungary, the organic law provides that all protests against the election of members of the Upper House of the Diet are to be resolved by the Supreme Administrative Court (Law 22 of 1916, chap. 2, art. 37, par. 6). The Constitution of Poland of March 17, 1921 (art. 19) and the Constitution of the Free City of Danzig of May 13, 1922 (art. 10) vest the authority to decide contested elections to the Diet or National Assembly in the Supreme Court. For the purpose of
49

deciding legislative contests, the Constitution of the German Reich of July 1, 1919 (art. 31), the Constitution of the Czechoslovak Republic of February 29, 1920 (art. 19) and the Constitution of the Grecian Republic of June 2, 1927 (art. 43), all provide for an Electoral Commission. The creation of an Electoral Commission whose membership is recruited both from the legislature and the judiciary is by no means unknown in the United States. In the presidential elections of 1876 there was a dispute as to the number of electoral votes received by each of the two opposing candidates. As the Constitution made no adequate provision for such a contingency, Congress passed a law on January 29, 1877 (United States Statutes at Large, vol. 19, chap. 37, pp. 227-229), creating a special Electoral Commission composed of five members elected by the Senate, five members elected by the House of Representatives, and five justices of the Supreme Court, the fifth justice to be selected by the four designated in the Act. The decision of the commission was to be binding unless rejected by the two houses voting separately. Although there is not much of a moral lesson to be derived from the experience of America in this regard, judging from the observations of Justice Field, who was a member of that body on the part of the Supreme Court (Countryman, the Supreme Court of the United States and its Appellate Power under the Constitution [Albany, 1913] Relentless Partisanship of Electoral Commission, p. 25 et seq.), the experiment has at least abiding historical interest. The members of the Constitutional Convention who framed our fundamental law were in their majority men mature in years and experience. To be sure, many of them were familiar with the history and political development of other countries of the world. When , therefore, they deemed it wise to create an Electoral Commission as a constitutional organ and invested it with the exclusive function of passing upon and determining the election, returns and qualifications of the members of the National Assembly, they must have done so not only in the light of their own experience but also having in view the experience of other enlightened peoples of the world. The creation of the Electoral Commission was designed to remedy certain evils of which the framers of our Constitution were cognizant. Notwithstanding the vigorous opposition of some members of the Convention to its creation, the plan, as hereinabove stated, was approved by that body by a vote of 98 against 58. All that can be said now is that, upon the approval of the constitutional the creation of the Electoral Commission is the expression of the wisdom and "ultimate justice of the people". (Abraham Lincoln, First Inaugural Address, March 4, 1861.) From the deliberations of our Constitutional Convention it is evident that the purpose was to transfer in its totality all the powers previously exercised by the legislature in matters pertaining to contested elections of its members, to an independent and impartial tribunal. It was not so much the knowledge and appreciation of contemporary constitutional precedents, however, as the long-felt need of determining legislative contests devoid of partisan considerations which prompted the people, acting through their delegates to the Convention, to provide for this body known as the Electoral Commission. With this end in view, a composite body in which both the majority and minority parties are equally represented to off-set partisan influence in its deliberations was created, and further endowed with judicial temper by including in its membership three justices of the Supreme Court. The Electoral Commission is a constitutional creation, invested with the necessary authority in the performance and execution of the limited and specific function assigned to it by the Constitution. Although it is not a power in our tripartite scheme of government, it is, to all intents and purposes, when acting within the limits of its authority, an independent organ. It is, to be sure, closer to the legislative department than to any other. The location of the provision (section 4) creating the Electoral Commission under Article VI entitled "Legislative Department" of our Constitution is very indicative. Its compositions is also significant in that it is constituted by a majority of members of the legislature. But it is a body separate from and independent of the legislature. The grant of power to the Electoral Commission to judge all contests relating to the election, returns and qualifications of members of the National Assembly, is intended to be as complete and unimpaired as if it had remained originally in the legislature. The express lodging of that power in the Electoral Commission is an implied denial of the exercise of that power by the National Assembly. And this is as effective a

restriction upon the legislative power as an express prohibition in the Constitution (Ex parte Lewis, 45 Tex. Crim. Rep., 1; State vs. Whisman, 36 S.D., 260; L.R.A., 1917B, 1). If we concede the power claimed in behalf of the National Assembly that said body may regulate the proceedings of the Electoral Commission and cut off the power of the commission to lay down the period within which protests should be filed, the grant of power to the commission would be ineffective. The Electoral Commission in such case would be invested with the power to determine contested cases involving the election, returns and qualifications of the members of the National Assembly but subject at all times to the regulative power of the National Assembly. Not only would the purpose of the framers of our Constitution of totally transferring this authority from the legislative body be frustrated, but a dual authority would be created with the resultant inevitable clash of powers from time to time. A sad spectacle would then be presented of the Electoral Commission retaining the bare authority of taking cognizance of cases referred to, but in reality without the necessary means to render that authority effective whenever and whenever the National Assembly has chosen to act, a situation worse than that intended to be remedied by the framers of our Constitution. The power to regulate on the part of the National Assembly in procedural matters will inevitably lead to the ultimate control by the Assembly of the entire proceedings of the Electoral Commission, and, by indirection, to the entire abrogation of the constitutional grant. It is obvious that this result should not be permitted. We are not insensible to the impassioned argument or the learned counsel for the petitioner regarding the importance and necessity of respecting the dignity and independence of the national Assembly as a coordinate department of the government and of according validity to its acts, to avoid what he characterized would be practically an unlimited power of the commission in the admission of protests against members of the National Assembly. But as we have pointed out hereinabove, the creation of the Electoral Commission carried with it ex necesitate rei the power regulative in character to limit the time with which protests intrusted to its cognizance should be filed. It is a settled rule of construction that where a general power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred (Cooley, Constitutional Limitations, eight ed., vol. I, pp. 138, 139). In the absence of any further constitutional provision relating to the procedure to be followed in filing protests before the Electoral Commission, therefore, the incidental power to promulgate such rules necessary for the proper exercise of its exclusive power to judge all contests relating to the election, returns and qualifications of members of the National Assembly, must be deemed by necessary implication to have been lodged also in the Electoral Commission. It is, indeed, possible that, as suggested by counsel for the petitioner, the Electoral Commission may abuse its regulative authority by admitting protests beyond any reasonable time, to the disturbance of the tranquillity and peace of mind of the members of the National Assembly. But the possibility of abuse is not argument against the concession of the power as there is no power that is not susceptible of abuse. In the second place, if any mistake has been committed in the creation of an Electoral Commission and in investing it with exclusive jurisdiction in all cases relating to the election, returns, and qualifications of members of the National Assembly, the remedy is political, not judicial, and must be sought through the ordinary processes of democracy. All the possible abuses of the government are not intended to be corrected by the judiciary. We believe, however, that the people in creating the Electoral Commission reposed as much confidence in this body in the exclusive determination of the specified cases assigned to it, as they have given to the Supreme Court in the proper cases entrusted to it for decision. All the agencies of the government were designed by the Constitution to achieve specific purposes, and each constitutional organ working within its own particular sphere of discretionary action must be deemed to be animated with the same zeal and honesty in accomplishing the great ends for which they were created by the sovereign will. That the actuations of these constitutional agencies might leave much to be desired in given instances, is inherent in the perfection of human institutions. In the third place, from the fact that the Electoral Commission may not be interfered with in the exercise of its legitimate power, it does not follow that its acts, however illegal or unconstitutional, may not be challenge in appropriate cases over which the courts may exercise jurisdiction.
50

But independently of the legal and constitutional aspects of the present case, there are considerations of equitable character that should not be overlooked in the appreciation of the intrinsic merits of the controversy. The Commonwealth Government was inaugurated on November 15, 1935, on which date the Constitution, except as to the provisions mentioned in section 6 of Article XV thereof, went into effect. The new National Assembly convened on November 25th of that year, and the resolution confirming the election of the petitioner, Jose A. Angara was approved by that body on December 3, 1935. The protest by the herein respondent Pedro Ynsua against the election of the petitioner was filed on December 9 of the same year. The pleadings do not show when the Electoral Commission was formally organized but it does appear that on December 9, 1935, the Electoral Commission met for the first time and approved a resolution fixing said date as the last day for the filing of election protest. When, therefore, the National Assembly passed its resolution of December 3, 1935, confirming the election of the petitioner to the National Assembly, the Electoral Commission had not yet met; neither does it appear that said body had actually been organized. As a mater of fact, according to certified copies of official records on file in the archives division of the National Assembly attached to the record of this case upon the petition of the petitioner, the three justices of the Supreme Court the six members of the National Assembly constituting the Electoral Commission were respectively designated only on December 4 and 6, 1935. If Resolution No. 8 of the National Assembly confirming non-protested elections of members of the National Assembly had the effect of limiting or tolling the time for the presentation of protests, the result would be that the National Assembly on the hypothesis that it still retained the incidental power of regulation in such cases had already barred the presentation of protests before the Electoral Commission had had time to organize itself and deliberate on the mode and method to be followed in a matter entrusted to its exclusive jurisdiction by the Constitution. This result was not and could not have been contemplated, and should be avoided. From another angle, Resolution No. 8 of the National Assembly confirming the election of members against whom no protests had been filed at the time of its passage on December 3, 1935, can not be construed as a limitation upon the time for the initiation of election contests. While there might have been good reason for the legislative practice of confirmation of the election of members of the legislature at the time when the power to decide election contests was still lodged in the legislature, confirmation alone by the legislature cannot be construed as depriving the Electoral Commission of the authority incidental to its constitutional power to be "the sole judge of all contest relating to the election, returns, and qualifications of the members of the National Assembly", to fix the time for the filing of said election protests. Confirmation by the National Assembly of the returns of its members against whose election no protests have been filed is, to all legal purposes, unnecessary. As contended by the Electoral Commission in its resolution of January 23, 1936, overruling the motion of the herein petitioner to dismiss the protest filed by the respondent Pedro Ynsua, confirmation of the election of any member is not required by the Constitution before he can discharge his duties as such member. As a matter of fact, certification by the proper provincial board of canvassers is sufficient to entitle a member-elect to a seat in the national Assembly and to render him eligible to any office in said body (No. 1, par. 1, Rules of the National Assembly, adopted December 6, 1935). Under the practice prevailing both in the English House of Commons and in the Congress of the United States, confirmation is neither necessary in order to entitle a member-elect to take his seat. The return of the proper election officers is sufficient, and the member-elect presenting such return begins to enjoy the privileges of a member from the time that he takes his oath of office (Laws of England, vol. 12, pp. 331. 332; vol. 21, pp. 694, 695; U. S. C. A., Title 2, secs. 21, 25, 26). Confirmation is in order only in cases of contested elections where the decision is adverse to the claims of the protestant. In England, the judges' decision or report in controverted elections is certified to the Speaker of the House of Commons, and the House, upon being informed of such certificate or report by the Speaker, is required to enter the same upon the Journals, and to give such directions for confirming or altering the return, or for the issue of a writ for a new election, or for carrying into execution the determination as circumstances may require (31 & 32 Vict., c. 125, sec. 13). In the United States, it is believed, the order or decision of the particular

house itself is generally regarded as sufficient, without any actual alternation or amendment of the return (Cushing, Law and Practice of Legislative Assemblies, 9th ed., sec. 166). Under the practice prevailing when the Jones Law was still in force, each house of the Philippine Legislature fixed the time when protests against the election of any of its members should be filed. This was expressly authorized by section 18 of the Jones Law making each house the sole judge of the election, return and qualifications of its members, as well as by a law (sec. 478, Act No. 3387) empowering each house to respectively prescribe by resolution the time and manner of filing contest in the election of member of said bodies. As a matter of formality, after the time fixed by its rules for the filing of protests had already expired, each house passed a resolution confirming or approving the returns of such members against whose election no protests had been filed within the prescribed time. This was interpreted as cutting off the filing of further protests against the election of those members not theretofore contested (Amistad vs. Claravall [Isabela], Second Philippine Legislature, Record First Period, p. 89; Urguello vs. Rama [Third District, Cebu], Sixth Philippine Legislature; Fetalvero vs. Festin [Romblon], Sixth Philippine Legislature, Record First Period, pp. 637-640; Kintanar vs. Aldanese [Fourth District, Cebu], Sixth Philippine Legislature, Record First Period, pp. 1121, 1122; Aguilar vs. Corpus [Masbate], Eighth Philippine Legislature, Record First Period, vol. III, No. 56, pp. 892, 893). The Constitution has repealed section 18 of the Jones Law. Act No. 3387, section 478, must be deemed to have been impliedly abrogated also, for the reason that with the power to determine all contest relating to the election, returns and qualifications of members of the National Assembly, is inseparably linked the authority to prescribe regulations for the exercise of that power. There was thus no law nor constitutional provisions which authorized the National Assembly to fix, as it is alleged to have fixed on December 3, 1935, the time for the filing of contests against the election of its members. And what the National Assembly could not do directly, it could not do by indirection through the medium of confirmation. Summarizing, we conclude: (a) That the government established by the Constitution follows fundamentally the theory of separation of power into the legislative, the executive and the judicial. (b) That the system of checks and balances and the overlapping of functions and duties often makes difficult the delimitation of the powers granted. (c) That in cases of conflict between the several departments and among the agencies thereof, the judiciary, with the Supreme Court as the final arbiter, is the only constitutional mechanism devised finally to resolve the conflict and allocate constitutional boundaries. (d) That judicial supremacy is but the power of judicial review in actual and appropriate cases and controversies, and is the power and duty to see that no one branch or agency of the government transcends the Constitution, which is the source of all authority. (e) That the Electoral Commission is an independent constitutional creation with specific powers and functions to execute and perform, closer for purposes of classification to the legislative than to any of the other two departments of the governments. (f ) That the Electoral Commission is the sole judge of all contests relating to the election, returns and qualifications of members of the National Assembly. (g) That under the organic law prevailing before the present Constitution went into effect, each house of the legislature was respectively the sole judge of the elections, returns, and qualifications of their elective members. (h) That the present Constitution has transferred all the powers previously exercised by the legislature with respect to contests relating to the elections, returns and qualifications of its members, to the Electoral Commission.

(i) That such transfer of power from the legislature to the Electoral Commission was full, clear and complete, and carried with it ex necesitate rei the implied power inter alia to prescribe the rules and regulations as to the time and manner of filing protests. ( j) That the avowed purpose in creating the Electoral Commission was to have an independent constitutional organ pass upon all contests relating to the election, returns and qualifications of members of the National Assembly, devoid of partisan influence or consideration, which object would be frustrated if the National Assembly were to retain the power to prescribe rules and regulations regarding the manner of conducting said contests. (k) That section 4 of article VI of the Constitution repealed not only section 18 of the Jones Law making each house of the Philippine Legislature respectively the sole judge of the elections, returns and qualifications of its elective members, but also section 478 of Act No. 3387 empowering each house to prescribe by resolution the time and manner of filing contests against the election of its members, the time and manner of notifying the adverse party, and bond or bonds, to be required, if any, and to fix the costs and expenses of contest. (l) That confirmation by the National Assembly of the election is contested or not, is not essential before such member-elect may discharge the duties and enjoy the privileges of a member of the National Assembly. (m) That confirmation by the National Assembly of the election of any member against whom no protest had been filed prior to said confirmation, does not and cannot deprive the Electoral Commission of its incidental power to prescribe the time within which protests against the election of any member of the National Assembly should be filed. We hold, therefore, that the Electoral Commission was acting within the legitimate exercise of its constitutional prerogative in assuming to take cognizance of the protest filed by the respondent Pedro Ynsua against the election of the herein petitioner Jose A. Angara, and that the resolution of the National Assembly of December 3, 1935 can not in any manner toll the time for filing protests against the elections, returns and qualifications of members of the National Assembly, nor prevent the filing of a protest within such time as the rules of the Electoral Commission might prescribe. In view of the conclusion reached by us relative to the character of the Electoral Commission as a constitutional creation and as to the scope and extent of its authority under the facts of the present controversy, we deem it unnecessary to determine whether the Electoral Commission is an inferior tribunal, corporation, board or person within the purview of sections 226 and 516 of the Code of Civil Procedure. The petition for a writ of prohibition against the Electoral Commission is hereby denied, with costs against the petitioner. So ordered. Avancea, C. J., Diaz, Concepcion, and Horrilleno, JJ., concur.

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G.R. Nos. 177857-58

September 17, 2009

PHILIPPINE COCONUT PRODUCERS FEDERATION, INC. (COCOFED), MANUEL V. DEL ROSARIO, DOMINGO P. ESPINA, SALVADOR P. BALLARES, JOSELITO A. MORALEDA, PAZ M. YASON, VICENTE A. CADIZ, CESARIA DE LUNA TITULAR, and RAYMUNDO C. DE VILLA, Petitioners, vs. REPUBLIC OF THE PHILIPPINES, Respondent. JOVITO R. SALONGA, WIGBERTO E. TAADA, OSCAR F. SANTOS, ANA THERESIA HONTIVEROS, and TEOFISTO L. GUINGONA III, OppositorsIntervenors. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 178193
***

Dividend Rate - The SMC Board of Directors shall have the sole discretion to declare dividends on the Series 1 Preferred Shares as redeemed by SMC, the dividend rate shall be at a fixed rate of 8% per annum, payable quarterly and calculated by reference to the issue price. Dividend Rate Step Up - Unless the Series 1 Preferred Shares are redeemed by SMC, the Dividend Rate shall be adjusted at the end of the fifth year to the higher of (a) the Dividend Rate or (b) the prevailing 10-year PDSTF rate plus a spread of 300 bps. Optional Redemption and Purchase - SMC has the option, but not the obligation, to redeem all or part of the Series 1 Preferred Shares on the third anniversary from the Issue Date or on any Dividend Date thereafter at a redemption price equal to the Issue price of the Preferred Shares plus all cumulated and unpaid cash dividends. Preference in the event of the liquidation of SMC - The Series 1 Preferred Shares shall have preference over the common shares. Selling costs - All selling costs pertaining to the Common Shares shall be borne by the common shareholders. x x x (Emphasis added.) COCOFED proposes to constitute a trust fund to be known as the "Coconut Industry Trust Fund (CITF) for the Benefit of the Coconut Farmers," with respondent Republic, acting through the Philippine Coconut Authority (PCA), as trustee. As proposed, the constitution of the CITF shall be subject to terms and conditions which, for the most part, reiterate the features of SMCs conversion offer, albeit specific reference is made to the shares of the 14 CIIF companies. Among the terms and conditions are the following: Standard 1. There must be a prior approval by this Honorable Court in this instant case G.R. No. 177857-58 entitled "COCOFED, et. al. vs. Republic of the Philippines", of the conversion of the sequestered SMC Common Shares, Both Class "A" and Class "B", registered in the respective names of the 14 CIIF Holding Companies, into SMC Series 1 Preferred Shares. Standard 2. The SMC shares to be exchanged are all the shares of stock of SMC that are presently sequestered and registered in the respective names of the 14 CIIF Holding Companies in the total number of 753,848,312, both Class "A" and Class "B" shares x x x (hereinafter, collectively referred to as the "SMC Common Shares"). xxxx Standard 4. The SMC Common Shares shall be converted at an exchange ratio of one (1) SMC Series 1 Preferred Share (hereinafter, "SMC Series 1 Preferred Share") for every one (1) SMC Common Share tendered. Each SMC Series 1 Preferred Share shall have a par value of (P5.00) per share and an Issue Price of Seventy Five Pesos per share (P75.00). Dividends on the SMC Series 1 Preferred Share shall be
52

DANILO B. URUSA, Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 180705
***

EDUARDO M. COJUANGCO, JR., Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent. RESOLUTION VELASCO, JR., J.: For consideration is the Urgent Motion to Approve the Conversion of the SMC Common Shares into SMC Series 1 Preferred Shares dated July 24, 2009 (Motion) interposed by petitioners Philippine Coconut Producers Federation, Inc., et al. (collectively, COCOFED). COCOFED seeks the Courts approval of the conversion of 753,848,312 Class "A" and Class "B" common shares of San Miguel Corporation (SMC) registered in the names of Coconut Industry Investment Fund and the socalled "14 Holding Companies" (collectively known as "CIIF companies") into 753,848,312 SMC Series 1 Preferred Shares (hereinafter, the Conversion). SMCs conversion or stock exchange offer is embodied in its Information Statement and yields the following relevant features:
1

Instrument - Peso denominated, perpetual, cumulative, non-voting preferred shares with a par value of Php 5.00 per share and Issue Price of Php 75 per share.

cumulative and with dividend rate of 8% per annum computed on the Issue Price of Seventy Five Pesos (P75.00) per share. xxxx Standard 6. If and when SMC exercises its right, but not an obligation, to redeem after a period of three (3) years the SMC Series 1 Preferred Shares, the redemption shall in no case be less than the Issue Price of Seventy Five Pesos (P75.00) per share plus unpaid cumulative dividends. xxxx Standard 8. Upon written appointment to the Board of Governors of the [PCA] of the three (3) nominees submitted to the President of the Philippines by the [COCOFED], as required by PD 1468, a trust fund is thereby automatically created to be identified and known as the "Coconut Industry Trust Fund (CITF) For the Benefit of the Coconut Farmers" and the trustee of the Coconut Industry Trust fund shall be: "The Republic of the Philippines Acting Through the Philippine Coconut Authority for the Benefit of the Coconut Farmers." Standard 9. The initial capital of the [CITF] shall be the SMC Series 1 Preferred Shares that will be issued by SMC as herein described. Standard 10. Within ten (10) days from and after the date of the final approval by this Honorable Court of the Conversion, the Republic of the Philippines, acting through the Presidential Commission on Good Government through its duly authorized Chairman, shall deliver to SMC these documents. xxxx Standard 11. As the issuer, SMC shall within a reasonable period from a trade, or exchange, of the SMC Common Shares into 753,848,312 SMC Series 1 Preferred Shares through the facilities of the Philippine Stock Exchange, deliver duly-signed and issued SMC Series 1 Preferred Stock Certificate(s) in the name of "The Republic of the Philippines acting though the Philippine Coconut Authority as Trustee of the Coconut Industry Trust Fund (CITF) For the Benefit of the Coconut Farmers." Standard 12. Upon compliance by the SMC with its reciprocal obligations according to the terms and intent of the approval by this Honorable Court, then it shall acquire absolute ownership of the SMC Common Shares free from all liens, writs, demands, or claims x x x. Standard 13. The trustee of the [CITF] shall have no authority to sell, dispose, assign, encumber or otherwise impair the value of the SMC Series 1 Preferred Shares, unless the same are redeemed by SMC in accordance with its Articles of Incorporation, as amended.

Standard 14. For purposes of ascertaining x x x the identities and addresses of coconut farmers, the beneficiaries of the developmental projects herein authorized to be financed, a ground survey of coconut farmers as presently defined, or hereafter defined, by the [PCA], shall be conducted by the [PCA] x x x. Standard 15. Thirty (30) days after the receipt of any dividend paid on the SMC Series 1 preferred Shares, the net proceeds x x x shall be disbursed by the Trustee in favor of these entities in these proportions: a. Forty percent (40%) Coconut Industry Trust Fund constituted under Paragraph 11, Standard 8 and Standard 9 hereof which the Trustee should invest and re-invest only in the permissible investments authorized under Paragraph 11, Standard 16. b. Twenty percent (20%) To the (PCA) "in trust and for the benefit of the coconut farmers", being the governmental agency designated by law to implement projects for the coconut industry. c. Twenty percent (20%) To the [COCOFED], in its capacity as the duly recognized organization of the coconut farmers with the highest membership. d. Twenty percent (20%) To the PCA Accredited Other Coconut Farmers organizations The trustee shall disburse this allocation to each and all of those PCA Accredited Other Coconut Farmers Organizations. Standard 16. In the event of redemption of the SMC Series 1 Preferred Shares, whether in full or in part, the proceeds of such redemption shall form part of the capital of the [CITF] which the Trustee shall invest, within a period of forty eight (48) hours from receipt of the proceeds of such redemption, and reinvest in these 2 permissible investments x x x. To the basic motion, respondent Republic filed its Comment questioning COCOFEDs personality to seek the Courts approval of the desired conversion. Respondent Republic also disputes COCOFEDs right to impose and prescribe terms and conditions on the proposed conversion, maintaining that the CIIF SMC common shares are sequestered assets and are in custodia legis under Presidential Commission on Good Governments (PCGGs) administration. It postulates that, owing to the sequestrated status of the said common shares, only PCGG has the authority to approve the proposed conversion and seek the necessary Court 3 approval. In this connection, respondent Republic cites Republic v. Sandiganbayan where the coconut levy funds were declared as prima facie public funds, thus reinforcing its position that only PCGG, a government agency, can ask for approval of the conversion. On September 4, 2009, Jovito R. Salonga and four others sought leave to intervene. Attached to the motion was their Comment/Opposition-in-Intervention, asserting that "the government bears the burden of showing that the conversion is indubitably advantageous to the public interest or will result in clear and material benefit. Failure
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of the government to carry the burden means that the current status of the sequestered stocks should be maintained pending final disposition of G.R. Nos. 177857-58." They further postulate that "even assuming that the proposal to convert the SMC shares is beneficial to the government, it cannot pursue the exchange offer because it is without power to exercise acts of strict dominion over the sequestered shares." Lastly, they argue that "the proposed conversion x x x is not only not advantageous to the public interest but is in fact positively disadvantageous." On September 4, 2009, respondent Republic filed a Supplemental Comment in which it cited the Partial Summary Judgment rendered by the Sandiganbayan on May 27, 2004 in Civil Case No. 33-F, declaring the Republic as owner, in trust for the coconut farmers, of the subject CIIF SMC shares (27%). The same comment also referred to Resolution No. 365-2009 passed on August 28, 2009 by the United Coconut Planters Bank (UCPB) Board of Directors expressing the sense that "the proposed conversion of the CIIF SMC common shares to SMC Series I preferred shares is financially 4 beneficial." Reference was also made to PCGG Resolution 2009-037-756 dated September 2, 2009, requesting the Office of the Solicitor General (OSG) to seek 5 approval of this Court for the proposed conversion. By way of relief, respondent Republic prayed that the PCGG be allowed to proceed and effect the conversion. On the preliminary issue as to the proper party to seek the imprimatur on the conversion, the Court rules that it is the PCGG, not COCOFED, that is authorized to seek the approval of the Court of the Series 1 preferred shares conversion. As records show, PCGG sequestered the 753,848,312 SMC common shares 6 registered in the name of CIIF companies on April 7, 1986. From that time on, these sequestered shares became subject to the management, supervision, and control of PCGG, pursuant to Executive Order No. (EO) 1, Series of 1986, creating that commission and vesting it with the following powers: Sec. 3. The Commission shall have the power and authority: xxxx (b) To sequester or place or cause to be placed under its control or possession any building or office wherein any ill-gotten wealth or properties may be found, and any records pertaining thereto, in order to prevent their destruction, concealment or disappearance which would frustrate or hamper the investigation or otherwise prevent the Commission from accomplishing its task. (c) To provisionally take over in the public interest or to prevent its disposal or dissipation, business enterprises and properties taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos, until the transactions leading to such acquisition by the latter can be disposed of by the appropriate authorities. Eventually, the coconut levy funds that were used to acquire the sequestered CIIF SMC common shares in question were peremptorily determined to be prima facie
54

public funds. The Court, in Republic v. COCOFED, elucidated on the nature of the coconut levy funds: Coconut Levy Funds Are Prima Facie Public Funds To avoid misunderstanding and confusion, this Court will even be more categorical and positive than its earlier pronouncements: the coconut levy funds are not only affected with public interest; they are, in fact, prima facie public funds. Public funds are those moneys belonging to the State or to any political subdivision of the State; more specifically, taxes, customs duties and moneys raised by operation of law for the support of the government or for the discharge of its obligations. Undeniably, coconut levy funds satisfy this general definition of public funds, because of the following reasons: 1. Coconut levy funds are raised with the use of the police and taxing powers of the State. 2. They are levies imposed by the State for the benefit of the coconut industry and its farmers. 3. Respondents have judicially admitted that the sequestered shares were purchased with public funds. xxxx 6. The very laws governing coconut levies recognize their public character. xxxx 2. Coconut Funds Are Levied for the Benefit of the Coconut Industry and Its Farmers. xxxx And explaining the PCGGs authority to vote the sequestered shares acqui red from the coconut levy, the Court further wrote: Having Been Acquired With Public Funds, UCPB Shares Belong, Prima Facie, to the Government Having shown that the coconut levy funds are not only affected with public interest, but are in fact prima facie public funds, this Court believes that the government should be allowed to vote the questioned shares, because they belong to it as the prima facie beneficial and true owner.
8

As stated at the beginning, voting is an act of dominion that should be exercised by the share owner. One of the recognized rights of an owner is the right to vote at meetings of the corporation. The right to vote is classified as the right to control. Voting rights may be for the purpose of, among others, electing or removing directors, amending a charter, or making or amending by laws. Because the subject UCPB shares were acquired with government funds, the government becomes their prima facie beneficial and true owner. Ownership includes the right to enjoy, dispose of, exclude and recover a thing without limitations other than those established by law or by the owner. x x x And the right to vote shares is a mere incident of ownership. In the present case, the government has been shown to be the prima facie owner of the funds used to purchase the shares. 9 Hence, it should be allowed the rights and privileges flowing from such fact. Time and again, the Court has likened sequestration to preliminary attachment and receivership under Rules 57 and 59 of the Rules of Court and has accordingly applied 10 the said rules to sequestration cases. So it was that in Republic v. Sandiganbayan the Court noted that the powers and duties of the PCGG as conservator and protector of sequestered assets are virtually the same as those possessed by a receiver under Rule 59, Section 6: SEC. 6. General powers of receiver.Subject to the control of the court in which the action or proceeding is pending, a receiver shall have the power to bring and defend, in such capacity, actions in his own name; to take and keep possession of the property in controversy; to receive rents; to collect debts due to himself as receiver or to the fund, property, estate, person, or corporation of which he is the receiver; to compound for and compromise the same; to make transfers; to pay outstanding debts; to divide the money and other property that shall remain among the persons legally entitled to receive the same; and generally to do such acts respecting the property as the court may authorize. However, funds in the hands of a receiver may be invested only by order of the court upon the written consent of all the parties to the action. No action may be filed by or against a receiver without leave of the court which appointed him. (Emphasis supplied.) And in Republic v. Sandiganbayan, the Court observed that "the PCGGs power to sequester alleged ill-gotten properties is likened to the provisional remedies of preliminary attachment or receivership which are always subject to the control of the court." The PCGG, therefore, as the "receiver" of sequestered assets and in consonance with its duty under EO 1, Series of 1986, to protect and preserve them, has the power to exercise acts of dominion provided that those acts are approved by the proper court. From the foregoing discussion, it is clear that it is the PCGGnot COCOFED or the CIIF companiesthat has the right and/or authority during sequestration to seek this Courts approval for the proposed conversion. Consequently, the terms and
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11

conditions sought by COCOFED for the conversion are not material to the proposed conversion. At most, COCOFEDs prayer for approval of the conversion reflects its conformity to said transfiguration. After a circumspect evaluation of the incident at bar, we resolve to approve the conversion, taking into account certain circumstances and hard economic realities as discussed below: Contrary to the assertion of intervenors Salonga, et al., respondent Republic has satisfactorily demonstrated that the conversion will redound to the clear advantage and material benefit of the eventual owner of the CIIF SMC shares in question. Positive action must be taken in order to preserve the value of the sequestered CIIF SMC common shares. The worldwide economic crisis that started last year affected the Philippines and adversely impacted on several banks and financial institutions, resulting in billions of loses. The Philippine Stock Exchange Index retreated by a record 12.3% on October 27, 2008, the biggest single day fall since July 24, 1987. This year, 2009, the recorded index of 2,859 has not regained the pre-October 27, 2008 level of 3,837.89. Moreover, the CIIF SMC shares traded in the local bourse have substantially dropped in value in the last two (2) years. The SMC Class "A" shares, which commanded the unit price of PhP 48 per share as of November 6, 2008, were trading at PhP 57.50 in 2007 and PhP 65 in 2006. SMC Class "B" shares, on the other hand, which fetched a price of PhP 49 per share on November 6, 2008, were priced at PhP 61 in 2007 and PhP 74.50 in 2006. As of June 1, 2009, Class "A" and Class "B" common shares of CIIF SMC closed at PhP 53.50 and PhP 54 per unit, respectively. CIIF SMC share prices may decline over the years. No doubt shares of stock are not the safest of investments, moored as they are on the ever changing worldwide and local financial conditions. The proposed conversion would provide better protection either to the government or to the eventually declared real stock owners, depending on the final ruling on the ownership issue. In the event SMC suffers serious financial reverses in the short or long term and seeks insolvency protection, the owners of the preferred shares, being considered creditors, shall have, vis--vis common stock shareholders, preference in the corporate assets of the insolvent or dissolved corporation. In the case of the SMC Series 1 Preferred Shares, these preferential features are made available to buyers of said shares and are amply 12 protected in the investment. More importantly, the conversion will ensure a higher cumulative and fixed dividend rate of 8% per annum computed at an issue price of PhP 75 per share, a yield not currently available to common shareholders. The OSG succinctly explained the undeniable advantages to be gained from the conversion, thus: Assuming that the data contained in the SMC Information Sheet is accurate and true, the closing prices of SMC Common Class "A" and "B" Shares, as of June 1, 2009, are Fifty-three pesos and 50/100 (P53.50) and Fifty-four Pesos (P54.00), respectively. The proposed conversion into Series 1 Preferred Shares would give said share an

issue price of seventy-five pesos (P75.00) per share. Corollarily, while the current SMC Common shares have no fixed dividend rate, the Series 1 Preferred Shares have a determined dividend rate of eight percent (8%) per annum. On these points alone, the benefits to the shareholders are clearly quantifiable. Further still, the SMC Series 1 Preferred Shares are deemed cumulative. As a cumulative share with preference in the payment of dividends, it is entitled to cumulate the dividends in those years where no dividend is declared. Thus, if a cumulative share is entitled to 10% of par value as cumulative dividend yearly, where no dividends are declared in 1989, 1990 and 1991 because there are no profits, and dividends are declared in 1992 because of surplus or unrestricted earnings, the holder of the preferred cumulative shares is entitled to receive 40% of par value as his cumulative dividends for the years 1989 to 1991. The declaration of dividends is still generally subject to the discretion of the board but once dividends are declared, the cumulative preferred shareholders are entitled to receive the dividends for the years when no declaration was made. When dividends are declared, cumulative dividends must be paid regardless of the year in which they are earned. Therefore, holders of the converted preferred shares are assured of 13 accumulated annual dividends. (Emphasis added.) As it were, the issue price of PhP 75 per share represents a 40% premium, more or less, over the prevailing market price, i.e., about PhP 54 per share, of the CIIF SMC common shares as of June 1, 2009. The 40% premium amply covers the "block" and "control" features of the CIIF SMC common shares. These shares below 33.33% are, to many, not even considered vested with "control" premium. It can be safely assumed that the issue price of PhP 75 per share was based on an independent valuation of the CIIF SMC shares, a requisite usually prescribed as a prelude to Board approval. The redemption value of the preferred shares depends upon and is actually tied up with the issue price plus all the cumulated and unpaid dividends. This redemption feature is envisaged to effectively eliminate the market volatility risks on the side of the share owners. Undoubtedly, these are clear advantages and benefits that inure to the share owners who, on one hand, prefer a stable dividend yield on their investments and, on the other hand, want security from the uncertainty of market forces over which they do not have control. Recent developments saw SMC venturing and diversifying into several huge projects (i.e., oil, power, telecommunications), business moves which understandably have caused some critics to raise the concern over a possible prejudice to the CIIF SMC common shares presently under sequestration should such investments turn sour. A number of people claim these new acquisitions are likely to dissipate the assets of SMC. Some sectors ratiocinate that the huge capital investments poured into these projects may substantially erode SMCs profitability in the next few years, resulting in diminished dividends declaration. The proposed conversion will address the concerns and allay the fears of well meaning sectors, and insulate and protect the sequestered CIIF SMC shares from potential damage or loss.

Moreover, the conversion may be viewed as a sound business strategy to preserve and conserve the value of the governments interests in CIIF SMC shares. Preservation is attained by fixing the value today at a significant premium over the market price and ensuring that such value is not going to decline despite negative market conditions. Conservation is realized thru an improvement in the earnings value via the 8% per annum dividends versus the uncertain and most likely lower dividends on common shares. A fixed dividend rate of 8% per annum translates to PhP 6 per preferred share or a guaranteed yearly dividend of PhP 4,523,308,987.20 for the entire sequestered CIIF 14 SMC shares. The figures jibe with the estimate made by intervenors Salonga, et al. Compare this amount to the dividends declared for common shares for the recent past years which are in the vicinity of PhP 1.40 per unit share or a total amount of PhP 1,055,387,636.80 per annum. The whopping difference is around PhP 3.5 billion annually or PhP 10.5 billion in three (3) years. On a year-to-year basis, the difference reflects an estimated increase of 77% in dividend earnings. With the bold investments of SMC in various lines of business, there is no assurance of substantial earnings in the coming years. There may even be no earnings. The modest dividends that accrue to the common shares in the recent years may be a thing of the past and may even be obliterated by poor or unstable performance in the initial years of operation of newly-acquired ventures. In the light of the above findings, the Court holds that respondent Republic has satisfactorily hurdled the onus of showing that the conversion is advantageous to the public interest or will result in clear and material benefit to the eventually declared stock owners, be they the coconut farmers or the government itself. In their Comment/Opposition in Intervention, intervenors Salonga, et al., however, assert that the proposed conversion is positively disadvantageous to respondent. They label the conversion as a "devious compromise favorable only to COCOFED and Cojuangco, Jr." This allegation is simply conjectural. No evidence of the alleged compromise was presented, as it was only COCOFED that initiated the proposal for conversion. The claim that the Cojuangco, Jr. group will be able to oust the government nominees from the SMC Board, buy the sequestered shares without encumbrances, and do so with SMC funds is inaccurate and even speculative. Intervenors completely miss the point. The genuine issue is whether or not the desired conversion will be beneficial and advantageous to the government or the eventual owners of the shares. The perceived full control by Cojuangco, Jr. over SMC after the common shares are released from sequestration is hardly relevant to the propriety of the conversion. Intervenors have not been able to demonstrate how the domination of SMC by Cojuangco, Jr., if that should come to pass, will prejudice or impair the interests of respondent Republic in the preferred shares. The more important consideration in the exercise at hand is the preservation and conservation of the preferred shares and the innumerable benefits and substantial financial gains that will redound to the owner of these shares. The conversion, so intervenors claim, will result in the loss of voting rights of PCGG in SMC and enable Cojuangco, Jr. to acquire the sequestered shares, without
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encumbrances, using SMC funds. This is incorrect. The common shares after conversion and release from sequestration become treasury stocks or shares. Treasury shares under Sec. 9 of the Corporation Code (Batas Pambansa Blg. 68) are "shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors." A treasury share or stock, which may be common or preferred, may be used for a variety of corporate purposes, such as for a stock bonus plan for management and employees or for acquiring another company. It may be held indefinitely, resold or retired. While held in the companys treasury, the stock earns no dividends and has 15 no vote in company affairs. Thus, the CIIF common shares that would become treasury shares are not entitled to voting rights. And should conversion push through, SMC, not Cojuangco, Jr., becomes the owner of the reacquired sequestered CIIF SMC common shares. Should SMC opt, however, to sell said shares in the future, prospective buyers, including possibly Cojuangco, Jr., have to put up their own money to acquire said common shares. Thus, it is erroneous for intervenors to say that Cojuangco, Jr., with the use of SMC funds, will be acquiring the CIIF SMC common shares. It bears to stress that it was SMC which amended its articles of incorporation, reclassifying the existing composition of the authorized capital stock from PhP 4.5 billion common shares to PhP 3.39 billion common shares and PhP 1.11 billion Series 1 Preferred Shares. The conversion in question is a legitimate exercise of corporate powers under the Corporation Code. The shares in question will not be acquired with SMC funds but by reason of the reconfiguration of said shares to preferred shares. The Court can perhaps take judicial notice of the governments enunciated policy to reduce, if not eliminate, its exposure to business. The PCGG has held on to the sequestered shares for more than 20 years and this may be the opportune time to do away with its participation in SMC, especially considering the claim that the sequestration of the CIIF SMC common shares has frightened away investors and stunted growth of the company. The only interest of PCGG in SMC is to protect the CIIF SMC common shares from dissipation. PCGG is neither tasked to bar Cojuangco, Jr., or any individual for that matter, from securing domination of the SMC Board, nor avert Cojuangco, Jr.s acquisition of the CIIF SMC common shares once released from sequestration. Even if the conversion is approved, nothing can prevent the government from prosecuting the people whom intervenors tag as responsible for "greasing the government and the coconut farmers of billions of pesos." On the other hand, COCOFED does not stand to benefit from the conversion, because portions of the dividends or proceeds from the redemption cannot be allocated directly to proposed beneficiaries, as this will be contrary to Sec. 2 of 16 Presidential Decree No. (PD) 961, as amended by PD 1468. In addition, the preferred shares which will be placed in the names of the CIIF companies, or the dividends derived from said shares, shall remain as sequestered assets until final resolution of the ownership issue.
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Intervenors suggest a deferment of any action on the conversion until the CIIF SMC shares ownership issue is settled. The General Offer of conversion, originally expiring on August 24, 2009, was extended up to September 21, 2009. Availment of the conversion calls for immediate action. Almost all of the parties-in-interest COCOFED, UCPB as administrator of the CIIF, and respondent Republic through PCGGhave in one way or another signified their assent to the conversion. It has not successfully been demonstrated, however, how the alleged eventual ownership by Cojuangco, Jr. of the sequestered shares will prejudice the interests of respondent Republic in the preferred shares. It cannot likewise be figured out what distinct benefits the government will obtain if the common shares are converted to preferred shares or used in another manner after final resolution of the ownership issue. The indicated advantages of conversion, if accomplished now, will surely make up for the apprehensions arising from the possible domination by Cojuangco, Jr. of the SMC in the future. The primordial consideration is that the shares be shielded from dissipation and potential risks that may arise from uncertainty of market and business conditions. The conversion will ensure stable share value and enhanced earnings of the shares. Lest it be overlooked, the decision on whether to proceed with the conversion or defer action thereon until final adjudication of the issue of ownership over the sequestered shares properly pertains to the executive branch, represented by the PCGG. Just as it cannot look into the wisdom behind the enactment of a law, the Court cannot question the wisdom and reasons behind the decision of the executive branch to ask for the conversion of the common shares to preferred shares. Else, the Court would be trenching on the well-settled doctrine of separation of powers. The cardinal postulate explains that the three branches must discharge their respective functions within the limits of authority conferred by the Constitution. Under the principle of separation of powers, neither Congress, the President, nor the Judiciary may encroach on fields allocated to the other branches of government. The legislature is generally limited to the enactment of laws, the executive to the enforcement of laws, and the judiciary to 17 their interpretation and application to cases and controversies. Jurisprudence is well-established that the courts cannot intervene or interfere with executive or legislative discretion exercised within constitutional limits. In JG Summit 18 Holdings, Inc. v. Court of Appeals, the Court explained: The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the Government agencies x x x. The role of the Courts is to ascertain whether a branch or instrumentality of the Government has transgressed its constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it strays into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in contemplation of law, where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al., L-40867, 26 July 1988, 163 SCRA 489). (Emphasis supplied.) In Ledesma v. Court of Appeals,
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(1) Resolution of the UCPB Board of Directors approved during its July 20, 2009 special meeting, where it categorically decided and concluded that it is financially beneficial to convert the CIIF SMC shares as offered by the SMC. (2) Resolution No. 365-2009 of the UCPB Board of Directors issued on August 28, 2009 reiterating its position that the proposed conversion is financially beneficial, thus: WHEREAS, in its regular meeting on June 26, 2009, the UCPB Board of Directors instructed the UCPB-TBG to undertake a study on the financial and economic viability of the proposed SMC share conversion; WHEREAS, the UCPB Board of Directors in a special meeting on July 16, 2009 noted and referred to the PCGG and CIIF 14 Holding Companies for appropriate action UCPB-TBGs study on the financial and economic viability of the proposed SMC share conversion, which states that, "x x x it would be more advantageous to convert the CIIFs SMC common shares to the proposed SMC Series "1" Preferred Shares."; WHEREAS, during a special meeting on July 20, 2009 among the UCPB committee, PCGG and CIIF 14 Holding Companies, UCPBTBGs study on the financial and economic viability of the proposed SMC share conversion was affirmed and endorsed to the PCGG and CIIF 14 Holding Companies for appropriate action; WHEREAS, apart from the legal issues surrounding the CIIF SMC shares and considering the immediate concern to preserve the value of the said shares, taking into account the current global financial crisis and its effects on the Philippine financial situation, and as recommended by the UCPB-TBG, the proposed SMC share conversion is financially and economically advantageous; WHEREAS, in addition, given the dynamic market environment, when the shares are converted, the shareholders will no longer gain from any profits or suffer from any losses resulting from the change in business strategy of SMC, or from any change in the economic situation or market developments; BE IT RESOLVED, That, based on the facts and circumstances prevailing as of even date and the results of the study conducted by the UCPB-TBG, UCPB, as the administrator of the CIIF and in compliance with its mandate under PD 1468, concluded that it is financially beneficial to convert the CIIF SMC shares as offered by the San Miguel Corporation. (Emphasis supplied.) (3) The Department of Finance, through Secretary Margarito B. Teves, upon the recommendation of the Development Bank of the Philippines, confirmed
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the Court added:

x x x [A] court is without power to directly decide matters over which full discretionary authority has been delegated to the legislative or executive branch of the government. It is not empowered to substitute its judgment for that of Congress or of the President. It may, however, look into the question of whether such exercise has been made in grave abuse of discretion. In Francisco, Jr. v. UEM-MARA Philippines Corporation, co-equal status of the three branches of government:
20

the Court elucidated the

Considering the co-equal status of the three branches of government, courts may not tread into matters requiring the exercise of discretion of a functionary or office in the executive and legislative branches, unless it is clearly shown that the government official or office concerned abused his or its discretion. x x x Furthermore, "x x x courts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of administrative functions. This is so because such bodies are generally better equipped technically to decide administrative questions and that non-legal factors, such as government policy on the matter, are usually involved in the decisions." (Emphasis supplied.) Corollary to the principle of separation of powers is the doctrine of primary jurisdiction that the courts will DEFER to the decisions of the administrative offices and agencies by reason of their expertise and experience in the matters assigned to them. Administrative decisions on matters within the jurisdiction of administrative bodies are to be respected and can only be set aside on proof of grave abuse of discretion, 21 fraud, or error of law. The only instance when the Courts ought to interfere is when a department or an agency has acted with grave abuse of discretion or violated a law. A circumspect review of the pleadings and evidence extant on record shows that the PCGG approved the conversion only after it conducted an in-depth inquiry, thorough study, and judicious evaluation of the pros and cons of the proposed conversion. PCGG took into consideration the following:

that the CIIF SMC shares conversion is financially and economically advantageous and that it shall work for the best interest of the farmers who are the ultimate and beneficial owners of said shares. (4) The letter of the OSG dated July 30, 2009 opined that the proposed conversion is legally allowable as long as PCGG approval is obtained, thus: Parenthetically, x x x our Office received a copy of COCOFED, et al.s Urgent Motion To Approve the Conversion of the SMC Common Share Into SMC Series 1 Preferred Shares dated July 24, 2009. Attached therewith is the SMC Notice of Regular Meeting and Information Statement dated July 23, 2009 which discusses and compares the common shares and Series 1 preferred shares. As can be gleaned from the x x x Information Statement dated July 23, 2009, the advantages of conversion of the common shares to Series 1 preferred shares are as follows: 1. The Series 1 preferred shares shall be entitled to receive cash dividends upon declaration made at the sole option of the Board of Directors, fixed at 8% per annum as determined by Management. On the other hand, there is no fixed dividend rate for common shares. Further, no dividend shall be declared and paid to holders of common shares unless cash dividends shall have been declared and paid to all holders of the Series 1 preferred shares. Moreover, the Series 1 preferred shares are cumulative, which means that should dividend payments get delayed, it would eventually be paid in the future. This feature is not available for common shareholders. 2. The Series 1 preferred shares are redeemable in whole or in part, at the sole option of the Company (SMC), at the end of three (3) years from the Issue Date or on any Dividend Payment Date thereafter, at the price equal to the Issue Price plus any accumulated unpaid cash dividends. Series 1 preferred shares are also perpetual or have no stated maturity. 3. Should SMC decide not to redeem the Series 1 preferred shares at the end of the fifth year from Issue Date, the Dividend Rate will be adjusted to the higher of 8% per annum, and the prevailing 10-year Philippine Dealing System Treasury Fixing (PDST-F) Rate plus a spread of up to 300 basis points. This is an advantage because there is the opportunity for the Series 1 Preferred Shareholders to enjoy a higher dividend rate. 4. The Series 1 preferred shares have preference over common shares upon liquidation. 5. The Series 1 preferred shares shall be listed with the Philippine Stock Exchange within one year from issue date which should provide liquidity to the issue. On the other hand, the disadvantages to the conversion are as follows:

1. Holders of Series 1 preferred shares will have no voting rights except as provided by law. Thus, the PCGGs representatives in the SMC Board will have been effectively removed from participating in the management of the SMC. 2. Series 1 preferred shares have no maturing date as these are perpetual shares. There is no definite assurance that the SMC will exercise its option of redemption. 3. Holders of the Series 1 preferred shares shall not be entitled to any participation or share in the retained earnings remaining after dividend payment shall have been made on Series 1 preferred shares. 4. There is no expiry date on the SMCs option to redeem the Series 1 Preferred Shares. Should market interest rates fall below the Dividend Rate, on or after the 3rd anniversary from Issue Date, the SMC may exercise the option to redeem the Series 1 Preferred Shares. It is also our considered view that the conversion of the CIIF SMC common shares to SMC Series 1 preferred shares does not take them away from the jurisdiction of the courts. In conversion, the SMC common shares are merely reclassified into SMC Series 1 preferred shares without changing the proportional interest of the stockholder in San Miguel Corporation. Verily, the conversion of the SMC common shares to SMC Series 1 preferred shares does not involve a change in the condition of said shares. The conversion of the SMC common shares to SMC Series 1 preferred shares and its eventual redemption is legally allowable as long as the approval of the PCGG is obtained for the amendment of the Articles of Incorporation of SMC, to allow the creation of the proposed preferred share with its various features. As long as the PCGG approval is obtained, the exercise of the redemption feature of the SMC in accordance with the Amended Articles of Incorporation would not constitute a "sale" of the sequestered asset that is prohibited. Hence, on September 2, 2009, the PCGG issued Resolution No. 2009-037-756 approving the proposed conversion: WHEREAS, guided by the foregoing, the Commission interposes no objection to the conversion of the CIIF shares in SMC, as well as the PCGG ITF-CARP shares, including the qualifying shares issued to PCGG/government nominee-directors, to Series "1" Preferred shares. NOW, THEREFORE, be it RESOLVED, as it is hereby RESOLVED, that the Commission hereby APPROVES, as it is hereby APPROVED, the conversion of the CIIF owned common shares, as well as the PCGG ITF-CARP common shares, including the qualifying shares issued to PCGG/government nominee-directors in San Miguel Corporation (SMC), to Series "1" Preferred Shares, PURSUANT to the confirmation of the Department of Finance (DOF) and legal opinion of the Office of the Solicitor General (OSG), and SUBJECT to the conditions set forth in the said
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OSG opinion and requests of the OSG to seek the approval of the Honorable Supreme Court for the said proposed conversion. (Emphasis supplied.) The approval by the PCGG, for respondent Republic, of the conversion is a policy decision which cannot be interfered with in the absence of a showing or proof, as here, that PCGG committed grave abuse of discretion. In the similar Palm Avenue Realty Development Corporation v. PCGG, the Court ruled that the approval by PCGG of the sale of the sequestered shares of petitioner corporations allegedly owned and controlled by Kokoy Romualdez was legal and could not be the subject of a writ of certiorari or prohibition, absent proof that PCGG committed a grave abuse of discretion. The price of PhP 29 per share approved by the PCGG was even below the prevailing price of PhP 43 per share. The Court ratiocinated in that case, thus: It was no doubt in the light of these undeniable actualities, and in an attempt to discharge its responsibility to preserve the sequestered stock and put an end to its continuing and inexorable depreciation, that the PCGG performed the acts now subject of attack in the case at bar. Upon these facts and considerations, it cannot be said that the PCGG acted beyond the scope of the power conferred upon it by law. Indeed, it would appear that its acts were motivated and guided by the law creating it and prescribing its powers, functions, duties and responsibilities. Neither can it be said that it acted with grave abuse of discretion. It evidently considered and assessed the facts, the conflicting positions of the parties concerned, and the options open to it, before taking the course of action that it did. The possibility that it has erred cannot, to be sure, be completely eliminated. As above stated, it is entirely possible that a better bargain might have been struck with someone else. What cannot be denied is that the arrangement actually adopted and implemented has resulted in the satisfactory reconciliation of the conflicting facts in the case and the preservation of the stock for the benefit of the party that may finally be adjudged by competent court to be the owner thereof, and to a certain extent, to the advantage of numerous employees. The petitioners have failed to demonstrate that respondent PCGG has acted without or in excess of the authority granted to it by law, or with grave abuse of discretion, or that it had exercised judicial or quasi-judicial functions in this case, correctible by certiorari. The Court thus finds itself bereft of any justification to issue the prerogative writ of certiorari or prohibition that petitioners seek. (Emphasis supplied.) Salonga, et al. question the position of respondent Republic that the benefits derived from the conversion are clearly quantifiable. As they claim, the price differential of PhP 21 per share is only profit on paper and at the price of losing membership in the SMC Board. Moreover, they point out that the dividends to be distributed to the common shares may even be higher than the guaranteed 8% dividends. These contentions are specious. While it is conceded that the price differential of PhP 21 is an unrealized gain, the clear financial advantage derived from the transaction is not the price differential but the guaranteed 8% dividend per annum based on the issue price of PhP 75 per share as compared to a much lower dividend rate that
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common shares may earn. Worse, there may even be no dividends for the common shares after distribution of the dividends to the holders of the preferred shares in the event of poor or weak business performance. In addition, unless the Series 1 Preferred Shares are redeemed at the end of the fifth year from issue date, the dividend rate of 8% shall be increased based on the following formula: [T]he dividend rate shall be adjusted to the higher of (i) the Dividend Rate, and (ii) the prevailing 10-year PDST-F Rate (or such successor benchmark rate) as displayed under the heading "Bid Yield" as published on the PDEx Page (or such successor page) of Bloomberg (or such successor electronic service provider) at approximately 11:30 a.m. Manila time on the date corresponding to the end of the fifth year from the Issue Date (or if not available, the PDST-F Rate on the banking day prior to such date, or if still not available, the nearest preceding date on which the PDST-F Rate is available, but if such nearest preceding date is more than five days prior to the date corresponding to the end of the fifth year from the Issue Date, the Board of Directors at its reasonable discretion shall determine the appropriate substitute rate), plus a spread of up to 300 basis points, in either case calculated in respect of each share by 23 reference to the Issue Price. Undoubtedly, the holders of preferred shares will have distinct advantages over common shareholders. By relinquishing its voting rights in the SMC Board through the conversion, the government, it is argued, would be surrendering its final arsenal in combating the maneuverings to frustrate the recovery of ill-gotten wealth. It may, as feared, be rendered helpless in preventing an impending peril of a "lurking dissipation." This contention has no merit. The mere presence of four (4) PCGG nominated directors in the SMC Board does not mean it can prevent board actions that are viewed to fritter away the company assets. Even under the status quo, PCGG has no controlling sway in the SMC Board, let alone a veto power at 24% of the stockholdings. In relinquishing the voting rights, the government, through PCGG, is not in reality ceding control. Moreover, PCGG has ample powers to address alleged strategies to thwart recovery of ill-gotten wealth. Thus, the loss of voting rights has no significant effect on PCGGs function to recover ill-gotten wealth or prevent dissipation of sequestered assets. It is also not correct to say that the holders of the preferred shares lose all their voting rights. Sec. 6 of the Corporation Code provides for the situations where non-voting shares like preferred shares are granted voting rights, viz: Section 6. Classification of shares.The shares of stock in corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issues as "preferred" or "redeemable" shares, unless otherwise

provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. xxxx

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in this Code, and 3. In case of merger or consolidation.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporation property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; 6. Merger or consolidation of the corporation with another corporation or other corporations; 7. Investment of corporate funds in another corporation or business in accordance with this Code; and 8. Dissolution of the corporation. Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights. In addition, the holders of the preferred shares retain the right to dissent and demand payment of the fair value of their shares, to wit: Sec. 81. Instances of appraisal right.Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances: 1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

Lastly, the preferred shares will be placed under sequestration and management of PCGG. It has powers to protect and preserve the sequestered preferred shares even if there are no government-nominated directors in the SMC Board. Thus, the loss of four (4) board seats would not in reality prejudice the rights and interests of the holders of the preferred shares. And such loss is compensated by the tremendous financial gains and benefits and enormous protection from loss or deterioration of the value of the CIIF SMC shares. The advantages accorded to the preferred shares are undeniable, namely: the significant premium in the price being offered; the preference enjoyed in the dividends as well as in the liquidation of assets; and the voting rights still retained by preferred shares in major corporate actions. All things considered, conversion to preferred shares would best serve the interests and rights of the government or the eventual owner of the CIIF SMC shares. It is likewise postulated that the dividends distributed to the common shares may end up higher than 8% guaranteed to preferred shares. This assumption is speculative. With the huge investments SMC poured into several big ticket projects, it is unlikely that there will be much earnings left to be distributed to common shareholders. And to reiterate, the decision to convert is best left to the sound business discretion of the government agencies concerned. Salonga, et al. also argue that the proposed redemption is a right to buy the preferred shares at less than the market value. That the market value of the preferred shares may be higher than the issue price of PhP 75 per share at the time of redemption is possible. But then the opposite scenario is also possible. Again, the Court need not delve into policy decisions of government agencies because of their expertise and special knowledge of these matters. Suffice it to say that all indications show that SMC will redeem said preferred shares in the third year and not later because the dividend rate of 8% it has to pay on said shares is higher than the interest it will pay to the banks in case it simply obtains a loan. When market prices of shares are low, it is possible that interest rate on loans will likewise be low. On the other hand, if SMC has available cash, it would be prudent for it to use such cash to redeem the shares than place it in a regular bank deposit which will earn lower interests. It is plainly expensive and costly for SMC to keep on paying the 8% dividend rate annually in the hope that the market value of the shares will go up before it redeems the shares. Likewise, the conclusion that respondent Republic will suffer a loss corresponding to the difference between a high market value and the issue price does not take into account the dividends to be earned by the preferred shares for the three years prior to redemption. The guaranteed PhP 6 per share dividend multiplied by three years will amount to PhP 18. If one adds PhP 18 to the issue price of PhP 75, then the holders of the preferred shares will have actually attained a price of PhP 93 which hews closely to the speculative PhP 100 per share price indicated by movants-intervenors. In effect, there will not be much prejudice to respondent on the assumption that the speculative PhP 100 per share will be attained.
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On the issue of the net dividends accruing to COCOFED, the Court rules that the dividends shall be placed in escrow either at the Land Bank of the Philippines or at the Development Bank of the Philippines in the name of respondent Republic and not COCOFED. Salonga, et al. also contend that PCGG cannot pursue the exchange offer of SMC for want of power to exercise acts of strict dominion over the sequestered shares. This is incorrect. The Court, to be sure, has not barred the conversion of any sequestered common shares of a corporation into preferred shares. It may be argued that the conversion scheme under consideration may later on be treated as an indirect sale of the common shares from the registered owner to another person if and when SMC decides to redeem the Series 1 preferred shares on the third anniversary from the issue date of the preferred shares. Still, given the circumstances of the pending incident, the Court can validly allow the proposed conversion in accordance with Rule 57, Sec. 11, in relation to Rule 59, Sec. 6 of the Rules of Court. Sec. 11 reads: SEC. 11. When attached property may be sold after levy on attachment and before entry of judgment.Whenever it shall be made to appear to the court in which the action is pending, upon hearing with notice to both parties, that the property attached is perishable, or that the interests of all the parties to the action will be subserved by the sale thereof, the court may order such property to be sold at public auction in such manner as it may direct, and the proceeds of such sale to be deposited in court to abide the judgment in the action. (Emphasis supplied.) Republic v. Sandiganbayan teaches that sequestration is akin to preliminary attachment or receivership, thus: As thus described, sequestration, freezing and provisional takeover are akin to the provisional remedy of preliminary attachment, or receivership. x x x By attachment, a sheriff seizes property of a defendant in a civil suit so that it may stand as security for the satisfaction of any judgment that may be obtained, and not disposed of, or dissipated, or lost intentionally or otherwise, pending the action. x x x By receivership, property, real or personal, which is subject of litigation, is placed in the possession and control of a receiver appointed by the Court, who shall conserve it pending final determination of the title or right of possession over it. x x x All these remedies sequestration, freezing, provisional, takeover, attachment and receivership are provisional, temporary, designed for particular exigencies, attended by no character of permanency or finality, and always subject to the control of the issuing court or agency. (Emphasis supplied.) Even if the conversion-cum-redemption partakes of an indirect sale, PCGG can be allowed to approve the conversion in line with our ruling in Palm Avenue Realty 25 Development Corporation, subject to the approval of the Court. Evidently, as long as the interests of all the parties will be subserved by the sale of the sequestered properties, the Court may allow the properties to be sold. More so,
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the Rules would allow the mere conversion of the shares of stock given the evident benefit that all the parties would receive from such conversion that far outweighs any perceived disadvantage. Thus, the Court is clearly empowered to allow the conversion herein pressed by the PCGG. While the PCGG, as sequestrator, does not exercise acts of ownership over sequestered assets, the proper court, where the case involving the sequestered asset is pending, may, nevertheless, issue a positive and definite order authorizing the sale of said assets. As we held in Republic v. Sandiganbayan: Our temporary restraining order lifting the Sandiganbayan restraining order did not, by any stretch of the imagination, authorize PCGG to sell the Falcon aircraft. A definite and positive order of a court is needed before the jet plane may be sold. The proper procedure after the lifting of the restraining order was for PCGG to go to 26 Sandiganbayan and ask for formal authority to sell the aircraft. x x x The ruling in Republic v. Sandiganbayan voiding the sale by PCGG of a sequestered jet does not apply squarely to the incident at bar, because PCGG did not, in that case, seek court approval before the sale. Moreover, PCGG was not able to provide any justification for the seizure of the jet from the lessee. In the pending incident before the Court, it has long been settled that the CIIF SMC common shares were bought by what have been declared as prima facie public funds. Thus, the sequestration is justified. More importantly, respondent Republic, as contained in the Supplemental Comment filed by the OSG dated September 4, 2009, has adopted Resolution No. 2009-037-756 approving the conversion of the shares, and has prayed for the approval by the Court of such conversion. In sum, the conversion of the CIIF SMC Common Shares to Series 1 Preferred Shares should be approved in the best interests of everyone concerned including the government and the Filipino people.1avvphi1 Once the subject conversion is accomplished, the preferred shares shall remain in custodia legis and their ownership shall be subject to final ownership determination by the Court. In addition, the preferred shares shall be registered in the name of the CIIF companies until the final adjudication of the issue as to the true and legal owners of said shares. Unless and until the ownership issue shall have been resolved with finality, said preferred shares shall remain under sequestration and PCGG 27 management. WHEREFORE, the Court APPROVES the conversion of the 753,848,312 SMC Common Shares registered in the name of CIIF companies to SMC SERIES 1 PREFERRED SHARES of 753,848,312, the converted shares to be registered in the names of CIIF companies in accordance with the terms and conditions specified in the conversion offer set forth in SMCs Information Statement and appended as Annex "A" of COCOFEDs Urgent Motion to Approve the Conversion of the CIIF SMC Common Shares into SMC Series 1 Preferred Shares. The preferred shares shall remain in custodia legis and their ownership shall be subject to the final ownership determination of the Court. Until the ownership issue has been resolved, the preferred

shares in the name of the CIIF companies shall be placed under sequestration and PCGG management. The net dividend earnings and/or redemption proceeds from the Series 1 Preferred Shares shall be deposited in an escrow account with the Land Bank of the Philippines or the Development Bank of the Philippines. Respondent Republic, thru the PCGG, is hereby directed to cause the CIIF companies, including their respective directors, officers, employees, agents, and all other persons acting in their behalf, to perform such acts and execute such documents as required to effectuate the conversion of the common shares into SMC Series 1 Preferred Shares, within ten (10) days from receipt of this Resolution. Once the conversion is accomplished, the SMC Common Shares previously registered in the names of the CIIF companies shall be released from sequestration. SO ORDERED.

G.R. No. 166471 March 22, 2011 TAWANG MULTI-PURPOSE COOPERATIVE Petitioner, vs. LA TRINIDAD WATER DISTRICT, Respondent. DECISION CARPIO, J.: The Case This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition1 challenges the 1 October 2004 Judgment2 and 6 November 2004 Order3 of the Regional Trial Court (RTC), Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-CV-1878. The Facts Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the Cooperative Development Authority, and organized to provide domestic water services in Barangay Tawang, La Trinidad, Benguet. La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No. 198, as amended. It is authorized to supply water for domestic, industrial and commercial purposes within the municipality of La Trinidad, Benguet. On 9 October 2000, TMPC filed with the National Water Resources Board (NWRB) an application for a certificate of public convenience (CPC) to operate and maintain a waterworks system in Barangay Tawang. LTWD opposed TMPCs application. LTWD claimed that, under Section 47 of PD No. 198, as amended, its franchise is exclusive. Section 47 states that: Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for domestic, industrial or commercial water service within the district or any portion thereof unless and except to the extent that the board of directors of said district consents thereto by resolution duly adopted, such resolution, however, shall be subject to review by the Administration. In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPCs application for a CPC. In its 15 August 2002 Decision,4 the NWRB held that LTWDs franchise cannot be exclusive since exclusive franchises are unconstitutional and found that TMPC is legally and financially qualified to operate and maintain a waterworks system. NWRB stated that: With respect to LTWDs opposition, this Board observes that: 1. It is a substantial reproduction of its opposition to the application for water permits previously filed by this same CPC applicant, under WUC No. 98-17 and 98-62 which was decided upon by this Board on April 27, 2000. The issues being raised by Oppositor had been already resolved when this Board said in pertinent portions of its decision: "The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay Tawang is within their territorial jurisdiction, this does not mean that all others are excluded in engaging in such service, especially, if the district is not capable of supplying water within the area. This Board has time and again ruled that the "Exclusive Franchise" provision under P.D. 198 has misled most water districts to believe that it likewise extends to be [sic] the waters within their territorial boundaries. Such ideological
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adherence collides head on with the constitutional provision that "ALL WATERS AND NATURAL RESOURCES BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise, certificate or authorization for the operation of public [sic] shall be exclusive in character". xxxx All the foregoing premises all considered, and finding that Applicant is legally and financially qualified to operate and maintain a waterworks system; that the said operation shall redound to the benefit of the homeowners/residents of the subdivision, thereby, promoting public service in a proper and suitable manner, the instant application for a Certificate of Public Convenience is, hereby, GRANTED.5 LTWD filed a motion for reconsideration. In its 18 November 2002 Resolution,6 the NWRB denied the motion. LTWD appealed to the RTC. The RTCs Ruling In its 1 October 2004 Judgment, the RTC set aside the NWRBs 23 July 2002 Resolution and 15 August 2002 Decision and cancelled TMPCs CPC. The RTC held that Section 47 is valid. The RTC stated that: The Constitution uses the term "exclusive in character". To give effect to this provision, a reasonable, practical and logical interpretation should be adopted without disregard to the ultimate purpose of the Constitution. What is this ultimate purpose? It is for the state, through its authorized agencies or instrumentalities, to be able to keep and maintain ultimate control and supervision over the operation of public utilities. Essential part of this control and supervision is the authority to grant a franchise for the operation of a public utility to any person or entity, and to amend or repeal an existing franchise to serve the requirements of public interest. Thus, what is repugnant to the Constitution is a grant of franchise "exclusive in character" so as to preclude the State itself from granting a franchise to any other person or entity than the present grantee when public interest so requires. In other words, no franchise of whatever nature can preclude the State, through its duly authorized agencies or instrumentalities, from granting franchise to any person or entity, or to repeal or amend a franchise already granted. Consequently, the Constitution does not necessarily prohibit a franchise that is exclusive on its face, meaning, that the grantee shall be allowed to exercise this present right or privilege to the exclusion of all others. Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate authority of the State.7 TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied the motion. Hence, the present petition. Issue TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198, as amended, is valid. The Courts Ruling The petition is meritorious. What cannot be legally done directly cannot be done indirectly. This rule is basic and, to a reasonable mind, does not need explanation. Indeed, if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory. In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do directly, he cannot do indirectly."9 In Akbayan Citizens Action Party v. Aquino,10 quoting Agan, Jr. v. Philippine International Air Terminals Co., Inc.,11 the Court held that, "This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas,13 the Court held that, "No one is allowed to do indirectly what he is prohibited to do directly."14 The President, Congress and the Court cannot create directly franchises for the operation of a public utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly
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prohibit the creation of franchises that are exclusive in character. Section 8, Article XIII of the 1935 Constitution states that: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. (Empahsis supplied) Section 5, Article XIV of the 1973 Constitution states that: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. (Emphasis supplied) Section 11, Article XII of the 1987 Constitution states that: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. (Emphasis supplied) Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear franchises for the operation of a public utility cannot be exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly state that, "nor shall such franchise x x x be exclusive in character." There is no exception. When the law is clear, there is nothing for the courts to do but to apply it. The duty of the Court is to apply the law the way it is worded. In Security Bank and Trust Company v. Regional Trial Court of Makati, Branch 61,15 the Court held that: Basic is the rule of statutory construction that when the law is clear and unambiguous, the court is left with no alternative but to apply the same according to its clear language. As we have held in the case of Quijano v. Development Bank of the Philippines: "x x x We cannot see any room for interpretation or construction in the clear and unambiguous language of the above-quoted provision of law. This Court had steadfastly adhered to the doctrine that its first and fundamental duty is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible. No process of interpretation or construction need be resorted to where a provision of law peremptorily calls for application. Where a requirement or condition is made in explicit and unambiguous terms, no discretion is left to the judiciary. It must see to it that its mandate is obeyed."16 (Emphasis supplied) In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the Court held that, "The Constitution is quite emphatic that the operation of a public utility shall not be exclusive."18 In Pilipino Telephone Corporation v. National Telecommunications Commission,19 the Court held that, "Neither Congress nor the NTC can grant an exclusive franchise, certificate, or any other form of authorization to operate a public utility."20 In National Power Corp. v. Court of Appeals,21 the Court held that, "Exclusivity of any public franchise has not been favored by this Court such that in most, if not all, grants by the government to private corporations, the interpretation of rights, privileges or franchises is taken against the grantee."22 In Radio Communications of the Philippines, Inc. v. National Telecommunications Commission,23 the Court held that, "The Constitution mandates that a franchise cannot be exclusive in nature."24 Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in character. What the President, Congress and the Court cannot legally do directly they cannot do

indirectly. Thus, the President, Congress and the Court cannot create indirectly franchises that are exclusive in character by allowing the Board of Directors (BOD) of a water district and the Local Water Utilities Administration (LWUA) to create franchises that are exclusive in character. In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos) created indirectly franchises that are exclusive in character by allowing the BOD of LTWD and the LWUA to create directly franchises that are exclusive in character. Section 47 of PD No. 198, as amended, allows the BOD and the LWUA to create directly franchises that are exclusive in character. Section 47 states: Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for domestic, industrial or commercial water service within the district or any portion thereof unless and except to the extent that the board of directors of said district consents thereto by resolution duly adopted, such resolution, however, shall be subject to review by the Administration. (Emphasis supplied) In case of conflict between the Constitution and a statute, the Constitution always prevails because the Constitution is the basic law to which all other laws must conform to. The duty of the Court is to uphold the Constitution and to declare void all laws that do not conform to it. In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that if a law or an administrative rule violates any norm of the Constitution, that issuance is null and void and has no effect. The Constitution is the basic law to which all laws must conform; no act shall be valid if it conflicts with the Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution is the highest law of the land. It is the basic and paramount law to which all other laws must conform."28 In Atty. Macalintal v. Commission on Elections,29 the Court held that, "The Constitution is the fundamental and paramount law of the nation to which all other laws must conform and in accordance with which all private rights must be determined and all public authority administered. Laws that do not conform to the Constitution shall be stricken down for being unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance System,31 the Court held that: Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the constitution that law or contract whether promulgated by the legislative or by the executive branch or entered into by private persons for private purposes is null and void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and contract."32 (Emphasis supplied) To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation of franchises that are exclusive in character. They uniformly command that "nor shall such franchise x x x be exclusive in character." This constitutional prohibition is absolute and accepts no exception. On the other hand, PD No. 198, as amended, allows the BOD of LTWD and LWUA to create franchises that are exclusive in character. Section 47 states that, "No franchise shall be granted to any other person or agency x x x unless and except to the extent that the board of directors consents thereto x x x subject to review by the Administration." Section 47 creates a glaring exception to the absolute prohibition in the Constitution. Clearly, it is patently unconstitutional. Section 47 gives the BOD and the LWUA the authority to make an exception to the absolute prohibition in the Constitution. In short, the BOD and the LWUA are given the discretion to create franchises that are exclusive in character. The BOD and the LWUA are not even legislative bodies. The BOD is not a regulatory body but simply a management board of a water district. Indeed, neither the BOD nor the LWUA can be granted the power to create any exception to the absolute prohibition in the Constitution, a power that Congress itself cannot exercise. In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared Section 47 void. The Court held that: Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of CPCs for the reasons discussed above, the same provision must be deemed void ab initio for being irreconcilable with Article XIV, Section 5 of the 1973 Constitution which was ratified on January 17, 1973 the
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constitution in force when P.D. 198 was issued on May 25, 1973. Thus, Section 5 of Art. XIV of the 1973 Constitution reads: "SECTION 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Batasang Pambansa when the public interest so requires. The State shall encourage equity participation in public utiltities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof." This provision has been substantially reproduced in Article XII Section 11 of the 1987 Constitution, including the prohibition against exclusive franchises. xxxx Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, it is unconstitutional and may not, therefore, be relied upon by petitioner in support of its opposition against respondents application for CPC and the subsequent grant thereof by the NWRB. WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied) The dissenting opinion declares Section 47 valid and constitutional. In effect, the dissenting opinion holds that (1) President Marcos can create indirectly franchises that are exclusive in character; (2) the BOD can create directly franchises that are exclusive in character; (3) the LWUA can create directly franchises that are exclusive in character; and (4) the Court should allow the creation of franchises that are exclusive in character. Stated differently, the dissenting opinion holds that (1) President Marcos can violate indirectly the Constitution; (2) the BOD can violate directly the Constitution; (3) the LWUA can violate directly the Constitution; and (4) the Court should allow the violation of the Constitution. The dissenting opinion states that the BOD and the LWUA can create franchises that are exclusive in character "based on reasonable and legitimate grounds," and such creation "should not be construed as a violation of the constitutional mandate on the non-exclusivity of a franchise" because it "merely refers to regulation" which is part of "the governments inherent right to exercise police power in regulating public utilities" and that their violation of the Constitution "would carry with it the legal presumption that public officers regularly perform their official functions." The dissenting opinion states that: To begin with, a government agencys refusal to grant a franchise to another entity, based on reasonable and legitimate grounds, should not be construed as a violation of the constitutional mandate on the nonexclusivity of a franchise; this merely refers to regulation, which the Constitution does not prohibit. To say that a legal provision is unconstitutional simply because it enables a government instrumentality to determine the propriety of granting a franchise is contrary to the governments inherent right to exercise police power in regulating public utilities for the protection of the public and the utilities themselves. The refusal of the local water district or the LWUA to consent to the grant of other franchises would carry with it the legal presumption that public officers regularly perform their official functions. The dissenting opinion states two "reasonable and legitimate grounds" for the creation of exclusive franchise: (1) protection of "the governments investment,"35 and (2) avoidance of "a situation where ruinous competition could compromise the supply of public utilities in poor and remote areas."36 There is no "reasonable and legitimate" ground to violate the Constitution. The Constitution should never be violated by anyone. Right or wrong, the President, Congress, the Court, the BOD and the LWUA have no choice but to follow the Constitution. Any act, however noble its intentions, is void if it violates the Constitution. This rule is basic.

In Social Justice Society,37 the Court held that, "In the discharge of their defined functions, the three departments of government have no choice but to yield obedience to the commands of the Constitution. Whatever limits it imposes must be observed."38 In Sabio,39 the Court held that, "the Constitution is the highest law of the land. It is the basic and paramount law to which x x x all persons, including the highest officials of the land, must defer. No act shall be valid, however noble its intentions, if it conflicts with the Constitution."40 In Bengzon v. Drilon,41 the Court held that, "the three branches of government must discharge their respective functions within the limits of authority conferred by the Constitution."42 In Mutuc v. Commission on Elections,43 the Court held that, "The three departments of government in the discharge of the functions with which it is [sic] entrusted have no choice but to yield obedience to [the Constitutions] commands. Whatever limits it imposes must be observed."44 Police power does not include the power to violate the Constitution. Police power is the plenary power vested in Congress to make laws not repugnant to the Constitution. This rule is basic. In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,45 the Court held that, "Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable laws, statutes and ordinances, not repugnant to the Constitution."46 In Carlos Superdrug Corp. v. Department of Social Welfare and Development,47 the Court held that, police power "is the power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances x x x not repugnant to the constitution."48 In Metropolitan Manila Development Authority v. Garin,49 the Court held that, "police power, as an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances x x x not repugnant to the Constitution."50 There is no question that the effect of Section 47 is the creation of franchises that are exclusive in character. Section 47 expressly allows the BOD and the LWUA to create franchises that are exclusive in character. The dissenting opinion explains why the BOD and the LWUA should be allowed to create franchises that are exclusive in character to protect "the governments investment" and to avoid "a situation where ruinous competition could compromise the supply of public utilities in poor and remote areas." The dissenting opinion declares that these are "reasonable and legitimate grounds." The dissenting opinion also states that, "The refusal of the local water district or the LWUA to consent to the grant of other franchises would carry with it the legal presumption that public officers regularly perform their official functions." When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held that, "A statute may be declared unconstitutional because it is not within the legislative power to enact; or it creates or establishes methods or forms that infringe constitutional principles; or its purpose or effect violates the Constitution or its basic principles."52 The effect of Section 47 violates the Constitution, thus, it is void. In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the Court held that, "This Court must perform its duty to defend and uphold the Constitution."54 In Bengzon,55 the Court held that, "The Constitution expressly confers on the judiciary the power to maintain inviolate what it decrees."56 In Mutuc,57 the Court held that: The concept of the Constitution as the fundamental law, setting forth the criterion for the validity of any public act whether proceeding from the highest official or the lowest functionary, is a postulate of our system of government. That is to manifest fealty to the rule of law, with priority accorded to that which occupies the topmost rung in the legal hierarchy. The three departments of government in the discharge of the functions with which it is [sic] entrusted have no choice but to yield obedience to its commands. Whatever limits it imposes must be observed. Congress in the enactment of statutes must ever be on guard lest the restrictions on its authority, whether substantive or formal, be transcended. The Presidency in the execution of the laws cannot ignore or disregard what it ordains. In its task of applying the law to the facts as found in deciding cases, the judiciary is called upon to maintain inviolate what is
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decreed by the fundamental law. Even its power of judicial review to pass upon the validity of the acts of the coordinate branches in the course of adjudication is a logical corollary of this basic principle that the Constitution is paramount. It overrides any governmental measure that fails to live up to its mandates. Thereby there is a recognition of its being the supreme law.58 Sustaining the RTCs ruling would make a dangerous precedent. It will allow Congress to do indirectly what it cannot do directly. In order to circumvent the constitutional prohibition on franchises that are exclusive in character, all Congress has to do is to create a law allowing the BOD and the LWUA to create franchises that are exclusive in character, as in the present case. WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential Decree No. 198 UNCONSTITUTIONAL. We SET ASIDE the 1 October 2004 Judgment and 6 November 2004 Order of the Regional Trial Court, Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-CV1878 and REINSTATE the 23 July 2002 Resolution and 15 August 2002 Decision of the National Water Resources Board. SO ORDERED.

G.R. No. 177780 January 25, 2012 METROPOLITAN BANK & TRUST CO. (METROBANK), represented by ROSELLA A. SANTIAGO, Petitioner, vs. ANTONINO O. TOBIAS III, Respondent. DECISION BERSAMIN, J.: This appeal assails the adverse decision of the Court of Appeals (CA)1 that dismissed the petition for certiorari brought by the petitioner to nullify and set aside the resolutions issued by the Secretary of Justice on July 20, 20042 and November 18, 20053 directing the City Prosecutor of Malabon City to withdraw the information in Criminal Case No. 27020 entitled People v. Antonino O. Tobias III. We affirm the CA in keeping with the principle of non-interference with the prerogative of the Secretary of Justice to review the resolutions of the public prosecutor in the latters determination of the existence of probable cause, absent any showing that the Secretary of Justice thereby commits grave abuse of his discretion. Antecedents In 1997, Rosella A. Santiago, then the OIC-Branch Head of Metropolitan Bank & Trust Company (METROBANK) in Valero Street, Makati City, was introduced to respondent Antonino O. Tobias III (Tobias) by one Jose Eduardo Gonzales, a valued client of METROBANK. Subsequently, Tobias opened a savings/current account for and in the name of Adam Merchandising, his frozen meat business. Six months later, Tobias applied for a loan from METROBANK, which in due course conducted trade and credit verification of Tobias that resulted in negative findings. METROBANK next proceeded to appraise the property Tobias offered as collateral by asking him for a photocopy of the title and other related documents.4 The property consisted of four parcels of land located in Malabon City, Metro Manila with a total area of 6,080 square meters and covered by Transfer Certificate of Title (TCT) No. M-16751.5 Based on the financial statements submitted by Tobias, METROBANK approved a credit line for P40,000,000.00. On August 15, 1997, Joselito Bermeo Moreno, Lead Internal Affairs Investigator of METROBANK, proceeded to the Registry of Deeds of Malabon to cause the annotation of the deed of real estate mortgage on TCT No. M-16751. The annotation was Entry No. 26897.6 Thereafter, Tobias initially availed himself of P20,000,000, but took out the balance within six months.7 He paid the interest on the loan for about a year before defaulting. His loan was restructured to 5-years upon his request. Yet, after two months, he again defaulted. Thus, the mortgage was foreclosed, and the property was sold to METROBANK as the lone bidder.8 On June 11, 1999, the certificate of sale was issued in favor of METROBANK.9 When the certificate of sale was presented for registration to the Registry of Deeds of Malabon, no corresponding original copy of TCT No. M-16751 was found in the registry vault. Atty. Sarah PrincipeBido, Deputy Register of Deeds of Malabon, went on to verify TCT No. M-16751 and learned that Serial No. 4348590 appearing therein had been issued for TCT No. M-15363 in the name of one Alberto Cruz; while TCT No. 16751 (now TCT No. 390146) appeared to have been issued in the name of Eugenio S. Cruz and Co. for a parcel of land located in Navotas.10 Given such findings, METROBANK requested the Presidential Anti-Organized Crime Task Force (PAOCTF) to investigate.11 In its report dated May 29, 2000,12 PAOCTF concluded that TCT No. M16751 and the tax declarations submitted by Tobias were fictitious. PAOCTF recommended the filing against Tobias of a criminal complaint for estafa through falsification of public documents under paragraph 2 (a) of Article 315, in relation to Articles 172(1) and 171(7) of the Revised Penal Code.13 The Office of the City Prosecutor of Malabon ultimately charged Tobias with estafa through falsification of public documents through the following information,14 viz: xxx
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That on or about the 15th day of August, 1997 in the Municipality of Malabon, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, by means of deceit, false pretense, fraudulent acts and misrepresentation executed prior to or simultaneous with the commission of fraud, represented to METROBANK, as represented by MS. ROSELLA S. SANTIAGO, that he is the registered owner of a parcel of land covered by TCT No. M-16751 which he represented to be true and genuine when he knew the Certificate of Title No. M-16751 is fake and spurious and executed a Real Estate Mortgage in favor of Metrobank and offered the same as collateral for a loan and Rosella S. Santiago relying on said misrepresentation gave to accused, the amount of P20,000,000.00 and once in possession of the amount, with intent to defraud, willfully, unlawfully and feloniously failed to deliver the land covered by spurious title and misappropriate, misapply and converted the said amount of P20,000,000.00 to his own personal use and benefit and despite repeated demands accused failed and refused and still fails and refuses to return the amount to complainant METROBANK, and/or delivered the land covered in the spurious title in the aforementioned amount of P20,000,000.00. CONTRARY TO LAW.15 Tobias filed a motion for re-investigation,16 which was granted. In his counter-affidavit submitted during the re-investigation,17 Tobias averred that he had bought the property from one Leonardo Fajardo through real estate brokers Augusto Munsuyac and Carmelito Pilapil; that Natalio Bartolome, his financial consultant from Carwin International, had convinced him to purchase the property due to its being an ideal site for his meat processing plant and cold storage business; that the actual inspection of the property as well as the verification made in the Registry of Deeds of Malabon City had ascertained the veracity of TCT No. 106083 under the name of Leonardo Fajardo; that he had applied for the loan from METROBANK to pay the purchase price by offering the property as collateral; that in order for the final application to be processed and the loan proceeds to be released, METROBANK had advised him to have the title first transferred to his name; that he had executed a deed of absolute sale with Fajardo covering the property, and that said instrument had been properly registered in the Registry of Deeds; that the transfer of the title, being under the account of the seller, had been processed by seller Fajardo and his brokers Munsuyac and Pilapil; that his title and the property had been inspected and verified by METROBANKs personnel; and that he did not have any intention to defraud METROBANK. Nonetheless, on December 27, 2002, the City Prosecutor of Malabon still found probable cause against Tobias, and recommended his being charged with estafa through falsification of public document.18 Tobias appealed to the Department of Justice (DOJ). On July 20, 2004, then Acting Secretary of Justice Ma. Merceditas N. Gutierrez issued a resolution directing the withdrawal of the information filed against Tobias,19 to wit: WHEREFORE, the assailed resolution is hereby REVERSED and SET ASIDE. The City Prosecutor of Malabon City is directed to cause the withdrawal of the Information in Crim. Case No. 27020 against respondent Antonino O. Tobias III, and report the action taken thereon within ten (10) days from receipt hereof. SO ORDERED. Acting Secretary of Justice Gutierrez opined that Tobias had sufficiently established his good faith in purchasing the property; that he had even used part of the proceeds of the loan to pay the seller; that it was METROBANK that had caused the annotation of the mortgage on the TCT, thereby creating an impression that the title had been existing in the Registry of Deeds at that time; that, accordingly, the presumption that the possessor of a falsified document was the author of the falsification did not apply because it was always subject to the qualification or reference as to the approximate time of the commission of the falsification. METROBANK moved to reconsider,20 arguing that Tobias had employed deceit or false pretense in offering the property as collateral by using a fake title; and that the presumption that the possessor of the

document was the author of the falsification applied because no other person could have falsified the TCT and would have benefitted therefrom except Tobias himself. On November 18, 2005, Secretary of Justice Raul M. Gonzalez denied METROBANKs motion for reconsideration.21 Ruling of the CA METROBANK challenged the adverse resolutions through certiorari. On December 29, 2006, the CA promulgated its decision,22 dismissing METROBANKs petition for certiorari by holding that the presumption of authorship might be disputed through a satisfactory explanation, viz: We are not unaware of the established presumption and rule that when it is proved that a person has in his possession a falsified document and makes use of the same, the presumption or inference is that such person is the forger (Serrano vs. Court of Appeals, 404 SCRA 639, 651 [2003]), citing Koh Tieck Heng vs. People, 192 SCRA 533, 546-547 [1990]). Yet, the Supreme Court declared that in the absence of satisfactory explanation, one who is found in possession of a forged document and who used it is presumed to be the forger (citing People vs. Sendaydiego, 81 SCRA 120, 141 [1978]). Very clearly then, a satisfactory explanation could render ineffective the presumption which, after all, is merely a disputable one. It is in this score that We affirm the resolution of the Department of Justice finding no probable cause against private respondent Tobias for estafa thru falsification of public document. The record speaks well of Tobias good faith and lack of criminal intention and liability. Consider: (a) Tobias has in his favor a similar presumption that good faith is always presumed. Therefore, he who claims bad faith must prove it (Prinsipio vs. The Honorable Oscar Barrientos, G.R. 167025, December 19, 2005). No such evidence of bad faith of Tobias appears on record; (b) Tobias actuation in securing the loan belies any criminal intent on his part to deceive petitioner Bank. He was not in a hurry to obtain the loan. He had to undergo the usual process of the investigative arm or machine of the Bank not only on the location and the physical appearance of the property but likewise the veracity of its title. Out of the approved P40,000,000.00 loan he only availed of P20,000,000.00, for his frozen meat business which upon investigation of the Bank failed to give negative results; (c) Tobias paid the necessary interests for one (1) year on the loan and two (2) installments on the restructured loan; and (d) More importantly, the loan was not released to him until after the mortgage was duly registered with the Registry of Deeds of Malabon City and even paid the amount of P90,000.00 for the registration fees therefor. These actuations, for sure, can only foretell that Tobias has the least intention to deceive the Bank in obtaining the loan. It may not be surprising to find that Tobias could even be a victim himself by another person in purchasing the properties he offered as security for the loan.23 The CA stressed that the determination of probable cause was an executive function within the discretion of the public prosecutor and, ultimately, of the Secretary of Justice, and the courts of law could not interfere with such determination;24 that the private complainant in a criminal action was only concerned with its civil aspect; that should the State choose not to file the criminal action, the private complainant might initiate a civil action based on Article 35 of the Civil Code, to wit: In the eventuality that the Secretary of Justice refuses to file the criminal complaint, the complainant, whose only interest is the civil aspect of the case and not the criminal aspect thereof, is not left without a remedy. In Vda. De Jacob vs. Puno, 131 SCRA 144, 149 [1984], the Supreme Court has this for an answer:
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"The remedy of complainant in a case where the Minister of Justice would not allow the filing of a criminal complaint against an accused because it is his opinion that the evidence is not sufficient to sustain an information for the complaint with which the respondents are charged of, is to file a civil action as indicated in Article 35 of the Civil Code, which provides: Art. 35. When a person, claiming to be injured by a criminal offense, charges another with the same, for which no independent civil action is granted in this Code or any special law, but the justice of the peace finds no reasonable grounds to believe that a crime has been committed, or the prosecuting attorney refuses or fails to institute criminal proceedings, the complainant may bring a civil action for damages against the alleged offender. Such civil action may be supported by a preponderance of evidence. Upon the defendants motion, the court may require the plaintiff to file a bond to indemnify the defendant in case the complainant should be found to be malicious. If during the pendency of the civil action, an information should be presented by the prosecuting attorney, the civil action shall be suspended until the termination of the criminal proceedings."25 METROBANK sought reconsideration, but the CA denied its motion for that purpose, emphasizing that the presumption that METROBANK firmly relied upon was overcome by Tobias sufficiently establishing his good faith and lack of criminal intent. The CA relevantly held: Petitioner should be minded that the subject presumption that the possessor and user of a forged or falsified document is presumed to be the falsifier or forger is a mere disputable presumption and not a conclusive one. Under the law on evidence, presumptions are divided into two (2) classes: conclusive and rebuttable. Conclusive or absolute presumptions are rules determining the quantity of evidence requisite for the support of any particular averment which is not permitted to be overcome by any proof that the fact is otherwise, if the basis facts are established (1 Greenleaf, Ev 44; 29 Am Jur 2d, Evidence 164; 1 Jones on Evidence 6 ed, page 132). Upon the other hand, a disputable presumption has been defined as species of evidence that may be accepted and acted on when there is no other evidence to uphold the contention for which it stands, or one which may be overcome by other evidence (31A C.J.S., p. 197; People v. de Guzman, G.R. No. 106025, Feb. 9, 1994; Herrera, Remedial Law, Vol. VI, 1999 Edition, pp. 40-41). In fact, Section 3 of Rule 131 provides that the disputable presumptions therein enumerated are satisfactory if uncontradicted but may be contradicted and overcome by other evidence. Thus, as declared in Our decision in this case, private respondent had shown evidence of good faith and lack of criminal intention and liability that can overthrow the controversial disputable presumption.26 Issue In this appeal, METROBANK raises the lone issue of WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE PROBABLY NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT AND THUS, COMMITTED PATENT ERROR IN RENDERING THE ASSAILED DECISION DATED 29 DECEMBER 2006, DISMISSING METROBANKS PETITION FOR CERTIORARI AND AFFIRMING THE RESOLUTIONS DATED 20 JULY 2004 AND 18 NOVEMBER 2005 OF THE HON. SECRETARY OF JUDTICE AND IN DENYING METROBANKS MOTION FOR RECONSIDERATION. METROBANK submits that the presumption of authorship was sufficient to establish probable cause to hold Tobias for trial; that the presumption applies when a person is found in possession of the forged instrument, makes use of it, and benefits from it; that contrary to the ruling of the CA, there is no requirement that the legal presumption shall only apply in the absence of a valid explanation from the person found to have possessed, used and benefited from the forged document; that the CA erred in declaring that Tobias was in good faith, because good faith was merely evidentiary and best raised in the trial on the merits; and that Tobias was heavily involved in a modus operandi of using fake titles because he was also being tried for a similar crime in the RTC, Branch 133, in Makati City.

METROBANK maintains that what the Secretary of Justice did was to determine the innocence of the accused, which should not be done during the preliminary investigation; and that the CA disregarded such lapse. On the other hand, Tobias posits that the core function of the Department of Justice is to prosecute the guilty in criminal cases, not to persecute; that although the prosecutors are given latitude to determine the existence of probable cause, the review power of the Secretary of Justice prevents overzealous prosecutors from persecuting the innocent; that in reversing the resolution of Malabon City Assistant Prosecutor Ojer Pacis, the Secretary of Justice only acted within his authority; that, indeed, the Secretary of Justice was correct in finding that there was lack of evidence to prove that the purported fake title was the very cause that had induced the petitioner to grant the loan; and that the Secretary likewise appropriately found that Tobias dealt with the petitioner in good faith because of lack of proof that he had employed fraud and deceit in securing the loan. Lastly, Tobias argues that the presumption of forgery could not be applied in his case because it was METROBANK, through a representative, who had annotated the real estate mortgage with the Registry of Deeds; and that he had no access to and contact with the Registry of Deeds, and whatever went wrong after the annotation was beyond his control. Ruling The appeal has no merit. Under the doctrine of separation of powers, the courts have no right to directly decide matters over which full discretionary authority has been delegated to the Executive Branch of the Government,27 or to substitute their own judgments for that of the Executive Branch,28 represented in this case by the Department of Justice. The settled policy is that the courts will not interfere with the executive determination of probable cause for the purpose of filing an information, in the absence of grave abuse of discretion.29 That abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act at all in contemplation of law, such as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.30 For instance, in Balanganan v. Court of Appeals, Special Nineteenth Division, Cebu City,31 the Court ruled that the Secretary of Justice exceeded his jurisdiction when he required "hard facts and solid evidence" in order to hold the defendant liable for criminal prosecution when such requirement should have been left to the court after the conduct of a trial. In this regard, we stress that a preliminary investigation for the purpose of determining the existence of probable cause is not part of a trial.32 At a preliminary investigation, the investigating prosecutor or the Secretary of Justice only determines whether the act or omission complained of constitutes the offense charged.33 Probable cause refers to facts and circumstances that engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof.34 There is no definitive standard by which probable cause is determined except to consider the attendant conditions; the existence of probable cause depends upon the finding of the public prosecutor conducting the examination, who is called upon not to disregard the facts presented, and to ensure that his finding should not run counter to the clear dictates of reason.35 Tobias was charged with estafa through falsification of public document the elements of which are: (a) the accused uses a fictitious name, or falsely pretends to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or employs other similar deceits; (b) such false pretense, fraudulent act or fraudulent means must be made or executed prior to or simultaneously with the commission of the fraud; (c) the offended party must have relied on the false pretense, fraudulent act or fraudulent means, that is, he was induced to part with his money or property because of the false pretense, fraudulent act or fraudulent means; and (d) as a result thereof, the offended party suffered damage.36 It is required that the false statement or fraudulent representation constitutes the very cause or the only motive that induced the complainant to part with the thing.37

METROBANK urges the application of the presumption of authorship against Tobias based on his having offered the duplicate copy of the spurious title to secure the loan; and posits that there is no requirement that the presumption shall apply only when there is absence of a valid explanation from the person found to have possessed, used and benefited from the forged document. We cannot sustain METROBANKs urging. Firstly, a presumption affects the burden of proof that is normally lodged in the State.38 The effect is to create the need of presenting evidence to overcome the prima facie case that shall prevail in the absence of proof to the contrary.39 As such, a presumption of law is material during the actual trial of the criminal case where in the establishment thereof the party against whom the inference is made should adduce evidence to rebut the presumption and demolish the prima facie case.40 This is not so in a preliminary investigation, where the investigating prosecutor only determines the existence of a prima facie case that warrants the prosecution of a criminal case in court.41 Secondly, the presumption of authorship, being disputable, may be accepted and acted upon where no evidence upholds the contention for which it stands.42 It is not correct to say, consequently, that the investigating prosecutor will try to determine the existence of the presumption during preliminary investigation, and then to disregard the evidence offered by the respondent. The fact that the finding of probable cause during a preliminary investigation is an executive function does not excuse the investigating prosecutor or the Secretary of Justice from discharging the duty to weigh the evidence submitted by the parties. Towards that end, the investigating prosecutor, and, ultimately, the Secretary of Justice have ample discretion to determine the existence of probable cause,43 a discretion that must be used to file only a criminal charge that the evidence and inferences can properly warrant. The presumption that whoever possesses or uses a spurious document is its forger applies only in the absence of a satisfactory explanation.44 Accordingly, we cannot hold that the Secretary of Justice erred in dismissing the information in the face of the controverting explanation by Tobias showing how he came to possess the spurious document. Much less can we consider the dismissal as done with abuse of discretion, least of all grave. We concur with the erudite exposition of the CA on the matter, to wit: It would seem that under the above proposition of the petitioner, the moment a person has in his possession a falsified document and has made use of it, probable cause or prima facie is already established and that no amount of satisfactory explanation will prevent the filing of the case in court by the investigating officer, for any such good explanation or defense can only be threshed out in the trial on the merit. We are not to be persuaded. To give meaning to such argumentation will surely defeat the very purpose for which preliminary investigation is required in this jurisdiction.1avvphi1 A preliminary investigation is designed to secure the respondent involved against hasty, malicious and oppressive prosecution. A preliminary investigation is an inquiry to determine whether (a) a crime has been committed, and (b) whether there is probable cause to believe that the accused is guilty thereof (De Ocampo vs. Secretary of Justice, 480 SCRA 71 [2006]). It is a means of discovering the person or persons who may be reasonably charged with a crime (Preferred Home Specialties, Inc. vs. Court of Appeals, 478 SCRA 387, 410 [2005]). Prescindingly, under Section 3 of Rule 112 of the Rules of Criminal Procedure, the respondent must be informed of the accusation against him and shall have the right to examine the evidence against him and submit his counter-affidavit to disprove criminal liability. By far, respondent in a criminal preliminary investigation is legally entitled to explain his side of the accusation. We are not unaware of the established presumption and rule that when it is proved that a person has in his possession a falsified document and makes use of the same the presumption or inference is that such person is the forger (Serrano vs. Court of Appeals, 404 SCRA 639, 651 [2003]), citing Koh Tieck Heng vs. People, 192 SCRA 533, 546-547 [1990]). Yet, the Supreme Court declared that in the absence of satisfactory explanation, one who is found in possession of a forged document and who used it is presumed to be the forger (citing People vs. Sendaydiego, 81 SCRA 120, 141 [1978]). Very clearly then, a satisfactory explanation could render ineffective the presumption which, after all, is merely a disputable one.45
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We do not lose sight of the fact that METROBANK, a commercial bank dealing in real property, had the duty to observe due diligence to ascertain the existence and condition of the realty as well as the validity and integrity of the documents bearing on the realty.46 Its duty included the responsibility of dispatching its competent and experience representatives to the realty to assess its actual location and condition, and of investigating who was its real owner.47 Yet, it is evident that METROBANK did not diligently perform a thorough check on Tobias and the circumstances surrounding the realty he had offered as collateral. As such, it had no one to blame but itself. Verily, banks are expected to exercise greater care and prudence than others in their dealings because their business is impressed with public interest. 48 Their failure to do so constitutes negligence on its part.49 WHEREFORE, the Court DENIES the petition for review on certiorari, and AFFIRMS the decision of the Court of Appeals promulgated on December 29, 2006. The petitioner shall pay the costs of suit. SO ORDERED.

G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner, LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION, Petitioners-in-Intervention, vs. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents. DECISION VELASCO, JR., J.: "Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not resistance, even if only the number of agrarian suits filed serves to be the norm. Through the years, this battle cry and root of discord continues to reflect the seemingly ceaseless discourse on, and great disparity in, the distribution of land among the people, "dramatizing the increasingly urgent demand of the dispossessed x x x for a plot of earth as their place in the sun."2 As administrations and political alignments change, policies advanced, and agrarian reform laws enacted, the latest being what is considered a comprehensive piece, the face of land reform varies and is masked in myriads of ways. The stated goal, however, remains the same: clear the way for the true freedom of the farmer.3 Land reform, or the broader term "agrarian reform," has been a government policy even before the Commonwealth era. In fact, at the onset of the American regime, initial steps toward land reform were already taken to address social unrest.4 Then, under the 1935 Constitution, specific provisions on social justice and expropriation of landed estates for distribution to tenants as a solution to land ownership and tenancy issues were incorporated. In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation of all tenanted estates.5 On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted,6 abolishing share tenancy and converting all instances of share tenancy into leasehold tenancy.7 RA 3844 created the Land Bank of the Philippines (LBP) to provide support in all phases of agrarian reform. As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly to be accomplished by expropriating lands in excess of 75 hectares for their eventual resale to tenants. The law, however, had this restricting feature: its operations were confined mainly to areas in Central Luzon, and its implementation at any level of intensity limited to the pilot project in Nueva Ecija.8 Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform area, and providing for the automatic conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit was cut down to seven hectares.9 Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the "emancipation of the tiller from the bondage of the soil."10 Based on this issuance, tenant-farmers, depending on the size of the landholding worked on, can either purchase the land they tilled or shift from share to fixed-rent leasehold tenancy.11 While touted as "revolutionary," the scope of the agrarian reform program PD 27 enunciated covered only tenanted, privately-owned rice and corn lands.12 Then came the revolutionary government of then President Corazon C. Aquino and the drafting and eventual ratification of the 1987 Constitution. Its provisions foreshadowed the establishment of a legal framework for the formulation of an expansive approach to land reform, affecting all agricultural lands and covering both tenant-farmers and regular farmworkers.13 So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian reform program (CARP) to cover all agricultural lands, regardless of tenurial arrangement and commodity produced, as provided in the Constitution.
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On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title14 indicates, the mechanisms for CARP implementation. It created the Presidential Agrarian Reform Council (PARC) as the highest policy-making body that formulates all policies, rules, and regulations necessary for the implementation of CARP. On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the CARP Law, took effect, ushering in a new process of land classification, acquisition, and distribution. As to be expected, RA 6657 met stiff opposition, its validity or some of its provisions challenged at every possible turn. Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the observation that the assault was inevitable, the CARP being an untried and untested project, "an experiment [even], as all life is an experiment," the Court said, borrowing from Justice Holmes. The Case In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).18 The Facts At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-industrial-residential expanse straddling several municipalities of Tarlac and owned by Compaia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US dollars.19 To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US bank.20 Also, the Government Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale. One of the conditions contained in the approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as follows: That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants, should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act;21 As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and Tabacaleras interest in CAT.22 The details of the events that happened next involving the hacienda and the political color some of the parties embossed are of minimal significance to this narration and need no belaboring. Suffice it to state that on May 7, 1980, the martial law administration filed a suit before the Manila Regional Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which sugar landsof which the hacienda consistedare not covered by existing agrarian reform legislations. As perceived then, the government commenced the case against Tadeco as a political message to the family of the late Benigno Aquino, Jr.23 Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of Appeals (CA).

On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the governments case against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al. The dismissal action was, however, made subject to the obtention by Tadeco of the PARCs approval of a stock distribution plan (SDP) that must initially be implemented after such approval shall have been secured.24 The appellate court wrote: The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies concerned in moving for the dismissal of the case subject, however, to the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows: 1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements for corporate landowners set forth in the guidelines issued by the [PARC]: or 2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it. xxxx WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as above set forth is not duly complied with by the TADECO.25 Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land transfer scheme of CARP, to give qualified beneficiaries the right to purchase shares of stocks of the corporation under a stock ownership arrangement and/or land-to-share ratio. Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2) alternative modalities, i.e., land or stock transfer, pursuant to either of which the corporate landowner can comply with CARP, but subject to well-defined conditions and timeline requirements. Sec. 31 of RA 6657 provides: SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x. Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: (a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; (c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the
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same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Emphasis added.) Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of RA 6657. From the start, the stock distribution scheme appeared to be Tadecos preferred option, for, on August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock.29 Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI.30 To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commissions (SECs) approval, increased its capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be issued only to qualified and registered beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the corporation.31 As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share.32 On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs34 and attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of the SDP, which would eventually be submitted to the PARC for approval. In the SDOA, the parties agreed to the following: 1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares. 2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY. 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY [Tadeco] the acquisition and distribution to the THIRD PARTY on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY. 4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will receive on top of their regular compensation, an amount that approximates the equivalent of three (3%) of the total gross sales from the production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both.
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5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in stockholders and board of directors meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to. 6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge among the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not more than 240 sq.m. each, with each family-beneficiary being assured of receiving and owning a homelot in the barangay where it actually resides on the date of the execution of this Agreement. 7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the supervision of the [DAR], with the end in view of improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them greater benefits. (Emphasis added.) As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing equivalent to three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to family-beneficiaries. The production-sharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the nature of dividends, as the term is ordinarily understood under corporation law. While a little bit hard to follow, given that, during the period material, the assigned value of the agricultural land in the hacienda was PhP 196.63 million, while the total assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the HLI equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share. Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under C.A.R.P.,"35 which was substantially based on the SDOA. Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI.36 One hundred thirty-two (132) chose actual land distribution.37 After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised, along the following lines: 1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in the shares of stocks of individual [FWBs]; 2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time; 3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the implementation of the stock plan; 4. That the stock distribution plan provide for clear and definite terms for determining the actual number of seats to be allocated for the [FWBs] in the HLI Board;

5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs]; and 6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA. In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed revisions of the SDP are already embodied in both the SDP and MOA.39 Following that exchange, the PARC, under then Sec. Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP of Tadeco/HLI.41 At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed of permanent, seasonal and casual master list/payroll and non-master list members. From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs: (a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits (b) 59 million shares of stock distributed for free to the FWBs; (c) 150 million pesos (P150,000,000) representing 3% of the gross produce; (d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural land of Hacienda Luisita; (e) 240-square meter homelots distributed for free; (f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos (P80,000,000) for the SCTEX; (g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old age/death benefits and no interest bearing salary/educational loans and rice sugar accounts. 42 Two separate groups subsequently contested this claim of HLI. On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657, providing: SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorize the reclassification, or conversion of the land and its disposition: Provided, That the beneficiary shall have fully paid its obligation. The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and which was submitted to the DAR.44 After the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the application on August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series of 1996,45 subject to payment of three percent (3%) of the gross selling price to the FWBs and to HLIs continued compliance with its undertakings under the SDP, among other conditions. On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title (TCT) No. 28791047 was canceled and TCT No. 29209148 was issued in the name of Centennary. HLI transferred the remaining 200 hectares covered by TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each.50 Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000 shares and wholly-owned by HLI, had the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R. Lahoz.
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Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the purpose of developing an industrial complex.52 As a result, Centennarys TCT No. 292091 was canceled to be replaced by TCT No. 31098653 in the name of LIPCO. From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were issued in the name of LIPCO, specifically: (a) TCT No. 365800 54 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively. TCT No. 310986 was, accordingly, partially canceled. Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC. Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of Hacienda Luisita which had been acquired by the government as part of the Subic-ClarkTarlac Expressway (SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI.56 Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the latter part of 2003. In the first, denominated as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya, identifying themselves as head of the Supervisory Group of HLI (Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had failed to give them their dividends and the one percent (1%) share in gross sales, as well as the thirty-three percent (33%) share in the proceeds of the sale of the converted 500 hectares of land. They further claimed that their lives have not improved contrary to the promise and rationale for the adoption of the SDOA. They also cited violations by HLI of the SDOAs terms.58 They prayed for a renegotiation of the SDOA, or, in the alternative, its revocation. Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second petition, styled as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALAs members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita. HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand, HLIs answer62 to the AMBALA petition was contained in its letter dated January 21, 2005 also filed with DAR. Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other duties, the Special Task Force was mandated to review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance reports; evaluate the merits of the petitions for the revocation of the SDP; conduct ocular inspections or field investigations; and recommend appropriate remedial measures for approval of the Secretary.63 After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not complied with its obligations under RA 6657 despite the implementation of the SDP.65 The Terminal Report and the Special Task Forces recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66 Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of Hacienda Luisita through the compulsory acquisition scheme. Following review, the PARC Validation Committee favorably endorsed the DAR Secretarys recommendation afore-stated.67 On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:

NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation Committee affirming the recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated. RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the compulsory coverage or mandated land acquisition scheme of the [CARP]. APPROVED.68 A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the documents adverted to in the resolution attached. A letter-request dated December 28, 200569 for certified copies of said documents was sent to, but was not acted upon by, the PARC secretariat. Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day, the DAR Tarlac provincial office issued the Notice of Coverage71 which HLI received on January 4, 2006. Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DARs hasty placing of Hacienda Luisita under CARP even before PARC could rule or even read the motion for reconsideration.72 As HLI later rued, it "can not know from the above-quoted resolution the facts and the law upon which it is based."73 PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006. By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a temporary restraining order,75 enjoining the implementation of Resolution No. 2005-32-01 and the notice of coverage. On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment76 on the petition. On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with Comment Attached dated December 4, 2006 (Manifestation and Motion).77 In it, Mallari stated that he has broken away from AMBALA with other AMBALA ex-members and formed Farmworkers Agrarian Reform Movement, Inc. (FARM).78 Should this shift in alliance deny him standing, Mallari also prayed that FARM be allowed to intervene. As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be intervenors Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al. as the remaining members of FARM who sought to intervene. On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted their Comment/Opposition dated December 17, 2006.80 On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO later followed with a similar motion.82 In both motions, RCBC and LIPCO contended that the assailed resolution effectively nullified the TCTs under their respective names as the properties covered in the TCTs were veritably included in the January 2, 2006 notice of coverage. In the main, they claimed that the revocation of the SDP cannot legally affect their rights as innocent purchasers for value. Both motions for leave to intervene were granted and the corresponding petitions-in-intervention admitted. On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the Court, on August 24, 2010, heard public respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27 members83 argue their case. Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by Suniga and Andaya; and the United Luisita Workers Union, represented by Eldifonso
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Pingol, filed with the Court a joint submission and motion for approval of a Compromise Agreement (English and Tagalog versions) dated August 6, 2010. On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a Resolution84 creating a Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices Hector Hofilea and Teresita Dy-Liacco Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted. Despite persevering and painstaking efforts on the part of the panel, mediation had to be discontinued when no acceptable agreement could be reached. The Issues HLI raises the following issues for our consideration: I. WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA. II. [IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA? III. WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID PETITIONS. IV. WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x x. On the other hand, RCBC submits the following issues: I. RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE. A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-INTERVENOR RCBC. B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.

II. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN INNOCENT PURCHASER FOR VALUE. LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the converted property, and, hence, would ascribe on PARC the commission of grave abuse of discretion when it included those portions in the notice of coverage. And apart from raising issues identical with those of HLI, such as but not limited to the absence of valid grounds to warrant the rescission and/or revocation of the SDP, LIPCO would allege that the assailed resolution and the notice of coverage were issued without affording it the right to due process as an innocent purchaser for value. The government, LIPCO also argues, is estopped from recovering properties which have since passed to innocent parties. Simply formulated, the principal determinative issues tendered in the main petition and to which all other related questions must yield boil down to the following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity or propriety of such recall or revocatory action; and (5) corollary to (4), the validity of the terms and conditions of the SDP, as embodied in the SDOA. Our Ruling I. We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing on the validity of PARCs assailed issuance and the grounds for it. Supervisory Group, AMBALA and their respective leaders are real parties-in-interest HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene Galang, who filed the revocatory petitions before the DAR. As HLI would have it, Galang, the self-styled head of AMBALA, gained HLI employment in June 1990 and, thus, could not have been a party to the SDOA executed a year earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are not regular farmworkers, but the company nonetheless considered them FWBs under the SDOA as a mere concession to enable them to enjoy the same benefits given qualified regular farmworkers. However, if the SDOA would be canceled and land distribution effected, so HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded from receiving lands as farmworkers other than the regular farmworkers who are merely entitled to the "fruits of the land."87 The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by [HLI]."88 Galang, per HLIs own admission, is employed by HLI, and is, thus, a qualified beneficiary of the SDP; he comes within the definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to be benefited or injured by the judgment in the suit or is the party entitled to the avails of the suit. The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and whose names and signatures even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly parties who would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some other modality to comply with RA 6657. Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of "other farmworkers" mentioned in Sec. 4, Article XIII of the Constitution,89 thus only entitled to a share of the fruits of the land, as indeed Fortich teaches, this does not detract from the fact that they are still identified as being among the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP.90 At any rate, the following admission made by Atty. Gener Asuncion,
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counsel of HLI, during the oral arguments should put to rest any lingering doubt as to the status of protesters Galang, Suniga, and Andaya: Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer beneficiaries of Hacienda Luisita were real parties in interest? Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest initiated before the DAR and the real party in interest there be considered as possessed by the farmer beneficiaries who initiated the protest.91 Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves, their fellow farmers or their organizations in any proceedings before the DAR. Specifically: SEC. 50. Quasi-Judicial Powers of the DAR.x x x xxxx Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their organizations in any proceedings before the DAR: Provided, however, that when there are two or more representatives for any individual or group, the representatives should choose only one among themselves to represent such party or group before any DAR proceedings. (Emphasis supplied.) Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-ininterest allowed by law to file a petition before the DAR or PARC. This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry the usual authorization of the individuals in whose behalf it was supposed to have been instituted. To date, such authorization document, which would logically include a list of the names of the authorizing FWBs, has yet to be submitted to be part of the records. PARCs Authority to Revoke a Stock Distribution Plan On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to approve the plan for stock distribution in appropriate cases, the empowerment only includes the power to disapprove, but not to recall its previous approval of the SDP after it has been implemented by the parties.93 To HLI, it is the court which has jurisdiction and authority to order the revocation or rescission of the PARC-approved SDP. We disagree. Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to PARC. However, contrary to petitioner HLIs posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC under the principle of necessary implication, a basic postulate that what is implied in a statute is as much a part of it as that which is expressed.94 We have explained that "every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and logically inferred from its terms."95 Further, "every statutory grant of power, right or privilege is deemed to include all incidental power, right or privilege.96 Gordon v. Veridiano II is instructive: The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug store has complied with the requirements of the general laws and the implementing administrative rules and

regulations, it is only for their violation that the FDA may revoke the said license. By the same token, having granted the permit upon his ascertainment that the conditions thereof as applied x x x have been complied with, it is only for the violation of such conditions that the mayor may revoke the said permit.97 (Emphasis supplied.) Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan. As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to impose sanctions for noncompliance with it.98 With the view We take of the case, only PARC can effect such revocation. The DAR Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or approval of the SDP sought to be taken back or undone is the act of PARC whose official composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least eleven (11) other department heads.99 On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to compulsory distribution after its approved SDP has been implemented would impair the contractual obligations created under the SDOA. The broad sweep of HLIs argument ignores certain established legal precepts and must, therefore, be rejected. A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed read into the contract and its implementation cannot successfully be resisted by force of the non-impairment guarantee. There is, in that instance, no impingement of the impairment clause, the nonimpairment protection being applicable only to laws that derogate prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties. Impairment, in fine, obtains if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws existing remedies for the enforcement of the rights of the parties.100 Necessarily, the constitutional proscription would not apply to laws already in effect at the time of contract execution, as in the case of RA 6657, in relation to DAO 10, vis--vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.: The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws newly enacted have only a prospective operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence, their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of the Constitution] is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto.101 (Emphasis supplied.) Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the obligation of contracts shall be passed." Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and conditions is not a PARC administrative matter, but one that gives rise to a cause of action cognizable by regular courts.102 This contention has little to commend itself. The SDOA is a special contract imbued with public interest, entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP, which requires for its validity, or at least its enforceability, PARCs approval. And the fact that the certificate of compliance103to be issued by agrarian authorities upon completion of the distribution of stocksis revocable by the same issuing authority supports the idea that everything about the implementation of the SDP is, at the first instance, subject to administrative adjudication.
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HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the agricultural land of HLI. Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity. Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its applicability is limited as the rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian reform program. Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevailgeneralia specialibus non derogant.105 Besides, the present impasse between HLI and the private respondents is not an intra-corporate dispute which necessitates the application of the Corporation Code. What private respondents questioned before the DAR is the proper implementation of the SDP and HLIs compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case. HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the eventual distribution of the land to the FWBs would amount to a disposition of all or practically all of the corporate assets of HLI. HLI would add that this contingency, if ever it comes to pass, requires the applicability of the Corporation Code provisions on corporate dissolution. We are not persuaded. Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of HLIs affairs or liquidation of the assets is concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the lands eventual distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As stated in the SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita in relation to the total assets transferred and conveyed by Tadeco to HLI comprises only 33.296%, following this equation: value of the agricultural lands divided by total corporate assets. By no stretch of imagination would said percentage amount to a disposition of all or practically all of HLIs corporate assets should compulsory land acquisition and distribution ensue. This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom. But first, the matter of the constitutionality of said section. Constitutional Issue FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP compliance, to resort to stock distribution, an arrangement which, to FARM, impairs the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution.106 To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright agricultural land transfer; in fine, there is stock certificate ownership of the farmers or farmworkers instead of them owning the land, as envisaged in the Constitution. For FARM, this modality of distribution is an anomaly to be annulled for being inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.107 Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as here, be attacked collaterally.

The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO 229 must fail as explained below. When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of the executive or legislative departments, it does so only when the following essential requirements are first met, to wit: (1) there is an actual case or controversy; (2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with locus standi; and (3) the issue of constitutionality must be the very lis mota of the case.108 Not all the foregoing requirements are satisfied in the case at bar. While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter and why its members received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional legal provision. It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is properly raised and presented in an appropriate case at the first opportunity.109 FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest possible opportunity is clearly wanting. The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. The unyielding rule has been to avoid, whenever plausible, an issue assailing the constitutionality of a statute or governmental act.110 If some other grounds exist by which judgment can be made without touching the constitutionality of a law, such recourse is favored.111 Garcia v. Executive Secretary explains why: Lis Mota the fourth requirement to satisfy before this Court will undertake judicial review means that the Court will not pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the application of the statute or the general law. The petitioner must be able to show that the case cannot be legally resolved unless the constitutional question raised is determined. This requirement is based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative.112 (Italics in the original.) The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the Court, the lis mota is
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whether or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed. It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional should be a moot issue. It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and academic114 provided the following requisites are present: x x x first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; fourth, the case is capable of repetition yet evading review. These requisites do not obtain in the case at bar. For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads: The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied.) The wording of the provision is unequivocalthe farmers and regular farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distributiondirect and indirect ownership. Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through which collective ownership can be exercised. The word "collective" is defined as "indicating a number of persons or things considered as constituting one group or aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a mass or body."116 By using the word "collectively," the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that land reform may become successful even if it is done through the medium of juridical entities composed of farmers. Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers cooperatives or associations to collectively own the land, while the second paragraph of Sec. 31 allows corporations or associations to own agricultural land with the farmers becoming stockholders or members. Said provisions read: SEC. 29. Farms owned or operated by corporations or other business associations.In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC.

In general, lands shall be distributed directly to the individual worker-beneficiaries. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries who shall form a workers cooperative or association which will deal with the corporation or business association. x x x (Emphasis supplied.) SEC. 31. Corporate Landowners. x x x xxxx Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or participation. x x x (Emphasis supplied.) Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the succeeding Sec. 31, as differentiated from individual farmers, are authorized vehicles for the collective ownership of agricultural land. Cooperatives can be registered with the Cooperative Development Authority and acquire legal personality of their own, while corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution are in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus: MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller? MR. MONSOD. Yes. MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership? MS. NIEVA. In this section, we conceive of cooperatives; that is farmers cooperatives owning the land, not the State. MR. NOLLEDO. And when we talk of "collectively," referring to farmers cooperatives, do the farmers own specific areas of land where they only unite in their efforts? MS. NIEVA. That is one way. MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the "kibbutz." So are both contemplated in the report? MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari directly at ang tinatawag na samasamang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang sasakahin. xxxx MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather than land for the landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right? MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis supplied.) As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus, the main requisite for collective ownership of land is collective or group work by
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farmers of the agricultural land. Irrespective of whether the landowner is a cooperative, association or corporation composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls within the ambit of collective ownership scheme. Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue, by law, an agrarian reform program founded on the policy of land for the landless, but subject to such priorities as Congress may prescribe, taking into account such abstract variable as "equity considerations." The textual reference to a law and Congress necessarily implies that the above constitutional provision is not self-executory and that legislation is needed to implement the urgently needed program of agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a mechanism to carry out the constitutional directives. This piece of legislation, in fact, restates118 the agrarian reform policy established in the aforementioned provision of the Constitution of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of lands to farmers and regular farmworkers who are landless to lift the economic status of the beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as production or profit sharing, labor administration and the distribution of shares of stock which will allow beneficiaries to receive a just share of the fruits of the lands they work." With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless appears to be the dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to passing an agrarian reform law planted on direct land transfer to and ownership by farmers and no other, or else the enactment suffers from the vice of unconstitutionality. If the intention were otherwise, the framers of the Constitution would have worded said section in a manner mandatory in character. For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the States commitment to farmers and farmworkers to advance their interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective ownership by which the imperatives of social justice may, in its estimation, be approximated, if not achieved. The Court should be bound by such policy choice. FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but are merely given stock certificates. Thus, the farmers lose control over the land to the board of directors and executive officials of the corporation who actually manage the land. They conclude that such arrangement runs counter to the mandate of the Constitution that any agrarian reform must preserve the control over the land in the hands of the tiller. This contention has no merit. While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in the assets of the corporation, which include the agricultural lands. It was explained that the "equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the extent of his interest is described by the term shares. The expression shares of stock when qualified by words indicating number and ownership expresses the extent of the owners interest in the corporate property."119 A share of stock typifies an aliquot part of the corporations property, or the right to share in its proceeds to that extent when distributed according to law and equity and that its holder is not the owner of any part of the capital of the corporation.120 However, the FWBs will ultimately own the agricultural lands owned by the corporation when the corporation is eventually dissolved and liquidated. Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation, a reading of the second paragraph of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries have "the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets." The wording of the formula in the computation of the number of shares that can be bought by the farmers does not mean loss of control on the part of the farmers. It must be remembered that the

determination of the percentage of the capital stock that can be bought by the farmers depends on the value of the agricultural land and the value of the total assets of the corporation. There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over the agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own majority of the common shares entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be more than 50% of the total assets of the corporation to ensure that the majority of the members of the board of directors are composed of the farmers. The PARC composed of the President of the Philippines and cabinet secretaries must see to it that control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers. A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land distribution is the essential characteristic of a constitutional agrarian reform program. On the contrary, there have been so many instances where, despite actual land distribution, the implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may take judicial notice of cases where FWBs sold the awarded land even to non-qualified persons and in violation of the prohibition period provided under the law. This only proves to show that the mere fact that there is land distribution does not guarantee a successful implementation of agrarian reform. As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where nonhuman juridical persons, such as corporations, were prohibited from owning agricultural lands are no longer realistic under existing conditions. Practically, an individual farmer will often face greater disadvantages and difficulties than those who exercise ownership in a collective manner through a cooperative or corporation. The former is too often left to his own devices when faced with failing crops and bad weather, or compelled to obtain usurious loans in order to purchase costly fertilizers or farming equipment. The experiences learned from failed land reform activities in various parts of the country are lack of financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is still no successful implementation of agrarian reform to speak of in such a case. Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and competently maintain the agri-business than the individual farmer. While direct singular ownership over farmland does offer advantages, such as the ability to make quick decisions unhampered by interference from others, yet at best, these advantages only but offset the disadvantages that are often associated with such ownership arrangement. Thus, government must be flexible and creative in its mode of implementation to better its chances of success. One such option is collective ownership through juridical persons composed of farmers. Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be capable of repetition yet evading review is also wanting. It would be speculative for this Court to assume that the legislature will enact another law providing for a similar stock option. As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official functions, the heavy presumption being that a law is the product of earnest studies by Congress to ensure that no constitutional prescription or concept is infringed.121 Corollarily, courts will not pass upon questions of wisdom, expediency and justice of legislation or its provisions. Towards this end, all reasonable doubts should be resolved in favor of the constitutionality of a law and the validity of the acts and processes taken pursuant thereof.122
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Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict with the Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a manner as to leave no doubt in the mind of the Court. In other words, the grounds for nullity must be beyond reasonable doubt.123 FARM has not presented compelling arguments to overcome the presumption of constitutionality of Sec. 31 of RA 6657. The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian reform is not for judicial determination. Established jurisprudence tells us that it is not within the province of the Court to inquire into the wisdom of the law, for, indeed, We are bound by words of the statute.124 II. The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLIs SDP. Or to be more precise, the inquiry should be: whether or not PARC gravely abused its discretion in revoking or recalling the subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution scheme. The findings, analysis and recommendation of the DARs Special Task Force contained and summarized in its Terminal Report provided the bases for the assailed PARC revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular terms, the following are essentially the reasons underpinning PARCs revocatory or recall action: (1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives of the FWBs have hardly improved and the promised increased income has not materialized; (2) HLI has failed to keep Hacienda Luisita intact and unfragmented; (3) The issuance of HLI shares of stock on the basis of number of hours workedor the socalled "man days"is grossly onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny work to anyone. In elaboration of this ground, PARCs Resolution No. 200634-01, denying HLIs motion for reconsideration of Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the entitlement of the original share beneficiaries;125 (4) The distribution/transfer of shares was not in accordance with the timelines fixed by law; (5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-sharing benefit on top of the workers salary; and (6) Several homelot awardees have yet to receive their individual titles. Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by PARC itself, and tags the reasons given for the revocation of the SDP as unfounded. Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the Terminal Report, a position shared by AMBALA, which, in some pleadings, is represented by the same counsel as that appearing for the Supervisory Group. FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the resulting dilution of the equity of the FWBs appearing in HLIs masterlist, FARM would state that the SDP, as couched and implemented, spawned disparity when there should be none; parity when there should have been differentiation.126 The petition is not impressed with merit. In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of agricultural lands. We disagree. Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.It is the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to move the nation towards sound rural development and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture. To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands. The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof. To this end, the State shall encourage the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in this Act, having taken into account ecological, developmental, and equity considerations, and subject to the payment of just compensation. The State shall respect the right of small landowners and shall provide incentives for voluntary landsharing. (Emphasis supplied.) Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x x x shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands." Of note is the term "opportunity" which is defined as a favorable chance or opening offered by circumstances.127 Considering this, by no stretch of imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs, which may or may not be attained. Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option. Nothing in that option agreement, law or department order indicates otherwise. Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And attached as Annex "G" to HLIs Memorandum is the certified true report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the SCTEX.128 On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP. To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years, it cannot be over-emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the time. As has been suggested, one of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money.129 The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock distribution plan is the likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries] than if the lands were divided and distributed to them individually."130 But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
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actually exact assurance of success on something that is subject to the will of man, the forces of nature or the inherent risky nature of business.131 Just like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact that there were many instances wherein after a farmworker beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually left with nothing in the end. In all then, the onerous condition of the FWBs economic status, their life of hardship, if that really be the case, can hardly be attributed to HLI and its SDP and provide a valid ground for the plans revocation. Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit otherwise. The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of the assailed order revoking HLIs SDP, for the paragraph deals with the transfer of agricultural lands to the government, as a mode of CARP compliance, thus: SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such terms and conditions, consistent with this Act, as they may agree, subject to confirmation by the DAR. The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows: Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: (a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; (c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets" had been observed. Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation reads: 1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to

the THIRD PARTY under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares. The appraised value of the agricultural land is PhP 196,630,000 and of HLIs other assets is PhP 393,924,220. The total value of HLIs assets is, therefore, PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP 196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for free. The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657. Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1) representative in the board of directors or in a management or executive committee irrespective of the value of the equity of the FWBs in HLI, the Court finds that the SDOA contained provisions making certain the FWBs representation in HLIs governing board, thus: 5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in stockholders and board of directors meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to. Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by the FWBs; hence, the assumption may be made that there has been no violation of the statutory prescription under sub-paragraph (a) on the auditing of HLIs accounts. Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-toshares of stock, referring to the 118,391,976.85 shares with par value of PhP 1 each, should have been made in full within two (2) years from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said law.133 Public respondents submission is palpably erroneous. We have closely examined the last paragraph alluded to, with particular focus on the two-year period mentioned, and nothing in it remotely supports the public respondents posture. In its pertinent part, said Sec. 31 provides: SEC. 31. Corporate Landowners x x x If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Word in bracket and emphasis added.) Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate landowner, to avoid land transfer as a mode of CARP coverage under RA 6657, is to avail of the stock distribution option or to have the SDP approved. The HLI secured approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took effect. Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the statutory issues, We shall now delve into what PARC and respondents deem to be other instances of violation of DAO 10 and the SDP.
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On the Conversion of Lands Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is also not among the imperative impositions by the SDP, RA 6657, and DAO 10. The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured the intended stock beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-assailed resolution would take HLI to task for securing approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased profitability." The PARC is wrong. In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits to qualified beneficiariesis but one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs stated observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural land remaining intact x x x but the viability of the corporate operations with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate agricultural land does not remain intact or [un]fragmented."134 It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining the viability of Hacienda Luisitas operation, as the DAR Secretary approved the land conversion applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads: Sec. 65. Conversion of Lands.After the lapse of five years from its award when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or landowner with due notice to the affected parties, and subject to existing laws, may authorize the x x x conversion of the land and its dispositions. x x x On the 3% Production Share On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the hacienda and pay dividends from profit, the entries in its financial books tend to indicate compliance by HLI of the profit-sharing equivalent to 3% of the gross sales from the production of the agricultural land on top of (a) the salaries and wages due FWBs as employees of the company and (b) the 3% of the gross selling price of the converted land and that portion used for the SCTEX. A plausible evidence of compliance or non-compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of some groups of not having received their share from the gross production sales has not adequately been validated on the ground by the Special Task Force. Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are accorded due respect and weight, especially when they are affirmed by the CA.135 However, such rule is not absolute. One such exception is when the findings of an administrative agency are conclusions without citation of specific evidence on which they are based,136 such as in this particular instance. As culled from its Terminal Report, it would appear that the Special Task Force rejected HLIs claim of compliance on the basis of this ratiocination:

The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production share and that others alleged that they received 30 million pesos still others maintain that they have not received anything yet. Item No. 4 of the MOA is clear and must be followed. There is a distinction between the total gross sales from the production of the land and the proceeds from the sale of the land. The former refers to the fruits/yield of the agricultural land while the latter is the land itself. The phrase "the beneficiaries are entitled

every year to an amount approximately equivalent to 3% would only be feasible if the subject is the produce since there is at least one harvest per year, while such is not the case in the sale of the agricultural land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the purchase price of the converted land.

Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like, presently received by the FWBs shall not in any way be reduced or adversely affected. Three percent of the gross selling price of the sale of the converted land shall be awarded to the beneficiaries of the SDO." The 3% gross production share then is different from the 3% proceeds of the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs as part owners of the Hacienda, should have been given the FWBs, as stockholders, and to which they could have been entitled if only the land were acquired and redistributed to them under the CARP. xxxx

The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of stocks (partial), 3% gross production sale (not all) and homelots (not all)]. Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to comply with the 3% production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX lot. In fact, it admits that the FWBs, though not all, have received their share of the gross production sales and in the sale of the lot to SCTEX. At most, then, HLI had complied substantially with this SDP undertaking and the conversion order. To be sure, this slight breach would not justify the setting to naught by PARC of the approval action of the earlier PARC. Even in contract law, rescission, predicated on violation of reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement.137 Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below. On Titles to Homelots Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 states: SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual members of the cooperatives or corporations mentioned in the preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the land owned by the cooperative or corporation. The "preceding section" referred to in the above-quoted provision is as follows: SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC. In general, lands shall be distributed directly to the individual worker-beneficiaries. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a workers cooperative or association which will deal with the corporation or business association. Until a new agreement is entered into by and between the workers cooperative or association and the corporation or business association, any agreement existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the workers cooperative or association and the corporation or business association. Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this case.

Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually resides," "within a reasonable time." More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the FWBs that not all was given the 240-square meter homelots and, of those who were already given, some still do not have the corresponding titles. During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs were already given the said homelots: Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the 240 square meters each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square meter homelots. Atty. Asuncion: We will, your Honor please.138 Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP. On "Man Days" and the Mechanics of Stock Distribution In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states: 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY. Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from them, is contingent on the number of "man days," that is, the number of days that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10: Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution of an equal number of shares of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657. On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of sound company policy. (Emphasis supplied.) The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the corporation under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets."139 It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries." On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category constitutes an augmentation share/s that the corporate landowner may give
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under an additional stock distribution scheme, taking into account such variables as rank, seniority, salary, position and like factors which the management, in the exercise of its sound discretion, may deem desirable.140 Before anything else, it should be stressed that, at the time PARC approved HLIs SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the 30-year stock distribution program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as they appear to have in fact been accommodated as evidenced by their receipt of HLI shares. Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares earmarked for farmworkers as reward system chips to water down the shares of the original 6,296 FWBs.141 Particularly: Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP? Atty. Dela Merced: Yes, Your Honor. Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the land under CARP. And for that reason those who would have gotten their shares of the land actually gave up their rights to this land in place of the shares of the stock, is that correct? Atty. Dela Merced: It would be that way, Your Honor. Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes own [sic] the land and distribute it to the farmers and pay for the land, is that correct? Atty. Dela Merced: Yes, Your Honor. Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x x x those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct? Atty. Dela Merced: Yes, Your Honor. Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional shares who were not in the original list of owners? Atty. Dela Merced: Yes, Your Honor. Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to have been placed under CARP? Atty. Dela Merced: If you are talking or referring (interrupted) Justice Abad: None! You tell me. None. They gave up no rights to land? Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor. Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on. Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original (interrupted) Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to use the shares as reward system for new workers who come in? It is not that the new workers, in effect, become just workers of the corporation whose stockholders were already fixed. The TADECO who has shares there about sixty six percent (66%) and the five thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x
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what right or where did you get that right to use this shares, to water down the shares of those who should have been benefited, and to use it as a reward system decided by the company?142 From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on "man days" or "number of days worked" by the FWB in a years time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of "man days" and the hiring of additional farmworkers. Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the qualified FWBs should be recorded in the stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. As stated: Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan shall be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the names of the qualified beneficiaries shall be recorded in stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. (Emphasis supplied.) It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the clashing parties has made a compelling case of the thrust of this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to complete, not merely initiate, the transfer process of shares within that three-month timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the implementation of the SDP. To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme. The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock distribution program. HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land distribution. SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.

Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the shares of stock among the FWBs. Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to make it less cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does not apply to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time. Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied with.143 The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided. III. We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of the assailed PARC resolution those portions of the converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase. Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for the exclusion of that portion from PARC Resolution 2005-32-01, as implemented by a DARissued Notice of Coverage dated January 2, 2006, which called for mandatory CARP acquisition coverage of lands subject of the SDP. To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire three hundred (300) hectares of land from Centennary for the purpose of developing the land into an industrial complex.144 Accordingly, the TCT in Centennarys name was canceled and a new one issued in LIPCOs name. Thereafter, said land was subdivided into two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were subsequently issued. Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title in pursuance of a decree of registration and every subsequent purchaser of registered land taking a certificate of title for value and in good faith shall hold the same free from all encumbrances except those noted on the certificate and enumerated therein."145 It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the four corners of, but can rely on what appears on, the title. He is charged with notice only of such burdens and claims as are annotated on the title. This principle admits of certain exceptions, such as when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry, or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.146 A higher level of care and diligence is of course expected from banks, their business being impressed with public interest.147 Millena v. Court of Appeals describes a purchaser in good faith in this wise: x x x A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. Good faith, or the lack of it, is in the final analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. Truly, good faith is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged by actual
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or fancied tokens or signs. Otherwise stated, good faith x x x refers to the state of mind which is manifested by the acts of the individual concerned.148 (Emphasis supplied.) In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys the property of another without notice that some other person has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another. It can rightfully be said that both LIPCO and RCBC arebased on the above requirements and with respect to the adverted transactions of the converted land in questionpurchasers in good faith for value entitled to the benefits arising from such status. First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name of Centennary: the Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and residential use.149 The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million. It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good faith "consists in the possessors belief that the person from whom he received it was the owner of the same and could convey his title. Good faith requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it. There is good faith where there is an honest intention to abstain from taking any unconscientious advantage from another."150 It is the opposite of fraud. To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian reform. The DAR conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.151 On the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.

As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by DAR, PARC or even by this Court. As held in Spouses Chua v. Soriano: With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment that some irregularity attended the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit: x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance as to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law. Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good faith holds an indefeasible title to the property and he is entitled to the protection of the law.152 x x x (Emphasis supplied.) To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow from Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed" from the realities on the ground. To note, the approval and issuances of both the national and local governments showing that certain portions of Hacienda Luisita have effectively ceased, legally and physically, to be agricultural and, therefore, no longer CARPable are a matter of fact which cannot just be ignored by the Court and the DAR. Among the approving/endorsing issuances:154 (a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing the 300-hectare industrial estate project of LIPCO; (b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the Omnibus Investments Code of 1987; (c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCOs application for a mixed ecozone and proclaiming the three hundred (300) hectares of the industrial land as a Special Economic Zone; (d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final Development Permit for the Luisita Industrial Park II Project; (e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by the Office of the Sangguniang Bayan of Tarlac;155 (f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of building an industrial complex on three hundred (300) hectares of industrial land;156 (g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of Luisita Industrial Park II with an area of three million (3,000,000) square meters;157 (h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in the Luisita Industrial Park II; (i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916," designating the Luisita Industrial Park II consisting of three hundred hectares (300 has.) of industrial land as a Special Economic Zone; and
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(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to Presidential Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered as an Ecozone Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac, Tarlac. While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not automatically allow the corporate or individual landowner to change its use,158 the reclassification process is a prima facie indicium that the land has ceased to be economically feasible and sound for agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued in 1996 by then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land from agricultural to industrial/commercial use and authorized their disposition. In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed LIPCOs and RCBCs property which once formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage. As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be excluded from the compulsory agrarian reform coverage considering that the transfer was consistent with the governments exercise of the power of eminent domain159 and none of the parties actually questioned the transfer. While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 200532-01 and 2006-34-01, the Court cannot close its eyes to certain "operative facts" that had occurred in the interim. Pertinently, the "operative fact" doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no longer without force and effect, undue harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights might have accrued in favor of natural or juridical persons and obligations justly incurred in the meantime.160 The actual existence of a statute or executive act is, prior to such a determination, an operative fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a new judicial declaration.161 The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a legislative or executive act subsequently declared invalid: x x x It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects,with respect to particular relations, individual and corporate, and particular conduct, private and official." x x x Given the above perspective and considering that more than two decades had passed since the PARCs approval of the HLIs SDP, in conjunction with numerous activities performed in good faith by HLI, and

the reliance by the FWBs on the legality and validity of the PARC-approved SDP, perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to the application in a general way of the operative fact doctrine. A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to the instant case as it applies only in considering the effects of a declaration of unconstitutionality of a statute, and not of a declaration of nullity of a contract. This is incorrect, for this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the instant case. Rather, it is PARCs approval of the HLIs Proposal for Stock Distribution under CARP which embodied the SDP that was nullified. A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed the SDOA. This agreement provided the basis and mechanics of the SDP that was subsequently proposed and submitted to DAR for approval. It was only after its review that the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably, it is not the SDOA which gave legal force and effect to the stock distribution scheme but instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity. The above conclusion is bolstered by the fact that in Sec. Pangandamans recommendation to the PARC Excom, what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 approving HLIs SDP, and not the revocation of the SDOA. Sec. Pangandamans recommendation was favorably endorsed by the PARC Validation Committee to the PARC Excom, and these recommendations were referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the basis for the implementation of the stock distribution scheme. That the operative fact doctrine squarely applies to executive actsin this case, the approval by PARC of the HLI proposal for stock distributionis well-settled in our jurisprudence. In Chavez v. National Housing Authority,163 We held: Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used to countenance an inequitable result that is contrary to its proper office. On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines. The argument of the Solicitor General is meritorious. The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus: xxx xxx xxx This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that: Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application. (Citations omitted; Emphasis supplied.) The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People,164 thus:
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Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated General Order No. 60, issued by then President Ferdinand E. Marcos was subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of various presidential issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said: ". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. xxx xxx xxx "Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration . . . that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified." The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative or the executive act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under General Order No. 60 long before our Decision in Taada and the arrest of petitioner is an operative fact that can no longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.) To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it actually revoked or recalled was the PARCs approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared null and void was an executive act, PARC Resolution No. 89-12-2,165 and not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in the instant case. Evidently, the operative fact doctrine is applicable. IV. While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005.166 On August

6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A matter best left to their own discretion. With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the SDP was approved, they are not accorded the right to acquire land but shall, however, continue as HLI stockholders. All the benefits and homelots167 received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with no obligation to refund or return them since the benefits (except the homelots) were received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the existing collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the original FWBs who opt to remain as HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign additional shares to said FWBs to complete said minimum number of shares at no cost to said FWBs. With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or pay for its value since this is a benefit granted under the SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but were taken from the 120.9234 hectare residential lot owned by Tadeco. Those who did not receive the homelots as of the revocation of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the determination of the ultimate agricultural land that will be subjected to land distribution, the aggregate area of the homelots will no longer be deducted. There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share of the lands value. There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51hectare SCTEX lot acquired by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price received for said lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot. We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses relating to the transfer of the land and HLIs statement that most, if not all, of the proceeds were used for legitimate corporate purposes. In order to determine once and for all whether or not all the proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August 14, 1996 Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs. A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It should not be forgotten that the FWBs are also stockholders of HLI, and the benefits acquired by the corporation from its possession and use of the land ultimately redounded to the FWBs benefit based on its business operations in the form of salaries, and other fringe benefits under the CBA. To still require HLI to pay rent to the FWBs will result in double compensation.
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For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be operating under the SDP, but pursuant to the Corporation Code as a private stock corporation. The non-agricultural assets amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be turned over to DAR for distribution to the FWBs. To be deducted from said area are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual lots that should have been distributed to FWBs by DAR had they not opted to stay in HLI. HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs. We find that the date of the "taking" is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of just compensation. We cannot use May 11, 1989 when the SDOA was executed, since it was the SDP, not the SDOA, that was approved by PARC. The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case. WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and legal or practical implications of their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed names. Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to complete said prescribed number of shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other FWBs who do not belong to the original 6,296 qualified beneficiaries are not entitled to land distribution and shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3% share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-qualified FWBs, shall be respected with no obligation to refund or return them. Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that each FWB is entitled to under the CARP had he or she not opted to stay in HLI as a stockholder. After the segregation process, as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the original qualified FWBs who opted not to remain as HLI stockholders. The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation shall form part of the HLI assets. HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000 received by its owned subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government through the Bases Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the total gross sales from the production of the agricultural land and the 3% of the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the

transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or unused balance as determined by the audit shall be distributed to the 6,296 original FWBs. HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21, 1989 per PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI. DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of the compliance report, quarterly reports on the execution of this judgment to be submitted within the first 15 days at the end of each quarter, until fully implemented. The temporary restraining order is lifted. SO ORDERED.

G.R. No. 171101 November 22, 2011 HACIENDA LUISITA, INCORPORATED, Petitioner, LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION, Petitioners-in-Intervention, vs. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents. RESOLUTION VELASCO, JR., J.: For resolution are the (1) Motion for Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial Reconsideration dated July 20, 2011 filed by public respondents Presidential Agrarian Reform Council (PARC) and Department of Agrarian Reform (DAR); (3) Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4) Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively referred to as "Mallari, et al."); and (6) Motion for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and AMBALA.2 On July 5, 2011, this Court promulgated a Decision3 in the above-captioned case, denying the petition filed by HLI and affirming Presidential Agrarian Reform Council (PARC) Resolution No. 2005-32-01
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dated December 22, 2005 and PARC Resolution No. 2006-34-01 dated May 3, 2006 with the modification that the original 6,296 qualified farmworker-beneficiaries of Hacienda Luisita (FWBs) shall have the option to remain as stockholders of HLI. In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI raises the following issues for Our consideration: A IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE ORIGINAL FWBs OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF THE SALE OF THE 500 HECTARES AND 80.51 HECTARES OF THE HLI LAND, BECAUSE: (1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION, HLI, AS CORPORATE CAPITAL AND ASSETS IN SUBSTITUTION FOR THE PORTIONS OF ITS LAND ASSET WHICH WERE SOLD TO THIRD PARTY; (2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS OF THE LAND ASSET TO THE FWBs, WHO ARE STOCKHOLDERS OF HLI, IS TO DISSOLVE THE CORPORATION AND DISTRIBUTE THE PROCEEDS AS LIQUIDATING DIVIDENDS WITHOUT EVEN PAYING THE CREDITORS OF THE CORPORATION; (3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT PROVISIONS OF THE CORPORATION CODE AND CORPORATE PRACTICE. B IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE PAYMENT OF JUST COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR-SANTIAGO, APPROVED THE STOCK DISTRIBUTION PLAN (SDP) PROPOSED BY TADECO/HLI, BECAUSE: (1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989 WAS NOT THE "ACTUAL TAKING" OF THE TADECOs/HLIs AGRICULTURAL LAND; (2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01 OF THAT SDP BY THE NEW PARC UNDER THE CHAIRMANSHIP OF DAR SECRETARY NASSER PANGANDAMAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN THE SDP WAS APPROVED DID NOT RESULT IN "ACTUAL TAKING" ON NOVEMBER 21, 1989; (3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR 22 YEARS BACK WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE, CONSIDERING THE IMPROVEMENTS, EXPENSES IN THE MAINTENANCE AND PRESERVATION OF THE LAND, AND RISE IN LAND PRICES OR VALUE OF THE PROPERTY. On the other hand, PARC and DAR, through the Office of the Solicitor General (OSG), raise the following issues in their Motion for Partial Reconsideration dated July 20, 2011: THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR THE FOLLOWING REASONS: I THERE IS NO LAW OR RULE WHICH HAS BEEN INVALIDATED ON THE GROUND OF UNCONSTITUTIONALITY; AND II THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE ABSENCE OF A LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH MANDATES THE DISTRIBUTION OF THE LAND AS A RESULT OF THE REVOCATION OF THE STOCK DISTRIBUTION PLAN (SDP). For its part, AMBALA poses the following issues in its Motion for Reconsideration dated July 19, 2011: I

THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS CONSTITUTIONAL. II THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT ONLY THE [PARCS] APPROVAL OF HLIs PROPOSAL FOR STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE REVOKED AND NOT THE STOCK DISTRIBUTION OPTION AGREEMENT (SDOA). III THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN APPLYING THE DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE [FWBs] CHOOSE TO OPT FOR ACTUAL LAND DISTRIBUTION OR TO REMAIN AS STOCKHOLDERS OF [HLI]. IV THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE SDP AND AN IMPERATIVE IMPOSITION BY [RA 6657] AND DEPARTMENT OF AGRARIAN REFORM ADMINISTRATIVE ORDER NO. 10 (DAO 10). V THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT THE CONVERSION OF THE AGRICULTURAL LANDS DID NOT VIOLATE THE CONDITIONS OF RA 6657 AND DAO 10. VI THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT PETITIONER IS ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD THE HONORABLE COURT AFFIRM THE ENTITLEMENT OF THE PETITIONER TO JUST COMPENSATION, THE SAME SHOULD BE PEGGED TO FORTY THOUSAND PESOS (PhP 40,000.00) PER HECTARE. VII THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT LUISITA INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL COMMERCIAL BANKING CORPORATION (RCBC) ARE INNOCENT PURCHASERS FOR VALUE. In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the following issues: I THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN SECTION 31 OF [RA 6657] FOR BEING UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE THAT WAS RAISED BY THE RESPONDENTS-INTERVENORS IS THE LIS MOTA OF THE CASE. II THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE DOCTRINE OF "OPERATIVE FACT" TO THE CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN AS STOCKHOLDERS OF HACIENDA LUISITA IS EQUIVALENT TO AN OPTION FOR HACIENDA LUISITA TO RETAIN LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE AGRARIAN REFORM LAW. THE DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE SUPREME COURT HAS AFFIRMED ITS REVOCATION. III THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED [LIPCO] AND [RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE INSTANT CASE. Mallari, et al., on the other hand, advance the following grounds in support of their Motion for Reconsideration dated July 21, 2011:
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(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN DISTRIBUTED PURSUANT TO THE MEMORANDUM OF AGREEMENT. WHAT REMAINS MERELY IS THE RELEASE OF TITLE FROM THE REGISTER OF DEEDS. (2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE RECORDS WOULD SHOW THAT IF EVER NOT ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE ACTUAL ORIGINAL FARMWORKER BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE IS THE NEXT OF KIN OR CHILDREN OF SAID ORIGINAL [FWBs]. HENCE, WE RESPECTFULLY SUBMIT THAT SINCE THE SHARES WERE GIVEN TO THE SAME "FAMILY BENEFICIARY", THIS SHOULD BE DEEMED AS SUBSTANTIAL COMPLIANCE WITH THE PROVISIONS OF SECTION 4 OF DAO 10. (3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO IMPLEMENT THE [SDP] AS PROVIDED FOR BY SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE READ IN LIGHT OF SECTION 10 OF EXECUTIVE ORDER NO. 229, THE PERTINENT PORTION OF WHICH READS, "THE APPROVAL BY THE PARC OF A PLAN FOR SUCH STOCK DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION, SHALL BE DEEMED COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE CARP." (4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF NOVEMBER 21, 1989, THE DATE OF APPROVAL OF THE STOCK DISTRIBUTION OPTION. INSTEAD, WE RESPECTFULLY SUBMIT THAT THE "TIME OF TAKING" FOR VALUATION PURPOSES IS A FACTUAL ISSUE BEST LEFT FOR THE TRIAL COURTS TO DECIDE. (5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT WAS GIVEN TO THEM UNDER THE SDP. IT WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE LAND AND AT THE SAME TIME HOLD ON TO THE BENEFITS THEY RECEIVED PURSUANT TO THE SDP IN THE SAME WAY AS THOSE WHO WILL CHOOSE TO STAY WITH THE SDO. Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC), submit the following grounds in support of their Motion for Reconsideration dated July 22, 2011: I THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN ORDERING THE HOLDING OF A VOTING OPTION INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT LANDS TO [FWBs] in [HLI]. A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE REVOCATION OF THE [SDP] CARRIES WITH IT THE REVOCATION OF THE [SDOA]. B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS OF HLI WITHOUT MAKING THE NECESSARY CHANGES IN THE CORPORATE STRUCTURE WOULD ONLY SUBJECT THEM TO FURTHER MANIPULATION AND HARDSHIP. C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND PERTINENT LAWS JUSTIFY TOTAL LAND REDISTRIBUTION OF HACIENDA LUISITA. II THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN HOLDING THAT THE [RCBC] AND [LIPCO] ARE INNOCENT PURCHASERS FOR VALUE OF THE 300-HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS SOLD TO THEM PRIOR TO THE INCEPTION OF THE PRESENT CONTROVERSY. Ultimately, the issues for Our consideration are the following: (1) applicability of the operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory acquisition; (4) just compensation; (5) sale to third parties; (6) the violations of HLI; and (7) control over agricultural lands. We shall discuss these issues accordingly.

I. Applicability of the Operative Fact Doctrine In their motion for partial reconsideration, DAR and PARC argue that the doctrine of operative fact does not apply to the instant case since: (1) there is no law or rule which has been invalidated on the ground of unconstitutionality;4 (2) the doctrine of operative fact is a rule of equity which may be applied only in the absence of a law, and in this case, they maintain that there is a positive law which mandates the distribution of the land as a result of the revocation of the stock distribution plan (SDP).5 Echoing the stance of DAR and PARC, AMBALA submits that the operative fact doctrine should only be made to apply in the extreme case in which equity demands it, which allegedly is not in the instant case.6 It further argues that there would be no undue harshness or injury to HLI in case lands are actually distributed to the farmworkers, and that the decision which orders the farmworkers to choose whether to remain as stockholders of HLI or to opt for land distribution would result in inequity and prejudice to the farmworkers.7 The foregoing views are also similarly shared by Rene Galang and AMBALA, through the PILC.8 In addition, FARM posits that the option given to the FWBs is equivalent to an option for HLI to retain land in direct violation of RA 6657.9 (a) Operative Fact Doctrine Not Limited to Invalid or Unconstitutional Laws Contrary to the stance of respondents, the operative fact doctrine does not only apply to laws subsequently declared unconstitutional or unlawful, as it also applies to executive acts subsequently declared as invalid. As We have discussed in Our July 5, 2011 Decision: That the operative fact doctrine squarely applies to executive actsin this case, the approval by PARC of the HLI proposal for stock distributionis well-settled in our jurisprudence. In Chavez v. National Housing Authority, We held: Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used to countenance an inequitable result that is contrary to its proper office. On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines. The argument of the Solicitor General is meritorious. The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus: xxx xxx xxx This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that: Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application. The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People, thus: Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated General Order No. 60, issued by then President
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Ferdinand E. Marcos was subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of various presidential issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said: ". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. xxx xxx xxx "Similarly, the implementation/ enforcement of presidential decrees prior to their publication in the Official Gazette is an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration . . . that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified." The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative or the executive act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under General Order No. 60 long before our Decision in Taada and the arrest of petitioner is an operative fact that can no longer be disturbed or simply ignored. (Citations omitted; emphasis in the original.) Bearing in mind that PARC Resolution No. 89-12-210an executive actwas declared invalid in the instant case, the operative fact doctrine is clearly applicable. Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine should be limited to statutes and rules and regulations issued by the executive department that are accorded the same status as that of a statute or those which are quasi-legislative in nature. Thus, the minority concludes that the phrase "executive act" used in the case of De Agbayani v. Philippine National Bank11 refers only to acts, orders, and rules and regulations that have the force and effect of law. The minority also made mention of the Concurring Opinion of Justice Enrique Fernando in Municipality of Malabang v. Benito,12 where it was supposedly made explicit that the operative fact doctrine applies to executive acts, which are ultimately quasi-legislative in nature. We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case elaborates what "executive act" mean. Moreover, while orders, rules and regulations issued by the President or the executive branch have fixed definitions and meaning in the Administrative Code and jurisprudence, the phrase "executive act" does not have such specific definition under existing laws. It should be noted that in the cases cited by the minority, nowhere can it be found that the term "executive act" is confined to the foregoing. Contrarily, the term "executive act" is broad enough to encompass decisions of administrative

bodies and agencies under the executive department which are subsequently revoked by the agency in question or nullified by the Court. A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC) which was declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma.13 In said case, this Court ruled that the concurrent appointment of Elma to these offices is in violation of Section 7, par. 2, Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably, the appointment of Elma as Chairman of the PCGG and as CPLC is, without a question, an executive act. Prior to the declaration of unconstitutionality of the said executive act, certain acts or transactions were made in good faith and in reliance of the appointment of Elma which cannot just be set aside or invalidated by its subsequent invalidation. In Tan v. Barrios,14 this Court, in applying the operative fact doctrine, held that despite the invalidity of the jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to have existed so as not to trample upon the rights of the accused therein. Relevant thereto, in Olaguer v. Military Commission No. 34,15 it was ruled that "military tribunals pertain to the Executive Department of the Government and are simply instrumentalities of the executive power, provided by the legislature for the President as Commander-in-Chief to aid him in properly commanding the army and navy and enforcing discipline therein, and utilized under his orders or those of his authorized military representatives."16 Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by the executive department that are accorded the same status as that of a statute or those which are quasilegislative in nature. Even assuming that De Agbayani initially applied the operative fact doctrine only to executive issuances like orders and rules and regulations, said principle can nonetheless be applied, by analogy, to decisions made by the President or the agencies under the executive department. This doctrine, in the interest of justice and equity, can be applied liberally and in a broad sense to encompass said decisions of the executive branch. In keeping with the demands of equity, the Court can apply the operative fact doctrine to acts and consequences that resulted from the reliance not only on a law or executive act which is quasi-legislative in nature but also on decisions or orders of the executive branch which were later nullified. This Court is not unmindful that such acts and consequences must be recognized in the higher interest of justice, equity and fairness. Significantly, a decision made by the President or the administrative agencies has to be complied with because it has the force and effect of law, springing from the powers of the President under the Constitution and existing laws. Prior to the nullification or recall of said decision, it may have produced acts and consequences in conformity to and in reliance of said decision, which must be respected. It is on this score that the operative fact doctrine should be applied to acts and consequences that resulted from the implementation of the PARC Resolution approving the SDP of HLI. More importantly, respondents, and even the minority, failed to clearly explain how the option to remain in HLI granted to individual farmers would result in inequity and prejudice. We can only surmise that respondents misinterpreted the option as a referendum where all the FWBs will be bound by a majority vote favoring the retention of all the 6,296 FWBs as HLI stockholders. Respondents are definitely mistaken. The fallo of Our July 5, 2011 Decision is unequivocal that only those FWBs who signified their desire to remain as HLI stockholders are entitled to 18,804.32 shares each, while those who opted not to remain as HLI stockholders will be given land by DAR. Thus, referendum was not required but only individual options were granted to each FWB whether or not they will remain in HLI. The application of the operative fact doctrine to the FWBs is not iniquitous and prejudicial to their interests but is actually beneficial and fair to them. First, they are granted the right to remain in HLI as stockholders and they acquired said shares without paying their value to the corporation. On the other hand, the qualified FWBs are required to pay the value of the land to the Land Bank of the Philippines (LBP) if land is awarded to them by DAR pursuant to RA 6657. If the qualified FWBs really want
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agricultural land, then they can simply say no to the option. And second, if the operative fact doctrine is not applied to them, then the FWBs will be required to return to HLI the 3% production share, the 3% share in the proceeds of the sale of the 500-hectare converted land, and the 80.51-hectare Subic-ClarkTarlac Expressway (SCTEX) lot, the homelots and other benefits received by the FWBs from HLI. With the application of the operative fact doctrine, said benefits, homelots and the 3% production share and 3% share from the sale of the 500-hectare and SCTEX lots shall be respected with no obligation to refund or return them. The receipt of these things is an operative fact "that can no longer be disturbed or simply ignored." (b) The Operative Fact Doctrine as Recourse in Equity As mentioned above, respondents contend that the operative fact doctrine is a rule of equity which may be applied only in the absence of a law, and that in the instant case, there is a positive law which mandates the distribution of the land as a result of the revocation of the SDP. Undeniably, the operative fact doctrine is a rule of equity.17 As a complement of legal jurisdiction, equity "seeks to reach and complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so. Equity regards the spirit and not the letter, the intent and not the form, the substance rather than the circumstance, as it is variously expressed by different courts."18 Remarkably, it is applied only in the absence of statutory law and never in contravention of said law.19 In the instant case, respondents argue that the operative fact doctrine should not be applied since there is a positive law, particularly, Sec. 31 of RA 6657, which directs the distribution of the land as a result of the revocation of the SDP. Pertinently, the last paragraph of Sec. 31 of RA 6657 states: If within two (2) years from the approval of this Act, the land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Emphasis supplied.) Markedly, the use of the word "or" under the last paragraph of Sec. 31 of RA 6657 connotes that the law gives the corporate landowner an "option" to avail of the stock distribution option or to have the SDP approved within two (2) years from the approval of RA 6657. This interpretation is consistent with the well-established principle in statutory construction that "[t]he word or is a disjunctive term signifying disassociation and independence of one thing from the other things enumerated; it should, as a rule, be construed in the sense in which it ordinarily implies, as a disjunctive word."20 In PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc.,21 this Court held: Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the equipment; only either one of the two was required. The demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably petitioners counsel. As such, the use of "or" instead of "and" in the letter could hardly be treated as a simple typographical error, bearing in mind the nature of the demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would have known that a world of difference exists between "and" and "or" in the manner that the word was employed in the letter. A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and independence of one thing from other things enumerated unless the context requires a different interpretation.22 In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It often connects a series of words or propositions indicating a choice of either. When "or" is used, the various members of the enumeration are to be taken separately.23 The word "or" is a disjunctive term signifying disassociation and independence of one thing from each of the other things enumerated.24 (Emphasis in the original.)

Given that HLI secured approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took effect, then HLI did not violate the last paragraph of Sec. 31 of RA 6657. Pertinently, said provision does not bar Us from applying the operative fact doctrine. Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed the revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP and DAO 10. By applying the operative fact doctrine, this Court merely gave the qualified FWBs the option to remain as stockholders of HLI and ruled that they will retain the homelots and other benefits which they received from HLI by virtue of the SDP. It bears stressing that the application of the operative fact doctrine by the Court in its July 5, 2011 Decision is favorable to the FWBs because not only were the FWBs allowed to retain the benefits and homelots they received under the stock distribution scheme, they were also given the option to choose for themselves whether they want to remain as stockholders of HLI or not. This is in recognition of the fact that despite the claims of certain farmer groups that they represent the qualified FWBs in Hacienda Luisita, none of them can show that they are duly authorized to speak on their behalf. As We have mentioned, "To date, such authorization document, which would logically include a list of the names of the authorizing FWBs, has yet to be submitted to be part of the records." II. Constitutionality of Sec. 31, RA 6657 FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota of the case, raised at the earliest opportunity, and not to be considered as moot and academic.25 This contention is unmeritorious. As We have succinctly discussed in Our July 5, 2011 Decision: While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter and why its members received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional legal provision. It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is properly raised and presented in an appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest possible opportunity is clearly wanting. The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. The unyielding rule has been to avoid, whenever plausible, an issue assailing the constitutionality of a statute or governmental act. If some other grounds exist by which judgment can be made without touching the constitutionality of a law, such recourse is favored. Garcia v. Executive Secretary explains why:
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Lis Mota the fourth requirement to satisfy before this Court will undertake judicial review means that the Court will not pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the application of the statute or the general law. The petitioner must be able to show that the case cannot be legally resolved unless the constitutional question raised is determined. This requirement is based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative. The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed. It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional should be a moot issue. (Citations omitted; emphasis in the original.) Based on the foregoing disquisitions, We maintain that this Court is NOT compelled to rule on the constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that this Court, in its July 5, 2011 Decision, made no ruling in favor of the constitutionality of Sec. 31 of RA 6657. There was, however, a determination of the existence of an apparent grave violation of the Constitution that may justify the resolution of the issue of constitutionality, to which this Court ruled in the negative. Having clarified this matter, all other points raised by both FARM and AMBALA concerning the constitutionality of RA 6657 deserve scant consideration. III. Coverage of Compulsory Acquisition FARM argues that this Court ignored certain material facts when it limited the maximum area to be covered to 4,915.75 hectares, whereas the area that should, at the least, be covered is 6,443 hectares,26 which is the agricultural land allegedly covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco).27 We cannot subscribe to this view. Since what is put in issue before the Court is the propriety of the revocation of the SDP, which only involves 4,915.75 has. of agricultural land and not 6,443 has., then We are constrained to rule only as regards the 4,915.75 has. of agricultural land. Moreover, as admitted by FARM itself, this issue was raised for the first time by FARM in its Memorandum dated September 24, 2010 filed before this Court.28 In this regard, it should be noted that "[a]s a legal recourse, the special civil action of certiorari is a limited form of review."29 The certiorari jurisdiction of this Court is narrow in scope as it is restricted to resolving errors of jurisdiction and grave abuse of discretion, and not errors of judgment.30 To allow additional issues at this stage of the proceedings is violative of fair play, justice and due process.31 Nonetheless, it should be taken into account that this should not prevent the DAR, under its mandate under the agrarian reform law, from subsequently subjecting to agrarian reform other agricultural lands originally held by Tadeco that were allegedly not transferred to HLI but were supposedly covered by RA 6657.

DAR, however, contends that the declaration of the area32 to be awarded to each FWB is too restrictive. It stresses that in agricultural landholdings like Hacienda Luisita, there are roads, irrigation canals, and other portions of the land that are considered commonly-owned by farmworkers, and this may necessarily result in the decrease of the area size that may be awarded per FWB.33 DAR also argues that the July 5, 2011 Decision of this Court does not give it any leeway in adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs decreases.34 The argument is meritorious. In order to ensure the proper distribution of the agricultural lands of Hacienda Luisita per qualified FWB, and considering that matters involving strictly the administrative implementation and enforcement of agrarian reform laws are within the jurisdiction of the DAR,35 it is the latter which shall determine the area with which each qualified FWB will be awarded. (a) Conversion of Agricultural Lands AMBALA insists that the conversion of the agricultural lands violated the conditions of RA 6657 and DAO 10, stating that "keeping the land intact and unfragmented is one of the essential conditions of [the] SD[P], RA 6657 and DAO 10."36 It asserts that "this provision or conditionality is not mere decoration and is intended to ensure that the farmers can continue with the tillage of the soil especially since it is the only occupation that majority of them knows."37 We disagree. As We amply discussed in Our July 5, 2011 Decision: Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is also not among the imperative impositions by the SDP, RA 6657, and DAO 10. The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured the intended stock beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-assailed resolution would take HLI to task for securing approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased profitability." The PARC is wrong. In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits to qualified beneficiariesis but one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs stated observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural land remaining intact x x x but the viability of the corporate operations with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate agricultural land does not remain intact or [un]fragmented."38 It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining the viability of Hacienda Luisitas operation, as the DAR Secretary approved the land conversion applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads: Sec. 65. Conversion of Lands.After the lapse of five years from its award when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or landowner with due notice to the affected parties, and subject to existing laws, may authorize the x x x conversion of the land and its dispositions. x x x Moreover, it is worth noting that the application for conversion had the backing of 5,000 or so FWBs, including respondents Rene Galang, and Jose Julio Suniga, then leaders of the AMBALA and the Supervisory Group, respectively, as evidenced by the Manifesto of Support they signed and which was
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submitted to the DAR.39 If at all, this means that AMBALA should be estopped from questioning the conversion of a portion of Hacienda Luisita, which its leader has fully supported. (b) LIPCO and RCBC as Innocent Purchasers for Value The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not innocent purchasers for value. The AMBALA, in particular, argues that LIPCO, being a wholly-owned subsidiary of HLI, is conclusively presumed to have knowledge of the agrarian dispute on the subject land and could not feign ignorance of this fact, especially since they have the same directors and stockholders.40 This is seconded by Rene Galang and AMBALA, through the PILC, which intimate that a look at the General Information Sheets of the companies involved in the transfers of the 300-hectare portion of Hacienda Luisita, specifically, Centennary Holdings, Inc. (Centennary), LIPCO and RCBC, would readily reveal that their directors are interlocked and connected to Tadeco and HLI.41 Rene Galang and AMBALA, through the PILC, also allege that "with the clear-cut involvement of the leadership of all the corporations concerned, LIPCO and RCBC cannot feign ignorance that the parcels of land they bought are under the coverage of the comprehensive agrarian reform program [CARP] and that the conditions of the respective sales are imbued with public interest where normal property relations in the Civil Law sense do not apply."42 Avowing that the land subject of conversion still remains undeveloped, Rene Galang and AMBALA, through the PILC, further insist that the condition that "[t]he development of the land should be completed within the period of five [5] years from the issuance of this Order" was not complied with. AMBALA also argues that since RCBC and LIPCO merely stepped into the shoes of HLI, then they must comply with the conditions imposed in the conversion order.43 In addition, FARM avers that among the conditions attached to the conversion order, which RCBC and LIPCO necessarily have knowledge of, are (a) that its approval shall in no way amend, diminish, or alter the undertaking and obligations of HLI as contained in the [SDP] approved on November 21, 1989; and (b) that the benefits, wages and the like, received by the FWBs shall not in any way be reduced or adversely affected, among others.44 The contentions of respondents are wanting. In the first place, there is no denying that RCBC and LIPCO knew that the converted lands they bought were under the coverage of CARP. Nevertheless, as We have mentioned in Our July 5, 2011 Decision, this does not necessarily mean that both LIPCO and RCBC already acted in bad faith in purchasing the converted lands. As this Court explained: It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good faith "consists in the possessors belief that the person from whom he received it was the owner of the same and could convey his title. Good faith requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it. There is good faith where there is an honest intention to abstain from taking any unconscientious advantage from another." It is the opposite of fraud. To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian reform. The DAR

conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. (Emphasis supplied.) In the second place, the allegation that the converted lands remain undeveloped is contradicted by the evidence on record, particularly, Annex "X" of LIPCOs Memorandum dated September 23, 2010,45 which has photographs showing that the land has been partly developed.46 Certainly, it is a general rule that the factual findings of administrative agencies are conclusive and binding on the Court when supported by substantial evidence.47 However, this rule admits of certain exceptions, one of which is when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.48 In the third place, by arguing that the companies involved in the transfers of the 300-hectare portion of Hacienda Luisita have interlocking directors and, thus, knowledge of one may already be imputed upon all the other companies, AMBALA and Rene Galang, in effect, want this Court to pierce the veil of corporate fiction. However, piercing the veil of corporate fiction is warranted "only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one."49 As succinctly discussed by the Court in Velarde v. Lopez, Inc.:50 Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by piercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one. The rationale behind piercing a corporations identity is to remove the barrier between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities. In applying the doctrine of piercing the veil of corporate fiction, the following requisites must be established: (1) control, not merely majority or complete stock control; (2) such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in contravention of plaintiffs legal rights; and (3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. (Citations omitted.) Nowhere, however, in the pleadings and other records of the case can it be gathered that respondent has complete control over Sky Vision, not only of finances but of policy and business practice in respect to the transaction attacked, so that Sky Vision had at the time of the transaction no separate mind, will or existence of its own. The existence of interlocking directors, corporate officers and shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy considerations. Absent any allegation or proof of fraud or other public policy considerations, the existence of interlocking directors, officers and stockholders is not enough justification to pierce the veil of corporate fiction as in the instant case. And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered the payment of the proceeds of the sale of the converted land, and even of the 80.51-hectare land sold to the government, through the Bases Conversion Development Authority, to the qualified FWBs, effectively fulfils the conditions in the conversion order, to wit: (1) that its approval shall in no way amend, diminish, or alter the undertaking and obligations of HLI as contained in the SDP approved on November 21, 1989; and (2) that the benefits, wages and the like, received by the FWBs shall not in any way be reduced or adversely affected, among others.

A view has also been advanced that the 200-hectare lot transferred to Luisita Realty Corporation (LRC) should be included in the compulsory coverage because the corporation did not intervene. We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by PARC Resolution 2005-32-01, this Court is constrained to make a ruling on the rights of LRC over the said lot. Moreover, the 500-hectare portion of Hacienda Luisita, of which the 200-hectare portion sold to LRC and the 300hectare portion subsequently acquired by LIPCO and RCBC were part of, was already the subject of the August 14, 1996 DAR Conversion Order. By virtue of the said conversion order, the land was already reclassified as industrial/commercial land not subject to compulsory coverage. Thus, if We place the 200-hectare lot sold to LRC under compulsory coverage, this Court would, in effect, be disregarding the DAR Conversion Order, which has long attained its finality. And as this Court held in Berboso v. CA,51 "Once final and executory, the Conversion Order can no longer be questioned." Besides, to disregard the Conversion Order through the revocation of the approval of the SDP would create undue prejudice to LRC, which is not even a party to the proceedings below, and would be tantamount to deprivation of property without due process of law. Nonethess, the minority is of the adamant view that since LRC failed to intervene in the instant case and was, therefore, unable to present evidence supporting its good faith purchase of the 200-hectare converted land, then LRC should be given full opportunity to present its case before the DAR. This minority view is a contradiction in itself. Given that LRC did not intervene and is, therefore, not a party to the instant case, then it would be incongruous to order them to present evidence before the DAR. Such an order, if issued by this Court, would not be binding upon the LRC. Moreover, LRC may be considered to have waived its right to participate in the instant petition since it did not intervene in the DAR proceedings for the nullification of the PARC Resolution No. 89-12-2 which approved the SDP. (c) Proceeds of the sale of the 500-hectare converted land and of the 80.51-hectare land used for the SCTEX As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court excluded the 500hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the government from compulsory coverage, then HLI and its subsidiary, Centennary, should be liable to the FWBs for the price received for said lots. Thus: There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share of the lands value. There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51hectare SCTEX lot acquired by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price received for said lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot. We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses relating to the transfer of the land and HLIs statement that most, if not all, of the proceeds were used for legitimate corporate purposes. In order to determine once and for all whether or not all the proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August 14, 1996 Conversion
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Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs. HLI, however, takes exception to the above-mentioned ruling and contends that it is not proper to distribute the unspent or unused balance of the proceeds of the sale of the 500-hectare converted land and 80.51-hectare SCTEX lot to the qualified FWBs for the following reasons: (1) the proceeds of the sale belong to the corporation, HLI, as corporate capital and assets in substitution for the portions of its land asset which were sold to third parties; (2) to distribute the cash sales proceeds of the portions of the land asset to the FWBs, who are stockholders of HLI, is to dissolve the corporation and distribute the proceeds as liquidating dividends without even paying the creditors of the corporation; and (3) the doing of said acts would violate the stringent provisions of the Corporation Code and corporate practice.52 Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability to the FWBs for the price received for the 500-hectare converted lot and the 80.51-hectare SCTEX lot. However, as We have established in Our July 5, 2011 Decision, the rights, obligations and remedies of the parties in the instant case are primarily governed by RA 6657 and HLI cannot shield itself from the CARP coverage merely under the convenience of being a corporate entity. In this regard, it should be underscored that the agricultural lands held by HLI by virtue of the SDP are no ordinary assets. These are special assets, because, originally, these should have been distributed to the FWBs were it not for the approval of the SDP by PARC. Thus, the government cannot renege on its responsibility over these assets. Likewise, HLI is no ordinary corporation as it was formed and organized precisely to make use of these agricultural lands actually intended for distribution to the FWBs. Thus, it cannot shield itself from the coverage of CARP by invoking the Corporation Code. As explained by the Court: HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the agricultural land of HLI. Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP.53 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity. Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its applicability is limited as the rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian reform program. Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevailgeneralia specialibus non derogant.54 Besides, the present impasse between HLI and the private respondents is not an intra-corporate dispute which necessitates the application of the Corporation Code. What private respondents questioned before the DAR is the proper implementation of the SDP and HLIs compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case. (Emphasis supplied.) Considering that the 500-hectare converted land, as well as the 80.51-hectare SCTEX lot, should have been included in the compulsory coverage were it not for their conversion and valid transfers, then it is only but proper that the price received for the sale of these lots should be given to the qualified FWBs. In effect, the proceeds from the sale shall take the place of the lots. The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the payment of taxes and expenses relating to the transfer of the land, as well as HLIs statement that most, if not all, of the proceeds were used for legitimate corporate purposes. Accordingly, We ordered the deduction of the
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taxes and expenses relating to the transfer of titles to the transferees, and the expenditures incurred by HLI and Centennary for legitimate corporate purposes, among others. On this note, DAR claims that the "[l]egitimate corporate expenses should not be deducted as there is no basis for it, especially since only the auditing to be conducted on the financial records of HLI will reveal the amounts to be offset between HLI and the FWBs."55 The contention is unmeritorious. The possibility of an offsetting should not prevent Us from deducting the legitimate corporate expenses incurred by HLI and Centennary. After all, the Court has ordered for a proper auditing "[i]n order to determine once and for all whether or not all the proceeds were properly utilized by HLI and its subsidiary, Centennary." In this regard, DAR is tasked to "engage the services of a reputable accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August 14, 1996 Conversion Order." Also, it should be noted that it is HLI which shall shoulder the cost of audit to reduce the burden on the part of the FWBs. Concomitantly, the legitimate corporate expenses incurred by HLI and Centennary, as will be determined by a reputable accounting firm to be engaged by DAR, shall be among the allowable deductions from the proceeds of the sale of the 500-hectare land and the 80.51hectare SCTEX lot. We, however, find that the 3% production share should not be deducted from the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot. The 3% production share, like the homelots, was among the benefits received by the FWBs as farmhands in the agricultural enterprise of HLI and, thus, should not be taken away from the FWBs. Contrarily, the minority is of the view that as a consequence of the revocation of the SDP, the parties should be restored to their respective conditions prior to its execution and approval, subject to the application of the principle of set-off or compensation. Such view is patently misplaced. The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To reiterate, what was actually revoked by this Court, in its July 5, 2011 Decision, is PARC Resolution No. 89-12-2 approving the SDP. To elucidate, it was the SDP, not the SDOA, which was presented for approval by Tadeco to DAR.56 The SDP explained the mechanics of the stock distribution but did not make any reference nor correlation to the SDOA. The pertinent portions of the proposal read: MECHANICS OF STOCK DISTRIBUTION PLAN Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land may distribute among the qualified beneficiaries such proportion or percentage of its capital stock that the value of the agricultural land actually devoted to agricultural activities, bears in relation to the corporations total assets. Conformably with this legal provision, Tarlac Development Corporation hereby submits for approval a stock distribution plan that envisions the following:57 (Terms and conditions omitted; emphasis supplied) xxxx The above stock distribution plan is hereby submitted on the basis of all these benefits that the farmworker-beneficiaries of Hacienda Luisita will receive under its provisions in addition to their regular compensation as farmhands in the agricultural enterprise and the fringe benefits granted to them by their collective bargaining agreement with management.58 Also, PARC Resolution No. 89-12-2 reads as follows: RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF TARLAC DEVELOPMENT COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI) NOW THEREFORE, on motion duly seconded, RESOLVED, as it is hereby resolved, to approve the stock distribution plan of TDC/HLI. UNANIMOUSLY APPROVED.59 (Emphasis supplied)

Clearly, what was approved by PARC is the SDP and not the SDOA. There is, therefore, no basis for this Court to apply the law on contracts to the revocation of the said PARC Resolution. IV. Just Compensation In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs." We also ruled that the date of the "taking" is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2. In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the foregoing ruling and contends that the "taking" should be reckoned from finality of the Decision of this Court, or at the very least, the reckoning period may be tacked to January 2, 2006, the date when the Notice of Coverage was issued by the DAR pursuant to PARC Resolution No. 2006-34-01 recalling/revoking the approval of the SDP.60 For their part, Mallari, et al. argue that the valuation of the land cannot be based on November 21, 1989, the date of approval of the SDP. Instead, they aver that the date of "taking" for valuation purposes is a factual issue best left to the determination of the trial courts.61 At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid just compensation for the agricultural land that will be distributed to the FWBs, since the Manila Regional Trial Court (RTC) already rendered a decision ordering "the Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian Reform, which will distribute the land to small farmers after compensating the landowners P3.988 million."62 In the event, however, that this Court will rule that HLI is indeed entitled to compensation, AMBALA contends that it should be pegged at forty thousand pesos (PhP 40,000) per hectare, since this was the same value that Tadeco declared in 1989 to make sure that the farmers will not own the majority of its stocks.63 Despite the above propositions, We maintain that the date of "taking" is November 21, 1989, the date when PARC approved HLIs SDP per PARC Resolution No. 89-12-2, in view of the fact that this is the time that the FWBs were considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands became subject of the agrarian reform coverage through the stock distribution scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such approval is akin to a notice of coverage ordinarily issued under compulsory acquisition. Further, any doubt should be resolved in favor of the FWBs. As this Court held in Perez-Rosario v. CA:64 It is an established social and economic fact that the escalation of poverty is the driving force behind the political disturbances that have in the past compromised the peace and security of the people as well as the continuity of the national order. To subdue these acute disturbances, the legislature over the course of the history of the nation passed a series of laws calculated to accelerate agrarian reform, ultimately to raise the material standards of living and eliminate discontent. Agrarian reform is a perceived solution to social instability. The edicts of social justice found in the Constitution and the public policies that underwrite them, the extraordinary national experience, and the prevailing national consciousness, all command the great departments of government to tilt the balance in favor of the poor and underprivileged whenever reasonable doubt arises in the interpretation of the law. But annexed to the great and sacred charge of protecting the weak is the diametric function to put every effort to arrive at an equitable solution for all parties concerned: the jural postulates of social justice cannot shield illegal acts, nor do they sanction false sympathy towards a certain class, nor yet should they deny justice to the landowner whenever truth and justice happen to be on her side. In the occupation of the legal questions in all agrarian disputes whose outcomes can significantly affect societal harmony, the considerations of social advantage must be weighed, an inquiry into the prevailing social interests is necessary in the adjustment of conflicting demands and expectations of the people, and the social interdependence of these interests, recognized. (Emphasis supplied.) The minority contends that it is the date of the notice of coverage, that is, January 2, 2006, which is determinative of the just compensation HLI is entitled to for its expropriated lands. To support its
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contention, it cited numerous cases where the time of the taking was reckoned on the date of the issuance of the notice of coverage. However, a perusal of the cases cited by the minority would reveal that none of them involved the stock distribution scheme. Thus, said cases do not squarely apply to the instant case. Moreover, it should be noted that it is precisely because the stock distribution option is a distinctive mechanism under RA 6657 that it cannot be treated similarly with that of compulsory land acquisition as these are two (2) different modalities under the agrarian reform program. As We have stated in Our July 5, 2011 Decision, RA 6657 "provides two (2) alternative modalities, i.e., land or stock transfer, pursuant to either of which the corporate landowner can comply with CARP." In this regard, it should be noted that when HLI submitted the SDP to DAR for approval, it cannot be gainsaid that the stock distribution scheme is clearly HLIs preferred modality in order to comply with CARP. And when the SDP was approved, stocks were given to the FWBs in lieu of land distribution. As aptly observed by the minority itself, "[i]nstead of expropriating lands, what the government took and distributed to the FWBs were shares of stock of petitioner HLI in proportion to the value of the agricultural lands that should have been expropriated and turned over to the FWBs." It cannot, therefore, be denied that upon the approval of the SDP submitted by HLI, the agricultural lands of Hacienda Luisita became subject of CARP coverage. Evidently, the approval of the SDP took the place of a notice of coverage issued under compulsory acquisition. Also, it is surprising that while the minority opines that under the stock distribution option, "title to the property remains with the corporate landowner, which should presumably be dominated by farmers with majority stockholdings in the corporation," it still insists that the just compensation that should be given to HLI is to be reckoned on January 2, 2006, the date of the issuance of the notice of coverage, even after it found that the FWBs did not have the majority stockholdings in HLI contrary to the supposed avowed policy of the law. In effect, what the minority wants is to prejudice the FWBs twice. Given that the FWBs should have had majority stockholdings in HLI but did not, the minority still wants the government to pay higher just compensation to HLI. Even if it is the government which will pay the just compensation to HLI, this will also affect the FWBs as they will be paying higher amortizations to the government if the "taking" will be considered to have taken place only on January 2, 2006. The foregoing notwithstanding, it bears stressing that the DAR's land valuation is only preliminary and is not, by any means, final and conclusive upon the landowner. The landowner can file an original action with the RTC acting as a special agrarian court to determine just compensation. The court has the right to review with finality the determination in the exercise of what is admittedly a judicial function.65 A view has also been advanced that HLI should pay the qualified FWBs rental for the use and possession of the land up to the time it surrenders possession and control over these lands. What this view fails to consider is the fact that the FWBs are also stockholders of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also, the income earned by the corporation from its possession and use of the land ultimately redounded to the benefit of the FWBs based on its business operations in the form of salaries, benefits voluntarily granted by HLI and other fringe benefits under their Collective Bargaining Agreement. That being so, there would be unjust enrichment on the part of the FWBs if HLI will still be required to pay rent for the use of the land in question. V. Sale to Third Parties There is a view that since the agricultural lands in Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May 11, 1989, then the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10, 1999, and, consequently, the qualified FWBs should already be allowed to sell these lands with respect to their land interests to third parties, including HLI, regardless of whether they have fully paid for the lands or not. The proposition is erroneous. Sec. 27 of RA 6657 states: SEC. 27. Transferability of Awarded Lands. - Lands acquired by beneficiaries under this Act may not be sold, transferred or conveyed except through hereditary succession, or to the government, or to the LBP,

or to other qualified beneficiaries for a period of ten (10) years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase the land from the government or LBP within a period of two (2) years. Due notice of the availability of the land shall be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay where the land is situated. The Provincial Agrarian Coordinating Committee (PARCCOM), as herein provided, shall, in turn, be given due notice thereof by the BARC. If the land has not yet been fully paid by the beneficiary, the right to the land may be transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph. In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the amounts the latter has already paid, together with the value of improvements he has made on the land. (Emphasis supplied.) To implement the above-quoted provision, inter alia, DAR issued Administrative Order No. 1, Series of 1989 (DAO 1) entitled Rules and Procedures Governing Land Transactions. Said Rules set forth the rules on validity of land transactions, to wit: II. RULES ON VALIDITY OF LAND TRANSACTIONS A. The following transactions are valid: 1. Those executed by the original landowner in favor of the qualified beneficiary from among those certified by DAR. 2. Those in favor of the government, DAR or the Land Bank of the Philippines. 3. Those covering lands retained by the landowner under Section 6 of R.A. 6657 duly certified by the designated DAR Provincial Agrarian Reform Officer (PARO) as a retention area, executed in favor of transferees whose total landholdings inclusive of the land to be acquired do not exceed five (5) hectares; subject, however, to the right of pre-emption and/or redemption of tenant/lessee under Section 11 and 12 of R.A. 3844, as amended. xxxx 4. Those executed by beneficiaries covering lands acquired under any agrarian reform law in favor of the government, DAR, LBP or other qualified beneficiaries certified by DAR. 5. Those executed after ten (10) years from the issuance and registration of the Emancipation Patent or Certificate of Land Ownership Award. B. The following transactions are not valid: 1. Sale, disposition, lease management contract or transfer of possession of private lands executed by the original landowner prior to June 15, 1988, which are registered on or before September 13, 1988, or those executed after June 15, 1988, covering an area in excess of the five-hectare retention limit in violation of R.A. 6657. 2. Those covering lands acquired by the beneficiary under R.A. 6657 and executed within ten (10) years from the issuance and registration of an Emancipation Patent or Certificate of Land Ownership Award. 3. Those executed in favor of a person or persons not qualified to acquire land under R.A. 6657. 4. Sale, transfer, conveyance or change of nature of the land outside of urban centers and city limits either in whole or in part as of June 15, 1988, when R.A. 6657 took effect, except as provided for under DAR Administrative Order No. 15, series of 1988. 5. Sale, transfer or conveyance by beneficiary of the right to use or any other usufructuary right over the land he acquired by virtue of being a beneficiary, in order to circumvent the law.
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x x x x (Emphasis supplied.) Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten (10) years from the issuance and registration of the emancipation patent (EP) or certificate of land ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in the instant case, the 10-year prohibitive period has not even started. Significantly, the reckoning point is the issuance of the EP or CLOA, and not the placing of the agricultural lands under CARP coverage. Moreover, if We maintain the position that the qualified FWBs should be immediately allowed the option to sell or convey the agricultural lands in Hacienda Luisita, then all efforts at agrarian reform would be rendered nugatory by this Court, since, at the end of the day, these lands will just be transferred to persons not entitled to land distribution under CARP. As aptly noted by the late Senator Neptali Gonzales during the Joint Congressional Conference Committee on the Comprehensive Agrarian Reform Program Bills: SEN. GONZALES. My point is, as much as possible let the said lands be distributed under CARP remain with the beneficiaries and their heirs because that is the lesson that we have to learn from PD No. 27. If you will talk with the Congressmen representing Nueva Ecija, Pampanga and Central Luzon provinces, law or no law, you will find out that more than one-third of the original, of the lands distributed under PD 27 are no longer owned, possessed or being worked by the grantees or the awardees of the same, something which we ought to avoid under the CARP bill that we are going to enact.66 (Emphasis supplied.) Worse, by raising that the qualified beneficiaries may sell their interest back to HLI, this smacks of outright indifference to the provision on retention limits67 under RA 6657, as this Court, in effect, would be allowing HLI, the previous landowner, to own more than five (5) hectares of agricultural land, which We cannot countenance. There is a big difference between the ownership of agricultural lands by HLI under the stock distribution scheme and its eventual acquisition of the agricultural lands from the qualified FWBs under the proposed buy-back scheme. The rule on retention limits does not apply to the former but only to the latter in view of the fact that the stock distribution scheme is sanctioned by Sec. 31 of RA 6657, which specifically allows corporations to divest a proportion of their capital stock that "the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets." On the other hand, no special rules exist under RA 6657 concerning the proposed buy-back scheme; hence, the general rules on retention limits should apply. Further, the position that the qualified FWBs are now free to transact with third parties concerning their land interests, regardless of whether they have fully paid for the lands or not, also transgresses the second paragraph of Sec. 27 of RA 6657, which plainly states that "[i]f the land has not yet been fully paid by the beneficiary, the right to the land may be transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the LBP x x x." When the words and phrases in the statute are clear and unequivocal, the law is applied according to its express terms.68 Verba legis non est recedendum, or from the words of a statute there should be no departure.69 The minority, however, posits that "[t]o insist that the FWBs rights sleep for a period of ten years is unrealistic, and may seriously deprive them of real opportunities to capitalize and maximize the victory of direct land distribution." By insisting that We disregard the ten-year restriction under the law in the case at bar, the minority, in effect, wants this Court to engage in judicial legislation, which is violative of the principle of separation of powers.70 The discourse by Ruben E. Agpalo, in his book on statutory construction, is enlightening: Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed. Where the law is clear and free from doubt or ambiguity, there is no room for construction or interpretation. Thus, where what is not clearly provided in the law is read into the law by construction because it is more logical and wise, it would be to encroach

upon legislative prerogative to define the wisdom of the law, which is judicial legislation. For whether a statute is wise or expedient is not for the courts to determine. Courts must administer the law, not as they think it ought to be but as they find it and without regard to consequences.71 (Emphasis supplied.) And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang Ladlad LGBT Party v. COMELEC:72 Regardless of the personal beliefs and biases of its individual members, this Court can only apply and interpret the Constitution and the laws. Its power is not to create policy but to recognize, review or reverse the policy crafted by the political departments if and when a proper case is brought before it. Otherwise, it will tread on the dangerous grounds of judicial legislation. Considerably, this Court is left with no other recourse but to respect and apply the law. VI. Grounds for Revocation of the SDP AMBALA and FARM reiterate that improving the economic status of the FWBs is among the legal obligations of HLI under the SDP and is an imperative imposition by RA 6657 and DAO 10.73 FARM further asserts that "[i]f that minimum threshold is not met, why allow [stock distribution option] at all, unless the purpose is not social justice but a political accommodation to the powerful."74 Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657 and DAO 10 can it be inferred that improving the economic status of the FWBs is among the legal obligations of HLI under the SDP or is an imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option. As We have painstakingly explained in Our July 5, 2011 Decision: In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of agricultural lands. We disagree. Sec. 2 of RA 6657 states: SECTION 2. Declaration of Principles and Policies.It is the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to move the nation towards sound rural development and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture. To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands. The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof. To this end, the State shall encourage the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in this Act, having taken into account ecological, developmental, and equity considerations, and subject to the payment of just compensation. The State shall respect the right of small landowners and shall provide incentives for voluntary landsharing. Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x x x shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands." Of note is the term "opportunity" which is defined as a favorable chance or opening offered by circumstances. Considering this, by no stretch of imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs, which may or may not be attained. Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify
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discarding the stock distribution option. Nothing in that option agreement, law or department order indicates otherwise. Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And attached as Annex "G" to HLIs Memorandum is the certified true report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the SCTEX. On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP. To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years, it cannot be over-emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the time. As has been suggested, one of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money. The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock distribution plan is the likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries] than if the lands were divided and distributed to them individually." But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot, actually exact assurance of success on something that is subject to the will of man, the forces of nature or the inherent risky nature of business.75 Just like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact that there were many instances wherein after a farmworker beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually left with nothing in the end. In all then, the onerous condition of the FWBs economic status, their life of hardship, if that really be the case, can hardly be attributed to HLI and its SDP and provide a valid ground for the plans revocation. (Citations omitted; emphasis in the original.) This Court, despite the above holding, still affirmed the revocation by PARC of its approval of the SDP based on the following grounds: (1) failure of HLI to fully comply with its undertaking to distribute homelots to the FWBs under the SDP; (2) distribution of shares of stock to the FWBs based on the number of "man days" or "number of days worked" by the FWB in a years time; and (3) 30-year timeframe for the implementation or distribution of the shares of stock to the FWBs. Just the same, Mallari, et al. posit that the homelots required to be distributed have all been distributed pursuant to the SDOA, and that what merely remains to be done is the release of title from the Register of Deeds.76 They further assert that there has been no dilution of shares as the corporate records would show that if ever not all of the 18,804.32 shares were given to the actual original FWB, the recipient of the difference is the next of kin or children of said original FWB.77 Thus, they submit that since the shares were given to the same "family beneficiary," this should be deemed as substantial compliance with the provisions of Sec. 4 of DAO 10.78 Also, they argue that there has been no violation of the threemonth period to implement the SDP as mandated by Sec. 11 of DAO, since this provision must be read in light of Sec. 10 of Executive Order No. 229, the pertinent portion of which reads, "The approval by the PARC of a plan for such stock distribution, and its initial implementation, shall be deemed compliance with the land distribution requirement of the CARP."79

Again, the matters raised by Mallari, et al. have been extensively discussed by the Court in its July 5, 2011 Decision. As stated: On Titles to Homelots Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 states: SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual members of the cooperatives or corporations mentioned in the preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the land owned by the cooperative or corporation. The "preceding section" referred to in the above-quoted provision is as follows: SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC. In general, lands shall be distributed directly to the individual worker-beneficiaries. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a workers cooperative or association which will deal with the corporation or business association. Until a new agreement is entered into by and between the workers cooperative or association and the corporation or business association, any agreement existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the workers cooperative or association and the corporation or business association. Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this case. Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually resides," "within a reasonable time." More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the FWBs that not all was given the 240-square meter homelots and, of those who were already given, some still do not have the corresponding titles. During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs were already given the said homelots: Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the 240 square meters each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square meter homelots. Atty. Asuncion: We will, your Honor please. Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP. On "Man Days" and the Mechanics of Stock Distribution In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states: 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.
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Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from them, is contingent on the number of "man days," that is, the number of days that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10: Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution of an equal number of shares of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657. On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of sound company policy. The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the corporation under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets." It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries." On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category constitutes an augmentation share/s that the corporate landowner may give under an additional stock distribution scheme, taking into account such variables as rank, seniority, salary, position and like factors which the management, in the exercise of its sound discretion, may deem desirable. Before anything else, it should be stressed that, at the time PARC approved HLIs SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the 30-year stock distribution program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as they appear to have in fact been accommodated as evidenced by their receipt of HLI shares. Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares earmarked for farmworkers as reward system chips to water down the shares of the original 6,296 FWBs. Particularly: Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP? Atty. Dela Merced: Yes, Your Honor. Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the land under CARP. And for that reason those who would have gotten their shares of the land actually gave up their rights to this land in place of the shares of the stock, is that correct? Atty. Dela Merced: It would be that way, Your Honor. Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes own [sic] the land and distribute it to the farmers and pay for the land, is that correct? Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x x x those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct? Atty. Dela Merced: Yes, Your Honor. Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional shares who were not in the original list of owners? Atty. Dela Merced: Yes, Your Honor. Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to have been placed under CARP? Atty. Dela Merced: If you are talking or referring (interrupted) Justice Abad: None! You tell me. None. They gave up no rights to land? Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor. Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on. Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original (interrupted) Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to use the shares as reward system for new workers who come in? It is not that the new workers, in effect, become just workers of the corporation whose stockholders were already fixed. The TADECO who has shares there about sixty six percent (66%) and the five thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x what right or where did you get that right to use this shares, to water down the shares of those who should have been benefited, and to use it as a reward system decided by the company? From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on "man days" or "number of days worked" by the FWB in a years time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of "man days" and the hiring of additional farmworkers. Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the qualified FWBs should be recorded in the stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. As stated: Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan shall be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the names of the qualified beneficiaries
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shall be recorded in stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the clashing parties has made a compelling case of the thrust of this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to complete, not merely initiate, the transfer process of shares within that three-month timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the implementation of the SDP. To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme. The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock distribution program. HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land distribution. SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x. Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the shares of stock among the FWBs. Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to make it less cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does not apply to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time. Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied with. The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided. (Citations omitted; emphasis in the original.) Based on the foregoing ruling, the contentions of Mallari, et al. are either not supported by the evidence on record or are utterly misplaced. There is, therefore, no basis for the Court to reverse its ruling affirming PARC Resolution No. 2005-32-01 and PARC Resolution No. 2006-34-01, revoking the previous approval of the SDP by PARC. VII. Control over Agricultural Lands After having discussed and considered the different contentions raised by the parties in their respective motions, We are now left to contend with one crucial issue in the case at bar, that is, control over the agricultural lands by the qualified FWBs. Upon a review of the facts and circumstances, We realize that the FWBs will never have control over these agricultural lands for as long as they remain as stockholders of HLI. In Our July 5, 2011 Decision, this Court made the following observations: There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over the agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own majority of the common

shares entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be more than 50% of the total assets of the corporation to ensure that the majority of the members of the board of directors are composed of the farmers. The PARC composed of the President of the Philippines and cabinet secretaries must see to it that control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers. (Emphasis supplied.) In line with Our finding that control over agricultural lands must always be in the hands of the farmers, We reconsider our ruling that the qualified FWBs should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control given the present proportion of shareholdings in HLI. A revisit of HLIs Proposal for Stock Distribution under CARP and the Stock Distribution Option Agreement (SDOA) upon which the proposal was based reveals that the total assets of HLI is PhP 590,554,220, while the value of the 4,915.7466 hectares is PhP 196,630,000. Consequently, the share of the farmer-beneficiaries in the HLI capital stock is 33.296% (196,630,000 divided by 590,554.220); 118,391,976.85 HLI shares represent 33.296%. Thus, even if all the holders of the 118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which is unlikely, control will never be placed in the hands of the farmer-beneficiaries.1awp++i1 Control, of course, means the majority of 50% plus at least one share of the common shares and other voting shares. Applying the formula to the HLI stockholdings, the number of shares that will constitute the majority is 295,112,101 shares (590,554,220 divided by 2 plus one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by PARC substantially fall short of the 295,112,101 shares needed by the FWBs to acquire control over HLI. Hence, control can NEVER be attained by the FWBs. There is even no assurance that 100% of the 118,391,976.85 shares issued to the FWBs will all be voted in favor of staying in HLI, taking into account the previous referendum among the farmers where said shares were not voted unanimously in favor of retaining the SDP. In light of the foregoing consideration, the option to remain in HLI granted to the individual FWBs will have to be recalled and revoked. Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI will no longer be operating under SDP and will only be treated as an ordinary private corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary stockholders and will no longer be under the protective mantle of RA 6657. In addition to the foregoing, in view of the operative fact doctrine, all the benefits and homelots80 received by all the FWBs shall be respected with no obligation to refund or return them, since, as We have mentioned in our July 5, 2011 Decision, "the benefits x x x were received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the existing collective bargaining agreement with Tadeco." One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22 of RA 6657. In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent with its administrative prerogative to identify and select the agrarian reform beneficiaries under RA 6657.81 WHEREFORE, the Motion for Partial Reconsideration dated July 20, 2011 filed by public respondents Presidential Agrarian Reform Council and Department of Agrarian Reform, the Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita, the Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor
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Farmworkers Agrarian Reform Movement, Inc., and the Motion for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and AMBALA are PARTIALLY GRANTED with respect to the option granted to the original farmworker-beneficiaries of Hacienda Luisita to remain with Hacienda Luisita, Inc., which is hereby RECALLED and SET ASIDE. The Motion for Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner HLI and the Motion for Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita, Inc. and Windsor Andaya are DENIED. The fallo of the Courts July 5, 2011 Decision is hereby amended and shall read: PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the following modifications: All salaries, benefits, the 3% of the gross sales of the production of the agricultural lands, the 3% share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and the homelots already received by the 10,502 FWBs composed of 6,296 original FWBs and the 4,206 nonqualified FWBs shall be respected with no obligation to refund or return them. The 6,296 original FWBs shall forfeit and relinquish their rights over the HLI shares of stock issued to them in favor of HLI. The HLI Corporate Secretary shall cancel the shares issued to the said FWBs and transfer them to HLI in the stocks and transfer book, which transfers shall be exempt from taxes, fees and charges. The 4,206 nonqualified FWBs shall remain as stockholders of HLI. DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-12-2 the 500-hectare lot subject of the August 14, l996 Conversion Order and the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX complex. After the segregation process, as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the original 6,296 FWBs or their successors-in-interest which will be identified by the DAR. The 4,206 non-qualified FWBs are not entitled to any share in the land to be distributed by DAR.1wphi1 HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000 received by its owned subsidiary, Centennary Holdings, Inc., for the sale of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government through the Bases Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were actually used or spent for legitimate corporate purposes. Any unspent or unused balance and any disallowed expenditures as determined by the audit shall be distributed to the 6,296 original FWBs. HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21, 1989 which is the date of issuance of PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI. DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of the compliance report, quarterly reports on the execution of this judgment within the first 15 days after the end of each quarter, until fully implemented. The temporary restraining order is lifted. SO ORDERED.

G. R. No. 180989 February 7, 2012 GUALBERTO J. DELA LLANA, Petitioner, vs. THE CHAIRPERSON, COMMISSION ON AUDIT, THE EXECUTIVE SECRETARY and THE NATIONAL TREASURER, Respondents. DECISION SERENO, J.: This is a Petition for Certiorari under Rule 65 of the Rules of Court with a prayer for the issuance of a temporary restraining order pursuant to Section 7, Article IX-D of the 1987 Constitution, seeking to annul and set aside Commission on Audit (COA) Circular No. 89-299, which lifted its system of pre-audit of government financial transactions. Statement of the Facts and the Case On 26 October 1982, the COA issued Circular No. 82-195, lifting the system of pre-audit of government financial transactions, albeit with certain exceptions. The circular affirmed the state policy that all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. Further, the circular emphasized that the responsibility to ensure faithful adherence to the policy rested directly with the chief or head of the government agency concerned. The circular was also designed to further facilitate or expedite government transactions without impairing their integrity. After the change in administration due to the February 1986 revolution, grave irregularities and anomalies in the governments financial transactions were uncovered. Hence, on 31 March 1986, the COA issued Circular No. 86-257, which reinstated the pre-audit of selected government transactions. The selective pre-audit was perceived to be an effective, although temporary, remedy against the said anomalies. With the normalization of the political system and the stabilization of government operations, the COA saw it fit to issue Circular No. 89-299, which again lifted the pre-audit of government transactions of national government agencies (NGAs) and government-owned or -controlled corporations (GOCCs). The rationale for the circular was, first, to reaffirm the concept that fiscal responsibility resides in management as embodied in the Government Auditing Code of the Philippines; and, second, to contribute to accelerating the delivery of public services and improving government operations by curbing undue bureaucratic red tape and ensuring facilitation of government transactions, while continuing to preserve and protect the integrity of these transactions. Concomitant to the lifting of the pre-audit of government transactions of NGAs and GOCCs, Circular No. 89-299 mandated the
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installation, implementation and monitoring of an adequate internal control system, which would be the direct responsibility of the government agency head. Circular No. 89-299 further provided that the pre-audit activities retained by the COA as therein outlined shall no longer be a pre-requisite to the implementation or prosecution of projects and the payment of claims. The COA aimed to henceforth focus its efforts on the post-audit of financial accounts and transactions, as well as on the assessment and evaluation of the adequacy and effectivity of the agencys fiscal control process. However, the circular did not include the financial transactions of local government units (LGUs) in its coverage. The COA later issued Circular No. 94-006 on 17 February 1994 and Circular No. 95-006 on 18 May 1995. Both circulars clarified and expanded the total lifting of pre-audit activities on all financial transactions of NGAs, GOCCs, and LGUs. The remaining audit activities performed by COA auditors would no longer be pre-requisites to the implementation or prosecution of projects, perfection of contracts, payment of claims, and/or approval of applications filed with the agencies.1 It also issued COA Circular No. 89-299, as amended by Circular No. 89-299A, which in Section 3.2 provides: 3.2 Whenever circumstances warrant, however, such as where the internal control system of a government agency is inadequate, This Commission may reinstitute pre-audit or adopt such other control measures, including temporary or special pre-audit, as are necessary and appropriate to protect the funds and property of the agency. On 18 May 2009, COA issued Circular No. 2009-002, which reinstituted the selective pre-audit of government transactions in view of the rising incidents of irregular, illegal, wasteful and anomalous disbursements of huge amounts of public funds and disposals of public property. Two years later, or on 22 July 2011, COA issued Circular No. 2011-002, which lifted the pre-audit of government transactions implemented by Circular No. 2009-002. In its assessment, subsequent developments had shown heightened vigilance of government agencies in safeguarding their resources. In the interregnum, on 3 May 2006, petitioner dela Llana wrote to the COA regarding the recommendation of the Senate Committee on Agriculture and Food that the Department of Agriculture set up an internal pre-audit service. On 18 July 2006, the COA replied to petitioner, informing him of the prior issuance of Circular No. 89-299.2 The 18 July 2006 reply of the COA further emphasized the required observance of Administrative Order No. 278 dated 8 June 1992, which directed the strengthening of internal control systems of government offices through the installation of an internal audit service (IAS). On 15 January 2008, petitioner filed this Petition for Certiorari under Rule 65. He alleges that the preaudit duty on the part of the COA cannot be lifted by a mere circular, considering that pre-audit is a constitutional mandate enshrined in Section 2 of Article IX-D of the 1987 Constitution.3 He further claims that, because of the lack of pre-audit by COA, serious irregularities in government transactions have been committed, such as the P728-million fertilizer fund scam, irregularities in the P550-million call center laboratory project of the Commission on Higher Education, and many others. On 22 February 2008, public respondents filed their Comment4 on the Petition. They argue therein that the Petition must be dismissed, as it is not proper for a petition for certiorari, considering that (1) there is no allegation showing that the COA exercised judicial or quasi-judicial functions when it promulgated Circular No. 89-299; and (2) there is no convincing explanation showing how the promulgation of the circular was done with grave abuse of discretion. Further, the Petition is allegedly defective in form, in that there is no discussion of material dates as to when petitioner received a copy of the circular; there is no factual background of the case; and petitioner failed to attach a certified true copy of the circular. In any case, public respondents aver that the circular is valid, as the COA has the power under the 1987 Constitution to promulgate it. On 9 May 2008, petitioner filed his Reply5 to the Comment.

On 17 June 2008, this Court resolved to require the parties to submit their respective memoranda. On 12 September 2008, public respondents submitted their Memorandum.6 On 15 September 2008, Amethya dela Llana-Koval, daughter of petitioner, manifested to the Court his demise on 8 July 2008 and moved that she be allowed to continue with the Petition and substitute for him. Her motion for substitution was granted by this Court in a Resolution dated 7 October 2008. On 5 January 2009, petitioner, substituted by his daughter,7 filed his Memorandum.8 The main issue for our resolution in this Petition is whether or not petitioner is entitled to the extraordinary writ of certiorari. Procedural Issues Technical Defects of the Petition Public respondents correctly allege that petitioner failed to attach a certified true copy of the assailed Order, and that the Petition lacked a statement of material dates. In view, however, of the serious matters dealt with in this Petition, this Court opts to tackle the merits thereof with least regard to technicalities. A perusal of the Petition shows that the factual background of the case, although brief, has been sufficiently alleged by petitioner. Standing This Petition has been filed as a taxpayers suit. A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds from taxation have been disbursed in alleged contravention of the law or the Constitution.9 Petitioner claims that the issuance of Circular No. 89-299 has led to the dissipation of public funds through numerous irregularities in government financial transactions. These transactions have allegedly been left unchecked by the lifting of the pre-audit performed by COA, which, petitioner argues, is its Constitutional duty. Thus, petitioner has standing to file this suit as a taxpayer, since he would be adversely affected by the illegal use of public money. Propriety of Certiorari Public respondents aver that a petition for certiorari is not proper in this case, as there is no indication that the writ is directed against a tribunal, a board, or an officer exercising judicial or quasi-judicial functions, as required in certiorari proceedings.10 Conversely, petitioner for his part claims that certiorari is proper under Section 7, Article IX-A of the 1987 Constitution, which provides in part: Section 7. x x x. Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof. Petitioner is correct in that decisions and orders of the COA are reviewable by the court via a petition for certiorari. However, these refer to decisions and orders which were rendered by the COA in its quasijudicial capacity. Circular No. 89-299 was promulgated by the COA under its quasi-legislative or rulemaking powers. Hence, Circular No. 89-299 is not reviewable by certiorari. Neither is a petition for prohibition appropriate in this case. A petition for prohibition is filed against any tribunal, corporation, board, or person whether exercising judicial, quasi-judicial, or ministerial functions who has acted without or in excess of jurisdiction or with grave abuse of discretion, and the petitioner prays that judgment be rendered, commanding the respondent to desist from further proceeding in the action or matter specified in the petition.11 However, prohibition only lies against judicial or ministerial functions, but not against legislative or quasi-legislative functions.12 Nonetheless, this Court has in the past seen fit to step in and resolve petitions despite their being the subject of an improper remedy, in view of the public importance of the issues raised therein.13 In this case, petitioner avers that the conduct of pre-audit by the COA could have prevented the occurrence of the numerous alleged irregularities in government transactions that involved substantial amounts of public money. This is a serious allegation of a grave deficiency in observing a constitutional duty if proven correct.
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This Court can use its authority to set aside errors of practice or technicalities of procedure, including the aforementioned technical defects of the Petition, and resolve the merits of a case with such serious allegations of constitutional breach. Rules of procedure were promulgated to provide guidelines for the orderly administration of justice, not to shackle the hand that dispenses it.14 Substantive Issues The 1987 Constitution has made the COA the guardian of public funds, vesting it with broad powers over all accounts pertaining to government revenues and expenditures and the use of public funds and property, including the exclusive authority to define the scope of its audit and examination; to establish the techniques and methods for the review; and to promulgate accounting and auditing rules and regulations.15 Its exercise of its general audit power is among the constitutional mechanisms that give life to the check and balance system inherent in our form of government.16 Petitioner claims that the constitutional duty of COA includes the duty to conduct pre-audit.1wphi1 A pre-audit is an examination of financial transactions before their consumption or payment.17 It seeks to determine whether the following conditions are present: (1) the proposed expenditure complies with an appropriation law or other specific statutory authority; (2) sufficient funds are available for the purpose; (3) the proposed expenditure is not unreasonable or extravagant, and the unexpended balance of appropriations to which it will be charged is sufficient to cover the entire amount of the expenditure; and (4) the transaction is approved by the proper authority and the claim is duly supported by authentic underlying evidence.18 It could, among others, identify government agency transactions that are suspicious on their face prior to their implementation and prior to the disbursement of funds. Petitioner anchors his argument on Section 2 of Article IX-D of the 1987 Constitution, which reads as follows: Section 2. 1. The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post- audit basis: . a. constitutional bodies, commissions and offices that have been granted fiscal autonomy under this
Constitution; b. autonomous state colleges and universities; c. other government-owned or controlled corporations and their subsidiaries; and d. such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto

2. The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties. (Emphasis supplied) He claims that under the first paragraph quoted above, government transactions must undergo a preaudit, which is a COA duty that cannot be lifted by a mere circular. We find for public respondents. Petitioners allegations find no support in the aforequoted Constitutional provision. There is nothing in the said provision that requires the COA to conduct a pre-audit of all government transactions and for all

government agencies. The only clear reference to a pre-audit requirement is found in Section 2, paragraph 1, which provides that a post-audit is mandated for certain government or private entities with state subsidy or equity and only when the internal control system of an audited entity is inadequate. In such a situation, the COA may adopt measures, including a temporary or special pre-audit, to correct the deficiencies. Hence, the conduct of a pre-audit is not a mandatory duty that this Court may compel the COA to perform. This discretion on its part is in line with the constitutional pronouncement that the COA has the exclusive authority to define the scope of its audit and examination. When the language of the law is clear and explicit, there is no room for interpretation, only application.19 Neither can the scope of the provision be unduly enlarged by this Court. WHEREFORE, premises considered, the Petition is DISMISSED. SO ORDERED. G.R. No. 185053 February 15, 2012 EUSTAQUIO CANDARI, Jr., RENE ESPULGAR, EDITHA DACIA, GONZALO PALMA, Jr., ANDRES DE LEON, ARNOLD BAJAR, PETER BAYBAYAN, EUGENIO TABURNO, MATEO ALOJADO, ANSELMO LIGTAS, FLORITA BULANGIS, ADELAIDA PENIG, ATTY. LEVI SALIGUMBA, EDITHA JIMENA, CYNTHIA BELARMA and ANTONIA BANTING, Petitioners, vs. ROLAND DONASCO, LIDIO VILLA, RENE GAID, PEPITO GUMBAN, OSCAR ANDRADA, ROMEO CASTONES, ROSEMARY CORDOVA, GLORIA MATULLANO, PONCIANO ABALOS, RESTITUTO BATIANCILLA, Respondents. DECISION SERENO, J.: Respondents were members of the board of directors of Dolefil Agrarian Reform Beneficiaries Cooperative, Incorporated (DARBCI). They were elected into office on 12 July 1998 and their terms should have ended on 12 July 2000. However, they continued to occupy their positions in a holdover capacity until the controversy in this case arose. On 23 November 2005, respondents instituted Civil Case No. 471-05 at Branch 39 of the Regional Trial Court (RTC) of Polomolok, South Cotabato to enjoin petitioners from holding a special general assembly (GA) and an election of officers. Respondents alleged that the process by which the GA had been called was not in accordance with Sec. 35 of Republic Act No. 6938, otherwise known as the Cooperative Code of the Philippines. On 24 November 2005, the RTC issued a 72-hour Temporary Restraining Order (TRO) to restrain petitioners from holding the GA.1 Despite the TRO, but without the participation of petitioners, 5,910 members or 78.68% of the total membership of the cooperative went through with the GA on 26 November 2005 and elected petitioners in absentia as new members of the board. On 1 December 2005, the TRO was extended to its full term of twenty (20) days from issuance.2 The trial court considered the evidence adduced during the hearing on the application for a writ of preliminary injunction. In addition, it considered the supervening events that occurred since the issuance of the TRO. These events were the holding of the GA on 26 November 2005 and the election of new officers. Thus, on 8 December 2005, the RTC, finding the provisional remedy of preliminary injunction to be moot, issued a Resolution3 denying respondents prayer for the issuance of a writ of preliminary injunction and quashing the TRO previously issued. Thereafter, respondents filed an Amended Complaint4 seeking to enjoin petitioners from assuming office and exercising the powers conferred on directors of DARBCI.

On 29 November 2006, the RTC issued an Omnibus Order5 dismissing the Amended Complaint, ruling as follows: Gauging from these allegations that plaintiffs were incumbent BOD members of DARBCI and did not consent or sanctioned (sic) the 26 November 2005 BOD election, which was conducted despite the existing TRO, do not confer a right unto them that ought to be respected by defendants (sic); neither the Tripartite Agreement among Board I, II, and III help their cause. The supervening factors, i.e. the General Assembly Meeting and the Election of Officers by the overriding majority members of DARBCI then occurring (sic) rendered these averments insignificant. Resultantly, no delict or wrong can be imputed to the latter owing to said factors which were duly established during the hearings and found by the Honorable Court. xxx xxx xxx In sum, the Amended Complaint and the evidence thus far adduced disclose that plaintiffs have neither legal right nor the requisite personality to file an action for nullification of the assailed DARBCI General Assembly and Election. Hence, their aforesaid Complaint is doomed for dismissal for failing to state a cause of action. The Court must hold, as it holds now, that the present action cannot pass muster on sheer dictates of law and equity. (Emphasis supplied.) Respondents thereafter filed a Petition for Certiorari6 with the Court of Appeals (CA) docketed as CAG.R. SP No. 01851. They contended that the trial court committed grave abuse of discretion when it considered the evidence adduced in the hearing for the issuance of a writ of preliminary injunction. They further alleged that the Amended Complaint clearly stated a cause of action based on their rights as the then incumbent officers of DARBCI. The CA rendered the assailed Decision,7 which remanded the case to the RTC for further proceedings. In allowing the Petition, the appellate court stated that the "lingering organization and leadership crisis in the DARBCI undermines the cooperatives viability to pursue its objectives." It considered the case to be one that might become an impediment to the States land reform program in Polomolok. Thus, it took cognizance of the case in the interest of public welfare and the advancement of public policy. The CA found that respondents Amended Complaint contained sufficient allegations that constituted a cause of action against herein petitioners. Thus, it held that the RTC gravely abused its discretion when the latter dismissed the case for lack of cause of action. Petitioners moved for reconsideration, but this motion was subsequently denied.8 Petitioners now come before this Court, alleging that the CA erred in allowing respondents Petition for Certiorari despite being the wrong remedy. They also insist that the CA erred in ruling that a cause of action existed despite the fact that the issue had become moot. They allege that the trial court was not limited to the allegations of the Complaint, but it may also consider the evidence presented during the hearing for the issuance of the writ of preliminary injunction. Finally, they contend that the CA misappreciated the facts of the case in stating that the issue was with regard to the implementation of the agrarian reform program, when it was merely the legality of the elections of the new board of directors. Respondents, in their Comment,9 assert that their Amended Complaint stated a cause of action, and that the trial court should have conducted a trial on the merits instead of dismissing the Amended Complaint, especially when petitioners failed to present proof that a GA and an election of officers were held on 26 November 2005. Finally, respondents contend that the RTCs act of dismissing the case was in grave abuse of discretion, reviewable via their Petition for Certiorari. On 8 July 2009, petitioners filed a Reply to respondents Comment.10 They informed this Court that two more GA meetings had been held. During the 20 December 2008 meeting, the GA ratified the Amended Articles of Cooperation and the Amended By-Laws of the cooperative. A Certificate of Registration to that effect was issued by Cooperative Development Authority (CDA) on 9 February 2009.11
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Article X, Sec. 1 of the Amended By-Laws provides: The incumbent members of the Board of Directors and various committees who were elected into office during the November 25, 2005 special elections shall continue to serve the cooperative until their successors have been elected and qualified into office. They shall be deemed to have served for one term only; The Court notes that the 25 November 2005 GA meeting referred to by the by-laws was actually held on 26 November 2005. However, considering the clear language and intent of the provision, the Court deems the date contained in the Amended By-laws to be a mere typographical error. On 29 March 2009, the second meeting was held whereby a new set of officers was elected by the GA. In Joya v. Presidential Commission on Good Government,12 we said: For a court to exercise its power of adjudication, there must be an actual case or controversy one which involves a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial resolution; the case must not be moot or academic or based on extra-legal or other similar considerations not cognizable by a court of justice. A case becomes moot and academic when its purpose has become stale, such as the case before us. Sec. 34 of the Cooperative Code states that the highest policy-making body of the cooperative is the GA, to wit: The general assembly shall be the highest policy-making body of the cooperative and shall exercise such powers as are stated in this Code, in the articles of cooperation and in the by-laws of the cooperative. The general assembly shall have the following exclusive powers which cannot be delegated: (1) To determine and approve amendments to the articles of cooperation and by-laws; (2) To elect or appoint the members of the board of directors, and to remove them for cause; (3) To approve developmental plans of the cooperative; and (4) Such other matters requiring a two-thirds (2/3) vote of all members of the general assembly, as provided in this Code. In the present case, the GA has clearly expressed its intentions through the subsequent amendment of DARBCIs Articles of Cooperation and By-Laws and through the election of new officers. In Kilusang Bayan sa Paglilingkod ng mga Magtitinda ng Bagong Pamilihang Bayan ng Muntinlupa, Inc. (KBMBPM) v. Dominguez,13 we denied the Petition on the ground that the issue had become moot and academic considering that the GA of KBMPM already elected a new set of officers, even if it was found that the right to due process of petitioners therein were clearly violated, to wit: In the instant case, there was no notice of a hearing on the alleged petition of the general membership of the KBMBPM; there was, as well, not even a semblance of a hearing. The Order was based solely on an alleged petition by the general membership of the KBMBPM. There was then a clear denial of due process. It is most unfortunate that it was done after democracy was restored through the peaceful people revolt at EDSA and the overwhelming ratification of a new Constitution thereafter, which preserves for the generations to come the gains of that historic struggle which earned for this Republic universal admiration. If there were genuine grievances against petitioners, the affected members should have timely raise (sic) these issues in the annual general assembly or in a special general assembly. Or, if such a remedy would be futile for some reason or another, judicial recourse was available. Be that as it may, petitioners cannot, however, be restored to their positions.1wphi1 Their terms expired in 1989, thereby rendering their prayer for reinstatement moot and academic. Pursuant to Section 13 of the by-laws, during the election at the first annual general assembly after registration, one-half plus one (4) of the directors obtaining the highest number of votes shall serve for two years, and the remaining directors (3) for one year; thereafter, all shall be elected for a term of two years. Hence, in 1988, when
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the board was disbanded, there was a number of directors whose terms would have expired the next year (1989) and a number whose terms would have expired two years after (1990). Reversion to the status quo preceding October 1988 would not be feasible in view of this turn of events. Besides, elections were held in 1990 and 1991. The affairs of the cooperative are presently being managed by a new board of directors duly elected in accordance with the cooperative's by-laws. In the present case, the replacement of respondents with other members of the board was willed by the GA. It is also important to note that respondents were only occupying their positions in a holdover capacity when they filed the case with the RTC, as their terms had ended on 12 July 2000. Undoubtedly, it would be a futile attempt and a waste of resources to remand the case to the trial court. There would be nothing left for the trial court to execute, should respondents be successful in their Petition. It is clear from the Omnibus Order of the RTC that it dismissed the Amended Complaint because the supervening events had rendered the case moot through the voluntary act of the GA as the highest policy-making body of the cooperative to declare the contested positions vacant and to elect a new set of officers. As a consequence, respondents no longer had the personality or the cause of action to maintain the case against petitioners herein. Thus, the RTC committed no error when it dismissed the case. WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The assailed Court of Appeals Decision in CA-G.R. SP No. 01851 dated 6 August 2008 and the Resolution dated 14 October 2008 are hereby REVERSED and SET ASIDE. The Order dated 21 November 2006 issued by Branch 39 of the Regional Trial Court of Polomolok, South Cotabato is hereby AFFIRMED and REINSTATED. SO ORDERED.

G.R. No. 193978 February 28, 2012 JELBERT B. GALICTO, Petitioner, vs. H.E. PRESIDENT BENIGNO SIMEON C. AQUINO III, in his capacity as President of the Republic of the Philippines; ATTY. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary; and FLORENCIO B. ABAD, in his capacity as Secretary of the Department of Budget and Management, Respondents. RESOLUTION BRION, J.: Before us is a Petition for Certiorari and Prohibition with Application for Writ of Preliminary Injunction and/or Temporary Restraining Order,1 seeking to nullify and enjoin the implementation of Executive Order No. (EO) 7 issued by the Office of the President on September 8, 2010. Petitioner Jelbert B. Galicto asserts that EO 7 is unconstitutional for having been issued beyond the powers of the President and for being in breach of existing laws. The petitioner is a Filipino citizen and an employee of the Philippine Health Insurance Corporation (PhilHealth).2 He is currently holding the position of Court Attorney IV and is assigned at the PhilHealth Regional Office CARAGA.3 Respondent Benigno Simeon C. Aquino III is the President of the Republic of the Philippines (Pres. Aquino); he issued EO 7 and has the duty of implementing it. Respondent Paquito N. Ochoa, Jr. is the incumbent Executive Secretary and, as the alter ego of Pres. Aquino, is tasked with the implementation of EO 7. Respondent Florencio B. Abad is the incumbent Secretary of the Department of Budget and Management (DBM) charged with the implementation of EO 7.4 The Antecedent Facts On July 26, 2010, Pres. Aquino made public in his first State of the Nation Address the alleged excessive allowances, bonuses and other benefits of Officers and Members of the Board of Directors of the Manila Waterworks and Sewerage System a government owned and controlled corporation (GOCC) which has been unable to meet its standing obligations.5 Subsequently, the Senate of the Philippines (Senate), through the Senate Committee on Government Corporations and Public Enterprises, conducted an inquiry in aid of legislation on the reported excessive salaries, allowances, and other benefits of GOCCs and government financial institutions (GFIs).6 Based on its findings that "officials and governing boards of various [GOCCs] and [GFIs] x x x have been granting themselves unwarranted allowances, bonuses, incentives, stock options, and other benefits [as well as other] irregular and abusive practices,"7 the Senate issued Senate Resolution No. 17 "urging the President to order the immediate suspension of the unusually large and apparently excessive allowances, bonuses, incentives and other perks of members of the governing boards of [GOCCs] and [GFIs]."8
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Heeding the call of Congress, Pres. Aquino, on September 8, 2010, issued EO 7, entitled "Directing the Rationalization of the Compensation and Position Classification System in the [GOCCs] and [GFIs], and for Other Purposes." EO 7 provided for the guiding principles and framework to establish a fixed compensation and position classification system for GOCCs and GFIs. A Task Force was also created to review all remunerations of GOCC and GFI employees and officers, while GOCCs and GFIs were ordered to submit to the Task Force information regarding their compensation. Finally, EO 7 ordered (1) a moratorium on the increases in the salaries and other forms of compensation, except salary adjustments under EO 8011 and EO 900, of all GOCC and GFI employees for an indefinite period to be set by the President,9 and (2) a suspension of all allowances, bonuses and incentives of members of the Board of Directors/Trustees until December 31, 2010.10 EO 7 was published on September 10, 2010.11 It took effect on September 25, 2010 and precluded the Board of Directors, Trustees and/or Officers of GOCCs from granting and releasing bonuses and allowances to members of the board of directors, and from increasing salary rates of and granting new or additional benefits and allowances to their employees. The Petition The petitioner claims that as a PhilHealth employee, he is affected by the implementation of EO 7, which was issued with grave abuse of discretion amounting to lack or excess of jurisdiction, based on the following arguments: I. EXECUTIVE ORDER NO. 7 IS NULL AND VOID FOR LACK OF LEGAL BASIS DUE TO THE FOLLOWING GROUNDS: A. P.D. 985 IS NOT APPLICABLE AS BASIS FOR EXECUTIVE ORDER NO. 7 BECAUSE THE GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS WERE SUBSEQUENTLY GRANTED THE POWER TO FIX COMPENSATION LONG AFTER SUCH POWER HAS BEEN REVOKED BY P.D. 1597 AND R.A. 6758. B. THE GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS DO NOT NEED TO HAVE ITS COMPENSATION PLANS, RATES AND POLICIES REVIEWED BY THE DBM AND APPROVED BY THE PRESIDENT BECAUSE P.D. 1597 REQUIRES ONLY THE GOCCs TO REPORT TO THE OFFICE TO THE PRESIDENT THEIR COMPENSATION PLANS AND RATES BUT THE SAME DOES NOT GIVE THE PRESIDENT THE POWER OF CONTROL OVER THE FISCAL POWER OF THE GOCCs. C. J.R. NO. 4, [SERIES] 2009 IS NOT APPLICABLE AS LEGAL BASIS BECAUSE IT HAD NOT RIPENED INTO X X X LAW, THE SAME NOT HAVING BEEN PUBLISHED. D. ASSUMING ARGUENDO THAT J.R. NO. 1, S. 2004 (sic) AND J.R. 4, S. 2009 ARE VALID, STILL THEY ARE NOT APPLICABLE AS LEGAL BASIS BECAUSE THEY ARE NOT LAWS WHICH MAY VALIDLY DELEGATE POWER TO THE PRESIDENT TO SUSPEND THE POWER OF THE BOARD TO FIX COMPENSATION. II. EXECUTIVE ORDER NO. 7 IS INVALID FOR DIVESTING THE BOARD OF DIRECTORS OF [THE] GOCCS OF THEIR POWER TO FIX THE COMPENSATION, A POWER WHICH IS A LEGISLATIVE GRANT AND WHICH COULD NOT BE REVOKED OR MODIFIED BY AN EXECUTIVE FIAT. III.

EXECUTIVE ORDER NO. 7 IS BY SUBSTANCE A LAW, WHICH IS A DEROGATION OF CONGRESSIONAL PREROGATIVE AND IS THEREFORE UNCONSTITUTIONAL. IV. THE ACTS OF SUSPENDING AND IMPOSING MORATORIUM ARE ULTRA VIRES ACTS BECAUSE J.R. NO. 4 DOES NOT EXPRESSLY AUTHORIZE THE PRESIDENT TO EXERCISE SUCH POWERS. V. EXECUTIVE ORDER NO. 7 IS AN INVALID ISSUANCE BECAUSE IT HAS NO SUFFICIENT STANDARDS AND IS THEREFORE ARBITRARY, UNREASONABLE AND A VIOLATION OF SUBSTANTIVE DUE PROCESS. VI. EXECUTIVE ORDER NO. 7 INVOLVES THE DETERMINATION AND DISCRETION AS TO WHAT THE LAW SHALL BE AND IS THEREFORE INVALID FOR ITS USURPATION OF LEGISLATIVE POWER. VII. CONSISTENT WITH THE DECISION OF THE SUPREME COURT IN PIMENTEL V. AGUIRRE CASE, EXECUTIVE ORDER NO. 7 IS ONLY DIRECTORY AND NOT MANDATORY.12 The Case for the Respondents On December 13, 2010, the respondents filed their Comment. They pointed out the following procedural defects as grounds for the petitions dismissal: (1) the petitioner lacks locus standi; (2) the petitioner failed to attach a board resolution or secretarys certificate authorizing him to question EO 7 in behalf of PhilHealth; (3) the petitioners signature does not indicate his PTR Number, Mandatory Continuing Legal Education (MCLE) Compliance Number and Integrated Bar of the Philippines (IBP) Number; (4) the jurat of the Verification and Certification of Non-Forum Shopping failed to indicate a valid identification card as provided under A.M. No. 02-8-13-SC; (5) the President should be dropped as a party respondent as he is immune from suit; and (6) certiorari is not applicable to this case.13 The respondents also raised substantive defenses to support the validity of EO 7. They claim that the President exercises control over the governing boards of the GOCCs and GFIs; thus, he can fix their compensation packages. In addition, EO 7 was issued in accordance with law for the purpose of controlling the grant of excessive salaries, allowances, incentives and other benefits to GOCC and GFI employees. They also advocate the validity of Joint Resolution (J.R.) No. 4, which they point to as the authority for issuing EO 7.14 Meanwhile, on June 6, 2011, Congress enacted Republic Act (R.A.) No. 10149,15 otherwise known as the "GOCC Governance Act of 2011." Section 11 of RA 10149 expressly authorizes the President to fix the compensation framework of GOCCs and GFIs. The Courts Ruling We resolve to DISMISS the petition for its patent formal and procedural infirmities, and for having been mooted by subsequent events. A. Certiorari is not the proper remedy. Under the Rules of Court, petitions for Certiorari and Prohibition are availed of to question judicial, quasijudicial and mandatory acts. Since the issuance of an EO is not judicial, quasi-judicial or a mandatory act, a petition for certiorari and prohibition is an incorrect remedy; instead a petition for declaratory relief under Rule 63 of the Rules of Court, filed with the Regional Trial Court (RTC), is the proper recourse to assail the validity of EO 7: Section 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other
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governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. (Emphases ours.) Liga ng mga Barangay National v. City Mayor of Manila16 is a case in point.17 In Liga, we dismissed the petition for certiorari to set aside an EO issued by a City Mayor and insisted that a petition for declaratory relief should have been filed with the RTC. We painstakingly ruled: After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari. First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal, board, or officer exercising judicial or quasi-judicial functions. Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides: SECTION 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasijudicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting [to] lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties. Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of public administrative officers or bodies required to investigate facts or ascertain the existence of fact s, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature." Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that gives rise to some specific rights of persons or property under which adverse claims to such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and authority to determine the law and adjudicate the respective rights of the contending parties. The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasijudicial functions. As correctly pointed out by the respondents, the enactment by the City Council of Manila of the assailed ordinance and the issuance by respondent Mayor of the questioned executive order were done in the exercise of legislative and executive functions, respectively, and not of judicial or quasi-judicial functions. On this score alone, certiorari will not lie. Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the declaration by this Court of the unconstitutionality or illegality of the questioned ordinance and executive order. It, thus, partakes of the nature of a petition for declaratory relief over which this Court has only appellate, not original, jurisdiction. Section 5, Article VIII of the Constitution provides: Sec. 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. (2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in: (a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. (Italics supplied). As such, this petition must necessar[ily] fail, as this Court does not have original jurisdiction over a petition for declaratory relief even if only questions of law are involved.18 Likewise, in Southern Hemisphere Engagement Network, Inc. v. Anti Terrorism Council,19 we similarly dismissed the petitions for certiorari and prohibition challenging the constitutionality of R.A. No. 9372, otherwise known as the "Human Security Act of 2007," since the respondents therein (members of the Anti-Terrorism Council) did not exercise judicial or quasi-judicial functions. While we have recognized in the past that we can exercise the discretion and rulemaking authority we are granted under the Constitution,20 and set aside procedural considerations to permit parties to bring a suit before us at the first instance through certiorari and/or prohibition,21 this liberal policy remains to be an exception to the general rule, and thus, has its limits. In Concepcion v. Commission on Elections (COMELEC),22 we emphasized the importance of availing of the proper remedies and cautioned against the wrongful use of certiorari in order to assail the quasi-legislative acts of the COMELEC, especially by the wrong party. In ruling that liberality and the transcendental doctrine cannot trump blatant disregard of procedural rules, and considering that the petitioner had other available remedies (such as a petition for declaratory relief with the appropriate RTC under the terms of Rule 63 of the Rules of Court), as in this case, we categorically ruled: The petitioners unusual approaches and use of Rule 65 of the Rules of Court do not appear to us to be the result of any error in reading Rule 65, given the way the petition was crafted. Rather, it was a backdoor approach to achieve what the petitioner could not directly do in his individual capacity under Rule 65. It was, at the very least, an attempted bypass of other available, albeit lengthier, modes of review that the Rules of Court provide. While we stop short of concluding that the petitioners approaches constitute an abuse of process through a manipulative reading and application of the Rules of Court, we nevertheless resolve that the petition should be dismissed for its blatant violation of the Rules. The transgressions alleged in a petition, however weighty they may sound, cannot be justifications for blatantly disregarding the rules of procedure, particularly when remedial measures were available under these same rules to achieve the petitioners objectives. For our part, we cannot and should not in the name of liberality and the "transcendental importance" doctrine entertain these types of petitions. As we held in the very recent case of Lozano, et al. vs. Nograles, albeit from a different perspective, our liberal approach has its limits and should not be abused.23 [emphasis supplied] B. Petitioner lacks locus standi. "Locus standi or legal standing has been defined as a personal and substantial interest in a case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged. The gist of the question on standing is whether a party alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions."24 This requirement of standing relates to the constitutional mandate that this Court settle only actual cases or controversies.25 Thus, as a general rule, a party is allowed to "raise a constitutional question" when (1) he can show that he will personally suffer some actual or threatened injury because of the allegedly illegal conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a favorable action.26
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Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By real interest is meant a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or consequential interest."27 To support his claim that he has locus standi to file the present petition, the petitioner contends that as an employee of PhilHealth, he "stands to be prejudiced by [EO] 7, which suspends or imposes a moratorium on the grants of salary increases or new or increased benefits to officers and employees of GOCC[s] and x x x curtail[s] the prerogative of those officers who are to fix and determine his compensation."28 The petitioner also claims that he has standing as a member of the bar in good standing who has an interest in ensuring that laws and orders of the Philippine government are legally and validly issued and implemented. The respondents meanwhile argue that the petitioner is not a real party-in-interest since future increases in salaries and other benefits are merely contingent events or expectancies.29 The petitioner, too, is not asserting a public right for which he is entitled to seek judicial protection. Section 9 of EO 7 reads: Section 9. Moratorium on Increases in Salaries, Allowances, Incentives and Other Benefits. Moratorium on increases in the rates of salaries, and the grant of new increases in the rates of allowances, incentives and other benefits, except salary adjustments pursuant to Executive Order No. 8011 dated June 17, 2009 and Executive Order No. 900 dated June 23, 2010, are hereby imposed until specifically authorized by the President. [emphasis ours] In the present case, we are not convinced that the petitioner has demonstrated that he has a personal stake or material interest in the outcome of the case because his interest, if any, is speculative and based on a mere expectancy. In this case, the curtailment of future increases in his salaries and other benefits cannot but be characterized as contingent events or expectancies. To be sure, he has no vested rights to salary increases and, therefore, the absence of such right deprives the petitioner of legal standing to assail EO 7. It has been held that as to the element of injury, such aspect is not something that just anybody with some grievance or pain may assert. It has to be direct and substantial to make it worth the courts time, as well as the effort of inquiry into the constitutionality of the acts of another department of government. If the asserted injury is more imagined than real, or is merely superficial and insubstantial, then the courts may end up being importuned to decide a matter that does not really justify such an excursion into constitutional adjudication.30 The rationale for this constitutional requirement of locus standi is by no means trifle. Not only does it assure the vigorous adversary presentation of the case; more importantly, it must suffice to warrant the Judiciarys overruling the determination of a coordinate, democratically elected organ of government, such as the President, and the clear approval by Congress, in this case. Indeed, the rationale goes to the very essence of representative democracies.31 Neither can the lack of locus standi be cured by the petitioners claim that he is instituting the present petition as a member of the bar in good standing who has an interest in ensuring that laws and orders of the Philippine government are legally and validly issued. This supposed interest has been branded by the Court in Integrated Bar of the Phils. (IBP) v. Hon. Zamora,32 "as too general an interest which is shared by other groups and [by] the whole citizenry."33 Thus, the Court ruled in IBP that the mere invocation by the IBP of its duty to preserve the rule of law and nothing more, while undoubtedly true, is not sufficient to clothe it with standing in that case. The Court made a similar ruling in Prof. David v. Pres. Macapagal-Arroyo34 and held that the petitioners therein, who are national officers of the IBP, have no legal standing, having failed to allege any direct or potential injury which the IBP, as an institution, or its members may suffer as a consequence of the issuance of Presidential Proclamation No. 1017 and General Order No. 5.35 We note that while the petition raises vital constitutional and statutory questions concerning the power of the President to fix the compensation packages of GOCCs and GFIs with possible implications on their officials and employees, the same cannot "infuse" or give the petitioner locus standi under the transcendental importance or paramount public interest doctrine. In Velarde v. Social Justice Society,36

we held that even if the Court could have exempted the case from the stringent locus standi requirement, such heroic effort would be futile because the transcendental issue could not be resolved any way, due to procedural infirmities and shortcomings, as in the present case.37 In other words, giving due course to the present petition which is saddled with formal and procedural infirmities explained above in this Resolution, cannot but be an exercise in futility that does not merit the Courts liberality. As we emphasized in Lozano v. Nograles,38 "while the Court has taken an increasingly liberal approach to the rule of locus standi, evolving from the stringent requirements of personal injury to the broader transcendental importance doctrine, such liberality is not to be abused."39 Finally, since the petitioner has failed to demonstrate a material and personal interest in the issue in dispute, he cannot also be considered to have filed the present case as a representative of PhilHealth. In this regard, we cannot ignore or excuse the blatant failure of the petitioner to provide a Board Resolution or a Secretarys Certificate from PhilHealth to act as its representative. C. The petition has a defective jurat. The respondents claim that the petition should be dismissed for failing to comply with Section 3, Rule 7 of the Rules of Civil Procedure, which requires the party or the counsel representing him to sign the pleading and indicate an address that should not be a post office box. The petition also allegedly violated the Supreme Court En Banc Resolution dated November 12, 2001, requiring counsels to indicate in their pleadings their Roll of Attorneys Number, their PTR Number and their IBP Official Receipt or Lifetime Member Number; otherwise, the pleadings would be considered unsigned and dismissible. Bar Matter No. 1922 likewise states that a counsel should note down his MCLE Certificate of Compliance or Certificate of Exemption in the pleading, but the petitioner had failed to do so.40 We do not see any violation of Section 3, Rule 7 of the Rules of Civil Procedure as the petition bears the petitioners signature and office address. The present suit was brought before this Court by the petitioner himself as a party litigant and not through counsel. Therefore, the requirements under the Supreme Court En Banc Resolution dated November 12, 2001 and Bar Matter No. 1922 do not apply. In Bar Matter No. 1132, April 1, 2003, we clarified that a party who is not a lawyer is not precluded from signing his own pleadings as this is allowed by the Rules of Court; the purpose of requiring a counsel to indicate his IBP Number and PTR Number is merely to protect the public from bogus lawyers. A similar construction should be given to Bar Matter No. 1922, which requires lawyers to indicate their MCLE Certificate of Compliance or Certificate of Exemption; otherwise, the provision that allows parties to sign their own pleadings will be negated. However, the point raised by the respondents regarding the petitioners defective jurat is correct. Indeed, A.M. No. 02-8-13-SC, dated February 19, 2008, calls for a current identification document issued by an official agency bearing the photograph and signature of the individual as competent evidence of identity. Nevertheless, we hasten to clarify that the defective jurat in the Verification/Certification of Non-Forum Shopping is not a fatal defect, as we held in In-N-Out Burger, Inc. v. Sehwani, Incorporated.41 The verification is only a formal, not a jurisdictional, requirement that the Court may waive. D. The petition has been mooted by supervening events. Because of the transitory nature of EO 7, it has been pointed out that the present case has already been rendered moot by these supervening events: (1) the lapse on December 31, 2010 of Section 10 of EO 7 that suspended the allowances and bonuses of the directors and trustees of GOCCs and GFIs; and (2) the enactment of R.A. No. 10149 amending the provisions in the charters of GOCCs and GFIs empowering their board of directors/trustees to determine their own compensation system, in favor of the grant of authority to the President to perform this act. With the enactment of the GOCC Governance Act of 2011, the President is now authorized to fix the compensation framework of GOCCs and GFIs. The pertinent provisions read: Section 5. Creation of the Governance Commission for Government-Owned or -Controlled Corporations. There is hereby created an advisory, monitoring, and oversight body with authority to formulate, implement and coordinate policies to be known as the Governance Commission for Government-Owned
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or-Controlled Corporations, hereinafter referred to as the GCG, which shall be attached to the Office of the President. The GCG shall have the following powers and functions: xxxx h) Conduct compensation studies, develop and recommend to the President a competitive compensation and remuneration system which shall attract and retain talent, at the same time allowing the GOCC to be financially sound and sustainable; xxxx Section 8. Coverage of the Compensation and Position Classification System. The GCG, after conducting a compensation study, shall develop a Compensation and Position Classification System which shall apply to all officers and employees of the GOCCs whether under the Salary Standardization Law or exempt therefrom and shall consist of classes of positions grouped into such categories as the GCG may determine, subject to approval of the President. Section 9. Position Titles and Salary Grades. All positions in the Positions Classification System, as determined by the GCG and as approved by the President, shall be allocated to their proper position titles and salary grades in accordance with an Index of Occupational Services, Position Titles and Salary Grades of the Compensation and Position Classification System, which shall be prepared by the GCG and approved by the President. xxxx [N]o GOCC shall be exempt from the coverage of the Compensation and Position Classification System developed by the GCG under this Act. As may be gleaned from these provisions, the new law amended R.A. No. 7875 and other laws that enabled certain GOCCs and GFIs to fix their own compensation frameworks; the law now authorizes the President to fix the compensation and position classification system for all GOCCs and GFIs, as well as other entities covered by the law. This means that, the President can now reissue an EO containing these same provisions without any legal constraints.1wphi1 A moot case is "one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value."42 "[A]n action is considered moot when it no longer presents a justiciable controversy because the issues involved have become academic or dead[,] or when the matter in dispute has already been resolved and hence, one is not entitled to judicial intervention unless the issue is likely to be raised again between the parties x x x. Simply stated, there is nothing for the x x x court to resolve as [its] determination x x x has been overtaken by subsequent events."43 This is the present situation here. Congress, thru R.A. No. 10149, has expressly empowered the President to establish the compensation systems of GOCCs and GFIs. For the Court to still rule upon the supposed unconstitutionality of EO 7 will merely be an academic exercise. Any further discussion of the constitutionality of EO 7 serves no useful purpose since such issue is moot in its face in light of the enactment of R.A. No. 10149. In the words of the eminent constitutional law expert, Fr. Joaquin Bernas, S.J., "the Court normally [will not] entertain a petition touching on an issue that has become moot because x x x there would [be] no longer x x x a flesh and blood case for the Court to resolve."44 All told, in view of the supervening events rendering the petition moot, as well as its patent formal and procedural infirmities, we no longer see any reason for the Court to resolve the other issues raised in the certiorari petition. WHEREFORE, premises considered, the petition is DISMISSED. No costs. SO ORDERED.

G.R. No. 164987 April 24, 2012 LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP), represented by its Chairman and counsel, CEFERINO PADUA, Members, ALBERTO ABELEDA, JR., ELEAZAR ANGELES, GREGELY FULTON ACOSTA, VICTOR AVECILLA, GALILEO BRION, ANATALIA BUENAVENTURA, EFREN CARAG, PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., MARIA LUZ ARZAGA-MENDOZA, LEO LUIS MENDOZA, ANTONIO P. PAREDES, AQUILINO PIMENTEL III, MARIO REYES, EMMANUEL SANTOS, TERESITA SANTOS, RUDEGELIO TACORDA, SECRETARY GEN. ROLANDO ARZAGA, Board of Consultants, JUSTICE ABRAHAM SARMIENTO, SEN. AQUILINO PIMENTEL, JR., and BARTOLOME FERNANDEZ, JR., Petitioners, vs. THE SECRETARY OF BUDGET AND MANAGEMENT, THE TREASURER OF THE PHILIPPINES, THE COMMISSION ON AUDIT, and THE PRESIDENT OF THE SENATE and the SPEAKER OF THE HOUSE OF REPRESENTATIVES in representation of the Members of the Congress, Respondents. DECISION MENDOZA, J.: For consideration of the Court is an original action for certiorari assailing the constitutionality and legality of the implementation of the Priority Development Assistance Fund (PDAF) as provided for in Republic Act (R.A.) 9206 or the General Appropriations Act for 2004 (GAA of 2004). Petitioner Lawyers Against Monopoly and Poverty (LAMP), a group of lawyers who have banded together with a mission of dismantling all forms of political, economic or social monopoly in the country,1 also sought the issuance of a writ of preliminary injunction or temporary restraining order to enjoin respondent Secretary of the Department of Budget and Management (DBM) from making, and, thereafter, releasing budgetary allocations to individual members of Congress as "pork barrel" funds out of PDAF. LAMP likewise aimed to stop the National Treasurer and the Commission on Audit (COA) from enforcing the questioned provision. On September 14, 2004, the Court required respondents, including the President of the Senate and the Speaker of the House of Representatives, to comment on the petition. On April 7, 2005, petitioner filed a Reply thereto.2 On April 26, 2005, both parties were required to submit their respective memoranda. The GAA of 2004 contains the following provision subject of this petition: PRIORITY DEVELOPMENT ASSISTANCE FUND For fund requirements of priority development programs and projects, as indicated hereunder P 8,327,000,000.00 Xxxxx Special Provision 1. Use and Release of the Fund. The amount herein appropriated shall be used to fund priority programs and projects or to fund the required counterpart for foreign-assisted programs and projects: PROVIDED, That such amount shall be released directly to the implementing agency or Local Government Unit concerned: PROVIDED, FURTHER, That the allocations authorized herein may be realigned to any
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expense class, if deemed necessary: PROVIDED FURTHERMORE, That a maximum of ten percent (10%) of the authorized allocations by district may be used for procurement of rice and other basic commodities which shall be purchased from the National Food Authority. Petitioners Position According to LAMP, the above provision is silent and, therefore, prohibits an automatic or direct allocation of lump sums to individual senators and congressmen for the funding of projects. It does not empower individual Members of Congress to propose, select and identify programs and projects to be funded out of PDAF. "In previous GAAs, said allocation and identification of projects were the main features of the pork barrel system technically known as Countrywide Development Fund (CDF). Nothing of the sort is now seen in the present law (R.A. No. 9206 of CY 2004).3 In its memorandum, LAMP insists that "[t]he silence in the law of direct or even indirect participation by members of Congress betrays a deliberate intent on the part of the Executive and the Congress to scrap and do away with the pork barrel system."4 In other words, "[t]he omission of the PDAF provision to specify sums as allocations to individual Members of Congress is a casus omissus signifying an omission intentionally made by Congress that this Court is forbidden to supply."5 Hence, LAMP is of the conclusion that "the pork barrel has become legally defunct under the present state of GAA 2004."6 LAMP further decries the supposed flaws in the implementation of the provision, namely: 1) the DBM illegally made and directly released budgetary allocations out of PDAF in favor of individual Members of Congress; and 2) the latter do not possess the power to propose, select and identify which projects are to be actually funded by PDAF. For LAMP, this situation runs afoul against the principle of separation of powers because in receiving and, thereafter, spending funds for their chosen projects, the Members of Congress in effect intrude into an executive function. In other words, they cannot directly spend the funds, the appropriation for which was made by them. In their individual capacities, the Members of Congress cannot "virtually tell or dictate upon the Executive Department how to spend taxpayers money.7 Further, the authority to propose and select projects does not pertain to legislation. "It is, in fact, a non-legislative function devoid of constitutional sanction,"8 and, therefore, impermissible and must be considered nothing less than malfeasance. The proposal and identification of the projects do not involve the making of laws or the repeal and amendment thereof, which is the only function given to the Congress by the Constitution. Verily, the power of appropriation granted to Congress as a collegial body, "does not include the power of the Members thereof to individually propose, select and identify which projects are to be actually implemented and funded - a function which essentially and exclusively pertains to the Executive Department."9 By allowing the Members of Congress to receive direct allotment from the fund, to propose and identify projects to be funded and to perform the actual spending of the fund, the implementation of the PDAF provision becomes legally infirm and constitutionally repugnant. Respondents Position For their part, the respondents10 contend that the petition miserably lacks legal and factual grounds. Although they admit that PDAF traced its roots to CDF,11 they argue that the former should not be equated with "pork barrel," which has gained a derogatory meaning referring "to government projects affording political opportunism."12 In the petition, no proof of this was offered. It cannot be gainsaid then that the petition cannot stand on inconclusive media reports, assumptions and conjectures alone. Without probative value, media reports cited by the petitioner deserve scant consideration especially the accusation that corrupt legislators have allegedly proposed cuts or slashes from their pork barrel. Hence, the Court should decline the petitioners plea to take judicial notice of the supposed iniquity of PDAF because there is no concrete proof that PDAF, in the guise of "pork barrel," is a source of "dirty money" for unscrupulous lawmakers and other officials who tend to misuse their allocations. These "facts" have no attributes of sufficient notoriety or general recognition accepted by the public without qualification, to be subjected to judicial notice. This applies, a fortiori, to the claim that Members of Congress are beneficiaries of commissions (kickbacks) taken out of the PDAF allocations and releases and preferred by favored contractors representing from 20% to 50% of the approved budget for a particular project. 13

Suffice it to say, the perceptions of LAMP on the implementation of PDAF must not be based on mere speculations circulated in the news media preaching the evils of pork barrel. Failing to present even an iota of proof that the DBM Secretary has been releasing lump sums from PDAF directly or indirectly to individual Members of Congress, the petition falls short of its cause. Likewise admitting that CDF and PDAF are "appropriations for substantially similar, if not the same, beneficial purposes," 14 the respondents invoke Philconsa v. Enriquez,15 where CDF was described as an imaginative and innovative process or mechanism of implementing priority programs/projects specified in the law. In Philconsa, the Court upheld the authority of individual Members of Congress to propose and identify priority projects because this was merely recommendatory in nature. In said case, it was also recognized that individual members of Congress far more than the President and their congressional colleagues were likely to be knowledgeable about the needs of their respective constituents and the priority to be given each project. The Issues The respondents urge the Court to dismiss the petition for its failure to establish factual and legal basis to support its claims, thereby lacking an essential requisite of judicial reviewan actual case or controversy. The Courts Ruling To the Court, the case boils down to these issues: 1) whether or not the mandatory requisites for the exercise of judicial review are met in this case; and 2) whether or not the implementation of PDAF by the Members of Congress is unconstitutional and illegal. Like almost all powers conferred by the Constitution, the power of judicial review is subject to limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have the standing to question the validity of the subject act or issuance; otherwise stated, he must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the question of constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be the very lis mota of the case.16 An aspect of the "case-or-controversy" requirement is the requisite of "ripeness." In the United States, courts are centrally concerned with whether a case involves uncertain contingent future events that may not occur as anticipated, or indeed may not occur at all. Another concern is the evaluation of the twofold aspect of ripeness: first, the fitness of the issues for judicial decision; and second, the hardship to the parties entailed by withholding court consideration. In our jurisdiction, the issue of ripeness is generally treated in terms of actual injury to the plaintiff. Hence, a question is ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging it.17 In this case, the petitioner contested the implementation of an alleged unconstitutional statute, as citizens and taxpayers. According to LAMP, the practice of direct allocation and release of funds to the Members of Congress and the authority given to them to propose and select projects is the core of the laws flawed execution resulting in a serious constitutional transgression involving the expenditure of public funds. Undeniably, as taxpayers, LAMP would somehow be adversely affected by this. A finding of unconstitutionality would necessarily be tantamount to a misapplication of public funds which, in turn, cause injury or hardship to taxpayers. This affords "ripeness" to the present controversy. Further, the allegations in the petition do not aim to obtain sheer legal opinion in the nature of advice concerning legislative or executive action. The possibility of constitutional violations in the implementation of PDAF surely involves the interplay of legal rights susceptible of judicial resolution. For LAMP, this is the right to recover public funds possibly misapplied by no less than the Members of Congress. Hence, without prejudice to other recourse against erring public officials, allegations of illegal expenditure of public funds reflect a concrete injury that may have been committed by other branches of government before the court intervenes. The possibility that this injury was indeed committed cannot be discounted. The petition complains of illegal disbursement of public funds derived from taxation and this
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is sufficient reason to say that there indeed exists a definite, concrete, real or substantial controversy before the Court. Anent locus standi, "the rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustained, direct injury as a result of its enforcement.18 The gist of the question of standing is whether a party alleges "such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."19 In public suits, the plaintiff, representing the general public, asserts a "public right" in assailing an allegedly illegal official action. The plaintiff may be a person who is affected no differently from any other person, and could be suing as a "stranger," or as a "citizen" or "taxpayer."20 Thus, taxpayers have been allowed to sue where there is a claim that public funds are illegally disbursed or that public money is being deflected to any improper purpose, or that public funds are wasted through the enforcement of an invalid or unconstitutional law.21 Of greater import than the damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental law by the enforcement of an invalid statute.22 Here, the sufficient interest preventing the illegal expenditure of money raised by taxation required in taxpayers suits is established. Thus, in the claim that PDAF funds have been illegally disbursed and wasted through the enforcement of an invalid or unconstitutional law, LAMP should be allowed to sue. The case of Pascual v. Secretary of Public Works23 is authority in support of the petitioner: In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute, the general rule is that not only persons individually affected, but also taxpayers have sufficient interest in preventing the illegal expenditures of moneys raised by taxation and may therefore question the constitutionality of statutes requiring expenditure of public moneys. [11 Am. Jur. 761, Emphasis supplied.] Lastly, the Court is of the view that the petition poses issues impressed with paramount public interest. The ramification of issues involving the unconstitutional spending of PDAF deserves the consideration of the Court, warranting the assumption of jurisdiction over the petition. Now, on the substantive issue. The powers of government are generally divided into three branches: the Legislative, the Executive and the Judiciary. Each branch is supreme within its own sphere being independent from one another and it is this supremacy which enables the courts to determine whether a law is constitutional or unconstitutional.24 The Judiciary is the final arbiter on the question of whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature.25 With these long-established precepts in mind, the Court now goes to the crucial question: In allowing the direct allocation and release of PDAF funds to the Members of Congress based on their own list of proposed projects, did the implementation of the PDAF provision under the GAA of 2004 violate the Constitution or the laws? The Court rules in the negative. In determining whether or not a statute is unconstitutional, the Court does not lose sight of the presumption of validity accorded to statutory acts of Congress. In Farias v. The Executive Secretary,26 the Court held that: Every statute is presumed valid. The presumption is that the legislature intended to enact a valid, sensible and just law and one which operates no further than may be necessary to effectuate the specific purpose of the law. Every presumption should be indulged in favor of the constitutionality and the burden of proof is on the party alleging that there is a clear and unequivocal breach of the Constitution.

To justify the nullification of the law or its implementation, there must be a clear and unequivocal, not a doubtful, breach of the Constitution. In case of doubt in the sufficiency of proof establishing unconstitutionality, the Court must sustain legislation because "to invalidate [a law] based on x x x baseless supposition is an affront to the wisdom not only of the legislature that passed it but also of the executive which approved it."27 This presumption of constitutionality can be overcome only by the clearest showing that there was indeed an infraction of the Constitution, and only when such a conclusion is reached by the required majority may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged act must be struck down.28 The petition is miserably wanting in this regard. LAMP would have the Court declare the unconstitutionality of the PDAFs enforcement based on the absence of express provision in the GAA allocating PDAF funds to the Members of Congress and the latters encroachment on executive power in proposing and selecting projects to be funded by PDAF. Regrettably, these allegations lack substantiation. No convincing proof was presented showing that, indeed, there were direct releases of funds to the Members of Congress, who actually spend them according to their sole discretion. Not even a documentation of the disbursement of funds by the DBM in favor of the Members of Congress was presented by the petitioner to convince the Court to probe into the truth of their claims. Devoid of any pertinent evidentiary support that illegal misuse of PDAF in the form of kickbacks has become a common exercise of unscrupulous Members of Congress, the Court cannot indulge the petitioners request for rejection of a law which is outwardly legal and capable of lawful enforcement. In a case like this, the Courts hands are tied in deference to the presumption of constitutionality lest the Court commits unpardonable judicial legislation. The Court is not endowed with the power of clairvoyance to divine from scanty allegations in pleadings where justice and truth lie.29 Again, newspaper or electronic reports showing the appalling effects of PDAF cannot be appreciated by the Court, "not because of any issue as to their truth, accuracy, or impartiality, but for the simple reason that facts must be established in accordance with the rules of evidence."30 Hence, absent a clear showing that an offense to the principle of separation of powers was committed, much less tolerated by both the Legislative and Executive, the Court is constrained to hold that a lawful and regular government budgeting and appropriation process ensued during the enactment and all throughout the implementation of the GAA of 2004. The process was explained in this wise, in Guingona v. Carague:31 1. Budget preparation. The first step is essentially tasked upon the Executive Branch and covers the estimation of government revenues, the determination of budgetary priorities and activities within the constraints imposed by available revenues and by borrowing limits, and the translation of desired priorities and activities into expenditure levels. Budget preparation starts with the budget call issued by the Department of Budget and Management. Each agency is required to submit agency budget estimates in line with the requirements consistent with the general ceilings set by the Development Budget Coordinating Council (DBCC). With regard to debt servicing, the DBCC staff, based on the macro-economic projections of interest rates (e.g. LIBOR rate) and estimated sources of domestic and foreign financing, estimates debt service levels. Upon issuance of budget call, the Bureau of Treasury computes for the interest and principal payments for the year for all direct national government borrowings and other liabilities assumed by the same. 2. Legislative authorization. At this stage, Congress enters the picture and deliberates or acts on the budget proposals of the President, and Congress in the exercise of its own judgment and wisdom formulates an appropriation act precisely following the process established by the Constitution, which specifies that no money may be paid from the Treasury except in accordance with an appropriation made by law. xxx
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3. Budget Execution. Tasked on the Executive, the third phase of the budget process covers the various operational aspects of budgeting. The establishment of obligation authority ceilings, the evaluation of work and financial plans for individual activities, the continuing review of government fiscal position, the regulation of funds releases, the implementation of cash payment schedules, and other related activities comprise this phase of the budget cycle. 4. Budget accountability. The fourth phase refers to the evaluation of actual performance and initially approved work targets, obligations incurred, personnel hired and work accomplished are compared with the targets set at the time the agency budgets were approved. Under the Constitution, the power of appropriation is vested in the Legislature, subject to the requirement that appropriation bills originate exclusively in the House of Representatives with the option of the Senate to propose or concur with amendments.32 While the budgetary process commences from the proposal submitted by the President to Congress, it is the latter which concludes the exercise by crafting an appropriation act it may deem beneficial to the nation, based on its own judgment, wisdom and purposes. Like any other piece of legislation, the appropriation act may then be susceptible to objection from the branch tasked to implement it, by way of a Presidential veto. Thereafter, budget execution comes under the domain of the Executive branch which deals with the operational aspects of the cycle including the allocation and release of funds earmarked for various projects. Simply put, from the regulation of fund releases, the implementation of payment schedules and up to the actual spending of the funds specified in the law, the Executive takes the wheel. "The DBM lays down the guidelines for the disbursement of the fund. The Members of Congress are then requested by the President to recommend projects and programs which may be funded from the PDAF. The list submitted by the Members of Congress is endorsed by the Speaker of the House of Representatives to the DBM, which reviews and determines whether such list of projects submitted are consistent with the guidelines and the priorities set by the Executive."33 This demonstrates the power given to the President to execute appropriation laws and therefore, to exercise the spending per se of the budget. As applied to this case, the petition is seriously wanting in establishing that individual Members of Congress receive and thereafter spend funds out of PDAF. Although the possibility of this unscrupulous practice cannot be entirely discounted, surmises and conjectures are not sufficient bases for the Court to strike down the practice for being offensive to the Constitution. Moreover, the authority granted the Members of Congress to propose and select projects was already upheld in Philconsa. This remains as valid case law. The Court sees no need to review or reverse the standing pronouncements in the said case. So long as there is no showing of a direct participation of legislators in the actual spending of the budget, the constitutional boundaries between the Executive and the Legislative in the budgetary process remain intact. While the Court is not unaware of the yoke caused by graft and corruption, the evils propagated by a piece of valid legislation cannot be used as a tool to overstep constitutional limits and arbitrarily annul acts of Congress. Again, "all presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that a law may work hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted."34 There can be no question as to the patriotism and good motive of the petitioner in filing this petition. Unfortunately, the petition must fail based on the foregoing reasons. WHEREFORE, the petition is DISMISSED without pronouncement as to costs. SO ORDERED.

G.R. No. 192791 April 24, 2012 DENNIS A. B. FUNA, Petitioner, vs. THE CHAIRMAN, COMMISSION ON AUDIT, REYNALDO A. VILLAR, Respondent. DECISION VELASCO, JR., J.: In this Petition for Certiorari and Prohibition under Rule 65, Dennis A. B. Funa challenges the constitutionality of the appointment of Reynaldo A. Villar as Chairman of the Commission on Audit and accordingly prays that a judgment issue "declaring the unconstitutionality" of the appointment. The facts of the case are as follows: On February 15, 2001, President Gloria Macapagal-Arroyo (President Macapagal-Arroyo) appointed Guillermo N. Carague (Carague) as Chairman of the Commission on Audit (COA) for a term of seven (7) years, pursuant to the 1987 Constitution.1 Caragues term of office started on February 2, 2001 to end on February 2, 2008. Meanwhile, on February 7, 2004, President Macapagal-Arroyo appointed Reynaldo A. Villar (Villar) as the third member of the COA for a term of seven (7) years starting February 2, 2004 until February 2, 2011. Following the retirement of Carague on February 2, 2008 and during the fourth year of Villar as COA Commissioner, Villar was designated as Acting Chairman of COA from February 4, 2008 to April 14, 2008. Subsequently, on April 18, 2008, Villar was nominated and appointed as Chairman of the COA. Shortly thereafter, on June 11, 2008, the Commission on Appointments confirmed his appointment. He was to serve as Chairman of COA, as expressly indicated in the appointment papers, until the expiration of the original term of his office as COA Commissioner or on February 2, 2011. Challenged in this recourse, Villar, in an obvious bid to lend color of title to his hold on the chairmanship, insists that his appointment as COA Chairman accorded him a fresh term of seven (7) years which is yet to lapse. He would argue, in fine, that his term of office, as such chairman, is up to February 2, 2015, or 7 years reckoned from February 2, 2008 when he was appointed to that position. Meanwhile, Evelyn R. San Buenaventura (San Buenaventura) was appointed as COA Commissioner to serve the unexpired term of Villar as Commissioner or up to February 2, 2011. Before the Court could resolve this petition, Villar, via a letter dated February 22, 2011 addressed to President Benigno S. Aquino III, signified his intention to step down from office upon the appointment of his replacement. True to his word, Villar vacated his position when President Benigno Simeon Aquino III named Ma. Gracia Pulido-Tan (Chairman Tan) COA Chairman. This development has rendered this petition and the main issue tendered therein moot and academic. case is considered moot and academic when its purpose has become stale,2 or when it ceases to present a justiciable controversy owing to the onset of supervening events, 3 so that a resolution of the case or a declaration on the issue would be of no practical value or use.4 In such instance, there is no actual substantial relief which a petitioner would be entitled to, and which will anyway be negated by the dismissal of the basic petition.5 As a general rule, it is not within Our charge and function to act upon and decide a moot case. However, in David v. Macapagal-Arroyo,6 We acknowledged and accepted certain exceptions to the issue of mootness, thus:
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The "moot and academic" principle is not a magical formula that can automatically dissuade the courts in resolving a case. Courts will decide cases, otherwise moot and academic, if: first, there is a grave violation of the Constitution, second, the exceptional character of the situation and the paramount public interest is involved, third, when constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public, and fourth, the case is capable of repetition yet evading review. Although deemed moot due to the intervening appointment of Chairman Tan and the resignation of Villar, We consider the instant case as falling within the requirements for review of a moot and academic case, since it asserts at least four exceptions to the mootness rule discussed in David, namely: there is a grave violation of the Constitution; the case involves a situation of exceptional character and is of paramount public interest; the constitutional issue raised requires the formulation of controlling principles to guide the bench, the bar and the public; and the case is capable of repetition yet evading review.7 The situation presently obtaining is definitely of such exceptional nature as to necessarily call for the promulgation of principles that will henceforth "guide the bench, the bar and the public" should like circumstance arise. Confusion in similar future situations would be smoothed out if the contentious issues advanced in the instant case are resolved straightaway and settled definitely. There are times when although the dispute has disappeared, as in this case, it nevertheless cries out to be addressed. To borrow from Javier v. Pacificador,8 "Justice demands that we act then, not only for the vindication of the outraged right, though gone, but also for the guidance of and as a restraint in the future." Both procedural and substantive issues are raised in this proceeding. The procedural aspect comes down to the question of whether or not the following requisites for the exercise of judicial review of an executive act obtain in this petition, viz: (1) there must be an actual case or justiciable controversy before the court; (2) the question before it must be ripe for adjudication; (3) the person challenging the act must be a proper party; and (4) the issue of constitutionality must be raised at the earliest opportunity and must be the very litis mota of the case.9 To Villar, all the requisites have not been met, it being alleged in particular that petitioner, suing as a taxpayer and citizen, lacks the necessary standing to challenge his appointment.10 On the other hand, the Office of the Solicitor General (OSG), while recognizing the validity of Villars appointment for the period ending February 11, 2011, has expressed the view that petitioner should have had filed a petition for declaratory relief or quo warranto under Rule 63 or Rule 66, respectively, of the Rules of Court instead of certiorari under Rule 65. Villars posture on the absence of some of the mandatory requisites for the exercise by the Court of its power of judicial review must fail. As a general rule, a petitioner must have the necessary personality or standing (locus standi) before a court will recognize the issues presented. In Integrated Bar of the Philippines v. Zamora, We defined locus standi as: x x x a personal and substantial interest in the case such that the party has sustained or will sustain a direct injury as a result of the governmental act that is being challenged. The term "interest" means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to assure the concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions."11 To have legal standing, therefore, a suitor must show that he has sustained or will sustain a "direct injury" as a result of a government action, or have a "material interest" in the issue affected by the challenged official act.12 However, the Court has time and again acted liberally on the locus standi requirements and has accorded certain individuals, not otherwise directly injured, or with material interest affected, by a Government act, standing to sue provided a constitutional issue of critical significance is at stake.13 The rule on locus standi is after all a mere procedural technicality in relation to which the Court, in a catena of cases involving a subject of transcendental import, has waived, or relaxed, thus allowing non-traditional plaintiffs, such as concerned citizens, taxpayers, voters or legislators, to sue in the public interest, albeit they may not have been personally injured by the

operation of a law or any other government act.14 In David, the Court laid out the bare minimum norm before the so-called "non-traditional suitors" may be extended standing to sue, thusly: 1.) For taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is unconstitutional; 2.) For voters, there must be a showing of obvious interest in the validity of the election law in question; 3.) For concerned citizens, there must be a showing that the issues raised are of transcendental importance which must be settled early; and 4.) For legislators, there must be a claim that the official action complained of infringes their prerogatives as legislators. This case before Us is of transcendental importance, since it obviously has "far-reaching implications," and there is a need to promulgate rules that will guide the bench, bar, and the public in future analogous cases. We, thus, assume a liberal stance and allow petitioner to institute the instant petition. Anent the aforestated posture of the OSG, there is no serious disagreement as to the propriety of the availment of certiorari as a medium to inquire on whether the assailed appointment of respondent Villar as COA Chairman infringed the constitution or was infected with grave abuse of discretion. For under the expanded concept of judicial review under the 1987 Constitution, the corrective hand of certiorari may be invoked not only "to settle actual controversies involving rights which are legally demandable and enforceable," but also "to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government."15 "Grave abuse of discretion" denotes: such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act in contemplation of law.16 We find the remedy of certiorari applicable to the instant case in view of the allegation that then President Macapagal-Arroyo exercised her appointing power in a manner constituting grave abuse of discretion. This brings Us to the pivotal substantive issue of whether or not Villars appointment as COA Chairman, while sitting in that body and after having served for four (4) years of his seven (7) year term as COA commissioner, is valid in light of the term limitations imposed under, and the circumscribing concepts tucked in, Sec. 1 (2), Art. IX(D) of the Constitution, which reads: (2) The Chairman and Commissioners [on Audit] shall be appointed by the President with the consent of the Commission on Appointments for a term of seven years without reappointment. Of those first appointed, the Chairman shall hold office for seven years, one commissioner for five years, and the other commissioner for three years, without reappointment. Appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor. In no case shall any member be appointed or designated in a temporary or acting capacity. (Emphasis added.)17 And if valid, for how long can he serve? At once clear from a perusal of the aforequoted provision are the defined restricting features in the matter of the composition of COA and the appointment of its members (commissioners and chairman) designed to safeguard the independence and impartiality of the commission as a body and that of its individual members.18 These are, first, the rotational plan or the staggering term in the commission membership, such that the appointment of commission members subsequent to the original set appointed after the effectivity of the 1987 Constitution shall occur every two years; second, the maximum but a fixed term-limit of seven (7) years for all commission members whose appointments came about by reason of the expiration of term save the aforementioned first set of appointees and those made to fill up vacancies resulting from certain causes; third, the prohibition against reappointment of commission
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members who served the full term of seven years or of members first appointed under the Constitution who served their respective terms of office; fourth, the limitation of the term of a member to the unexpired portion of the term of the predecessor; and fifth, the proscription against temporary appointment or designation. To elucidate on the mechanics of and the adverted limitations on the matter of COA-member appointments with fixed but staggered terms of office, the Court lays down the following postulates deducible from pertinent constitutional provisions, as construed by the Court: 1. The terms of office and appointments of the first set of commissioners, or the seven, five and three-year termers referred to in Sec. 1(2), Art. IX(D) of the Constitution, had already expired. Hence, their respective terms of office find relevancy for the most part only in understanding the operation of the rotational plan. In Gaminde v. Commission on Audit,19 the Court described how the smooth functioning of the rotational system contemplated in said and like provisions covering the two other independent commissions is achieved thru the staggering of terms: x x x [T]he terms of the first Chairmen and Commissioners of the Constitutional Commissions under the 1987 Constitution must start on a common date [February 02, 1987, when the 1987 Constitution was ratified] irrespective of the variations in the dates of appointments and qualifications of the appointees in order that the expiration of the first terms of seven, five and three years should lead to the regular recurrence of the two-year interval between the expiration of the terms. x x x In case of a belated appointment, the interval between the start of the terms and the actual appointment shall be counted against the appointee.20 (Italization in the original; emphasis added.) Early on, in Republic v. Imperial,21 the Court wrote of two conditions, "both indispensable to [the] workability" of the rotational plan. These conditions may be described as follows: (a) that the terms of the first batch of commissioners should start on a common date; and (b) that any vacancy due to death, resignation or disability before the expiration of the term should be filled only for the unexpired balance of the term. Otherwise, Imperial continued, "the regularity of the intervals between appointments would be destroyed." There appears to be near unanimity as to the purpose/s of the rotational system, as originally conceived, i.e., to place in the commission a new appointee at a fixed interval (every two years presently), thus preventing a four-year administration appointing more than one permanent and regular commissioner,22 or to borrow from Commissioner Monsod of the 1986 CONCOM, "to prevent one person (the President of the Philippines) from dominating the commissions."23 It has been declared too that the rotational plan ensures continuity in, and, as indicated earlier, secure the independence of, the commissions as a body.24 2. An appointment to any vacancy in COA, which arose from an expiration of a term, after the first chairman and commissioners appointed under the 1987 Constitution have bowed out, shall, by express constitutional fiat, be for a term of seven (7) years, save when the appointment is to fill up a vacancy for the corresponding unserved term of an outgoing member. In that case, the appointment shall only be for the unexpired portion of the departing commissioners term of office. There can only be an unexpired portion when, as a direct result of his demise, disability, resignation or impeachment, as the case may be, a sitting member is unable to complete his term of office.25 To repeat, should the vacancy arise out of the expiration of the term of the incumbent, then there is technically no unexpired portion to speak of. The vacancy is for a new and complete seven-year term and, ergo, the appointment thereto shall in all instances be for a maximum seven (7) years.

3. Sec. 1(2), Art. IX(D) of the 1987 Constitution prohibits the "reappointment" of a member of COA after his appointment for seven (7) years. Writing for the Court in Nacionalista Party v. De Vera,26 a case involving the promotion of then COMELEC Commissioner De Vera to the position of chairman, then Chief Justice Manuel Moran called attention to the fact that the prohibition against "reappointment" comes as a continuation of the requirement that the commissionersreferring to members of the COMELEC under the 1935 Constitutionshall hold office for a term of nine (9) years. This sentence formulation imports, notes Chief Justice Moran, that reappointment is not an absolute prohibition. 4. The adverted system of regular rotation or the staggering of appointments and terms in the membership for all three constitutional commissions, namely the COA, Commission on Elections (COMELEC) and Civil Service Commission (CSC) found in the 1987 Constitution was patterned after the amended 1935 Constitution for the appointment of the members of COMELEC27 with this difference: the 1935 version entailed a regular interval of vacancy every three (3) years, instead of the present two (2) years and there was no express provision on appointment to any vacancy being limited to the unexpired portion of the his predecessors term. The model 1935 provision reads: Section 1. There shall be an independent Commission on Elections composed of a Chairman and two other members to be appointed by the President with the consent of the Commission on Appointments, who shall hold office for a term of nine years and may not be reappointed. Of the Members of the Commission first appointed, one shall hold office for nine years, another for six years and the third for three years. x x x Petitioner now asseverates the view that Sec. 1(2), Art. IX(D) of the 1987 Constitution proscribes reappointment of any kind within the commission, the point being that a second appointment, be it for the same position (commissioner to another position of commissioner) or upgraded position (commissioner to chairperson) is a prohibited reappointment and is a nullity ab initio. Attention is drawn in this regard to the Courts disposition in Matibag v. Benipayo.28 Villars promotional appointment, so it is argued, is void from the start, constituting as it did a reappointment enjoined by the Constitution, since it actually needed another appointment to a different office and requiring another confirmation by the Commission on Appointments. Central to the adjudication of the instant petition is the correct meaning to be given to Sec. 1(2), Article IX(D) of the Constitution on the ban against reappointment in relation to the appointment issued to respondent Villar to the position of COA Chairman. Without question, the parties have presented two (2) contrasting and conflicting positions. Petitioner contends that Villars appointment is proscribed by the constitutional ban on reappointment under the aforecited constitutional provision. On the other hand, respondent Villar initially asserted that his appointment as COA Chairman is valid up to February 2, 2015 pursuant to the same provision. The Court finds petitioners position bereft of merit. The flaw lies in regarding the word "reappointment" as, in context, embracing any and all species of appointment. The rule is that if a statute or constitutional provision is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.29 This is known as the plain meaning rule enunciated by the maxim verba legis non est recedendum, or from the words of a statute there should be no departure.30 The primary source whence to ascertain constitutional intent or purpose is the language of the provision itself.31 If possible, the words in the Constitution must be given their ordinary meaning, save where technical terms are employed. J.M. Tuason & Co., Inc. v. Land Tenure Administration illustrates the verbal legis rule in this wise: We look to the language of the document itself in our search for its meaning. We do not of course stop there, but that is where we begin. It is to be assumed that the words in which constitutional provisions are couched express the objective sought to be attained. They are to be given their ordinary meaning
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except where technical terms are employed in which case the significance thus attached to them prevails. As the Constitution is not primarily a lawyers document, it being essential for the rule of law to obtain that it should ever be present in the peoples consciousness, its language as much as possible should be understood in the sense they have in common use. What it says according to the text of the provision to be construed compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say. Thus there are cases where the need for construction is reduced to a minimum.32 (Emphasis supplied.) Let us dissect and examine closely the provision in question: (2) The Chairman and Commissioners [on Audit] shall be appointed by the President with the consent of the Commission on Appointments for a term of seven years without reappointment. Of those first appointed, the Chairman shall hold office for seven years, one commissioner for five years, and the other commissioner for three years, without reappointment. Appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor. x x x (Emphasis added.) The first sentence is unequivocal enough. The COA Chairman shall be appointed by the President for a term of seven years, and if he has served the full term, then he can no longer be reappointed or extended another appointment. In the same vein, a Commissioner who was appointed for a term of seven years who likewise served the full term is barred from being reappointed. In short, once the Chairman or Commissioner shall have served the full term of seven years, then he can no longer be reappointed to either the position of Chairman or Commissioner. The obvious intent of the framers is to prevent the president from "dominating" the Commission by allowing him to appoint an additional or two more commissioners. The same purpose obtains in the second sentence of Sec. 1(2). The Constitutional Convention barred reappointment to be extended to commissioner-members first appointed under the 1987 Constitution to prevent the President from controlling the commission. Thus, the first Chairman appointed under the 1987 Constitution who served the full term of seven years can no longer be extended a reappointment. Neither can the Commissioners first appointed for the terms of five years and three years be eligible for reappointment. This is the plain meaning attached to the second sentence of Sec. 1(2), Article IX(D). On the other hand, the provision, on its face, does not prohibit a promotional appointment from commissioner to chairman as long as the commissioner has not served the full term of seven years, further qualified by the third sentence of Sec. 1(2), Article IX (D) that "the appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor." In addition, such promotional appointment to the position of Chairman must conform to the rotational plan or the staggering of terms in the commission membership such that the aggregate of the service of the Commissioner in said position and the term to which he will be appointed to the position of Chairman must not exceed seven years so as not to disrupt the rotational system in the commission prescribed by Sec. 1(2), Art. IX(D). In conclusion, there is nothing in Sec. 1(2), Article IX(D) that explicitly precludes a promotional appointment from Commissioner to Chairman, provided it is made under the aforestated circumstances or conditions. It may be argued that there is doubt or ambiguity on whether Sec. 1(2), Art. IX(D), as couched, allows a promotional appointment from Commissioner to Chairman. Even if We concede the existence of an ambiguity, the outcome will remain the same. J.M. Tuason & Co., Inc.33 teaches that in case of doubt as to the import and react of a constitutional provision, resort should be made to extraneous aids of construction, such as debates and proceedings of the Constitutional Convention, to shed light on and ascertain the intent of the framers or the purpose of the provision being construed. The understanding of the Convention as to what was meant by the terms of the constitutional provision which was the subject of the deliberation goes a long way toward explaining the understanding of the people when they ratified it. The Court applied this principle in Civil Liberties Union v. Executive Secretary:

A foolproof yardstick in constitutional construction is the intention underlying the provision under consideration. Thus, it has been held that the Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in the light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose.34 (Emphasis added.) And again in Nitafan v. Commissioner on Internal Revenue: x x x The ascertainment of that intent is but in keeping with the fundamental principle of constitutional construction that the intent of the framers of the organic law and of the people adopting it should be given effect. The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers and of the people in the adoption of the Constitution. It may also be safely assumed that the people in ratifying the Constitution were guided mainly by the explanation offered by the framers.35 (Emphasis added.) Much weight and due respect must be accorded to the intent of the framers of the Constitution in interpreting its provisions. Far from prohibiting reappointment of any kind, including a situation where a commissioner is upgraded to the position of chairman, the 1987 Constitution in fact unequivocally allows promotional appointment, but subject to defined parameters. The ensuing exchanges during the deliberations of the 1986 Constitutional Commission (CONCOM) on a draft proposal of what would eventually be Sec. 1(2), Art. IX(D) of the present Constitution amply support the thesis that a promotional appointment is allowed provided no one may be in the COA for an aggregate threshold period of 7 years: MS. AQUINO: In the same paragraph, I would propose an amendment x x x. Between x x x the sentence which begins with "In no case," insert THE APPOINTEE SHALL IN NO CASE SERVE AN AGGREGATE PERIOD OF MORE THAN SEVEN YEARS. I was thinking that this may approximate the situation wherein a commissioner is first appointed as chairman. I am willing to withdraw that amendment if there is a representation on the part of the Committee that there is an implicit intention to prohibit a term that in the aggregate will exceed more than seven years. If that is the intention, I am willing to withdraw my amendment. MR. MONSOD: If the [Gentlewoman] will read the whole Article, she will notice that there is no reappointment of any kind and, therefore, as a whole there is no way somebody can serve for more than seven years. The purpose of the last sentence is to make sure that this does not happen by including in the appointment both temporary and acting capacities. MS. AQUINO. Yes. Reappointment is fine; that is accounted for. But I was thinking of a situation wherein a commissioner is upgraded to a position of chairman. But if this provision is intended to cover that kind of situation, then I am willing to withdraw my amendment. MR. MONSOD. It is covered. MR. FOZ. There is a provision on line 29 precisely to cover that situation. It states: "Appointment to any vacancy shall be only for the unexpired portion of the predecessor." In other words, if there is upgrading of position from commissioner to chairman, the appointee can serve only the unexpired portion of the term of the predecessor. MS. AQUINO: But we have to be very specific x x x because it might shorten the term because he serves only the unexpired portion of the term of the predecessor. MR. FOZ: He takes it at his own risk. He knows that he will only have to serve the unexpired portion of the term of the predecessor. (Emphasis added.)36 The phrase "upgrading of position" found in the underscored portion unmistakably shows that Sec. 1(2), Art. IX(D) of the 1987 Constitution, for all its caveat against reappointment, does not per se preclude, in
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any and all cases, the promotional appointment or upgrade of a commissioner to chairman, subject to this proviso: the appointees tenure in office does not exceed 7 years in all. Indeed, such appointment does not contextually come within the restricting phrase "without reappointment" twice written in that section. Delegate Foz even cautioned, as a matter of fact, that a sitting commissioner accepting a promotional appointment to fill up an unexpired portion pertaining to the higher office does so at the risk of shortening his original term. To illustrate the Fozs concern: assume that Carague left COA for reasons other than the expiration of his threshold 7-year term and Villar accepted an appointment to fill up the vacancy. In this situation, the latter can only stay at the COA and served the unexpired portion of Caragues unexpired term as departing COA Chairman, even if, in the process, his (Villars) own 7-year term as COA commissioner has not yet come to an end. In this illustration, the inviolable regularity of the intervals between appointments in the COA is preserved. Moreover, jurisprudence tells us that the word "reappointment" means a second appointment to one and the same office.37 As Justice Arsenio Dizon (Justice Dizon) aptly observed in his dissent in Visarra v. Miraflor,38 the constitutional prohibition against the reappointment of a commissioner refers to his second appointment to the same office after holding it for nine years.39 As Justice Dizon observed, "[T]he occupant of an office obviously needs no such second appointment unless, for some valid cause, such as the expiration of his term or resignation, he had ceased to be the legal occupant thereof." 40 The inevitable implication of Justice Dizons cogent observation is that a promotion from commissioner to chairman, albeit entailing a second appointment, involves a different office and, hence, not, in the strict legal viewpoint, a reappointment. Stated a bit differently, "reappointment" refers to a movement to one and the same office. Necessarily, a movement to a different position within the commission (from Commissioner to Chairman) would constitute an appointment, or a second appointment, to be precise, but not reappointment. A similar opinion was expressed in the same Visarra case by the concurring Justice Angelo Bautista, although he expressly alluded to a promotional appointment as not being a prohibited appointment under Art. X of the 1935 Constitution. Petitioners invocation of Matibag as additional argument to contest the constitutionality of Villars elevation to the COA chairmanship is inapposite. In Matibag, then President Macapagal-Arroyo appointed, ad interim, Alfredo Benipayo as COMELEC Chairman and Resurreccion Borra and Florentino Tuason as Commissioners, each for a term of office of seven (7) years. All three immediately took their oath of, and assumed, office. These appointments were twice renewed because the Commission on Appointments failed to act on the first two ad interim appointments. Via a petition for prohibition, some disgruntled COMELEC officials assail as infirm the appointments of Benipayo, et al. Matibag lists (4) four situations where the prohibition on reappointment would arise, or to be specific, where the proviso "[t]he Chairman and the Commissioners shall be appointed x x x for a term of seven years without reappointment" shall apply. Justice Antonio T. Carpio declares in his dissent that Villars appointment falls under a combination of two of the four situations. Conceding for the nonce the correctness of the premises depicted in the situations referred to in Matibag, that case is of doubtful applicability to the instant petition. Not only is it cast against a different milieu, but the lis mota of the case, as expressly declared in the main opinion, "is the very constitutional issue raised by petitioner."41 And what is/are this/these issue/s? Only two defined issues in Matibag are relevant, viz: (1) the nature of an ad interim appointment and subsumed thereto the effect of a by-passed ad interim appointment; and (2) the constitutionality of renewals of ad interim appointments. The opinion defined these issues in the following wise: "Petitioner [Matibag] filed the instant petition questioning the appointment and the right to remain in office of Benipayo, Borra and Tuason as Chairman and Commissioners of the COMELEC, respectively. Petitioner claims that the ad interim appointments of Benipayo, et al. violate the constitutional provisions on the independence of COMELEC, as well as on the prohibitions on temporary appointments and reappointments of its Chairman and members." As may distinctly be noted, an upgrade or promotion was not in issue in Matibag.

We shall briefly address the four adverted situations outlined in Matibag, in which, as there urged, the uniform proviso on no reappointmentafter a member of any of the three constitutional commissions is appointed for a term of seven (7) yearsshall apply. Matibag made the following formulation: The first situation is where an ad interim appointee after confirmation by the Commission on Appointments serves his full 7-year term. Such person cannot be reappointed whether as a member or as chairman because he will then be actually serving more than seven (7) years. The second situation is where the appointee, after confirmation, serves part of his term and then resigns before his seven-year term of office ends. Such person cannot be reappointed whether as a member or as chair to a vacancy arising from retirement because a reappointment will result in the appointee serving more than seven years. The third situation is where the appointee is confirmed to serve the unexpired portion of someone who died or resigned, and the appointee completes the unexpired term. Such person cannot be reappointed whether as a member or as chair to a vacancy arising from retirement because a reappointment will result in the appointee also serving more than seven (7) years. The fourth situation is where the appointee has previously served a term of less than seven (7) years, and a vacancy arises from death or resignation. Even if it will not result in his serving more than seven years, a reappointment of such person to serve an unexpired term is also prohibited because his situation will be similar to those appointed under the second sentence of Sec. 1(20), Art. IX-C of the Constitution [referring to the first set of appointees (the 5 and 3 year termers) whose term of office are less than 7 years but are barred from being reappointed under any situation]."42 (Words in brackets and emphasis supplied.) The situations just described constitute an obiter dictum, hence without the force of adjudication, for the corresponding formulation of the four situations was not in any way necessary to resolve any of the determinative issues specifically defined in Matibag. An opinion entirely unnecessary for the decision of the case or one expressed upon a point not necessarily involved in the determination of the case is an obiter.43 There can be no serious objection to the scenarios depicted in the first, second and third situations, both hewing with the proposition that no one can stay in any of the three independent commissions for an aggregate period of more than seven (7) years. The fourth situation, however, does not commend itself for concurrence inasmuch as it is basically predicated on the postulate that reappointment, as earlier herein defined, of any kind is prohibited under any and all circumstances. To reiterate, the word "reappointment" means a second appointment to one and the same office; and Sec. 1(2), Art. IX(D) of the 1987 Constitution and similar provisions do not peremptorily prohibit the promotional appointment of a commissioner to chairman, provided the new appointees tenure in both capacities does not exceed seven (7) years in all. The statements in Matibag enunciating the ban on reappointment in the aforecited fourth situation, perforce, must be abandoned, for, indeed, a promotional appointment from the position of Commissioner to that of Chairman is constitutionally permissible and not barred by Sec. 1(2), Art. IX (D) of the Constitution. One of the aims behind the prohibition on reappointment, petitioner urges, is to ensure and preserve the independence of COA and its members,44 citing what the dissenting Justice J.B.L Reyes wrote in Visarra, that once appointed and confirmed, the commissioners should be free to act as their conscience demands, without fear of retaliation or hope or reward. Pursued to its logical conclusion, petitioners thesis is that a COA member may no longer act with independence if he or she can be rewarded with a promotion or appointment, for then he or she will do the bidding of the appointing authority in the hope of being promoted or reappointed. The unstated reason behind Justice J.B.L. Reyes counsel is that independence is really a matter of choice. Without taking anything away from the gem imparted by the eminent jurist, what Chief Justice Moran said on the subject of independence is just as logically sound and perhaps even more compelling, as follows:
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A Commissioner, hopeful of reappointment may strive to do good. Whereas, without that hope or other hope of material reward, his enthusiasm may decline as the end of his term approaches and he may even lean to abuses if there is no higher restrain in his moral character. Moral character is no doubt the most effective safeguard of independence. With moral integrity, a commissioner will be independent with or without the possibility of reappointment.45 The Court is likewise unable to sustain Villars proposition that his promotional appointment as COA Chairman gave him a completely fresh 7-year termfrom February 2008 to February 2015given his four (4)-year tenure as COA commissioner devalues all the past pronouncements made by this Court, starting in De Vera, then Imperial, Visarra, and finally Matibag. While there had been divergence of opinion as to the import of the word "reappointment," there has been unanimity on the dictum that in no case can one be a COA member, either as chairman or commissioner, or a mix of both positions, for an aggregate term of more than 7 years. A contrary view would allow a circumvention of the aggregate 7year service limitation and would be constitutionally offensive as it would wreak havoc to the spirit of the rotational system of succession. Imperial, passing upon the rotational system as it applied to the then organizational set-up of the COMELEC, stated: The provision that of the first three commissioners appointed "one shall hold office for 9 years, another for 6 years and the third for 3 years," when taken together with the prescribed term of office for 9 years without reappointment, evinces a deliberate plan to have a regular rotation or cycle in the membership of the commission, by having subsequent members appointable only once every three years.46 To be sure, Villars appointment as COA Chairman partakes of a promotional appointment which, under appropriate setting, would be outside the purview of the constitutional reappointment ban in Sec 1(2), Art. IX(D) of the Constitution. Nonetheless, such appointment, even for the term appearing in the underlying appointment paper, ought still to be struck down as unconstitutional for the reason as shall be explained. Consider: In a mandatory tone, the aforecited constitutional provision decrees that the appointment of a COA member shall be for a fixed 7-year term if the vacancy results from the expiration of the term of the predecessor. We reproduce in its pertinent part the provision referred to: (2) The Chairman and Commissioners [on Audit] shall be appointed x x x for a term of seven years without reappointment. x x x Appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor. x x x Accordingly, the promotional appointment as COA Chairman of Villar for a stated fixed term of less than seven (7) years is void for violating a clear, but mandatory constitutional prescription. There can be no denying that the vacancy in the position of COA chairman when Carague stepped down in February 2, 2008 resulted from the expiration of his 7-year term. Hence, the appointment to the vacancy thus created ought to have been one for seven (7) years in line with the verbal legis approach47 of interpreting the Constitution. It is to be understood, however, following Gaminde, that in case of a belated appointment, the interval between the start of the term and the actual appointment shall be counted against the 7-year term of the appointee. Posing, however, as an insurmountable barrier to a full 7-year appointment for Villar is the rule against one serving the commission for an aggregate term of more than seven (7) years. Where the Constitution or, for that matter, a statute, has fixed the term of office of a public official, the appointing authority is without authority to specify in the appointment a term shorter or longer than what the law provides. If the vacancy calls for a full seven-year appointment, the President is without discretion to extend a promotional appointment for more or for less than seven (7) years. There is no in between. He or she cannot split terms. It is not within the power of the appointing authority to override the positive provision of the Constitution which dictates that the term of office of members of constitutional bodies shall be seven (7) years.48 A contrary reasoning "would make the term of office to

depend upon the pleasure or caprice of the [appointing authority] and not upon the will [of the framers of the Constitution] of the legislature as expressed in plain and undoubted language in the law."49 In net effect, then President Macapagal-Arroyo could not have had, under any circumstance, validly appointed Villar as COA Chairman, for a full 7-year appointment, as the Constitution decrees, was not legally feasible in light of the 7-year aggregate rule. Villar had already served 4 years of his 7-year term as COA Commissioner. A shorter term, however, to comply with said rule would also be invalid as the corresponding appointment would effectively breach the clear purpose of the Constitution of giving to every appointee so appointed subsequent to the first set of commissioners, a fixed term of office of 7 years. To recapitulate, a COA commissioner like respondent Villar who serves for a period less than seven (7) years cannot be appointed as chairman when such position became vacant as a result of the expiration of the 7-year term of the predecessor (Carague). Such appointment to a full term is not valid and constitutional, as the appointee will be allowed to serve more than seven (7) years under the constitutional ban. On the other hand, a commissioner who resigned before serving his 7- year term can be extended an appointment to the position of chairman for the unexpired period of the term of the latter, provided the aggregate of the period he served as commissioner and the period he will serve as chairman will not exceed seven (7) years. This situation will only obtain when the chairman leaves the office by reason of death, disability, resignation or impeachment. Let us consider, in the concrete, the situation of then Chairman Carague and his successor, Villar. Carague was appointed COA Chairman effective February 2, 2001 for a term of seven (7) years, or up to February 2, 2008. Villar was appointed as Commissioner on February 2, 2004 with a 7-year term to end on February 2, 2011. If Carague for some reason vacated the chairmanship in 2007, then Villar can resign as commissioner in the same year and later be appointed as chairman to serve only up to February 2, 2008, the end of the unexpired portion of Caragues term. In this hypothetical scenario, Villars appointment to the position of chairman is valid and constitutional as the aggregate periods of his two (2) appointments will only be five (5) years which neither distorts the rotational scheme nor violates the rule that the sum total of said appointments shall not exceed seven (7) years. Villar would, however, forfeit two (2) years of his original seven (7)-year term as Commissioner, since, by accepting an upgraded appointment to Caragues position, he agreed to serve the unexpired portion of the term of the predecessor. As illustrated earlier, following Mr. Fozs line, if there is an upgrading of position from commissioner to chairman, the appointee takes the risk of cutting short his original term, knowing pretty well before hand that he will serve only the unexpired portion of the term of his predecessor, the outgoing COA chairman. In the extreme hypothetical situation that Villar vacates the position of chairman for causes other than the expiration of the original term of Carague, the President can only appoint the successor of Villar for the unexpired portion of the Carague term in line with Sec. 1(2), Art. IX(D) of the Constitution. Upon the expiration of the original 7-year term of Carague, the President can appoint a new chairman for a term of seven (7) full years. In his separate dissent, my esteemed colleague, Mr. Justice Mendoza, takes strong exception to the view that the promotional appointment of a sitting commissioner is plausible only when he is appointed to the position of chairman for the unexpired portion of the term of said official who leaves the office by reason of any the following reasons: death, disability, resignation or impeachment, not when the vacancy arises out as a result of the expiration of the 7-year term of the past chairman. There is nothing in the Constitution, so Justice Mendoza counters, that restricts the promotion of an incumbent commissioner to the chairmanship only in instances where the tenure of his predecessor was cut short by any of the four events referred to. As earlier explained, the majority view springs from the interplay of the following premises: The explicit command of the Constitution is that the "Chairman and the Commissioners shall be appointed by the President x x x for a term of seven years [and] appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor." To repeat, the President has two and only two options on term appointments. Either he extends an appointment for a full 7-year term when the vacancy results from the expiration of term, or for a shorter period corresponding to the unexpired term
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of the predecessor when the vacancy occurs by reason of death, physical disability, resignation or impeachment. If the vacancy calls for a full seven-year appointment, the Chief Executive is barred from extending a promotional appointment for less than seven years. Else, the President can trifle with terms of office fixed by the Constitution. Justice Mendoza likewise invites attention to an instance in history when a commissioner had been promoted chairman after the expiration of the term of his predecessor, referring specifically to the appointment of then COMELEC Commissioner Gaudencio Garcia to succeed Jose P. Carag after the expiration of the latters term in 1959 as COMELEC chairman. Such appointment to the position of chairman is not constitutionally permissible under the 1987 Constitution because of the policy and intent of its framers that a COA member who has served his full term of seven (7) years or even for a shorter period can no longer be extended another appointment to the position of chairman for a full term of seven (7) years. As revealed in the deliberations of the Constitutional Commission that crafted the 1987 Constitution, a member of COA who also served as a commissioner for less than seven (7) years in said position cannot be appointed to the position of chairman for a full term of seven (7) years since the aggregate will exceed seven (7) years. Thus, the adverted Garcia appointment in 1959 made under the 1935 Constitution cannot be used as a precedent to an appointment of such nature under the 1987 Constitution. The dissent further notes that the upgrading remained uncontested. In this regard, suffice it to state that the promotion in question was either legal or it was not. If it were not, no amount of repetitive practices would clear it of invalidating taint. Lastly, Villars appointment as chairman ending February 2, 2011 which Justice Mendoza considers as valid is likewise unconstitutional, as it will destroy the rationale and policy behind the rotational system or the staggering of appointments and terms in COA as prescribed in the Constitution. It disturbs in a way the staggered rotational system of appointment under Sec. 1(2), Art. IX(D) of the 1987 Constitution. Consider: If Villars term as COA chairman up to February 2, 2011 is viewed as valid and constitutional as espoused by my esteemed colleague, then two vacancies have simultaneously occurred and two (2) COA members going out of office at once, opening positions for two (2) appointables on that date as Commissioner San Buenaventuras term also expired on that day. This is precisely one of the mischiefs the staggering of terms and the regular intervals appointments seek to address. Note that San Buenaventura was specifically appointed to succeed Villar as commissioner, meaning she merely occupied the position vacated by her predecessor whose term as such commissioner expired on February 2, 2011. The result is what the framers of the Constitution doubtless sought to avoid, a sitting President with a 6-year term of office, like President Benigno C. Aquino III, appointing all or at least two (2) members of the three-man Commission during his term. He appointed Ma. Gracia Pulido-Tan as Chairman for the term ending February 2, 2015 upon the relinquishment of the post by respondent Villar, and Heidi Mendoza was appointed Commissioner for a 7-year term ending February 2, 2018 to replace San Buenaventura. If Justice Mendozas version is adopted, then situations like the one which obtains in the Commission will definitely be replicated in gross breach of the Constitution and in clear contravention of the intent of its framers. Presidents in the future can easily control the Commission depriving it of its independence and impartiality. To sum up, the Court restates its ruling on Sec. 1(2), Art. IX(D) of the Constitution, viz: 1. The appointment of members of any of the three constitutional commissions, after the expiration of the uneven terms of office of the first set of commissioners, shall always be for a fixed term of seven (7) years; an appointment for a lesser period is void and unconstitutional. The appointing authority cannot validly shorten the full term of seven (7) years in case of the expiration of the term as this will result in the distortion of the rotational system prescribed by the Constitution. 2. Appointments to vacancies resulting from certain causes (death, resignation, disability or impeachment) shall only be for the unexpired portion of the term of the predecessor, but such appointments cannot be less than the unexpired portion as this will likewise disrupt the staggering of terms laid down under Sec. 1(2), Art. IX(D).

3. Members of the Commission, e.g. COA, COMELEC or CSC, who were appointed for a full term of seven years and who served the entire period, are barred from reappointment to any position in the Commission. Corollarily, the first appointees in the Commission under the Constitution are also covered by the prohibition against reappointment. 4. A commissioner who resigns after serving in the Commission for less than seven years is eligible for an appointment to the position of Chairman for the unexpired portion of the term of the departing chairman. Such appointment is not covered by the ban on reappointment, provided that the aggregate period of the length of service as commissioner and the unexpired period of the term of the predecessor will not exceed seven (7) years and provided further that the vacancy in the position of Chairman resulted from death, resignation, disability or removal by impeachment. The Court clarifies that "reappointment" found in Sec. 1(2), Art. IX(D) means a movement to one and the same office (Commissioner to Commissioner or Chairman to Chairman). On the other hand, an appointment involving a movement to a different position or office (Commissioner to Chairman) would constitute a new appointment and, hence, not, in the strict legal sense, a reappointment barred under the Constitution. 5. Any member of the Commission cannot be appointed or designated in a temporary or acting capacity. WHEREFORE the petition is PARTLY GRANTED. The appointment of then Commissioner Reynaldo A. Villar to the position of Chairman of the Commission on Audit to replace Guillermo N. Carague, whose term of office as such chairman has expired, is hereby declared UNCONSTITUTIONAL for violation of Sec. 1(2), Art. IX(D) of the Constitution. SO ORDERED.

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G.R. No. 202242 July 17, 2012 FRANCISCO I. CHAVEZ, Petitioner, vs. JUDICIAL AND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS, JR., Respondents. DECISION MENDOZA, J.: The issue at hand has been in hibernation until the unexpected departure of Chief Justice Renato C. Corona on May 29, 2012, and the nomination of former Solicitor General Francisco I. Chavez (petitioner), as his potential successor, triggered the filing of this case. The issue has constantly been nagging legal minds, yet remained dormant for lack of constitutional challenge. As the matter is of extreme urgency considering the constitutional deadline in the process of selecting the nominees for the vacant seat of the Chief Justice, the Court cannot delay the resolution of the issue a day longer. Relegating it in the meantime to the back burner is not an option. Does the first paragraph of Section 8, Article VIII of the 1987 Constitution allow more than one (1) member of Congress to sit in the JBC? Is the practice of having two (2) representatives from each house of Congress with one (1) vote each sanctioned by the Constitution? These are the pivotal questions to be resolved in this original action for prohibition and injunction. Long before the naissance of the present Constitution, the annals of history bear witness to the fact that the exercise of appointing members of the Judiciary has always been the exclusive prerogative of the executive and legislative branches of the government. Like their progenitor of American origins, both the Malolos Constitution1 and the 1935 Constitution2 had vested the power to appoint the members of the Judiciary in the President, subject to confirmation by the Commission on Appointments. It was during these times that the country became witness to the deplorable practice of aspirants seeking confirmation of their appointment in the Judiciary to ingratiate themselves with the members of the legislative body.3 Then, with the fusion of executive and legislative power under the 1973 Constitution,4 the appointment of judges and justices was no longer subject to the scrutiny of another body. It was absolute, except that the appointees must have all the qualifications and none of the disqualifications. Prompted by the clamor to rid the process of appointments to the Judiciary from political pressure and partisan activities,5 the members of the Constitutional Commission saw the need to create a separate, competent and independent body to recommend nominees to the President. Thus, it conceived of a body representative of all the stakeholders in the judicial appointment process and called it the Judicial and Bar Council (JBC). Its composition, term and functions are provided under Section 8, Article VIII of the Constitution, viz: Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector. (2) The regular members of the Council shall be appointed by the President for a term of four years with the consent of the Commission on Appointments. Of the Members first appointed, the representative of the Integrated Bar shall serve for four years, the professor of law for three years, the retired Justice for two years, and the representative of the private sector for one year. (3) The Clerk of the Supreme Court shall be the Secretary ex officio of the Council and shall keep a record of its proceedings. (4) The regular Members of the Council shall receive such emoluments as may be determined by the Supreme Court. The Supreme Court shall provide in its annual budget the appropriations for the Council. (5) The Council shall have the principal function of recommending appointees to the Judiciary. It may exercise such other functions and duties as the Supreme Court may assign to it.
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In compliance therewith, Congress, from the moment of the creation of the JBC, designated one representative to sit in the JBC to act as one of the ex officio members.6 Perhaps in order to give equal opportunity to both houses to sit in the exclusive body, the House of Representatives and the Senate would send alternate representatives to the JBC. In other words, Congress had only one (1) representative. In 1994, the composition of the JBC was substantially altered. Instead of having only seven (7) members, an eighth (8th) member was added to the JBC as two (2) representatives from Congress began sitting in the JBC - one from the House of Representatives and one from the Senate, with each having one-half (1/2) of a vote.7 Then, curiously, the JBC En Banc, in separate meetings held in 2000 and 2001, decided to allow the representatives from the Senate and the House of Representatives one full vote each.8 At present, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas, Jr. (respondents) simultaneously sit in the JBC as representatives of the legislature. It is this practice that petitioner has questioned in this petition,9 setting forth the following GROUNDS FOR ALLOWANCE OF THE PETITION I Article VIII, Section 8, Paragraph 1 is clear, definite and needs no interpretation in that the JBC shall have only one representative from Congress. II The framers of the Constitution clearly envisioned, contemplated and decided on a JBC composed of only seven (7) members. III Had the framers of the Constitution intended that the JBC composed of the one member from the Senate and one member from the House of Representatives, they could have easily said so as they did in the other provisions of the Constitution. IV The composition of the JBC providing for three ex-officio members is purposely designed for a balanced representation of each of the three branches of the government. V One of the two (2) members of the JBC from Congress has no right (not even right) to sit in the said constitutional body and perform the duties and functions of a member thereof. VI The JBC cannot conduct valid proceedings as its composition is illegal and unconstitutional.10 On July 9, 2012, the JBC filed its Comment.11 It, however, abstained from recommending on how this constitutional issue should be disposed in gracious deference to the wisdom of the Court. Nonetheless, the JBC was more than generous enough to offer the insights of various personalities previously connected with it.12 Through the Office of the Solicitor General (OSG), respondents defended their position as members of the JBC in their Comment13 filed on July 12, 2012. According to them, the crux of the controversy is the phrase "a representative of Congress."14 Reverting to the basics, they cite Section 1, Article VI of the Constitution15 to determine the meaning of the term "Congress." It is their theory that the two houses, the Senate and the House of Representatives, are permanent and mandatory components of "Congress," such that the absence of either divests the term of its substantive meaning as expressed under the Constitution. In simplistic terms, the House of Representatives, without the Senate and vice-versa, is not Congress.16 Bicameralism, as the system of choice by the Framers, requires that both houses exercise their respective powers in the performance of its mandated duty which is to legislate. Thus, when Section 8(1), Article VIII of the Constitution speaks of

"a representative from Congress," it should mean one representative each from both Houses which comprise the entire Congress.17 Tracing the subject provisions history, the respondents claim that when the JBC was established, the Framers originally envisioned a unicameral legislative body, thereby allocating "a representative of the National Assembly" to the JBC. The phrase, however, was not modified to aptly jive with the change to bicameralism, the legislative system finally adopted by the Constitutional Commission on July 21, 1986. According to respondents, if the Commissioners were made aware of the consequence of having a bicameral legislature instead of a unicameral one, they would have made the corresponding adjustment in the representation of Congress in the JBC.18 The ambiguity having resulted from a plain case of inadvertence, the respondents urge the Court to look beyond the letter of the disputed provision because the literal adherence to its language would produce absurdity and incongruity to the bicameral nature of Congress.19 In other words, placing either of the respondents in the JBC will effectively deprive a house of Congress of its representation. In the same vein, the electorate represented by Members of Congress will lose their only opportunity to participate in the nomination process for the members of the Judiciary, effectively diminishing the republican nature of the government.20 The respondents further argue that the allowance of two (2) representatives of Congress to be members of the JBC does not render the latters purpose nugatory. While they admit that the purpose in creating the JBC was to insulate appointments to the Judiciary from political influence, they likewise cautioned the Court that this constitutional vision did not intend to entirely preclude political factor in said appointments. Therefore, no evil should be perceived in the current set-up of the JBC because two (2) members coming from Congress, whose membership to certain political parties is irrelevant, does not necessarily amplify political partisanship in the JBC. In fact, the presence of two (2) members from Congress will most likely provide balance as against the other six (6) members who are undeniably presidential appointees.21 The Issues In resolving the procedural and substantive issues arising from the petition, as well as the myriad of counter-arguments proffered by the respondents, the Court synthesized them into two: (1) Whether or not the conditions sine qua non for the exercise of the power of judicial review have been met in this case; and (2) Whether or not the current practice of the JBC to perform its functions with eight (8) members, two (2) of whom are members of Congress, runs counter to the letter and spirit of the 1987 Constitution. The Power of Judicial Review In its Comment, the JBC submits that petitioner is clothed with locus standi to file the petition, as a citizen and taxpayer, who has been nominated to the position of Chief Justice.22 For the respondents, however, petitioner has no "real interest" in questioning the constitutionality of the JBCs current composition.23 As outlined in jurisprudence, it is well-settled that for locus standi to lie, petitioner must exhibit that he has been denied, or is about to be denied, of a personal right or privilege to which he is entitled. Here, petitioner failed to manifest his acceptance of his recommendation to the position of Chief Justice, thereby divesting him of a substantial interest in the controversy. Without his name in the official list of applicants for the post, the respondents claim that there is no personal stake on the part of petitioner that would justify his outcry of unconstitutionality. Moreover, the mere allegation that this case is of transcendental importance does not excuse the waiver of the rule on locus standi, because, in the first place, the case lacks the requisites therefor. The respondents also question petitioners belated filing of the petition.24 Being aware that the current composition of the JBC has been in practice since 1994, petitioners silence for eighteen (18) years show that the constitutional issue being raised before the Court does not comply with the "earliest possible opportunity" requirement.
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Before addressing the above issues in seriatim, the Court deems it proper to first ascertain the nature of the petition. Pursuant to the rule that the nature of an action is determined by the allegations therein and the character of the relief sought, the Court views the petition as essentially an action for declaratory relief under Rule 63 of the 1997 Rules of Civil Procedure.25 The Constitution as the subject matter, and the validity and construction of Section 8 (1), Article VIII as the issue raised, the petition should properly be considered as that which would result in the adjudication of rights sans the execution process because the only relief to be granted is the very declaration of the rights under the document sought to be construed. It being so, the original jurisdiction over the petition lies with the appropriate Regional Trial Court (RTC). Notwithstanding the fact that only questions of law are raised in the petition, an action for declaratory relief is not among those within the original jurisdiction of this Court as provided in Section 5, Article VIII of the Constitution.26 At any rate, due to its serious implications, not only to government processes involved but also to the sanctity of the Constitution, the Court deems it more prudent to take cognizance of it. After all, the petition is also for prohibition under Rule 65 seeking to enjoin Congress from sending two (2) representatives with one (1) full vote each to the JBC. The Courts power of judicial review, like almost all other powers conferred by the Constitution, is subject to several limitations, namely: (1) there must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have "standing" to challenge; he must have a personal and substantial interest in the case, such that he has sustained or will sustain, direct injury as a result of its enforcement; (3) the question of constitutionality must be raised at the earliest possible opportunity; and (4) the issue of constitutionality must be the very lis mota of the case.27 Generally, a party will be allowed to litigate only when these conditions sine qua non are present, especially when the constitutionality of an act by a co-equal branch of government is put in issue. Anent locus standi, the question to be answered is this: does the party possess a personal stake in the outcome of the controversy as to assure that there is real, concrete and legal conflict of rights and duties from the issues presented before the Court? In David v. Macapagal-Arroyo,28 the Court summarized the rules on locus standi as culled from jurisprudence. There, it was held that taxpayers, voters, concerned citizens, and legislators may be accorded standing to sue, provided that the following requirements are met: (1) cases involve constitutional issues; (2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is unconstitutional; (3) for voters, there must be a showing of obvious interest in the validity of the election law in question; (4) for concerned citizens, there must be a showing that the issues raised are of transcendental importance which must be settled early; and (5) for legislators, there must be a claim that the official action complained of infringes upon their prerogatives as legislators. In public suits, the plaintiff, representing the general public, asserts a "public right" in assailing an allegedly illegal official action. The plaintiff may be a person who is affected no differently from any other person, and can be suing as a "stranger," or as a "citizen" or "taxpayer." Thus, taxpayers have been allowed to sue where there is a claim that public funds are illegally disbursed or that public money is being deflected to any improper purpose, or that public funds are wasted through the enforcement of an invalid or unconstitutional law. Of greater import than the damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental law by the enforcement of an invalid statute.29 In this case, petitioner seeks judicial intervention as a taxpayer, a concerned citizen and a nominee to the position of Chief Justice of the Supreme Court. As a taxpayer, petitioner invokes his right to demand that the taxes he and the rest of the citizenry have been paying to the government are spent for lawful purposes. According to petitioner, "since the JBC derives financial support for its functions, operation and proceedings from taxes paid, petitioner possesses as taxpayer both right and legal standing to demand that the JBCs proceedings are not tainted with illegality and that its composition and actions do not violate the Constitution."30

Notably, petitioner takes pains in enumerating past actions that he had brought before the Court where his legal standing was sustained. Although this inventory is unnecessary to establish locus standi because obviously, not every case before the Court exhibits similar issues and facts, the Court recognizes the petitioners right to sue in this case. Clearly, petitioner has the legal standing to bring the present action because he has a personal stake in the outcome of this controversy. The Court disagrees with the respondents contention that petitioner lost his standing to sue because he is not an official nominee for the post of Chief Justice. While it is true that a "personal stake" on the case is imperative to have locus standi, this is not to say that only official nominees for the post of Chief Justice can come to the Court and question the JBC composition for being unconstitutional. The JBC likewise screens and nominates other members of the Judiciary. Albeit heavily publicized in this regard, the JBCs duty is not at all limited to the nominations for the highest magistrate in the land. A vast number of aspirants to judicial posts all over the country may be affected by the Courts ruling. More importantly, the legality of the very process of nominations to the positions in the Judiciary is the nucleus of the controversy. The Court considers this a constitutional issue that must be passed upon, lest a constitutional process be plagued by misgivings, doubts and worse, mistrust. Hence, a citizen has a right to bring this question to the Court, clothed with legal standing and at the same time, armed with issues of transcendental importance to society. The claim that the composition of the JBC is illegal and unconstitutional is an object of concern, not just for a nominee to a judicial post, but for all citizens who have the right to seek judicial intervention for rectification of legal blunders. With respect to the question of transcendental importance, it is not difficult to perceive from the opposing arguments of the parties that the determinants established in jurisprudence are attendant in this case: (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in the questions being raised.31 The allegations of constitutional violations in this case are not empty attacks on the wisdom of the other branches of the government. The allegations are substantiated by facts and, therefore, deserve an evaluation from the Court. The Court need not elaborate on the legal and societal ramifications of the issues raised. It cannot be gainsaid that the JBC is a constitutional innovation crucial in the selection of the magistrates in our judicial system. The Composition of the JBC Central to the resolution of the foregoing petition is an understanding of the composition of the JBC as stated in the first paragraph of Section 8, Article VIII of the Constitution. It reads: Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector. From a simple reading of the above-quoted provision, it can readily be discerned that the provision is clear and unambiguous. The first paragraph calls for the creation of a JBC and places the same under the supervision of the Court. Then it goes to its composition where the regular members are enumerated: a representative of the Integrated Bar, a professor of law, a retired member of the Court and a representative from the private sector. On the second part lies the crux of the present controversy. It enumerates the ex officio or special members of the JBC composed of the Chief Justice, who shall be its Chairman, the Secretary of Justice and "a representative of Congress." As petitioner correctly posits, the use of the singular letter "a" preceding "representative of Congress" is unequivocal and leaves no room for any other construction. It is indicative of what the members of the Constitutional Commission had in mind, that is, Congress may designate only one (1) representative to the JBC. Had it been the intention that more than one (1) representative from the legislature would sit in the JBC, the Framers could have, in no uncertain terms, so provided.

One of the primary and basic rules in statutory construction is that where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.32 It is a well-settled principle of constitutional construction that the language employed in the Constitution must be given their ordinary meaning except where technical terms are employed. As much as possible, the words of the Constitution should be understood in the sense they have in common use. What it says according to the text of the provision to be construed compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.33 Verba legis non est recedendum from the words of a statute there should be no departure.34 The raison d tre for the rule is essentially two-fold: First, because it is assumed that the words in which constitutional provisions are couched express the objective sought to be attained;35 and second, because the Constitution is not primarily a lawyers document but essentially that of the people, in whose consciousness it should ever be present as an important condition for the rule of law to prevail. 36 Moreover, under the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of words in which it is founded or with which it is associated.37 This is because a word or phrase in a statute is always used in association with other words or phrases, and its meaning may, thus, be modified or restricted by the latter.38 The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce a harmonious whole. A statute must be so construed as to harmonize and give effect to all its provisions whenever possible.39 In short, every meaning to be given to each word or phrase must be ascertained from the context of the body of the statute since a word or phrase in a statute is always used in association with other words or phrases and its meaning may be modified or restricted by the latter. Applying the foregoing principle to this case, it becomes apparent that the word "Congress" used in Article VIII, Section 8(1) of the Constitution is used in its generic sense. No particular allusion whatsoever is made on whether the Senate or the House of Representatives is being referred to, but that, in either case, only a singular representative may be allowed to sit in the JBC. The foregoing declaration is but sensible, since, as pointed out by an esteemed former member of the Court and consultant of the JBC in his memorandum,40 "from the enumeration of the membership of the JBC, it is patent that each category of members pertained to a single individual only."41 Indeed, the spirit and reason of the statute may be passed upon where a literal meaning would lead to absurdity, contradiction, injustice, or defeat the clear purpose of the lawmakers.42 Not any of these instances, however, is present in the case at bench. Considering that the language of the subject constitutional provision is plain and unambiguous, there is no need to resort extrinsic aids such as records of the Constitutional Commission. Nevertheless, even if the Court should proceed to look into the minds of the members of the Constitutional Commission, it is undeniable from the records thereof that it was intended that the JBC be composed of seven (7) members only. Thus: MR. RODRIGO: Let me go to another point then. On page 2, Section 5, there is a novel provision about the appointments of members of the Supreme Court and judges of the lower courts. At present it is the President who appoints them. If there is a Commission on Appointments, then it is the President with the confirmation of the Commission on Appointment. In this proposal, we would like to establish a new office, a sort of a board composed of seven members called the Judicial and Bar Council. And while the President will still appoint the member of the judiciary, he will be limited to the recommendees of this Council. xxx xxx xxx MR. RODRIGO. Of the seven members of the Judicial and Bar Council, the President appoints four of them who are regular members.
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xxx xxx xxx MR. CONCEPCION. The only purpose of the Committee is to eliminate partisan politics.43 xxx xxx xxx MR. RODRIGO. If my amendment is approved, then the provision will be exactly the same as the provision in the 1935 Constitution, Article VIII, Section 5. xxx xxx xxx If we do not remove the proposed amendment on the creation of the Judicial and Bar Council, this will be a diminution of the appointing power of the highest magistrate of the land, of the President of the Philippines elected by all the Filipino people. The appointing power will be limited by a group of seven people who are not elected by the people but only appointed. Mr. Presiding Officer, if this Council is created, there will be no uniformity in our constitutional provisions on appointments. The members of the Judiciary will be segregated from the rest of the government. Even a municipal judge cannot be appointed by the President except upon recommendation or nomination of the three names by this Committee of seven people, commissioners of the Commission on Elections, the COA and the Commission on Civil Serviceeven ambassadors, generals of the Army will not come under this restriction. Why are we going to segregate the Judiciary from the rest of our government in the appointment of high-ranking officials? Another reason is that this Council will be ineffective. It will just besmirch the honor of our President without being effective at all because this Council will be under the influence of the President. Four out of seven are appointees of the President and they can be reappointed when their term ends. Therefore, they would be kowtow the President. A fifth member is the Minister of Justice, an alter ego of the President. Another member represents the Legislature. In all probability, the controlling part in the legislature belongs to the President and, therefore, this representative form the National Assembly is also under the influence of the President. And may I say, Mr. Presiding Officer, that event the Chief Justice of the Supreme Court is an appointee of the President. So it is futile he will be influence anyway by the President.44 [Emphases supplied] At this juncture, it is worthy to note that the seven-member composition of the JBC serves a practical purpose, that is, to provide a solution should there be a stalemate in voting. This underlying reason leads the Court to conclude that a single vote may not be divided into half (1/2), between two representatives of Congress, or among any of the sitting members of the JBC for that matter. This unsanctioned practice can possibly cause disorder and eventually muddle the JBCs voting process, especially in the event a tie is reached. The aforesaid purpose would then be rendered illusory, defeating the precise mechanism which the Constitution itself created. While it would be unreasonable to expect that the Framers provide for every possible scenario, it is sensible to presume that they knew that an odd composition is the best means to break a voting deadlock. The respondents insist that owing to the bicameral nature of Congress, the word "Congress" in Section 8(1), Article VIII of the Constitution should be read as including both the Senate and the House of Representatives. They theorize that it was so worded because at the time the said provision was being drafted, the Framers initially intended a unicameral form of Congress. Then, when the Constitutional Commission eventually adopted a bicameral form of Congress, the Framers, through oversight, failed to amend Article VIII, Section 8 of the Constitution.45 On this score, the Court cites the insightful analysis of another member of the Court and JBC consultant, retired Justice Consuelo Ynares-Santiago.46 Thus: A perusal of the records of the Constitutional Commission reveals that the composition of the JBC reflects the Commissions desire "to have in the Council a representation for the major elements of the community." xxx The ex-officio members of the Council consist of representatives from the three main branches of government while the regular members are composed of various stakeholders in the judiciary. The unmistakeable tenor of Article VIII, Section 8(1) was to treat each ex-officio member
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as representing one co-equal branch of government. xxx Thus, the JBC was designed to have seven voting members with the three ex-officio members having equal say in the choice of judicial nominees. xxx xxx xxx No parallelism can be drawn between the representative of Congress in the JBC and the exercise by Congress of its legislative powers under Article VI and constituent powers under Article XVII of the Constitution. Congress, in relation to the executive and judicial branches of government, is constitutionally treated as another co-equal branch of in the matter of its representative in the JBC. On the other hand, the exercise of legislative and constituent powers requires the Senate and House of Representatives to coordinate and act as distinct bodies in furtherance of Congress role under our constitutional scheme. While the latter justifies and, in fact, necessitates the separateness of the two houses of Congress as they relate inter se, no such dichotomy need be made when Congress interacts with the other two co-equal branches of government. It is more in keeping with the co-equal nature of the three governmental branches to assign the same weight to considerations that any of its representatives may have regarding aspiring nominees to the judiciary. The representatives of the Senate and the House of Representatives act as such for one branch and should not have any more quantitative influence as the other branches in the exercise of prerogatives evenly bestowed upon the three. Sound reason and principle of equality among the three branches support this conclusion. [Emphases and underscoring supplied] More than the reasoning provided in the above discussed rules of constitutional construction, the Court finds the above thesis as the paramount justification of the Courts conclusion that "Congress," in the context of JBC representation, should be considered as one body. It is evident that the definition of "Congress" as a bicameral body refers to its primary function in government - to legislate.47 In the passage of laws, the Constitution is explicit in the distinction of the role of each house in the process. The same holds true in Congress non-legislative powers such as, inter alia, the power of appropriation,48 the declaration of an existence of a state of war,49 canvassing of electoral returns for the President and Vice-President,50 and impeachment.51 In the exercise of these powers, the Constitution employs precise language in laying down the roles which a particular house plays, regardless of whether the two houses consummate an official act by voting jointly or separately. An inter-play between the two houses is necessary in the realization of these powers causing a vivid dichotomy that the Court cannot simply discount. Verily, each house is constitutionally granted with powers and functions peculiar to its nature and with keen consideration to 1) its relationship with the other chamber; and 2) in consonance with the principle of checks and balances, to the other branches of government. This, however, cannot be said in the case of JBC representation because no liaison between the two houses exists in the workings of the JBC. No mechanism is required between the Senate and the House of Representatives in the screening and nomination of judicial officers. Hence, the term "Congress" must be taken to mean the entire legislative department. A fortiori, a pretext of oversight cannot prevail over the more pragmatic scheme which the Constitution laid with firmness, that is, that the JBC has a seat for a single representative of Congress, as one of the co-equal branches of government. Doubtless, the Framers of our Constitution intended to create a JBC as an innovative solution in response to the public clamor in favor of eliminating politics in the appointment of members of the Judiciary.52 To ensure judicial independence, they adopted a holistic approach and hoped that, in creating a JBC, the private sector and the three branches of government would have an active role and equal voice in the selection of the members of the Judiciary. Therefore, to allow the Legislature to have more quantitative influence in the JBC by having more than one voice speak, whether with one full vote or one-half (1/2) a vote each, would, as one former congressman and member of the JBC put it, "negate the principle of equality among the three branches of government which is enshrined in the Constitution."53

To quote one former Secretary of Justice: The present imbalance in voting power between the Legislative and the other sectors represented in the JBC must be corrected especially when considered vis--vis the avowed purpose for its creation, i.e., to insulate the appointments in the Judiciary against political influence. By allowing both houses of Congress to have a representative in the JBC and by giving each representative one (1) vote in the Council, Congress, as compared to the other members of the JBC, is accorded greater and unwarranted influence in the appointment of judges.54 [Emphasis supplied] It is clear, therefore, that the Constitution mandates that the JBC be composed of seven (7) members only. Thus, any inclusion of another member, whether with one whole vote or half (1/2) of it, goes against that mandate. Section 8(1), Article VIII of the Constitution, providing Congress with an equal voice with other members of the JBC in recommending appointees to the Judiciary is explicit. Any circumvention of the constitutional mandate should not be countenanced for the Constitution is the supreme law of the land. The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest officials of the land, must defer. Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot be simply made to sway and accommodate the call of situations and much more tailor itself to the whims and caprices of the government and the people who run it.55 Hence, any act of the government or of a public official or employee which is contrary to the Constitution is illegal, null and void. As to the effect of the Courts finding that the current composition of the JBC is unconstitutional, it bears mentioning that as a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all.56 This rule, however, is not absolute. In the interest of fair play under the doctrine of operative facts, actions previous to the declaration of unconstitutionality are legally recognized. They are not nullified. In Planters Products, Inc. v. Fertiphil Corporation,57 the Court explained: The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play.1wphi1 It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it. Considering the circumstances, the Court finds the exception applicable in this case and holds that notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior official actions are nonetheless valid. At this point, the Court takes the initiative to clarify that it is not in a position to determine as to who should remain as the sole representative of Congress in the JBC. This is a matter beyond the province of the Court and is best left to the determination of Congress. Finally, while the Court finds wisdom in respondents' contention that both the Senate and the House of Representatives should be equally represented in the JBC, the Court is not in a position to stamp its imprimatur on such a construction at the risk of expanding the meaning of the Constitution as currently worded. Needless to state, the remedy lies in the amendment of this constitutional provision. The courts merely give effect to the lawgiver's intent. The solemn power and duty of the Court to interpret and apply the law does not include the power to correct, by reading into the law what is not written therein. WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar Council IS declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to reconstitute itself so that only one ( 1) member of Congress will sit as a representative in its proceedings, in accordance with Section 8( 1 ), Article VIII of the 1987 Constitution.
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This disposition is immediately executory. SO ORDERED.

G.R. No. 192088 October 9, 2012 INITIATIVES FOR DIALOGUE AND EMPOWERMENT THROUGH ALTERNATIVE LEGAL SERVICES, INC. (IDEALS, INC.), represented by its Executive Director, Mr. Edgardo Ligon, and FREEDOM FROM DEBT COALITION (FDC), represented by its Vice President Rebecca L. Malay, AKBAYAN CITIZEN'S ACTION PARTY, represented by its Chair Emeritus Loretta Anne P. Rosales, ALLIANCE OF PROGRESSIVE LABOR, represented by its Chairperson, Daniel L. Edralin, REP. WALDEN BELLO, in his capacity as duly-elected Member of the House of Representatives, Petitioners, vs. POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION (PSALM), represented by its Acting President and Chief Executive Officer Atty. Ma. Luz L. Caminero, METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), represented by its Administrator Atty. Diosdado M. Allado, NATIONAL IRRIGATION ADMINISTRATION (NIA), represented by its Administrator Carlos S. Salazar, KOREA WATER RESOURCES CORPORATION, represented by its Chief Executive Officer, Kim Kuen-Ho and/or Attorneys-infact, Atty. Anna Bianca L. Torres and Atty. Luther D. Ramos, FIRST GEN NORTHERN ENERGY CORP., represented by its President, Mr. Federico R. Lopez, SAN MIGUEL CORP., represented by its President, Mr. Ramon S. Ang, SNABOITIZ POWER-PANGASINAN INC., represented by its President, Mr. Antonio R. Moraza, TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION, represented by its President and CEO, Mr. Francisco L. Viray, and DMCI POWER CORP., represented by its President, Mr. Nestor Dadivas, Respondents. DECISION VILLARAMA, J.: Before us is a petition for certiorari and prohibition seeking to permanently enjoin the sale of the Angat Hydro-Electric Power Plant (AHEPP) to Korea Water Resources Corporation (K-Water) which won the public bidding conducted by the Power Sector Assets and Liabilities Management Corporation (PSALM). The Facts Respondent PSALM is a government-owned and controlled corporation created by virtue of Republic Act No. 9136,1 otherwise known as the "Electric Power Industry Reform Act of 2001" (EPIRA). The EPIRAprovided a framework for the restructuring of the electric power industry, including the privatization of the assets of the National Power Corporation (NPC), the transition to the desired competitive structure, and the definition of the responsibilities of the various government agencies and private entities. Said law mandated PSALM to manage the orderly sale, disposition, and privatization of NPC generation assets, real estate and other disposable assets, and Independent Power Producer (IPP) contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner, which liquidation is to be completed within PSALMs 25-year term of existence.2 Sometime in August 2005, PSALM commenced the privatization of the 246-megawatt (MW) AHEPP located in San Lorenzo, Norzagaray, Bulacan. AHEPPs main units built in 1967 and 1968, and 5 auxiliary units, form part of the Angat Complex which includes the Angat Dam, Angat Reservoir and the outlying watershed area. A portion of the AHEPP - the 10 MW Auxiliary Unit No. 4 completed on June 16, 1986 and the 18 MW Auxiliary Unit No. 5 completed on January 14, 1993 - is owned by respondent Metropolitan Waterworks and Sewerage System (MWSS).3 The main units produce a total of 200 MW of power while the auxiliary units yield the remaining 46 MW of power. The Angat Dam and AHEPP are utilized for power generation, irrigation, water supply and flood control purposes. Because of its multifunctional design, the operation of the Angat Complex involves various government agencies, namely: (1) NPC; (2) National Water Resources Board (NWRB); (3) MWSS; (4) respondent National Irrigation Administration (NIA); and (5) Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA).

On December 15, 2009, PSALMs Board of Directors approved the Bidding Procedures for the privatization of the AHEPP. An Invitation to Bid was published on January 11, 12 and 13, 2010 in three major national newspapers. Subject of the bid was the AHEPP consisting of 4 main units and 3 auxiliary units with an aggregate installed capacity of 218 MW. The two auxiliary units owned by MWSS were excluded from the bid. The following terms and conditions for the purchase of AHEPP were set forth in the Bidding Package: IB-05 CONDITION OF THE SALE The Asset shall be sold on an "AS IS, WHERE IS" basis. The Angat Dam (which is part of the Non-Power Components) is a multi-purpose hydro facility which currently supplies water for domestic use, irrigation and power generation. The four main units of the Angat Plant release water to an underground trailrace that flows towards the Bustos Dam which is owned and operated by the National Irrigation Administration ("NIA") and provides irrigation requirements to certain areas in Bulacan. The water from the auxiliary units 1, 2 and 3 flows to the Ipo Dam which is owned and operated by MWSS and supplies domestic water to Metro Manila and other surrounding cities. The priority of water usage under Philippine Law would have to be observed by the Buyer/Operator. The Winning Bidder/Buyer shall be requested to enter into an operations and maintenance agreement with PSALM for the Non-Power Components in accordance with the terms and conditions of the O & M Agreement to be issued as part of the Final Transaction Documents. The Buyer, as Operator, shall be required to operate and maintain the Non-Power Components at its own cost and expense. PSALM is currently negotiating a water protocol agreement with various parties which are currently the MWSS, NIA, the National Water Resources Board and NPC. If required by PSALM, the Buyer will be required to enter into the said water protocol agreement as a condition to the award of the Asset. The Buyer shall be responsible for securing the necessary rights to occupy the land underlying the Asset.4 (Emphasis supplied.) All participating bidders were required to comply with the following: (a) submission of a Letter of Interest; (b) execution of Confidentiality Agreement and Undertaking; and (c) payment of a non-refundable fee of US$ 2,500 as Participation Fee.5 After holding pre-bid conferences and forum discussions with various stakeholders, PSALM received the following bids from six competing firms: K-Water First Gen Northern Energy Corporation San Miguel Corporation SNAboitiz Power-Pangasinan, Inc. Trans-Asia Oil & Energy Development Corporation DMCI Power Corporation 188,890,000.00 312,500,000.00 256,000,000.00 237,000,000.00 US$ 440,880,000.00 365,000,678.00

On May 5, 2010, and after a post-bid evaluation, PSALMs Board of Directors approved and confirmed the issuance of a Notice of Award to the highest bidder, K-Water.6 On May 19, 2010, the present petition with prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction was filed by the Initiatives for Dialogue and Empowerment Through Alternative
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Legal Services, Inc. (IDEALS), Freedom from Debt Coalition (FDC), AKBAYAN Citizens Action Party (AKBAYAN) and Alliance of Progressive Labor. On May 24, 2010, this Court issued a Status QuoAnte Order directing the respondents to maintain the status quo prevailing before the filing of the petition and to file their respective Comments on the petition.7 Arguments of the Parties Petitioners contend that PSALM gravely abused its discretion when, in the conduct of the bidding it disregarded and violated the peoples right to information guaranteed under the Constitution, as follows: (1) the bidding process was commenced by PSALM without having previously released to the public critical information such as the terms and conditions of the sale, the parties qualified to bid and the minimum bid price, as laid down in the case of Chavez v. Public Estates Authority8; (2) PSALM refused to divulge significant information requested by petitioners, matters which are of public concern; and (3) the bidding was not conducted in an open and transparent manner, participation was indiscriminately restricted to the private sectors in violation of the EPIRA which provides that its provisions shall be "construed in favor of the establishment, promotion, preservation of competition and people empowerment so that the widest participation of the people, whether directly or indirectly, is ensured."9 Petitioners also assail the PSALM in not offering the sale of the AHEPP to MWSS which co-owned the Angat Complex together with NPC and NIA. Being a mere co-owner, PSALM cannot sell the AHEPP without the consent of co-owners MWSS and NIA, and being an indivisible thing, PSALM has a positive obligation to offer its undivided interest to the other co-owners before selling the same to an outsider. Hence, PSALMs unilateral disposition of the said hydro complex facility violates the Civil Code rules on co-ownership (Art. 498) and Sec. 47 (e) of the EPIRA which granted PSALM the legal option of transferring possession, control and operation of NPC generating assets like the AHEPP to another entity in order "to protect potable water, irrigation and all other requirements imbued with public interest." As to the participation in the bidding of and award of contract to K-Water which is a foreign corporation, petitioners contend that PSALM clearly violated the constitutional provisions on the appropriation and utilization of water as a natural resource, as implemented by the Water Code of the Philippines limiting water rights to Filipino citizens and corporations which are at least 60% Filipino-owned. Further considering the importance of the Angat Dam which is the source of 97% of Metro Manilas water supply, as well as irrigation for farmlands in 20 municipalities and towns in Pampanga and Bulacan, petitioners assert that PSALM should prioritize such domestic and community use of water over that of power generation. They maintain that the Philippine Government, along with its agencies and subdivisions, have an obligation under international law, to recognize and protect the legally enforceable human right to water of petitioners and the public in general. Petitioners cite the Advisory on the "Right to Water in Light of the Privatization of the Angat HydroElectric Power Plant"10 dated November 9, 2009 issued by the Commission on Human Rights (CHR) urging the Government to revisit and reassess its policy on water resources vis--vis its concurrent obligations under international law to provide, and ensure and sustain, among others, "safe, sufficient, affordable and convenient access to drinking water." Since investment in hydropower business is primarily driven by generation of revenues both for the government and private sector, the CHR warns that once the AHEPP is privatized, there will be less accessible water supply, particularly for those living in Metro Manila and the Province of Bulacan and nearby areas which are currently benefited by the AHEPP. The CHR believes that the management of AHEPP is better left to MWSS being a government body and considering the public interest involved. However, should the decision to privatize the AHEPP become inevitable, the CHR strongly calls for specific and concrete safeguards to ensure the right to water of all, as the domestic use of water is more fundamental than the need for electric power. Petitioners thus argue that the protection of their right to water and of public interest requires that the bidding process initiated by PSALM be declared null and void for violating such right, as defined by
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international law and by domestic law establishing the States obligation to ensure water security for its people. In its Comment With Urgent Motion to Lift Status Quo Ante Order, respondent PSALM prayed for the dismissal of the petition on the following procedural grounds: (a) a petition for certiorari is not the proper remedy because PSALM was not acting as a tribunal or board exercising judicial or quasi-judicial functions when it commenced the privatization of AHEPP; (b) the present petition is rendered moot by the issuance of a Notice of Award in favor of K-Water; (c) assuming the petition is not mooted by such contract award, this Court has no jurisdiction over the subject matter of the controversy involving a political question, and also because if it were the intent of Congress to exclude the AHEPP in the privatization of NPC assets, it should have clearly expressed such intent as it did with the Agus and Pulangui power plants under Sec. 47 of the EPIRA; (d) petitioners lack of standing to question the bidding process for failure to show any injury as a result thereof, while Rep. Walden Bello likewise does not have such legal standing in his capacity as a duly elected member of the House of Representatives as can be gleaned from the rulings in David v. Arroyo11 and Philippine Constitutional Association v. Enriquez.12 On the alleged violation of petitioners right to information, PSALM avers that it conducted the bidding in an open and transparent manner, through a series of events in accordance with the governing rules on public bidding. The non-disclosure of certain information in the invitation to bid was understandable, such as the minimum or reserve price which are still subject to negotiation and approval of PSALMs Board of Directors. The ruling in Chavez v. Public Estates Authority13 is inapplicable since it involved government property which has become unserviceable or was no longer needed and thus fell under Sec. 79 of the Government Auditing Code whereas the instant case concerns a hydroelectric power plant adjacent to a dam which still provides water supply to Metro Manila. In the bidding for the AHEPP, PSALM claims that it relied on the Rules and Regulations Implementing the EPIRA, as well as COA Circular No. 89-296 on the general procedures for bidding by government agencies and instrumentalities of assets that will be divested or government property that will be disposed of. PSALM likewise avers that it was constrained to deny petitioner IDEALS letter dated April 20, 2010 requesting documents relative to the privatization of Angat Dam due to non-submission of a Letter of Interest, Confidentiality and Undertaking and non-payment of the Participation Fee. With regard to IDEALS request for information about the winning bidder, as contained in its letter dated May 14, 2010, the same was already referred to respondent K-Waters counsel for appropriate action. In any case, PSALM maintains that not all details relative to the privatization of the AHEPP can be readily disclosed; the confidentiality of certain matters was necessary to ensure the optimum bid price for the property. PSALM further refutes the assertion of petitioners that the Angat Complex is an indivisible system and co-owned with MWSS and NIA. It contends that MWSSs contribution in the funds used for the construction of the AHEPP did not give rise to a regime of co-ownership as the said funds were merely in exchange for the supply of water that MWSS would get from the Angat Dam, while the UmirayAngatTransbasin Rehabilitation Project the improvement and repair of which were funded by MWSS, did not imply a co-ownership as these facilities are located in remote places. Moreover, PSALM points out that PSALM, MWSS and NIA each was issued a water permit, and are thus holders of separate water rights. On the alleged violation of petitioners and the peoples right to water, PSALM contends that such is baseless and proceeds from the mistaken assumption that the Angat Dam was sold and as a result thereof, the continuity and availability of domestic water supply will be interrupted. PSALM stresses that only the hydroelectric facility is being sold and not the Angat Dam which remains to be owned by PSALM, and that the NWRB still governs the water allocation therein while the NPC-FFWSDO still retains exclusive control over the opening of spillway gates during rainy season. The foregoing evinces the continued collective control by government agencies over the Angat Dam, which in the meantime, is in dire need of repairs, the cost of which cannot be borne by the Government.

PSALM further debunks the nationality issue raised by petitioners, citing previous opinions rendered by the Department of Justice (DOJ) consistently holding that the utilization of water by a hydroelectric power plant does not constitute appropriation of water from its natural source considering that the source of water (dam) that enters the intake gate of the power plant is an artificial structure. Moreover, PSALM is mindful of the States duty to protect the publics right to water when it sold the AHEPP. In fact, such concern as taken into consideration by PSALM in devising a privatization scheme for the AHEPP whereby the water allocation is continuously regulated by the NWRB and the dam and its spillway gates remain under the ownership and control of NPC. In its Comment,14 respondent MWSS asserts that by virtue of its various statutory powers since its creation in 1971, which includes the construction, maintenance and operation of dams, reservoir and other waterworks within its territorial jurisdiction, it has supervision and control over the Angat Dam given that the Angat Reservoir supplies approximately 97% of the water requirements of Metro Manila. Over the course of its authority over the Angat Dam, Dykes and Reservoir, MWSS has incurred expenses to maintain their upkeep, improve and upgrade their facilities. Thus, in 1962, MWSS contributed about 20% for the construction cost of the Angat Dam and Dykes (then equivalent to about P 21 million); in 1992, MWSS contributed about P 218 million for the construction of Auxiliary Unit No. 5; in 1998, MWSS contributed P 73.5 million for the construction cost of the low level outlet; and subsequently, MWSS invested P 3.3 billion to build the Umiray-AngatTransbasin Tunnel to supplement the water supply available from the Angat Dam, which tunnel contributes a minimum of about 9 cubic meters per second to the Angat Reservoir, thus increasing power generation. MWSS argues that its powers over waterworks are vested upon it by a special law (MWSS Charter) which prevails over the EPIRA which is a general law, as well as other special laws, issuances and presidential edicts. And as contained in Sec. 1 of the MWSS Charter, which remains valid and effective, it is expressly provided that the establishment, operation and maintenance of waterworks systems must always be supervised by the State. MWSS further alleges that after the enactment of EPIRA, it had expressed the desire to acquire ownership and control of the AHEPP so as not to leave the operation of the Angat Reservoir to private discretion that may prejudice the water allocation to MWSS as dictated by NWRB rules. Representations were thereafter made with the Office of the President (OP) for the turn over of the management of these facilities to MWSS, and joint consultation was also held with PSALM officials for the possibility of a Management Committee to manage and control the Angat Dam Complex under the chairmanship of the water sector, which position was supported by former Secretary HermogenesEbdane of the Department of Public Works and Highways (DPWH). In March 2008, PSALM proposed the creation of an inter-agency technical working group (TWG) to draft the Operations and Maintenance (O & M) Agreement for the AHEPP that will be in effect after its privatization. PSALM likewise sought the view of the Office of the Government Corporate Counsel (OGCC) which opined that PSALM may turn over the facility to a qualified entity such as MWSS without need of public bidding. In 2009, various local governments supported the transfer of the control and management of the AHEPP to MWSS, while the League of Cities and Municipalities interposed its opposition to the privatization of the AHEPP fearing that it might increase the cost of water in Metro Manila, and also because it will be disadvantageous to the national government since the AHEPP only contributes 246 MW of electricity to the Luzon Grid. Even the CHR has advised the Government to reassess its privatization policy and to always consider paramount the most basic resources necessary and indispensable for human survival, which includes water. MWSS further avers that upon the facilitation of the OGCC and participated in by various stakeholders, including its two concessionaires, Manila Water Company, Inc. and Maynilad Water Services, Inc., various meetings and conferences were held relative to the drafting of the Memorandum of Agreement on the Angat Water Protocol. On April 20, 2010, the final draft of the Angat Water Protocol was finally complete. However, as of June 18, 2010, only MWSS and NIA signed the
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said final draft. MWSS thus contends that PSALM failed to institute any safeguards as prescribed in Sec. 47 of the EPIRA when it proceeded with the privatization of the AHEPP. As to the issue of nationality requirement in the appropriation of water resources under the Constitution, MWSS cites the case of Manila Prince Hotel v. Government Service Insurance System15 which interpreted paragraph 2, Sec. 10, Art. XII of the 1987 Constitution providing that "in the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos" to imply "a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement x xx and is per se judicially enforceable." In this case, the AHEPP is in dire danger of being wholly-owned by a Korean corporation which probably merely considers it as just another business opportunity, and as such cannot be expected to observe and ensure the smooth facilitation of the more critical purposes of water supply and irrigation. Respondent First Gen Northern Energy Corporation (FGNEC) also filed a Comment16 disagreeing with the contentions of petitioners and respondent MWSS on account of the following: (1) the NPC charter vested upon it complete jurisdiction and control over watersheds like the Angat Watershed surrounding the reservoir of the power plants, and hence Art. 498 of the Civil Code is inapplicable; (2) NPC, MWSS and NIA are not co-owners of the various rights over the Angat Dam as in fact each of them holds its own water rights; (3) the State through the EPIRA expressly mandates PSALM to privatize all NPC assets, which necessarily includes the AHEPP; (4) the privatization of the AHEPP will not affect the priority of water for domestic and municipal uses as there are sufficient safeguards to ensure the same, and also because the Water Code specifically mandates that such use shall take precedence over other uses, and even the EPIRA itself gives priority to use of water for domestic and municipal purposes over power generation; (5) the Water Protocol also safeguards priority of use of water for domestic purposes; (6) the bidding procedure for the AHEPP was valid, and the bidding was conducted by PSALM in an open and transparent manner; and (7) the right to information of petitioners and the public in general was fully satisfied, and PSALM adopted reasonable rules and regulations for the orderly conduct of its functions pursuant to its mandate under the EPIRA. FGNEC nevertheless prays of this Court to declare the nationality requirements for the ownership, operation and maintenance of the AHEPP as prescribed by the Constitution and pertinent laws. Considering the allegation of petitioners that K-Water is owned by the Republic of South Korea, FGNEC asserts that PSALM should not have allowed said entity to participate in the bidding because under our Constitution, the exploration, development and utilization of natural resources are reserved to Filipino citizens or to corporations with 60% of their capital being owned by Filipinos. Respondent NIA filed its Comment17 stating that its interest in this case is limited only to the protection of its water allocation drawn from the Angat Dam as determined by the NWRB. Acknowledging that it has to share the meager water resources with other government agencies in fulfilment of their respective mandate, NIA submits that it is willing to sit down and discuss issues relating to water allocation, as evidenced by the draft Memorandum of Agreement on the Angat Water Protocol. Since the reliefs prayed for in the instant petition will not be applicable to NIA which was not involved in the bidding conducted by PSALM, it will thus not be affected by the outcome of the case. Respondents San Miguel Corporation (SMC), DMCI Power Corporation, Trans-Asia Oil and Energy Development Corporation and SNAboitiz Power-Pangasinan, Inc. filed their respective Comments18 with common submission that they are not real parties-in-interest and should be excluded from the case. They assert that PSALM acted pursuant to its mandate to privatize the AHEPP when it conducted the bidding, and there exists no reason for them to take any action to invalidate the said bidding wherein they lost to the highest bidder K-Water. On its part, respondent K-Water filed a Manifestation In Lieu of Comment19 stating that it is not in a position to respond to petitioners allegations, having justifiably relied on the mandate and expertise of PSALM in the conduct of public bidding for the privatization of the AHEPP and had no reason to question the legality or constitutionality of the privatization process, including the bidding. K-Water

submits that its participation in the bidding for the AHEPP was guided at all times by an abiding respect for the Constitution and the laws of the Philippines, and hopes for a prompt resolution of the present petition to further strengthen and enhance the investment environment considering the level of investment entailed, not only in financial terms by providing a definitive resolution and reliable guidance for investors, whether Filipino or foreign, as basis for effective investment and business decisions. In their Consolidated Reply,20 petitioners contend that the instant petition is not mooted with the issuance of a Notice of Award to K-Water because the privatization of AHEPP is not finished until and unless the deed of absolute sale has been executed. They cite the ruling in David v. Arroyo,21 that courts will decide cases, otherwise moot and academic, if: first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when constitutional issue raised requires formulation of controlling principles to guide the bench, the bar and the public; and fourth, the case is capable of repetition yet evading review. Petitioners reiterate their legal standing to file the present suit in their capacity as taxpayers, or as Filipino citizens asserting the promotion and protection of a public right, aside from being directly injured by the proceedings of PSALM. As to the absence of Certification and Verification of Non-Forum Shopping from petitioner Bello in the file copy of PSALM, the same was a mere inadvertence in photocopying the same. On the matter of compliance with an open and transparent bidding, petitioners also reiterate as held in Chavez v. Public Estates Authority,22 that the Courts interpretation of public bidding applies to any law which requires public bidding, especially since Sec. 79 of the Government Auditing Code does not enumerate the data that must be disclosed to the public. PSALM should have followed the minimum requirements laid down in said case instead of adopting the "format generally used by government entities in their procurement of goods, infrastructure and consultancy services," considering that what was involved in Chavez is an amended Joint Venture Agreement which seeks to transfer title and ownership over government property. Petitioners point out that the requirement under COA Circular 89296 as regards confidentiality covers only sealed proposals and not all information relating to the AHEPP privatization. PSALMs simple referral of IDEALS request letter to the counsel of K-Water is very telling, indicating PSALMs limited knowledge about a company it allowed to participate in the bidding and which even won the bidding. On the transfer of water rights to K-Water, petitioners reiterate that this violates the Water Code, and contrary to PSALMs statements, once NPC transfers its water permit to K -Water, in accordance with the terms of the Asset Purchase Agreement, NPC gives up its authority to extract or utilize water from the Angat River. Petitioners further assert that the terms of the sale of AHEPP allowing the buyer the operation and management of the Non-Power Components, constitutes a relinquishment of government control over the Angat Dam, in violation of Art. XII, Sec. 2 of the Constitution. PSALM likewise has not stated that all stakeholders have signed the Water Protocol. Such absence of a signed Water Protocol is alarming in the light of PSALMs pronouncement that the terms of the sale to K-Water would still subject to negotiation. Is PSALMs refusal to sign the Water Protocol part of its strategy to negotiate the terms of the sale with the bidders? If so, then PSALM is blithely and cavalierly bargaining away the Filipinos right to water. Responding to the claims of MWSS in its Comment, PSALM contends that MWSSs allegations regarding the bidding process is belied by MWSSs own admission that it held discussions with PSALM to highlight the important points and issues surrounding the AHEPP privatization that needed to be threshed out. Moreover, MWSS also admits having participated, along with other agencies and stakeholders, various meetings and conferences relative to the drafting of a Memorandum of Agreement on the Angat Water Protocol. As regards the Angat Dam, PSALM emphasizes that MWSS never exercised jurisdiction and control over the said facility. PSALM points out that the Angat Dam was constructed in 1967, or four years
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before the enactment of Republic Act No. 6234, upon the commissioning thereof by the NPC and the consequent construction by Grogun, Inc., a private corporation. MWSS attempt to base its claim of jurisdiction over the Angat Dam upon its characterization of EPIRA as a general law must likewise fail. PSALM explains that EPIRA cannot be classified as a general law as it applies to a particular portion of the State, i.e., the energy sector. The EPIRA must be deemed an exception to the provision in the Revised MWSS Charter on MWSSs general jurisdiction over waterworks systems. PSALM stresses that pursuant to the EPIRA, PSALM took ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate and other disposable assets, which necessarily includes the AHEPP Complex, of which the Angat Dam is part. As to the OGCC opinion cited by MWSS to support its position that control and management of the Angat Dam Complex should be turned over to MWSS, the OGCC had already issued a second opinion dated August 20, 2008 which clarified the tenor of its earlier Opinion No. 107, s. 2008, stating that "the disposal of the Angat HEPP by sale through public bidding the principal mode of disposition under EPIRA remains PSALMs primary option." Moreover, as pointed out by the National Economic Development Authority (NEDA) in its letter dated September 16, 2009, the ownership and operation of a hydropower plant goes beyond the mandate of MWSS. This view is consistent with the provisions of EPIRA mandating the transfer of ownership and control of NPC generation assets, IPP Contracts, real estate and other disposable assets to a private person or entity. Consequently, a transfer to another government entity of the said NPC assets would be a clear violation of the EPIRA. Even assuming such is allowed by EPIRA, it would not serve the objective of the EPIRA, i.e., that of liquidating all NPCs financial obligations and would merely transfer NPCs debts from the hands of one government entity to another, the funds that would be utilized by MWSS in the acquisition of the AHEPP would doubtless come from the pockets of the Filipino people. As regards the opposition of various local government units to the sale of the AHEPP, PSALM said that a forum was held specifically to address their concerns. After the said forum, these LGUs did not anymore raise the same concerns; such inaction on their part could be taken as an acquiescence to, and acceptance of, the explanations made by PSALM during the forum. PSALM had made it clear that it is only the AHEPP and not the Angat Dam which was being privatized. The same wrong premise underpinned the position of the CHR with its erroneous allegation that MWSS is allowed, under its Revised Charter, to operate and maintain a power plant. PSALM further contends that the sale of AHEPP to K-Water did not violate the Constitutions provision on the States natural resources and neither is the ruling in Manila Prince Hotel applicable as said case was decided under different factual circumstances. It reiterates that the AHEPP, being a generation asset, can be sold to a foreign entity, under the EPIRA, in accordance with the policy reforms said law introduced in the power sector; the EPIRA aims to enable open access in the electricity market and then enable the government to concentrate more fully on the supply of basic needs to the Filipino people. Owing to the competitive and open nature of the generation sector, foreign corporation may own generation assets. Issues The present controversy raised the following issues: 1) Legal standing of petitioners; 2) Mootness of the petition; 3) Violation of the right to information; 4) Ownership of the AHEPP; 5) Violation of Sec. 2, Art. XII of the Constitution; 6) Violation of the Water Code provisions on the grant of water rights; and 7) Failure of PSALM to comply with Sec. 47 (e) of EPIRA. Mootness and Locus Standi

PSALMs contention that the present petition had already been mooted by the issuance of the Notice of Award to K-Water is misplaced. Though petitioners had sought the immediate issuance of injunction against the bidding commenced by PSALM -- specifically enjoining it from proceeding to the next step of issuing a notice of award to any of the bidders -- they further prayed that PSALM be permanently enjoined from disposing of the AHEPP through privatization. The petition was thus filed not only as a means of enforcing the States obligation to protect the citizens "right to water" that is recognized under international law and legally enforceable under our Constitution, but also to bar a foreign corporation from exploiting our water resources in violation of Sec. 2, Art. XII of the 1987 Constitution. If the impending sale of the AHEPP to K-Water indeed violates the Constitution, it is the duty of the Court to annul the contract award as well as its implementation. As this Court held in Chavez v. Philippine Estates Authority,23 "supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution." We also rule that petitioners possess the requisite legal standing in filing this suit as citizens and taxpayers. "Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged, alleging more than a generalized grievance. The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions."24 This Court, however, has adopted a liberal attitude on the locus standi of a petitioner where the petitioner is able to craft an issue of transcendental significance to the people, as when the issues raised are of paramount importance to the public.25 Thus, when the proceeding involves the assertion of a public right, the mere fact that the petitioner is a citizen satisfies the requirement of personal interest.26 There can be no doubt that the matter of ensuring adequate water supply for domestic use is one of paramount importance to the public. That the continued availability of potable water in Metro Manila might be compromised if PSALM proceeds with the privatization of the hydroelectric power plant in the Angat Dam Complex confers upon petitioners such personal stake in the resolution of legal issues in a petition to stop its implementation. Moreover, we have held that if the petition is anchored on the peoples right to information on matters of public concern, any citizen can be the real party in interest. The requirement of personal interest is satisfied by the mere fact that the petitioner is a citizen, and therefore, part of the general public which possesses the right. There is no need to show any special interest in the result. It is sufficient that petitioners are citizens and, as such, are interested in the faithful execution of the laws.27 Violation of Right to Information The peoples right to information is provided in Section 7, Article III of the Constitution, which reads: Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. (Emphasis supplied.) The peoples constitutional right to information is intertwined with the governments constitutional duty of full public disclosure of all transactions involving public interest.28 Section 28, Article II of the Constitution declares the State policy of full transparency in all transactions involving public interest, to wit: Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. (Italics supplied.) The foregoing constitutional provisions seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. They are also essential to hold public officials "at all times x xx accountable to the people," for unless citizens have the proper information, they cannot hold public officials accountable
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for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy.29 Consistent with this policy, the EPIRA was enacted to provide for "an orderly and transparent privatization" of NPCs assets and liabilities.30 Specifically, said law mandated that "all assets of NPC shall be sold in an open and transparent manner through public bidding."31 In Chavez v. Public Estates Authority32 involving the execution of an Amended Joint Venture Agreement on the disposition of reclaimed lands without public bidding, the Court held: x x xBefore the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public matters relating to the disposition of its property. These include the size, location, technical description and nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of the disposition process, long before the consummation of the contract, because the Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at any time during the bidding process. Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review committee is not immediately accessible under the right to information. While the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the committee makes its official recommendation, there arises a "definite proposition" on the part of the government. From this moment, the publics right to information attaches, and any citizen can access all the non-proprietary information leading to such definite proposition. In Chavez v. PCGG, the Court ruled as follows: "Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of illgotten wealth. Such information, though, must pertain to definite propositions of the government not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the "exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information." (Emphasis supplied.) Chavez v. Public Estates Authority thus laid down the rule that the constitutional right to information includes official information on on-going negotiations before a final contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public order. In addition, Congress has prescribed other limitations on the right to information in several legislations.33 In this case, petitioners first letter dated April 20, 2010 requested for documents such as Terms of Reference and proposed bids submitted by the bidders. At that time, the bids were yet to be submitted at the bidding scheduled on April 28, 2010. It is also to be noted that PSALMs website carried news and updates on the sale of AHEPP, providing important information on bidding activities and clarifications regarding the terms and conditions of the Asset Purchase Agreement (APA) to be signed by PSALM and the winning bidder (Buyer).34 In Chavez v. National Housing Authority,35 the Court held that pending the enactment of an enabling law, the release of information through postings in public bulletin boards and government websites satisfies the constitutional requirement, thus: It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution, there is still no enabling law that provides the mechanics for the compulsory duty of government agencies to

disclose information on government transactions. Hopefully, the desired enabling law will finally see the light of day if and when Congress decides to approve the proposed "Freedom of Access to Information Act." In the meantime, it would suffice that government agencies post on their bulletin boards the documents incorporating the information on the steps and negotiations that produced the agreements and the agreements themselves, and if finances permit, to upload said information on their respective websites for easy access by interested parties. Without any law or regulation governing the right to disclose information, the NHA or any of the respondents cannot be faulted if they were not able to disclose information relative to the SMDRP to the public in general.36 (Emphasis supplied.) The Court, however, distinguished the duty to disclose information from the duty to permit access to information on matters of public concern under Sec. 7, Art. III of the Constitution. Unlike the disclosure of information which is mandatory under the Constitution, the other aspect of the peoples right to know requires a demand or request for one to gain access to documents and paper of the particular agency. Moreover, the duty to disclose covers only transactions involving public interest, while the duty to allow access has a broader scope of information which embraces not only transactions involving public interest, but any matter contained in official communications and public documents of the government agency.37 Such relief must be granted to the party requesting access to official records, documents and papers relating to official acts, transactions, and decisions that are relevant to a government contract. Here, petitioners second letter dated May 14, 2010 specifically requested for detailed information regarding the winning bidder, such as company profile, contact person or responsible officer, office address and Philippine registration. But before PSALM could respond to the said letter, petitioners filed the present suit on May 19, 2010. PSALMs letter-reply dated May 21, 2010 advised petitioners that their letter-re quest was referred to the counsel of K-Water. We find such action insufficient compliance with the constitutional requirement and inconsistent with the policy under EPIRA to implement the privatization of NPC assets in an "open and transparent" manner. PSALMs evasive response to the request for information was unjustified because all bidders were required to deliver documents such as company profile, names of authorized officers/representatives, financial and technical experience. Consequently, this relief must be granted to petitioners by directing PSALM to allow petitioners access to the papers and documents relating to the company profile and legal capacity of the winning bidder. Based on PSALMs own press releases, K-Water is described as a Korean firm with extensive experience in implementing and managing water resources development projects in South Korea, and also contributed significantly to the development of that countrys heavy and chemical industries and the modernization of its national industrial structure. AngatHEPP is Under the Jurisdiction of the Department of Energy Through NPC It must be clarified that though petitioners had alleged a co-ownership by virtue of the joint supervision in the operation of the Angat Complex by MWSS, NPC and NIA, MWSS actually recognized the ownership and jurisdiction of NPC over the hydroelectric power plant itself. While MWSS had initially sought to acquire ownership of the AHEPP without public bidding, it now prays that PSALM be ordered to turn over the possession and control of the said facility to MWSS. MWSS invokes its own authority or "special powers" by virtue of its general jurisdiction over waterworks systems, and in consideration of its substantial investments in the construction of two auxiliary units in the AHEPP, as well as the construction of the Umiray-AngatTransbasin Tunnel to supplement the water intake at the Angat Reservoir which resulted in increased power generation. Records disclosed that as early as December 2005, following the decision of PSALMs Board of Directors to commence the sale process of the AHEPP along with Magat and AmlanHEPPs in August 2005, MWSS was actively cooperating and working with PSALM regarding the proposed Protocol for the Privatization of the AHEPP, specifically on the terms and conditions for the management, control and operation of the Angat Dam Complex taking into consideration the concerns of its concessionaires. A Technical Working Group (TWG) similar to that formed for the Operation and Management Agreement of Pantabangan and Magat dams was created, consisting of representatives from PSALM, MWSS and
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other concerned agencies, to formulate strategies for the effective implementation of the privatization of AHEPP and appropriate structure for the operation and management of the Angat Dam Complex.38 In March 2008, PSALM sought legal advice from the OGCC on available alternatives to a sale structure for the AHEPP. On May 27, 2008, then Government Corporate Counsel Alberto C. Agra issued Opinion No. 107, s. 200839 stating that PSALM is not limited to "selling" as a means of fulfilling its mandate under the EPIRA, and that in dealing with the AHEPP, PSALM has the following options: 1. Transfer the ownership, possession, control, and operation of the Angat Facility to another entity, which may or may not be a private enterprise, as specifically provided under Section 47 (e) of RA 9136; 2. Transfer the Angat Facility, through whatever form, to another entity for the purpose of protecting the public interest.40 The OGCC cited COA Circular No. 89-296 which provides that government property or assets that are no longer serviceable or needed "may be transferred to other government entities/agencies without cost or at an appraised value upon authority of the head or governing body of the agency or corporation, and upon due accomplishment of an Invoice and Receipt of Property." Pointing out the absence of any prohibition under R.A. No. 9136 and its IRR for PSALM to transfer the AHEPP to another government instrumentality, and considering that MWSS is allowed under its charter to acquire the said facility, the OGCC expressed the view that PSALM may, "in the interest of stemming a potential water crisis, turn over the ownership, operations and management of the Angat Facility to a qualified entity, such as the MWSS, without need of public bidding as the latter is also a government entity."41 Consequently, MWSS requested the Office of the President (OP) to exclude the AHEPP from the list of NPC assets to be privatized under the EPIRA. Said request was endorsed to the Department of Finance (DOF) which requested the National Economic Development Authority (NEDA) to give its comments. Meanwhile, on August 20, 2008, the OGCC issued a Clarification42 on its Opinion No. 107, s. 2008 stating that the tenor of the latter issuance was "permissive" and "necessarily, the disposal of the AHEPP by sale through public bidding the principal mode of disposition under x xx R.A. 9136 remains PSALMs primary option." The OGCC further explained its position, thus: If, in the exercise of PSALMs discretion, it determines that privatization by sale through public bidding is the best mode to fulfill its mandate under R.A. 9136, and that this mode will not contravene the States declared policy on water resources, then the same is legally permissible. Finally, in OGCC Opinion No. 107 s. 2008, this Office underscored "the overriding policy of the State x xx recognizing that water is vital to national development x xx and the crucial role which the Angat Facility plays in the uninterrupted and adequate supply and distribution of potable water to residents of Metro Manila." This Office reiterates "the primacy of the States interest in mitigating the possible deleterious effects of an impending "water crisis" encompassing areas even beyond Metro Manila." Any transfer of the AHEPP to be undertaken by PSALM whether to a private or public entity must not contravene the States declared policy of ensuring the flow of clean, potable water under RA 6395 and 9136, and Presidential Decree 1067. Hence, said transfer and/or privatization scheme must ensure the preservation of the AHEPP as a vital source of water for Metro Manila and the surrounding provinces.43 (Emphasis supplied.) On September 16, 2009, NEDA Deputy Director General Rolando G. Tungpalan, by way of comment to MWSSs position, wrote the DOF stating that MWSSs concern on ensuring an uninterrupted and adequate supply of water for domestic use is amply protected and consistently addressed in the EPIRA. Hence, NEDA concluded that there appears to be no basis to exclude AHEPP from the list of NPC generation assets to be privatized and no compelling reason to transfer its management, operations and control to MWSS.44 NEDA further pointed out that: Ownership and operation of a hydropower plant, however, goes beyond the mandate of MWSS. To operate a power generation plant, given the sectors legislative setup would require certificati on and permits that has to be secured by the operator. MWSS does not have the technical capability to undertake the operation and maintenance of the AHEPP nor manage the contract of a contracted private

party to undertake the task for MWSS. While MWSS may tap NPC to operate and maintain the AHEPP, this, similar to contracting out a private party, may entail additional transaction costs, and ultimately result to higher generation rates.45 (Emphasis supplied.) Thereafter, MWSS sought the support of the DPWH in a letter dated September 24, 2009 addressed to then Secretary Hermogenes E. Ebdane, Jr., for the exclusion of the AHEPP from the list of NPC assets to be privatized and instead transfer the ownership, possession and control thereof to MWSS with reasonable compensation. Acting on the said request, Secretary Ebdane, Jr. wrote a memorandum for the President recommending that "the Angat Dam be excluded from the list of NPC assets to be privatized, and that the ownership, management and control of the Dam be transferred from NPC to MWSS, with reasonable compensation."46 Based on the foregoing factual backdrop, there seems to be no dispute as to the complete jurisdiction of NPC over the government-owned Angat Dam and AHEPP. The Angat Reservoir and Dam were constructed from 1964 to 1967 and have become operational since 1968. They have multiple functions: 1) To provide irrigation to about 31,000 hectares of land in 20 municipalities and towns in Pampanga and Bulacan; 2) To supply the domestic and industrial water requirements of residents in Metro Manila; 3) To generate hydroelectric power to feed the Luzon Grid; and 4) To reduce flooding to downstream towns and villages.47 The Angat Dam is a rockfill dam with a spillway equipped with three gates at a spilling level of 219 meters and has storage capacity of about 850 million cubic meters. Water supply to the MWSS is released through five auxiliary turbines where it is diverted to the two tunnels going to the Ipo Dam.48 The Angat Dam is one of the dams under the management of NPC while the La Mesa and Ipo dams are being managed by MWSS. MWSS is a government corporation existing by virtue of R.A. No. 6234.49 NAPOCOR or NPC is also a government-owned corporation created under Commonwealth Act (C.A.) No. 120,50 which, among others, was vested with the following powers under Sec. 2, paragraph (g): (g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power stations and substations, and other works for the purpose of developing hydraulic power from any river, creek, lake, spring and waterfall in the Philippines and supplying such power to the inhabitants thereof; to acquire, construct, install, maintain, operate and improve gas, oil, or steam engines, and/or other prime movers, generators and other machinery in plants and/or auxiliary plants for the production of electric power; to establish, develop, operate, maintain and administer power and lighting system for the use of the Government and the general public; to sell electric power and to fix the rates and provide for the collection of the charges for any service rendered: Provided, That the rates of charges shall not be subject to revision by the Public Service Commission; x x x x (Emphasis supplied.) On September 10, 1971, R.A. No. 6395 was enacted which revised the charter of NPC, extending its corporate life to the year 2036. NPC thereafter continued to exercise complete jurisdiction over dams and power plants including the Angat Dam, Angat Reservoir and AHEPP. While the NPC was expressly granted authority to construct, operate and maintain power plants, MWSS was not vested with similar function. Section 3 (f), (o) and (p) of R.A. No. 6234 provides that MWSSs powers and attributes include the following (f) To construct, maintain, and operate dams, reservoirs, conduits, aqueducts, tunnels, purification plants, water mains, pipes, fire hydrants, pumping stations, machineries and other waterworks for the purpose of supplying water to the inhabitants of its territory, for domestic and other purposes; and to purify, regulate and control the use, as well as prevent the wastage of water; xxxx
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(o) To assist in the establishment, operation and maintenance of waterworks and sewerage systems within its jurisdiction under cooperative basis; (p) To approve and regulate the establishment and construction of waterworks and sewerage systems in privately owned subdivisions within its jurisdiction; x xx. (Emphasis supplied.) On December 9, 1992, by virtue of R.A. No. 7638,51 NPC was placed under the Department of Energy (DOE) as one of its attached agencies. Aside from its ownership and control of the Angat Dam and AHEPP, NPC was likewise mandated to exercise complete jurisdiction and control over its watershed, pursuant to Sec. 2 (n) and (o) of R.A. No. 6395 for development and conservation purposes: (n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of plants and/or projects constructed or proposed to be constructed by the Corporation. Upon determination by the Corporation of the areas required for watersheds for a specific project, the Bureau of Forestry, the Reforestation Administration and the Bureau of Lands shall, upon written advice by the Corporation, forthwith surrender jurisdiction to the Corporation of all areas embraced within the watersheds, subject to existing private rights, the needs of waterworks systems, and the requirements of domestic water supply; (o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to prevent environmental pollution and promote the conservation, development and maximum utilization of natural resources; and x x x x (Emphasis supplied.) On December 4, 1965, Presidential Proclamation No. 505 was issued amending Proclamation No. 71 by transferring the administration of the watersheds established in Montalban, San Juan del Monte, Norzagaray, Angat, San Rafael, Pearanda and Infanta, Provinces of Rizal, Bulacan, Nueva Ecija and Quezon, to NPC. Subsequent executive issuances Presidential Decree (P.D.) No. 1515 which was signed in June 1978 and amended by P.D. No. 1749 in December 1980 led to the creation of the NPC Watershed Management Division which presently has 11 watershed areas under its management.52 Privatization of AHEPP Mandatory Under EPIRA With the advent of EPIRA in 2001, PSALM came into existence for the principal purpose of managing the orderly sale, privatization and disposition of generation assets, real estate and other disposable assets of the NPC including IPP Contracts. Accordingly, PSALM was authorized to take title to and possession of, those assets transferred to it. EPIRA mandated that all such assets shall be sold through public bidding with the exception of Agus and Pulangui complexes in Mindanao, the privatization of which was left to the discretion of PSALM in consultation with Congress,53 thus: Sec. 47. NPC Privatization. Except for the assets of SPUG, the generation assets, real estate, and other disposable assets as well as IPP contracts of NPC shall be privatized in accordance with this Act. Within six (6) months from the effectivity of this Act, the PSALM Corp. shall submit a plan for the endorsement by the Joint Congressional Power Commission and the approval of the President of the Philippines, on the total privatization of the generation assets, x xx of NPC and thereafter, implement the same, in accordance with the following guidelines, except as provided for in paragraph (f) herein: x xxx (d) All assets of NPC shall be sold in an open and transparent manner through public bidding, x xx; x xxx (f) The Agus and the Pulangui complexes in Mindanao shall be excluded from among the generation companies that will be initially privatized. Their ownership shall be transferred to the PSALM Corp. and both shall continue to be operated by the NPC. Said complexes may be privatized not earlier than ten (10) years from the effectivity of this Act, x xx.The privatization of Agus and Pulangui complexes shall be left to the discretion of PSALM Corp. in consultation with Congress; x xxx (Emphasis supplied.)

The intent of Congress not to exclude the AHEPP from the privatization of NPC generation assets is evident from the express provision exempting only the aforesaid two power plants in Mindanao. Had the legislature intended that PSALM should likewise be allowed discretion in case of NPC generation assets other than those mentioned in Sec. 47, it could have explicitly provided for the same. But the EPIRA exempted from privatization only those two plants in Mindanao and the Small Power Utilities Group (SPUG).54 Expressiouniusestexclusioalterius, the express inclusion of one implies the exclusion of all others.55 It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. The rule is expressed in the familiar maxim, expressiouniusestexclusioalterius. The rule of expressiouniusestexclusioalterius is formulated in a number of ways. One variation of the rule is principle that what is expressed puts an end to that which is implied. Expressiumfacitcessaretacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters. x xxx The rule of expressiouniusestexclusioalterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and the natural workings of the human mind. They are predicated upon ones own voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those expressly mentioned.56 The Court therefore cannot sustain the position of petitioners, adopted by respondent MWSS, that PSALM should have exercised the discretion not to proceed with the privatization of AHEPP, or at least the availability of the option to transfer the said facility to another government entity such as MWSS. Having no such discretion in the first place, PSALM committed no grave abuse of discretion when it commenced the sale process of AHEPP pursuant to the EPIRA. In any case, the Court finds that the operation and maintenance of a hydroelectric power plant is not among the statutorily granted powers of MWSS. Although MWSS was granted authority to construct and operate dams and reservoirs, such was for the specific purpose of supplying water for domestic and other uses, and the treatment, regulation and control of water usage, and not power generation.57 Moreover, since the sale of AHEPP by PSALM merely implements the legislated reforms for the electric power industry through schemes that aim "to enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors,"58 the proposed transfer to MWSS which is another government entity contravenes that State policy. COA Circular No. 89-296 likewise has no application to NPC generating assets which are still serviceable and definitely needed by the Government for the purpose of liquidating NPCs accumulated debts amounting to billions in US Dollars. Said administrative circular cannot prevail over the EPIRA, a special law governing the disposition of government properties under the jurisdiction of the DOE through NPC. Sale of Government-Owned AHEPP to a Foreign Corporation Not Prohibited But Only Filipino Citizens and Corporations 60% of whose capital is owned by Filipinos May be Granted Water Rights The core issue concerns the legal implications of the acquisition by K-Water of the AHEPP in relation to the constitutional policy on our natural resources. Sec. 2, Art. XII of the 1987 Constitution provides in part: SEC.2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under
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the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twentyfive years, and under such terms and conditions as may be provided by law. In case of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. x xxx (Emphasis supplied.) The States policy on the management of water resources is implemented through the regulation of water rights. Presidential Decree No. 1067, otherwise known as "The Water Code of the Philippines" is the basic law governing the ownership, appropriation utilization, exploitation, development, conservation and protection of water resources and rights to land related thereto. The National Water Resources Council (NWRC) was created in 1974 under P.D. No. 424 and was subsequently renamed as National Water Resources Board (NWRB) pursuant to Executive Order No. 124-A.59 The NWRB is the chief coordinating and regulating agency for all water resources management development activities which is tasked with the formulation and development of policies on water utilization and appropriation, the control and supervision of water utilities and franchises, and the regulation and rationalization of water rates.60 The pertinent provisions of Art. 3, P.D. No. 1067 provide: Art. 3. The underlying principles of this code are: a. All waters belong to the State. b. All waters that belong to the State can not be the subject to acquisitive prescription. c. The State may allow the use or development of waters by administrative concession. d. The utilization, exploitation, development, conservation and protection of water resources shall be subject to the control and regulation of the government through the National Water Resources Council x xx e. Preference in the use and development of waters shall consider current usages and be responsive to the changing needs of the country. x xxx Art. 9. Waters may be appropriated and used in accordance with the provisions of this Code. Appropriation of water, as used in this Code, is the acquisition of rights over the use of waters or the taking or diverting of waters from a natural source in the manner and for any purpose allowed by law. Art. 10. Water may be appropriated for the following purposes: x xxx (d) Power generation x xxx Art. 13. Except as otherwise herein provided, no person including government instrumentalities or government-owned or controlled corporations, shall appropriate water without a water right, which shall be evidenced by a document known as a water permit. Water right is the privilege granted by the government to appropriate and use water. x xxx Art. 15. Only citizens of the Philippines, of legal age, as well as juridical persons, who are duly qualified by law to exploit and develop water resources, may apply for water permits. (Emphasis supplied.)

It is clear that the law limits the grant of water rights only to Filipino citizens and juridical entities duly qualified by law to exploit and develop water resources, including private corporations with sixty percent of their capital owned by Filipinos. In the case of Angat River, the NWRB has issued separate water permits to MWSS, NPC and NIA.61 Under the EPIRA, the generation of electric power, a business affected with public interest, was opened to private sector and any new generation company is required to secure a certificate of compliance from the Energy Regulatory Commission (ERC), as well as health, safety and environmental clearances from the concerned government agencies. Power generation shall not be considered a public utility operation,62 and hence no franchise is necessary. Foreign investors are likewise allowed entry into the electric power industry. However, there is no mention of water rights in the privatization of multi-purpose hydropower facilities. Section 47 (e) addressed the issue of water security, as follows: (e) In cases of transfer of possession, control, operation or privatization of multi-purpose hydro facilities, safeguards shall be prescribed to ensure that the national government may direct water usage in cases of shortage to protect potable water, irrigation, and all other requirements imbued with public interest; x xxx (Emphasis supplied.) This provision is consistent with the priority accorded to domestic and municipal uses of water63 under the Water Code, thus: Art. 22. Between two or more appropriators of water from the same sources of supply, priority in time of appropriation shall give the better right, except that in times of emergency the use of water for domestic and municipal purposes shall have a better right over all other uses; Provided, That, where water shortage is recurrent and the appropriator for municipal use has a lower priority in time of appropriation, then it shall be his duty to find an alternative source of supply in accordance with conditions prescribed by the Board. (Emphasis supplied.) Rule 23, Section 6 of the Implementing Rules and Regulations (IRR) of the EPIRA provided for the structure of appropriation of water resources in multi-purpose hydropower plants which will undergo privatization, as follows: Section 6. Privatization of Hydroelectric Generation Plants. (a) Consistent with Section 47(e) of the Act and Section 4(f) of this Rule, the Privatization of hydro facilities of NPC shall cover the power component including assignable long-term water rights agreements for the use of water, which shall be passed onto and respected by the buyers of the hydroelectric power plants. (b) The National Water Resources Board (NWRB) shall ensure that the allocation for irrigation, as indicated by the NIA and requirements for domestic water supply as provided for by the appropriate Local Water District(s) are recognized and provided for in the water rights agreements. NPC or PSALM may also impose additional conditions in the shareholding agreement with the winning bidders to ensure national security, including, but not limited to, the use of water during drought or calamity. (c) Consistent with Section 34(d) of the Act, the NPC shall continue to be responsible for watershed rehabilitation and management and shall be entitled to the environmental charge equivalent to onefourth of one centavo per kilowatt-hour sales (P0.0025/kWh), which shall form part of the Universal Charge. This environmental fund shall be used solely for watershed rehabilitation and management and shall bemanaged by NPC under existing arrangements. NPC shall submit an annual report to the DOE detailing the progress of the water shed rehabilitation program. (d) The NPC and PSALM or NIA, as the case may be, shall continue to be responsible for the dam structure and all other appurtenant structures necessary for the safe and reliable operation of the hydropower plants. The NPC and PSALM or NIA, as the case may be, shall enter into an operations and maintenance agreement with the private operator of the power plant to cover the dam structure and all other appurtenant facilities. (Emphasis supplied.)
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In accordance with the foregoing implementing regulations, and in furtherance of the Asset Purchase Agreement64 (APA), PSALM, NPC and K-Water executed on April 28, 2010 an Operations and Maintenance Agreement65 (O & M Agreement) for the administration, rehabilitation, operation, preservation and maintenance, by K-Water as the eventual owner of the AHEPP, of the Non-Power Components meaning the Angat Dam, non-power equipment, facilities, installations, and appurtenant devices and structures, including the water sourced from the Angat Reservoir. It is the position of PSALM that as the new owner only of the hydroelectric power plant, K-Water will be a mere operator of the Angat Dam. In the power generation activity, K-Water will have to utilize the waters already extracted from the river and impounded on the dam. This process of generating electric power from the dam water entering the power plant thus does not constitute appropriation within the meaning of natural resource utilization in the Constitution and the Water Code. The operation of a typical hydroelectric power plant has been described as follows: Hydroelectric energy is produced by the force of falling water. The capacity to produce this energy is dependent on both the available flow and the height from which it falls. Building up behind a high dam, water accumulates potential energy. This is transformed into mechanical energy when the water rushes down the sluice and strikes the rotary blades of turbine. The turbine's rotation spins electromagnets which generate current in stationary coils of wire. Finally, the current is put through a transformer where the voltage is increased for long distance transmission over power lines.66 Foreign ownership of a hydropower facility is not prohibited under existing laws. The construction, rehabilitation and development of hydropower plants are among those infrastructure projects which even wholly-owned foreign corporations are allowed to undertake under the Amended Build-Operate-Transfer (Amended BOT) Law (R.A. No. 7718).67 Beginning 1987, the policy has been openness to foreign investments as evident in the fiscal incentives provided for the restructuring and privatization of the power industry in the Philippines, under the Power Sector Restructuring Program (PSRP) of the Asian Development Bank. The establishment of institutional and legal framework for the entry of private sector in the power industry began with the issuance by President Corazon C. Aquino of Executive Order No. 215 in 1987. Said order allowed the entry of private sector the IPPs to participate in the power generation activities in the country. The entry of IPPs was facilitated and made attractive through the first BOT Law in 1990 (R.A. No. 6957) which aimed to "minimize the burden of infrastructure projects on the national government budget, minimize external borrowing for infrastructure projects, and use the efficiency of the private sector in delivering a public good." In 1993, the Electric Power Crisis Act was passed giving the President emergency powers to urgently address the power crisis in the country.68 The full implementation of the restructuring and privatization of the power industry was achieved when Congress passed the EPIRA in 2001. With respect to foreign investors, the nationality issue had been framed in terms of the character or nature of the power generation process itself, i.e., whether the activity amounts to utilization of natural resources within the meaning of Sec. 2, Art. XII of the Constitution. If so, then foreign companies cannot engage in hydropower generation business; but if not, then government may legally allow even foreignowned companies to operate hydropower facilities. The DOJ has consistently regarded hydropower generation by foreign entities as not constitutionally proscribed based on the definition of water appropriation under the Water Code, thus: Opinion No. 173, 1984 This refers to your request for opinion on the possibility of granting water permits to foreign corporations authorized to do business in the Philippines x xx x xxx x xx while the Water Code imposes a nationality requirement for the grant of water permits, the same refers to the privilege "to appropriate and use water." This should be interpreted to mean the extraction

of water from its natural source (Art. 9, P.D. No. 1067). Once removed therefrom, they cease to be a part of the natural resources of the country and are the subject of ordinary commerce and may be acquired by foreigners (Op. No. 55, series of 1939). x xx in case of a contract of lease, the water permit shall be secured by the lessor and included in the lease as an improvement. The water so removed from the natural source may be appropriated/used by the foreign corporation leasing the property. Opinion No. 14, S. 1995 The nationality requirement imposed by the Water Code refers to the privilege "to appropriate and use water." This, we have consistently interpreted to mean the extraction of water directly from its natural source. Once removed from its natural source the water ceases to be a part of the natural resources of the country and may be subject of ordinary commerce and may even be acquired by foreigners. (Secretary of Justice Op. No. 173, s. 1984; No. 24, s. 1989; No. 100 s. 1994) In fine, we reiterate our earlier view that a foreign entity may legally process or treat water after its removal from a natural source by a qualified person, natural or juridical. Opinion No. 122, s. 1998 The crucial issue at hand is the determination of whether the utilization of water by the power plant to be owned and operated by a foreign-owned corporation (SRPC) will violate the provisions of the Water Code. As proposed, the participation of SRPC to the arrangement commences upon construction of the power station, consisting of a dam and a power plant. After the completion of the said station, its ownership and control shall be turned over to NPC. However, SRPC shall remain the owner of the power plant and shall operate it for a period of twenty-five (25) years. It appears that the dam, which will be owned and controlled by NPC, will block the natural flow of the river. The power plant, which is situated next to it, will entirely depend upon the dam for its water supply which will pass through an intake gate situated one hundred (100) meters above the riverbed. Due to the distance from the riverbed, water could not enter the power plant absent the dam that traps the flow of the river. It appears further that no water shall enter the power tunnel without specific dispatch instructions from NPC, and such supplied water shall be used only by SRPC for power generation and not for any other purpose. When electricity is generated therein, the same shall be supplied to NPC for distribution to the public. These facts x xx viewed in relation to the Water Code, specifically Article 9 thereof, x xx clearly show that there is no circumvention of the law. This Department has declared that the nationality requirement imposed by the Water Code refers to the privilege "to appropriate and use water" and has interpreted this phrase to mean the extraction of water directly from its natural source (Secretary of Justice Opinion No. 14, s. 1995). "Natural" is defined as that which is produced without aid of stop, valves, slides, or other supplementary means (see Websters New International Dictionary, Second Edition, p. 1630). The water that is used by the power plant could not enter the intake gate without the dam, which is a man-made structure. Such being the case, the source of the water that enters the power plant is of artificial character rather than natural. This Department is consistent in ruling, that once water is removed from its natural source, it ceases to be a part of the natural resources of the country and may be the subject of ordinary commerce and may even be acquired by foreigners. (Ibid., No. 173, s. 1984; No. 24, s. 1989; No. 100, s. 1994). It is also significant to note that NPC, a government-owned and controlled corporation, has the effective control over all elements of the extraction process, including the amount and timing thereof considering that x xx the water will flow out of the power tunnel and through the power plant, to be used for the generation of electricity, only when the Downstream Gates are opened, which occur only upon the specific water release instructions given by NPC to SRPC. This specific feature of the agreement, taken together with the above-stated analysis of the source of water that enters the plant, support the view that the nationality requirement embodied in Article XII, Section 2 of the present Constitution and in Article 15 of the Water Code, is not violated.69 (Emphasis supplied.)
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The latest executive interpretation is stated in DOJ Opinion No. 52, s. 2005 which was rendered upon the request of PSALM in connection with the proposed sale structure for the privatization of hydroelectric and geothermal generation assets (Gencos) of NPC. PSALM sought a ruling on the legality of its proposed privatization scheme whereby the non-power components (dam, reservoir and appurtenant structures and watershed area) shall be owned by the State through government entities like NPC or NIA which shall exercise control over the release of water, while the ownership of the power components (power plant and related facilities) is open to both Filipino citizens/corporations and 100% foreign-owned corporations. Sustaining the position of PSALM, then Secretary Raul M. Gonzalez opined: Premised on the condition that only the power components shall be transferred to the foreign bidders while the non-power components/structures shall be retained by state agencies concerned, we find that both PSALMs proposal and position are tenable. x xxx x xx as ruled in one case by a U.S. court: Where the State of New York took its natural resources consisting of Saratoga Spring and, through a bottling process, put those resources into preserved condition where they could be sold to the public in competition with private waters, the state agencies were not immune from federal taxes imposed upon bottled waters on the theory that state was engaged in the sale of "natural resources." Applied to the instant case, and construed in relation to the earlier-mentioned constitutional inhibition, it would appear clear that while both waters and geothermal steam are, undoubtedly "natural resources", within the meaning of Section 2 Article XII of the present Constitution, hence, their exploitation, development and utilization should be limited to Filipino citizens or corporations or associations at least sixty per centum of the capital of which is owned by Filipino citizens, the utilization thereof can be opened even to foreign nationals, after the same have been extracted from the source by qualified persons or entities. The rationale is because, since they no longer form part of the natural resources of the country, they become subject to ordinary commerce. A contrary interpretation, i.e., that the removed or extracted natural resources would remain inalienable especially to foreign nationals, can lead to absurd consequences, e.g. that said waters and geothermal steam, and any other extracted natural resources, cannot be acquired by foreign nationals for sale within or outside the country, which could not have been intended by the framers of the Constitution. The fact that under the proposal, the non-power components and structures shall be retained and maintained by the government entities concerned is, to us, not only a sufficient compliance of constitutional requirement of "full control and supervision of the State" in the exploitation, development and utilization of natural resources. It is also an enough safeguard against the evil sought to be avoided by the constitutional reservation x xx.70 (Italics in the original, emphasis supplied.) Appropriation of water, as used in the Water Code refers to the "acquisition of rights over the use of waters or the taking or diverting of waters from a natural source in the manner and for any purpose allowed by law."71 This definition is not as broad as the concept of appropriation of water in American jurisprudence: An appropriation of water flowing on the public domain consists in the capture, impounding, or diversion of it from its natural course or channel and its actual application to some beneficial use private or personal to the appropriator, to the entire exclusion (or exclusion to the extent of the water appropriated) of all other persons. x xx72 On the other hand, "water right" is defined in the Water Code as the privilege granted by the government to appropriate and use water.73 Blacks Law Dictionary defined "water rights" as "a legal right, in the nature of a corporeal hereditament, to use the water of a natural stream or water furnished through a ditch or canal, for general or specific purposes, such as irrigation, mining, power, or domestic use, either to its full capacity or to a measured extent or during a defined portion of the time," or "the right to have

the water flow so that some portion of it may be reduced to possession and be made private property of individual, and it is therefore the right to divert water from natural stream by artificial means and apply the same to beneficial use."74 Under the Water Code concept of appropriation, a foreign company may not be said to be "appropriating" our natural resources if it utilizes the waters collected in the dam and converts the same into electricity through artificial devices. Since the NPC remains in control of the operation of the dam by virtue of water rights granted to it, as determined under DOJ Opinion No. 122, s. 1998, there is no legal impediment to foreign-owned companies undertaking the generation of electric power using waters already appropriated by NPC, the holder of water permit. Such was the situation of hydropower projects under the BOT contractual arrangements whereby foreign investors are allowed to finance or undertake construction and rehabilitation of infrastructure projects and/or own and operate the facility constructed. However, in case the facility requires a public utility franchise, the facility operator must be a Filipino corporation or at least 60% owned by Filipino.75 With the advent of privatization of the electric power industry which resulted in its segregation into four sectors -- generation, transmission, distribution and supply NPCs generation and transmission functions were unbundled. Power generation and transmission were treated as separate sectors governed by distinct rules under the new regulatory framework introduced by EPIRA. The National Transmission Corporation (TRANSCO) was created to own and operate the transmission assets and perform the transmission functions previously under NPC. While the NPC continues to undertake missionary electrification programs through the SPUG, PSALM was also created to liquidate the assets and liabilities of NPC. Under the EPIRA, NPCs generation function was restricted as it was allowed to "generate and sell electricity only from the undisposed generating assets and IPP contracts of PSALM" and was prohibited from incurring "any new obligations to purchase power through bilateral contracts with generation companies or other suppliers."76 PSALM, on the other hand, was tasked "to structure the sale, privatization or disposition of NPC assets and IPP contracts and/or their energy output based on such terms and conditions which shall optimize the value and sale prices of said assets."77 In the case of multi-purpose hydropower plants, the IRR of R.A. No. 9136 provided that their privatization would extend to water rights which shall be transferred or assigned to the buyers thereof, subject to safeguards mandated by Sec. 47(e) to enable the national government to direct water usage in cases of shortage to protect water requirements imbued with public interest. Accordingly, the Asset Purchase Agreement executed between PSALM and K-Water stipulated: 2.04 Matters Relating to the Non-Power Component x xxx Matters relating to Water Rights NPC has issued a certification (the "Water Certification") wherein NPC consents, subject to Philippine Law, to the (i) transfer of the Water Permit to the BUYER or its Affiliate, and (ii) use by the BUYER or its Affiliate of the water covered by the Water Permit from Closing Date up to a maximum period of one (1) year thereafter to enable the BUYER to appropriate and use water sourced from Angat reservoir for purposes of power generation; provided, that should the consent or approval of any Governmental Body be required for either (i) or (ii), the BUYER must secure such consent or approval. The BUYER agrees and shall fully comply with the Water Permit and the Water Certification. x xx x xxx Multi-Purpose Facility The BUYER is fully aware that the Non-Power Components is a multi-purpose hydro-facility and the water is currently being appropriated for domestic use, municipal use, irrigation and power generation. Anything in this Agreement notwithstanding, the BUYER shall, at all times even after the Payment Date,
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fully and faithfully comply with Philippine Law, including the Instructions, the Rule Curve and Operating Guidelines and the Water Protocol.78 (Emphasis supplied.) Lease or transfer of water rights is allowed under the Water Code, subject to the approval of NWRB after due notice and hearing.79 However, lessees or transferees of such water rights must comply with the citizenship requirement imposed by the Water Code and its IRR. But regardless of such qualification of water permit holders/transferees, it is to be noted that there is no provision in the EPIRA itself authorizing the NPC to assign or transfer its water rights in case of transfer of operation and possession of multi-purpose hydropower facilities. Since only the power plant is to be sold and privatized, the operation of the non-power components such as the dam and reservoir, including the maintenance of the surrounding watershed, should remain under the jurisdiction and control of NPC which continue to be a government corporation. There is therefore no necessity for NPC to transfer its permit over the water rights to K-Water. Pursuant to its purchase and operation/management contracts with K-Water, NPC may authorize the latter to use water in the dam to generate electricity. NPCs water rights remain an integral aspect of its jurisdiction and control over the dam and reservoir. That the EPIRAitselfdid not ordain any transfer of water rights leads us to infer that Congress intended NPC to continue exercising full supervision over the dam, reservoir and, more importantly, to remain in complete control of the extraction or diversion of water from the Angat River. Indeed, there can be no debate that the best means of ensuring that PSALM/NPC can fulfill the duty to prescribe "safeguards to enable the national government to direct water usage to protect potable water, irrigation, and all other requirements imbued with public interest" is for it to retain the water rights over those water resources from where the dam waters are extracted. In this way, the States full supervision and control over the countrys water resources is also assured notwithstanding the privatized power generation business. Section 6 (a) of the IRR of R.A. No. 9136 insofar as it directs the transfer of water rights in the privatization of multi-purpose hydropower facilities, is thus merely directory. It is worth mentioning that the Water Code explicitly provides that Filipino citizens and juridical persons who may apply for water permits should be "duly qualified by law to exploit and develop water resources." Thus, aside from the grant of authority to construct and operate dams and power plants, NPCs Revised Charter specifically authorized it (f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines, for the purposes specified in this Act; to intercept and divert the flow of waters from lands of riparian owners and from persons owning or interested in waters which are or may be necessary for said purposes, upon payment of just compensation therefor; to alter, straighten, obstruct or increase the flow of water in streams or water channels intersecting or connecting therewith or contiguous to its works or any part thereof: Provided, That just compensation shall be paid to any person or persons whose property is, directly or indirectly, adversely affected or damaged thereby.80 The MWSS is likewise vested with the power to construct, maintain and operate dams and reservoirs for the purpose of supplying water for domestic and other purposes, as well to construct, develop, maintain and operate such artesian wells and springs as may be needed in its operation within its territory.81 On the other hand, NIA, also a water permit holder in Angat River, is vested with similar authority to utilize water resources, as follows: (b) To investigate all available and possible water resources in the country for the purpose of utilizing the same for irrigation, and to plan, design and construct the necessary projects to make the ten to twentyyear period following the approval of this Act as the Irrigation Age of the Republic of the Philippines;82 (c) To construct multiple-purpose water resources projects designed primarily for irrigation, and secondarily for hydraulic power development and/or other uses such as flood control, drainage, land reclamation, domestic water supply, roads and highway construction and reforestation, among others, provided, that the plans, designs and the construction thereof, shall be undertaken in coordination with the agencies concerned;83

To reiterate, there is nothing in the EPIRAwhich declares that it is mandatory for PSALM or NPC to transfer or assign NPCs water rights to buyers of its multi-purpose hydropower facilities as part of the privatization process. While PSALM was mandated to transfer the ownership of all hydropower plants except those mentioned in Sec. 47 (f), any transfer of possession, operation and control of the multipurpose hydropower facilities, the intent to preserve water resources under the full supervision and control of the State is evident when PSALM was obligated to prescribe safeguards to enable the national government to direct water usage to domestic and other requirements "imbued with public interest." There is no express requirement for the transfer of water rights in all cases where the operation of hydropower facilities in a multi-purpose dam complex is turned over to the private sector. As the new owner of the AHEPP, K-Water will have to utilize the waters in the Angat Dam for hydropower generation. Consistent with the goals of the EPIRA, private entities are allowed to undertake power generation activities and acquire NPCs generation assets. But since only the hydroelectric power plants and appurtenances are being sold, the privatization scheme should enable the buyer of a hydroelectric power plant in NPCs multi-purpose dam complex to have beneficialuse of the waters diverted or collected in the Angat Dam for its hydropower generation activities, and at the same time ensure that the NPC retains full supervision and control over the extraction and diversion of waters from the Angat River. In fine, the Court rules that while the sale of AHEPP to a foreign corporation pursuant to the privatization mandated by the EPIRA did not violate Sec. 2, Art. XII of the 1987 Constitution which limits the exploration, development and utilization of natural resources under the full supervision and control of the State or the States undertaking the same through joint venture, co-production or production sharing agreements with Filipino corporations 60% of the capital of which is owned by Filipino citizens, the stipulation in the Asset Purchase Agreement and Operations and Maintenance Agreement whereby NPC consents to the transfer of water rights to the foreign buyer, K-Water, contravenes the aforesaid constitutional provision and the Water Code.1wphi1 Section 6, Rule 23 of the IRR of EPIRA, insofar as it ordered NPCs water rights in multi-purpose hydropower facilities to be included in the sale thereof, is declared as merely directoryand not an absolute condition in the privatization scheme. In this case, we hold that NPC shall continue to be the holder of the water permit even as the operational control and day-to-day management of the AHEPP is turned over to K-Water under the terms and conditions of their APA and O & M Agreement, whereby NPC grants authority to K-Water to utilize the waters diverted or collected in the Angat Dam for hydropower generation. Further, NPC and K-Water shall faithfully comply with the terms and conditions of the Memorandum of Agreement on Water Protocol, as well as with such other regulations and issuances of the NWRB governing water rights and water usage. WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive relief/s is PARTLY GRANTED. The following DISPOSITIONS are in ORDER: 1) The bidding conducted and the Notice of Award issued by PSALM in favor of the winning bidder, KOREA WATER RESOURCES CORPORATION (K-WATER), are declared VALID and LEGAL; 2) PSALM is directed to FURNISH the petitioners with copies of all documents and records in its files pertaining to K-Water; 3) Section 6 (a), Rule 23, IRR of the EPIRA, is hereby declared as merely DIRECTORY, and not an absolute condition in all cases where NPC-owned hydropower generation facilities are privatized; 4) NPC shall CONTINUE to be the HOLDER of Water Permit No. 6512 issued by the National Water Resources Board. NPC shall authorize K-Water to utilize the waters in the Angat Dam for hydropower generation, subject to the NWRBs rules and regulations governing water right
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and usage. The Asset Purchase Agreement and Operation & Management Agreement between NPC/PSALM and K- Water are thus amended accordingly. Except for the requirement of securing a water permit, K-Water remains BOUND by its undertakings and warranties under the APA and O & M Agreement; 5) NPC shall be a CO-PARTY with K-Water in the Water Protocol Agreement with MWSS and NIA, and not merely as a conforming authority or agency; and 6) The Status Quo Ante Order issued by this Court on May 24, 2010 is hereby LIFTED and SET ASIDE. No pronouncement as to costs. SO ORDERED.

G.R. Nos. L-68379-81 September 22, 1986 EVELIO B. JAVIER, petitioner, vs. THE COMMISSION ON ELECTIONS, and ARTURO F. PACIFICADOR, respondents. Raul S. Roco and Lorna Patajo-Kapunan for petitioner. CRUZ, J.: The new Solicitor General has moved to dismiss this petition on the ground that as a result of supervening events it has become moot and academic. It is not as simple as that. Several lives have been lost in connection with this case, including that of the petitioner himself. The private respondent is now in hiding. The purity of suffrage has been defiled and the popular will scorned through a confabulation of those in authority. This Court cannot keep silent in the face of these terrible facts. The motion is denied. The petitioner and the private respondent were candidates in Antique for the Batasang Pambansa in the May 1984 elections. The former appeared to enjoy more popular support but the latter had the advantage of being the nominee of the KBL with all its perquisites of power. On May 13, 1984, the eve of the elections, the bitter contest between the two came to a head when several followers of the petitioner were ambushed and killed, allegedly by the latter's men. Seven suspects, including respondent Pacificador, are now facing trial for these murders. The incident naturally heightened tension in the province and sharpened the climate of fear among the electorate. Conceivably, it intimidated voters against supporting the Opposition candidate or into supporting the candidate of the ruling party. It was in this atmosphere that the voting was held, and the post-election developments were to run true to form. Owing to what he claimed were attempts to railroad the private respondent's proclamation, the petitioner went to the Commission on Elections to question the canvass of the election returns. His complaints were dismissed and the private respondent was proclaimed winner by the Second Division of the said body. The petitioner thereupon came to this Court, arguing that the proclamation was void because made only by a division and not by the Commission on Elections en banc as required by the Constitution. Meanwhile, on the strength of his proclamation, the private respondent took his oath as a member of the Batasang Pambansa. The case was still being considered by this Court when on February 11, 1986, the petitioner was gunned down in cold blood and in broad daylight. The nation, already indignant over the obvious manipulation of the presidential elections in favor of Marcos, was revolted by the killing, which flaunted a scornful disregard for the law by the assailants who apparently believed they were above the law. This ruthless murder was possibly one of the factors that strengthened the cause of the Opposition in the February revolution that toppled the Marcos regime and installed the present government under President Corazon C. Aquino. The abolition of the Batasang Pambansa and the disappearance of the office in dispute between the petitioner and the private respondent-both of whom have gone their separate ways-could be a convenient justification for dismissing this case. But there are larger issues involved that must be resolved now, once and for all, not only to dispel the legal ambiguities here raised. The more important purpose is to manifest in the clearest possible terms that this Court will not disregard and in effect condone wrong on the simplistic and tolerant pretext that the case has become moot and academic. The Supreme Court is not only the highest arbiter of legal questions but also the conscience of the government. The citizen comes to us in quest of law but we must also give him justice. The two are not always the same. There are times when we cannot grant the latter because the issue has been settled and decision is no longer possible according to the law. But there are also times when although the dispute has disappeared, as in this case, it nevertheless cries out to be resolved. Justice demands that we act then, not only for the vindication of the outraged right, though gone, but also for the guidance of and as a restraint upon the future.
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It is a notorious fact decried by many people and even by the foreign press that elections during the period of the Marcos dictatorship were in the main a desecration of the right of suffrage. Vote-buying, intimidation and violence, illegal listing of voters, falsified returns, and other elections anomalies misrepresented and vitiated the popular will and led to the induction in office of persons who did not enjoy the confidence of the sovereign electorate. Genuine elections were a rarity. The price at times was human lives. The rule was chicanery and irregularity, and on all levels of the polls, from the barangay to the presidential. This included the rigged plebiscites and referenda that also elicited the derision and provoked the resentments of the people. Antique in 1984 hewed to the line and equaled if it did not surpass the viciousness of elections in other provinces dominated by the KBL. Terrorism was a special feature, as demonstrated by the killings previously mentioned, which victimized no less than one of the main protagonists and implicated his rival as a principal perpetrator. Opposition leaders were in constant peril of their lives even as their supporters were gripped with fear of violence at the hands of the party in power. What made the situation especially deplorable was the apparently indifferent attitude of the Commission on Elections toward the anomalies being committed. It is a matter of record that the petitioner complained against the terroristic acts of his opponents. All the electoral body did was refer the matter to the Armed Forces without taking a more active step as befitted its constitutional role as the guardian of free, orderly and honest elections. A more assertive stance could have averted the Sibalom election eve massacre and saved the lives of the nine victims of the tragedy. Public confidence in the Commission on Elections was practically nil because of its transparent bias in favor of the administration. This prejudice left many opposition candidates without recourse except only to this Court. Alleging serious anomalies in the conduct of the elections and the canvass of the election returns, the petitioner went to the Commission on Elections to prevent the impending proclamation of his rival, the private respondent herein. 1 Specifically, the petitioner charged that the elections were marred by "massive terrorism, intimidation, duress, vote-buying, fraud, tampering and falsification of election returns under duress, threat and intimidation, snatching of ballot boxes perpetrated by the armed men of respondent Pacificador." 2 Particular mention was made of the municipalities of Caluya, Cabate, Tibiao, Barbaza, Laua-an, and also of San Remigio, where the petitioner claimed the election returns were not placed in the ballot boxes but merely wrapped in cement bags or Manila paper. On May 18, 1984, the Second Division of the Commission on Elections directed the provincial board of canvassers of Antique to proceed with the canvass but to suspend the proclamation of the winning candidate until further orders. 3 On June 7, 1984, the same Second Division ordered the board to immediately convene and to proclaim the winner without prejudice to the outcome of the case before the Commission. 4 On certiorari before this Court, the proclamation made by the board of canvassers was set aside as premature, having been made before the lapse of the 5-day period of appeal, which the petitioner had seasonably made. 5 Finally, on July 23, 1984, the Second Division promulgated the decision now subject of this petition which inter alia proclaimed Arturo F. Pacificador the elected assemblyman of the province of Antique. 6 This decision was signed by Chairman Victoriano Savellano and Commissioners Jaime Opinion and Froilan M. Bacungan. Previously asked to inhibit himself on the ground that he was a former law partner of private respondent Pacificador, Opinion had refused. 7 The petitioner then came to this Court, asking us to annul the said decision. The core question in this case is one of jurisdiction, to wit: Was the Second Division of the Commission on Elections authorized to promulgate its decision of July 23, 1984, proclaiming the private respondent the winner in the election? The applicable provisions are found in Article XII-C, Sections 2 and 3, of the 1973 Constitution. Section 2 confers on the Commission on Elections the power to:

(2) Be the sole judge of all contests relating to the election, returns and qualifications of all member of the Batasang Pambansa and elective provincial and city officials. Section 3 provides: The Commission on Elections may sit en banc or in three divisions. All election cases may be heard and decided by divisions except contests involving members of the Batasang Pambansa, which shall be heard and decided en banc. Unless otherwise provided by law, all election cases shall be decided within ninety days from the date of their submission for decision. While both invoking the above provisions, the petitioner and the respondents have arrived at opposite conclusions. The records are voluminous and some of the pleadings are exhaustive and in part even erudite. And well they might be, for the noble profession of the law-despite all the canards that have been flung against it-exerts all efforts and considers all possible viewpoints in its earnest search of the truth. The petitioner complains that the Proclamation made by the Second Division is invalid because all contests involving the members of the Batasang Pambansa come under the jurisdiction of the Commission on Elections en banc. This is as it should be, he says, to insure a more careful decision, considering the importance of the offices involved. The respondents, for their part, argue that only contests need to be heard and decided en banc and all other cases can be-in fact, should be-filed with and decided only by any of the three divisions. The former Solicitor General makes much of this argument and lays a plausible distinction between the terms "contests" and "cases" to prove his point. 8 Simply put, his contention is that the pre-proclamation controversy between the petitioner and the private respondent was not yet a contest at that time and therefore could be validly heard by a mere division of the Commission on Elections, consonant with Section 3. The issue was at this stage still administrative and so was resoluble by the Commission under its power to administer all laws relative to the conduct of elections, 9 not its authority as sole judge of the election contest. A contest, according to him, should involve a contention between the parties for the same office "in which the contestant seeks not only to oust the intruder but also to have himself inducted into the office." 10 No proclamation had as yet been made when the petition was filed and later decided. Hence, since neither the petitioner nor the private respondent had at that time assumed office, there was no Member of the Batasang Pambansa from Antique whose election, returns or qualifications could be examined by the Commission on Elections en banc. In providing that the Commission on Elections could act in division when deciding election cases, according to this theory, the Constitution was laying down the general rule. The exception was the election contest involving the members of the Batasang Pambansa, which had to be heard and decided en banc. 11 The en banc requirement would apply only from the time a candidate for the Batasang Pambansa was proclaimed as winner, for it was only then that a contest could be permitted under the law. All matters arising before such time were, necessarily, subject to decision only by division of the Commission as these would come under the general heading of "election cases." As the Court sees it, the effect of this interpretation would be to divide the jurisdiction of the Commission on Elections into two, viz.: (1) over matters arising before the proclamation, which should be heard and decided by division in the exercise of its administrative power; and (2) over matters arising after the proclamation, which could be heard and decided only en banc in the exercise of its judicial power. Stated otherwise, the Commission as a whole could not act as sole judge as long as one of its divisions was hearing a pre-proclamation matter affecting the candidates for the Batasang Pambansa because there was as yet no contest; or to put it still another way, the Commission en banc could not do what one of its divisions was competent to do, i.e., decide a pre-proclamation controversy. Moreover, a mere division of the Commission on Elections could hear and decide, save only those involving the election, returns and qualifications of the members of the Batasang Pambansa, all cases involving elective provincial and city
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officials from start to finish, including pre-proclamation controversies and up to the election protest. In doing so, it would exercise first administrative and then judicial powers. But in the case of the Commission en banc, its jurisdiction would begin only after the proclamation was made and a contest was filed and not at any time and on any matter before that, and always in the exercise only of judicial power. This interpretation would give to the part more powers than were enjoyed by the whole, granting to the division while denying to the banc. We do not think this was the intention of the Constitution. The framers could not have intended such an irrational rule. We believe that in making the Commission on Elections the sole judge of all contests involving the election, returns and qualifications of the members of the Batasang Pambansa and elective provincial and city officials, the Constitution intended to give it full authority to hear and decide these cases from beginning to end and on all matters related thereto, including those arising before the proclamation of the winners. It is worth observing that the special procedure for the settlement of what are now called "preproclamation controversies" is a relatively recent innovation in our laws, having been introduced only in 1978, through P.D. No. 1296, otherwise known as the 1978 Election Code. Section 175 thereof provided: Sec. 175. Suspension and annulment of proclamation.-The Commission shall be the sole judge of all pre-proclamation controversies and any of its decisions, orders or rulings shall be final and executory. It may, motu proprio or upon written petition, and after due notice and hearing order the suspension of the proclamation of a candidate-elect or annul any proclamation, if one has been made, on any of the grounds mentioned in Sections 172, 173 and 174 thereof. Before that time all proceedings affecting the election, returns and qualifications of public officers came under the complete jurisdiction of the competent court or tribunal from beginning to end and in the exercise of judicial power only. It therefore could not have been the intention of the framers in 1935, when the Commonwealth Charter was adopted, and even in 1973, when the past Constitution was imposed, to divide the electoral process into the pre-proclamation stage and the post-proclamation stage and to provide for a separate jurisdiction for each stage, considering the first administrative and the second judicial. Besides, the term "contest" as it was understood at the time Article XII-C. Section 2(2) was incorporated in the 1973 Constitution did not follow the strict definition of a contention between the parties for the same office. Under the Election Code of 1971, which presumably was taken into consideration when the 1973 Constitution was being drafted, election contests included the quo warranto petition that could be filed by any voter on the ground of disloyalty or ineligibility of the contestee although such voter was himself not claiming the office involved. 12 The word "contests" should not be given a restrictive meaning; on the contrary, it should receive the widest possible scope conformably to the rule that the words used in the Constitution should be interpreted liberally. As employed in the 1973 Constitution, the term should be understood as referring to any matter involving the title or claim of title to an elective office, made before or after proclamation of the winner, whether or not the contestant is claiming the office in dispute. Needless to stress, the term should be given a consistent meaning and understood in the same sense under both Section 2(2) and Section 3 of Article XII-C of the Constitution. The phrase "election, returns and qualifications" should be interpreted in its totality as referring to all matters affecting the validity of the contestee's title. But if it is necessary to specify, we can say that "election" referred to the conduct of the polls, including the listing of voters, the holding of the electoral campaign, and the casting and counting of the votes; "returns" to the canvass of the returns and the proclamation of the winners, including questions concerning the composition of the board of canvassers and the authenticity of the election returns and "qualifications" to matters that could be raised in a quo

warranto proceeding against the proclaimed winner, such as his disloyalty or ineligibility or the inadequacy of his certificate of candidacy. All these came under the exclusive jurisdiction of the Commission on Elections insofar as they applied to the members of the defunct Batasang Pambansa and, under Article XII-C, Section 3, of the 1973 Constitution, could be heard and decided by it only en banc. We interpret "cases" as the generic term denoting the actions that might be heard and decided by the Commission on Elections, only by division as a general rule except where the case was a "contest" involving members of the Batasang Pambansa, which had to be heard and decided en banc. As correctly observed by the petitioner, the purpose of Section 3 in requiring that cases involving members of the Batasang Pambansa be heard and decided by the Commission en banc was to insure the most careful consideration of such cases. Obviously, that objective could not be achieved if the Commission could act en banc only after the proclamation had been made, for it might then be too late already. We are all-too-familiar with the grab-the-proclamation-and-delay-the-protest strategy of many unscrupulous candidates which has resulted in the frustration of the popular will and the virtual defeat of the real winners in the election. The respondent's theory would make this gambit possible for the preproclamation proceedings, being summary in nature, could be hastily decided by only three members in division, without the care and deliberation that would have otherwise been observed by the Commission en banc. After that, the delay. The Commission en banc might then no longer be able to rectify in time the proclamation summarily and not very judiciously made by the division. While in the end the protestant might be sustained, he might find himself with only a Phyrric victory because the term of his office would have already expired. It may be argued that in conferring the initial power to decide the pre- proclamation question upon the division, the Constitution did not intend to prevent the Commission en banc from exercising the power directly, on the theory that the greater power embraces the lesser. It could if it wanted to but then it could also allow the division to act for it. That argument would militate against the purpose of the provision, which precisely limited all questions affecting the election contest, as distinguished from election cases in general, to the jurisdiction of the Commission en banc as sole judge thereof. "Sole judge" excluded not only all other tribunals but also and even the division of the Commission A decision made on the contest by less than the Commission en banc would not meet the exacting standard of care and deliberation ordained by the Constitution Incidentally, in making the Commission the "sole judge" of pre- proclamation controversies in Section 175, supra, the law was obviously referring to the body sitting en banc. In fact, the pre-proclamation controversies involved in Aratuc vs. Commission on Elections, 13 where the said provision was applied, were heard and decided en banc. Another matter deserving the highest consideration of this Court but accorded cavalier attention by the respondent Commission on Elections is due process of law, that ancient guaranty of justice and fair play which is the hallmark of the free society. Commissioner Opinion ignored it. Asked to inhibit himself on the ground that he was formerly a law partner of the private respondent, he obstinately insisted on participating in the case, denying he was biased. 14 Given the general attitude of the Commission on Elections toward the party in power at the time, and the particular relationship between Commissioner Opinion and MP Pacificador, one could not be at least apprehensive, if not certain, that the decision of the body would be adverse to the petitioner. As in fact it was. Commissioner Opinion's refusal to inhibit himself and his objection to the transfer of the case to another division cannot be justified by any criterion of propriety. His conduct on this matter belied his wounded protestations of innocence and proved the motives of the Second Division when it rendered its decision. This Court has repeatedly and consistently demanded "the cold neutrality of an impartial judge" as the indispensable imperative of due process. 15 To bolster that requirement, we have held that the judge
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must not only be impartial but must also appear to be impartial as an added assurance to the parties that his decision will be just. 16 The litigants are entitled to no less than that. They should be sure that when their rights are violated they can go to a judge who shall give them justice. They must trust the judge, otherwise they will not go to him at all. They must believe in his sense of fairness, otherwise they will not seek his judgment. Without such confidence, there would be no point in invoking his action for the justice they expect. Due process is intended to insure that confidence by requiring compliance with what Justice Frankfurter calls the rudiments of fair play. Fair play cans for equal justice. There cannot be equal justice where a suitor approaches a court already committed to the other party and with a judgment already made and waiting only to be formalized after the litigants shall have undergone the charade of a formal hearing. Judicial (and also extra-judicial) proceedings are not orchestrated plays in which the parties are supposed to make the motions and reach the denouement according to a prepared script. There is no writer to foreordain the ending. The judge will reach his conclusions only after all the evidence is in and all the arguments are filed, on the basis of the established facts and the pertinent law. The relationship of the judge with one of the parties may color the facts and distort the law to the prejudice of a just decision. Where this is probable or even only posssible, due process demands that the judge inhibit himself, if only out of a sense of delicadeza. For like Caesar's wife, he must be above suspicion. Commissioner Opinion, being a lawyer, should have recognized his duty and abided by this well-known rule of judicial conduct. For refusing to do so, he divested the Second Division of the necessary vote for the questioned decision, assuming it could act, and rendered the proceeding null and void. 17 Since this case began in 1984, many significant developments have taken place, not the least significant of which was the February revolution of "people power" that dislodged the past regime and ended well nigh twenty years of travail for this captive nation. The petitioner is gone, felled by a hail of bullets sprayed with deadly purpose by assassins whose motive is yet to be disclosed. The private respondent has disappeared with the "pomp of power" he had before enjoyed. Even the Batasang Pambansa itself has been abolished, "an iniquitous vestige of the previous regime" discontinued by the Freedom Constitution. It is so easy now, as has been suggested not without reason, to send the rec rds of this case to the archives and say the case is finished and the book is closed. But not yet. Let us first say these meager words in tribute to a fallen hero who was struck down in the vigor of his youth because he dared to speak against tyranny. Where many kept a meekly silence for fear of retaliation, and still others feigned and fawned in hopes of safety and even reward, he chose to fight. He was not afraid. Money did not tempt him. Threats did not daunt him. Power did not awe him. His was a singular and all-exacting obsession: the return of freedom to his country. And though he fought not in the barricades of war amid the sound and smoke of shot and shell, he was a soldier nonetheless, fighting valiantly for the liberties of his people against the enemies of his race, unfortunately of his race too, who would impose upon the land a perpetual night of dark enslavement. He did not see the breaking of the dawn, sad to say, but in a very real sense Evelio B. Javier made that dawn draw nearer because he was, like Saul and Jonathan, "swifter than eagles and stronger than lions." A year ago this Court received a letter which began: "I am the sister of the late Justice Calixto Zaldivar. I am the mother of Rhium Z. Sanchez, the grandmother of Plaridel Sanchez IV and Aldrich Sanchez, the aunt of Mamerta Zaldivar. I lost all four of them in the election eve ambush in Antique last year." She pleaded, as so did hundreds of others of her provincemates in separate signed petitions sent us, for the early resolution of that horrible crime, saying: "I am 82 years old now. I am sick. May I convey to you my prayer in church and my plea to you, 'Before I die, I would like to see justice to my son and grandsons.' May I also add that the people of Antique have not stopped praying that the true winner of the last elections will be decided upon by the Supreme Court soon." That was a year ago and since then a new government has taken over in the wake of the February revolution. The despot has escaped, and with him, let us pray, all the oppressions and repressions of the

past have also been banished forever. A new spirit is now upon our land. A new vision limns the horizon. Now we can look forward with new hope that under the Constitution of the future every Filipino shall be truly sovereign in his own country, able to express his will through the pristine ballow with only his conscience as his counsel. This is not an impossible dream. Indeed, it is an approachable goal. It can and will be won if we are able at last, after our long ordeal, to say never again to tyranny. If we can do this with courage and conviction, then and only then, and not until then, can we truly say that the case is finished and the book is closed. WHEREFORE, let it be spread in the records of this case that were it not for the supervening events that have legally rendered it moot and academic, this petition would have been granted and the decision of the Commission on Elections dated July 23, 1984, set aside as violative of the Constitution. SO ORDERED. Feria, Yap, Narvasa, Alampay and Paras, JJ., concur. Fernan and Gutierrez, Jr., JJ., concur in the result.

G.R. No. 133486 January 28, 2000 ABS-CBN BROADCASTING CORPORATION, petitioner, vs. COMMISSION ON ELECTIONS, respondent. PANGANIBAN, J.:
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The holding of exit polls and the dissemination of their results through mass media constitute an essential part of the freedoms of speech and of the press. Hence, the Comelec cannot ban them totally in the guise of promoting clean, honest, orderly and credible elections. Quite the contrary, exit polls properly conducted and publicized can be vital tools in eliminating the evils of election-fixing and fraud. Narrowly tailored countermeasures may be prescribed by the Comelec so as to minimize or suppress the incidental problems in the conduct of exit polls, without transgressing in any manner the fundamental rights of our people. The Case and the Facts Before us is a Petition for Certiorari under Rule 65 of the Rules of Court assailing Commission on Elections (Comelec) en banc Resolution No. 98-14191 dated April 21, 1998. In the said Resolution, the poll body RESOLVED to approve the issuance of a restraining order to stop ABS-CBN or any other groups, its agents or representatives from conducting such exit survey and to authorize the Honorable Chairman to issue the same. The Resolution was issued by the Comelec allegedly upon "information from [a] reliable source that ABS-CBN (Lopez Group) has prepared a project, with PR groups, to conduct radio-TV coverage of the elections . . . and to make [an] exit survey of the . . . vote during the elections for national officials particularly for President and Vice President, results of which shall be [broadcast] immediately."2 The electoral body believed that such project might conflict with the official Comelec count, as well as the unofficial quick count of the National Movement for Free Elections (Namfrel). It also noted that it had not authorized or deputized Petitioner ABS-CBN to undertake the exit survey. On May 9, 1998, this Court issued the Temporary Restraining Order prayed for by petitioner. We directed the Comelec to cease and desist, until further orders, from implementing the assailed Resolution or the restraining order issued pursuant thereto, if any. In fact, the exit polls were actually conducted and reported by media without any difficulty or problem. The Issues Petitioner raises this lone issue: "Whether or not the Respondent Commission acted with grave abuse of discretion amounting to a lack or excess of jurisdiction when it approved the issuance of a restraining order enjoining the petitioner or any [other group], its agents or representatives from conducting exit polls during the . . . May 11 elections."3 In his Memorandum,4 the solicitor general, in seeking to dismiss the Petition, brings up additional issues: (1) mootness and (2) prematurity, because of petitioner's failure to seek a reconsideration of the assailed Comelec Resolution. The Court's Ruling The Petition5 is meritorious. Procedural Issues: Mootness and Prematurity The solicitor general contends that the petition is moot and academic, because the May 11, 1998 election has already been held and done with. Allegedly, there is no longer any actual controversy before us. The issue is not totally moot. While the assailed Resolution referred specifically to the May 11, 1998 election, its implications on the people's fundamental freedom of expression transcend the past election. The holding of periodic elections is a basic feature of our democratic government. By its very nature, exit polling is tied up with elections. To set aside the resolution of the issue now will only postpone a task that could well crop up again in future elections.6 In any event, in Salonga v. Cruz Pao, the Court had occasion to reiterate that it "also has the duty to formulate guiding and controlling constitutional principles, precepts, doctrines, or rules. It has the

symbolic function of educating bench and bar on the extent of protection given by constitutional guarantees."7 Since the fundamental freedoms of speech and of the press are being invoked here, we have resolved to settle, for the guidance of posterity, whether they likewise protect the holding of exit polls and the dissemination of data derived therefrom. The solicitor general further contends that the Petition should be dismissed for petitioner's failure to exhaust available remedies before the issuing forum, specifically the filing of a motion for reconsideration. This Court, however, has ruled in the past that this procedural requirement may be glossed over to prevent a miscarriage of justice,8 when the issue involves the principle of social justice or the protection of labor,9 when the decision or resolution sought to be set aside is a nullity,10 or when the need for relief is extremely urgent and certiorari is the only adequate and speedy remedy available.11 The instant Petition assails a Resolution issued by the Comelec en banc on April 21, 1998, only twenty (20) days before the election itself. Besides, the petitioner got hold of a copy thereof only on May 4, 1998. Under the circumstances, there was hardly enough opportunity to move for a reconsideration and to obtain a swift resolution in time or the May 11, 1998 elections. Moreover, not only is time of the essence; the Petition involves transcendental constitutional issues. Direct resort to this Court through a special civil action for certiorari is therefore justified. Main Issue: Validity of Conducting Exit Polls An exit poll is a species of electoral survey conducted by qualified individuals or groups of individuals for the purpose of determining the probable result of an election by confidentially asking randomly selected voters whom they have voted for, immediately after they have officially cast their ballots. The results of the survey are announced to the public, usually through the mass media, to give an advance overview of how, in the opinion of the polling individuals or organizations, the electorate voted. In our electoral history, exit polls had not been resorted to until the recent May 11, 1998 elections. In its Petition, ABS-CBN Broadcasting Corporation maintains that it is a responsible member of the mass media, committed to report balanced election-related data, including "the exclusive results of Social Weather Station (SWS) surveys conducted in fifteen administrative regions." It argues that the holding of exit polls and the nationwide reporting their results are valid exercises of the freedoms of speech and of the press. It submits that, in precipitately and unqualifiedly restraining the holding and the reporting of exit polls, the Comelec gravely abused its discretion and grossly violated the petitioner's constitutional rights. Public respondent, on the other hand, vehemently denies that, in issuing the assailed Resolution, it gravely abused its discretion. It insists that the issuance thereof was "pursuant to its constitutional and statutory powers to promote a clean, honest, orderly and credible May 11, 1998 elections"; and "to protect, preserve and maintain the secrecy and sanctity of the ballot." It contends that "the conduct of exit surveys might unduly confuse and influence the voters," and that the surveys were designed "to condition the minds of people and cause confusion as to who are the winners and the [losers] in the election," which in turn may result in "violence and anarchy." Public respondent further argues that "exit surveys indirectly violate the constitutional principle to preserve the sanctity of the ballots," as the "voters are lured to reveal the contents of ballots," in violation of Section 2, Article V of the Constitution;12 and relevant provisions of the Omnibus Election Code.13 It submits that the constitutionally protected freedoms invoked by petitioner "are not immune to regulation by the State in the legitimate exercise of its police power," such as in the present case. The solicitor general, in support of the public respondent, adds that the exit polls pose a "clear and present danger of destroying the credibility and integrity of the electoral process," considering that they are not supervised by any government agency and can in general be manipulated easily. He insists that
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these polls would sow confusion among the voters and would undermine the official tabulation of votes conducted by the Commission, as well as the quick count undertaken by the Namfrel. Admittedly, no law prohibits the holding and the reporting of exit polls. The question can thus be more narrowly defined: May the Comelec, in the exercise of its powers, totally ban exit polls? In answering this question, we need to review quickly our jurisprudence on the freedoms of speech and of the press. Nature and Scope of Freedoms of Speech and of the Press The freedom of expression is a fundamental principle of our democratic government. It "is a 'preferred' right and, therefore, stands on a higher level than substantive economic or other liberties. . . . [T]his must be so because the lessons of history, both political and legal, illustrate that freedom of thought and speech is the indispensable condition of nearly every other form of freedom."14 Our Constitution clearly mandates that no law shall be passed abridging the freedom of speech or of the press.15 In the landmark case Gonzales v. Comelec,16 this Court enunciated that at the very least, free speech and a free press consist of the liberty to discuss publicly and truthfully any matter of public interest without prior restraint. The freedom of expression is a means of assuring individual self-fulfillment, of attaining the truth, of securing participation by the people in social and political decision-making, and of maintaining the balance between stability and change.17 It represents a profound commitment to the principle that debates on public issues should be uninhibited, robust, and wide open.18 It means more than the right to approve existing political beliefs or economic arrangements, to lend support to official measures, or to take refuge in the existing climate of opinion on any of public consequence. And paraphrasing the eminent Justice Oliver Wendell Holmes,19 we stress that the freedom encompasses the thought we hate, no less than the thought we agree with. Limitations The realities of life in a complex society, however, preclude an absolute exercise of the freedoms of speech and of the press. Such freedoms could not remain unfettered and unrestrained at all times and under all circumstances.20 They are not immune to regulation by the State in the exercise of its police power.21 While the liberty to think is absolute, the power to express such thought in words and deeds has limitations. In Cabansag v. Fernandez22 this Court had occasion to discuss two theoretical test in determining the validity of restrictions to such freedoms, as follows: These are the "clear and present danger" rule and the "dangerous tendency" rule. The first, as interpreted in a number of cases, means that the evil consequence of the comment or utterance must be "extremely serious and the degree of imminence extremely high" before the utterance can be punished. The danger to be guarded against is the "substantive evil" sought to be prevented. . . .23 The "dangerous tendency" rule, on the other hand, . . . may be epitomized as follows: if the words uttered create a dangerous tendency which the state has a right to prevent, then such words are punishable. It is not necessary that some definite or immediate acts of force, violence, or unlawfulness be advocated. It is sufficient that such acts be advocated in general terms. Nor is it necessary that the language used be reasonably calculated to incite persons to acts of force, violence, or unlawfulness. It is sufficient if the natural tendency and probable effect of the utterance be to bring about the substantive evil which the legislative body seeks to prevent.24 Unquestionably, this Court adheres to the "clear and present danger" test. It implicitly did in its earlier decisions in Primicias v. Fugoso25 and American Bible Society v. City of Manila;26 as well as in later ones, Vera v. Arca,27 Navarro v. Villegas,28 Imbong v. Ferrer,29 Blo Umpar Adiong v. Comelec30 and, more recently, in Iglesia ni Cristo v. MTRCB.31 In setting the standard or test for the "clear and present danger" doctrine, the Court echoed the words of Justice Holmes: "The question in every case is whether

the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent. It is a question of proximity and degree."32 A limitation on the freedom of expression may be justified only by a danger of such substantive character that the state has a right to prevent. Unlike in the "dangerous tendency" doctrine, the danger must not only be clear but also present. "Present" refers to the time element; the danger must not only be probable but very likely to be inevitable.33 The evil sought to be avoided must be so substantive as to justify a clamp over one's mouth or a restraint of a writing instrument.34 Justification for a Restriction Doctrinally, the Court has always ruled in favor of the freedom of expression, and any restriction is treated an exemption. The power to exercise prior restraint is not to be presumed; rather the presumption is against its validity.35 And it is respondent's burden to overthrow such presumption. Any act that restrains speech should be greeted with furrowed brows,36 so it has been said. To justify a restriction, the promotion of a substantial government interest must be clearly shown.37 Thus: A government regulation is sufficiently justified if it is within the constitutional power of the government, if it furthers an important or substantial government interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.38 Hence, even though the government's purposes are legitimate and substantial, they cannot be pursued by means that broadly stifle fundamental personal liberties, when the end can be more narrowly achieved.39 The freedoms of speech and of the press should all the more be upheld when what is sought to be curtailed is the dissemination of information meant. to add meaning to the equally vital right of suffrage.40 We cannot support any ruling or order "the effect of which would be to nullify so vital a constitutional right as free speech."41 When faced with borderline situations in which the freedom of a candidate or a party to speak or the freedom of the electorate to know is invoked against actions allegedly made to assure clean and free elections, this Court shall lean in favor of freedom. For in the ultimate analysis, the freedom of the citizen and the State's power to regulate should not be antagonistic. There can be no free and honest elections if, in the efforts to maintain them, the freedom to speak and the right to know are unduly curtailed.42 True, the government has a stake in protecting the fundamental right to vote by providing voting places that are safe and accessible. It has the duty to secure the secrecy of the ballot and to preserve the sanctity and the integrity of the electoral process. However, in order to justify a restriction of the people's freedoms of speech and of the press, the state's responsibility of ensuring orderly voting must far outweigh them. These freedoms have additional importance, because exit polls generate important research data which may be used to study influencing factors and trends in voting behavior. An absolute prohibition would thus be unreasonably restrictive, because it effectively prevents the use of exit poll data not only for election-day projections, but also for long-term research.43 Comelec Ban on Exit Polling In the case at bar, the Comelec justifies its assailed Resolution as having been issued pursuant to its constitutional mandate to ensure a free, orderly, honest, credible and peaceful election. While admitting that "the conduct of an exit poll and the broadcast of the results thereof [are] . . . an exercise of press freedom," it argues that "[p]ress freedom may be curtailed if the exercise thereof creates a clear and present danger to the community or it has a dangerous tendency." It then contends that "an exit poll has the tendency to sow confusion considering the randomness of selecting interviewees, which further make[s] the exit poll highly unreliable. The probability that the results of such exit poll may not be in
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harmony with the official count made by the Comelec . . . is ever present. In other words, the exit poll has a clear and present danger of destroying the credibility and integrity of the electoral process." Such arguments are purely speculative and clearly untenable. First, by the very nature of a survey, the interviewees or participants are selected at random, so that the results will as much as possible be representative or reflective of the general sentiment or view of the community or group polled. Second, the survey result is not meant to replace or be at par with the official Comelec count. It consists merely of the opinion of the polling group as to who the electorate in general has probably voted for, based on the limited data gathered from polled individuals. Finally, not at stake here are the credibility and the integrity of the elections, which are exercises that are separate and independent from the exit polls. The holding and the reporting of the results of exit polls cannot undermine those of the elections, since the former is only part of the latter. If at all, the outcome of one can only be indicative of the other. The Comelec's concern with the possible noncommunicative effect of exit polls disorder and confusion in the voting centers does not justify a total ban on them. Undoubtedly, the assailed Comelec Resolution is too broad, since its application is without qualification as to whether the polling is disruptive or not.44 Concededly, the Omnibus Election Code prohibits disruptive behavior around the voting centers.45 There is no showing, however, that exit polls or the means to interview voters cause chaos in voting centers. Neither has any evidence been presented proving that the presence of exit poll reporters near an election precinct tends to create disorder or confuse the voters. Moreover, the prohibition incidentally prevents the collection of exit poll data and their use for any purpose. The valuable information and ideas that could be derived from them, based on the voters' answer to the survey questions will forever remain unknown and unexplored. Unless the ban is restrained, candidates, researchers, social scientists and the electorate in general would be deprived of studies on the impact of current events and of election-day and other factors on voters' choices.1wphi1.nt In Daily Herald Co. v. Munro,46 the US Supreme Court held that a statute, one of the purposes of which was to prevent the broadcasting of early returns, was unconstitutional because such purpose was impermissible, and the statute was neither narrowly tailored to advance a state interest nor the least restrictive alternative. Furthermore, the general interest of the State in insulating voters from outside influences is insufficient to justify speech regulation. Just as curtailing election-day broadcasts and newspaper editorials for the reason that they might indirectly affect the voters' choices is impermissible, so is impermissible, so is regulating speech via an exit poll restriction.47 The absolute ban imposed by the Comelec cannot, therefore, be justified. It does not leave open any alternative channel of communication to gather the type of information obtained through exit polling. On the other hand, there are other valid and reasonable ways and means to achieve the Comelec end of avoiding or minimizing disorder and confusion that may be brought about by exit surveys. For instance, a specific limited area for conducting exit polls may be designated. Only professional survey groups may be allowed to conduct the same. Pollsters may be kept at a reasonable distance from the voting center. They may be required to explain to voters that the latter may refuse interviewed, and that the interview is not part of the official balloting process. The pollsters may further be required to wear distinctive clothing that would show they are not election officials.48 Additionally, they may be required to undertake an information campaign on the nature of the exercise and the results to be obtained therefrom. These measures, together with a general prohibition of disruptive behavior, could ensure a clean, safe and orderly election. For its part, petitioner ABS-CBN explains its survey methodology as follows: (1) communities are randomly selected in each province; (2) residences to be polled in such communities are also chosen at random; (3) only individuals who have already voted, as shown by the indelible ink on their fingers, are interviewed; (4) the interviewers use no cameras of any sort; (5) the poll results are released to the public only on the day after the elections.49 These precautions, together with the possible measures earlier stated, may be undertaken to abate the Comelec's fear, without consequently and unjustifiably stilling the people's voice.

With the foregoing premises, we conclude that the interest of the state in reducing disruption is outweighed by the drastic abridgment of the constitutionally guaranteed rights of the media and the electorate. Quite the contrary, instead of disrupting elections, exit polls properly conducted and publicized can be vital tools for the holding of honest, orderly, peaceful and credible elections; and for the elimination of election-fixing, fraud and other electoral ills. Violation of Ballot Secrecy The contention of public respondent that exit polls indirectly transgress the sanctity and the secrecy of the ballot is off-tangent to the real issue. Petitioner does not seek access to the ballots cast by the voters. The ballot system of voting is not at issue here. The reason behind the principle of ballot secrecy is to avoid vote buying through voter identification. Thus, voters are prohibited from exhibiting the contents of their official ballots to other persons, from making copies thereof, or from putting distinguishing marks thereon so as to be identified. Also proscribed is finding out the contents of the ballots cast by particular voters or disclosing those of disabled or illiterate voters who have been assisted. Clearly, what is forbidden is the association of voters with their respective votes, for the purpose of assuring that the votes have been cast in accordance with the instructions of a third party. This result cannot, however, be achieved merely through the voters' verbal and confidential disclosure to a pollster of whom they have voted for. In exit polls, the contents of the official ballot are not actually exposed. Furthermore, the revelation of whom an elector has voted for is not compulsory, but voluntary. Voters may also choose not to reveal their identities. Indeed, narrowly tailored countermeasures may be prescribed by the Comelec, so as to minimize or suppress incidental problems in the conduct of exit polls, without transgressing the fundamental rights of our people. WHEREFORE, the Petition is GRANTED, and the Temporary Restraining Order issued by the Court on May 9, 1998 is made PERMANENT. Assailed Minute Resolution No. 98-1419 issued by the Comelec en banc on April 21, 1998 is hereby NULLIFIED and SET ASIDE. No costs. SO ORDERED.

G.R. No. 148208 December 15, 2004 CENTRAL BANK (now Bangko Sentral ng Pilipinas) EMPLOYEES ASSOCIATION, INC., petitioner, vs. BANGKO SENTRAL NG PILIPINAS and the EXECUTIVE SECRETARY, respondents. DECISION
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PUNO, J.: Can a provision of law, initially valid, become subsequently unconstitutional, on the ground that its continued operation would violate the equal protection of the law? We hold that with the passage of the subsequent laws amending the charter of seven (7) other governmental financial institutions (GFIs), the continued operation of the last proviso of Section 15(c), Article II of Republic Act (R.A.) No. 7653, constitutes invidious discrimination on the 2,994 rank-and-file employees of the Bangko Sentral ng Pilipinas (BSP). I. The Case First the facts. On July 3, 1993, R.A. No. 7653 (the New Central Bank Act) took effect. It abolished the old Central Bank of the Philippines, and created a new BSP. On June 8, 2001, almost eight years after the effectivity of R.A. No. 7653, petitioner Central Bank (now BSP) Employees Association, Inc., filed a petition for prohibition against BSP and the Executive Secretary of the Office of the President, to restrain respondents from further implementing the last proviso in Section 15(c), Article II of R.A. No. 7653, on the ground that it is unconstitutional. Article II, Section 15(c) of R.A. No. 7653 provides: Section 15. Exercise of Authority - In the exercise of its authority, the Monetary Board shall: xxx xxx xxx (c) establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish professionalism and excellence at all levels of the Bangko Sentral in accordance with sound principles of management. A compensation structure, based on job evaluation studies and wage surveys and subject to the Board's approval, shall be instituted as an integral component of the Bangko Sentral's human resource development program: Provided, That the Monetary Board shall make its own system conform as closely as possible with the principles provided for under Republic Act No. 6758 [Salary Standardization Act]. Provided, however, That compensation and wage structure of employees whose positions fall under salary grade 19 and below shall be in accordance with the rates prescribed under Republic Act No. 6758. [emphasis supplied] The thrust of petitioner's challenge is that the above proviso makes an unconstitutional cut between two classes of employees in the BSP, viz: (1) the BSP officers or those exempted from the coverage of the Salary Standardization Law (SSL) (exempt class); and (2) the rank-and-file (Salary Grade [SG] 19 and below), or those not exempted from the coverage of the SSL (non-exempt class). It is contended that this classification is "a classic case of class legislation," allegedly not based on substantial distinctions which make real differences, but solely on the SG of the BSP personnel's position. Petitioner also claims that it is not germane to the purposes of Section 15(c), Article II of R.A. No. 7653, the most important of which is to establish professionalism and excellence at all levels in the BSP.1 Petitioner offers the following sub-set of arguments: a. the legislative history of R.A. No. 7653 shows that the questioned proviso does not appear in the original and amended versions of House Bill No. 7037, nor in the original version of Senate Bill No. 1235; 2 b. subjecting the compensation of the BSP rank-and-file employees to the rate prescribed by the SSL actually defeats the purpose of the law3 of establishing professionalism and excellence at all levels in the BSP; 4 (emphasis supplied)

c. the assailed proviso was the product of amendments introduced during the deliberation of Senate Bill No. 1235, without showing its relevance to the objectives of the law, and even admitted by one senator as discriminatory against low-salaried employees of the BSP;5 d. GSIS, LBP, DBP and SSS personnel are all exempted from the coverage of the SSL; thus within the class of rank-and-file personnel of government financial institutions (GFIs), the BSP rank-and-file are also discriminated upon;6 and e. the assailed proviso has caused the demoralization among the BSP rank-and-file and resulted in the gross disparity between their compensation and that of the BSP officers'.7 In sum, petitioner posits that the classification is not reasonable but arbitrary and capricious, and violates the equal protection clause of the Constitution.8 Petitioner also stresses: (a) that R.A. No. 7653 has a separability clause, which will allow the declaration of the unconstitutionality of the proviso in question without affecting the other provisions; and (b) the urgency and propriety of the petition, as some 2,994 BSP rank-and-file employees have been prejudiced since 1994 when the proviso was implemented. Petitioner concludes that: (1) since the inequitable proviso has no force and effect of law, respondents' implementation of such amounts to lack of jurisdiction; and (2) it has no appeal nor any other plain, speedy and adequate remedy in the ordinary course except through this petition for prohibition, which this Court should take cognizance of, considering the transcendental importance of the legal issue involved.9 Respondent BSP, in its comment,10 contends that the provision does not violate the equal protection clause and can stand the constitutional test, provided it is construed in harmony with other provisions of the same law, such as "fiscal and administrative autonomy of BSP," and the mandate of the Monetary Board to "establish professionalism and excellence at all levels in accordance with sound principles of management." The Solicitor General, on behalf of respondent Executive Secretary, also defends the validity of the provision. Quite simplistically, he argues that the classification is based on actual and real differentiation, even as it adheres to the enunciated policy of R.A. No. 7653 to establish professionalism and excellence within the BSP subject to prevailing laws and policies of the national government.11 II. Issue Thus, the sole - albeit significant - issue to be resolved in this case is whether the last paragraph of Section 15(c), Article II of R.A. No. 7653, runs afoul of the constitutional mandate that "No person shall be. . . denied the equal protection of the laws."12 III. Ruling A. UNDER THE PRESENT STANDARDS OF EQUAL PROTECTION, SECTION 15(c), ARTICLE II OF R.A. NO. 7653 IS VALID. Jurisprudential standards for equal protection challenges indubitably show that the classification created by the questioned proviso, on its face and in its operation, bears no constitutional infirmities. It is settled in constitutional law that the "equal protection" clause does not prevent the Legislature from establishing classes of individuals or objects upon which different rules shall operate - so long as the classification is not unreasonable. As held in Victoriano v. Elizalde Rope Workers' Union,13 and reiterated in a long line of cases:14 The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not
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require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate. The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences, that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not necessary that the classification be based on scientific or marked differences of things or in their relation. Neither is it necessary that the classification be made with mathematical nicety. Hence, legislative classification may in many cases properly rest on narrow distinctions, for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear. (citations omitted) Congress is allowed a wide leeway in providing for a valid classification.15 The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class.16 If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another.17 The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class.18 In the case at bar, it is clear in the legislative deliberations that the exemption of officers (SG 20 and above) from the SSL was intended to address the BSP's lack of competitiveness in terms of attracting competent officers and executives. It was not intended to discriminate against the rank-and-file. If the end-result did in fact lead to a disparity of treatment between the officers and the rank-and-file in terms of salaries and benefits, the discrimination or distinction has a rational basis and is not palpably, purely, and entirely arbitrary in the legislative sense. 19 That the provision was a product of amendments introduced during the deliberation of the Senate Bill does not detract from its validity. As early as 1947 and reiterated in subsequent cases,20 this Court has subscribed to the conclusiveness of an enrolled bill to refuse invalidating a provision of law, on the ground that the bill from which it originated contained no such provision and was merely inserted by the bicameral conference committee of both Houses. Moreover, it is a fundamental and familiar teaching that all reasonable doubts should be resolved in favor of the constitutionality of a statute.21 An act of the legislature, approved by the executive, is presumed to be within constitutional limitations.22 To justify the nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal breach.23 B. THE ENACTMENT, HOWEVER, OF SUBSEQUENT LAWS EXEMPTING ALL OTHER RANK-AND-FILE EMPLOYEES OF GFIs FROM THE SSL - RENDERS THE CONTINUED APPLICATION OF THE CHALLENGED PROVISION A VIOLATION OF THE EQUAL PROTECTION CLAUSE.

While R.A. No. 7653 started as a valid measure well within the legislature's power, we hold that the enactment of subsequent laws exempting all rank-and-file employees of other GFIs leeched all validity out of the challenged proviso. 1. The concept of relative constitutionality. The constitutionality of a statute cannot, in every instance, be determined by a mere comparison of its provisions with applicable provisions of the Constitution, since the statute may be constitutionally valid as applied to one set of facts and invalid in its application to another.24 A statute valid at one time may become void at another time because of altered circumstances.25 Thus, if a statute in its practical operation becomes arbitrary or confiscatory, its validity, even though affirmed by a former adjudication, is open to inquiry and investigation in the light of changed conditions.26 Demonstrative of this doctrine is Vernon Park Realty v. City of Mount Vernon,27 where the Court of Appeals of New York declared as unreasonable and arbitrary a zoning ordinance which placed the plaintiff's property in a residential district, although it was located in the center of a business area. Later amendments to the ordinance then prohibited the use of the property except for parking and storage of automobiles, and service station within a parking area. The Court found the ordinance to constitute an invasion of property rights which was contrary to constitutional due process. It ruled: While the common council has the unquestioned right to enact zoning laws respecting the use of property in accordance with a well-considered and comprehensive plan designed to promote public health, safety and general welfare, such power is subject to the constitutional limitation that it may not be exerted arbitrarily or unreasonably and this is so whenever the zoning ordinance precludes the use of the property for any purpose for which it is reasonably adapted. By the same token, an ordinance valid when adopted will nevertheless be stricken down as invalid when, at a later time, its operation under changed conditions proves confiscatory such, for instance, as when the greater part of its value is destroyed, for which the courts will afford relief in an appropriate case.28 (citations omitted, emphasis supplied) In the Philippine setting, this Court declared the continued enforcement of a valid law as unconstitutional as a consequence of significant changes in circumstances. Rutter v. Esteban29 upheld the constitutionality of the moratorium law - its enactment and operation being a valid exercise by the State of its police power30 - but also ruled that the continued enforcement of the otherwise valid law would be unreasonable and oppressive. It noted the subsequent changes in the country's business, industry and agriculture. Thus, the law was set aside because its continued operation would be grossly discriminatory and lead to the oppression of the creditors. The landmark ruling states:31 The question now to be determined is, is the period of eight (8) years which Republic Act No. 342 grants to debtors of a monetary obligation contracted before the last global war and who is a war sufferer with a claim duly approved by the Philippine War Damage Commission reasonable under the present circumstances? It should be noted that Republic Act No. 342 only extends relief to debtors of prewar obligations who suffered from the ravages of the last war and who filed a claim for their losses with the Philippine War Damage Commission. It is therein provided that said obligation shall not be due and demandable for a period of eight (8) years from and after settlement of the claim filed by the debtor with said Commission. The purpose of the law is to afford to prewar debtors an opportunity to rehabilitate themselves by giving them a reasonable time within which to pay their prewar debts so as to prevent them from being victimized by their creditors. While it is admitted in said law that since liberation conditions have gradually returned to normal, this is not so with regard to those who have suffered the ravages of war and so it was therein declared as a policy that as to them the debt moratorium should be continued in force (Section 1).
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But we should not lose sight of the fact that these obligations had been pending since 1945 as a result of the issuance of Executive Orders Nos. 25 and 32 and at present their enforcement is still inhibited because of the enactment of Republic Act No. 342 and would continue to be unenforceable during the eight-year period granted to prewar debtors to afford them an opportunity to rehabilitate themselves, which in plain language means that the creditors would have to observe a vigil of at least twelve (12) years before they could effect a liquidation of their investment dating as far back as 1941. his period seems to us unreasonable, if not oppressive. While the purpose of Congress is plausible, and should be commended, the relief accorded works injustice to creditors who are practically left at the mercy of the debtors. Their hope to effect collection becomes extremely remote, more so if the credits are unsecured. And the injustice is more patent when, under the law, the debtor is not even required to pay interest during the operation of the relief, unlike similar statutes in the United States. xxx xxx xxx In the face of the foregoing observations, and consistent with what we believe to be as the only course dictated by justice, fairness and righteousness, we feel that the only way open to us under the present circumstances is to declare that the continued operation and enforcement of Republic Act No. 342 at the present time is unreasonable and oppressive, and should not be prolonged a minute longer, and, therefore, the same should be declared null and void and without effect. (emphasis supplied, citations omitted) 2. Applicability of the equal protection clause. In the realm of equal protection, the U.S. case of Atlantic Coast Line R. Co. v. Ivey32 is illuminating. The Supreme Court of Florida ruled against the continued application of statutes authorizing the recovery of double damages plus attorney's fees against railroad companies, for animals killed on unfenced railroad right of way without proof of negligence. Competitive motor carriers, though creating greater hazards, were not subjected to similar liability because they were not yet in existence when the statutes were enacted. The Court ruled that the statutes became invalid as denying "equal protection of the law," in view of changed conditions since their enactment. In another U.S. case, Louisville & N.R. Co. v. Faulkner,33 the Court of Appeals of Kentucky declared unconstitutional a provision of a statute which imposed a duty upon a railroad company of proving that it was free from negligence in the killing or injury of cattle by its engine or cars. This, notwithstanding that the constitutionality of the statute, enacted in 1893, had been previously sustained. Ruled the Court: The constitutionality of such legislation was sustained because it applied to all similar corporations and had for its object the safety of persons on a train and the protection of property. Of course, there were no automobiles in those days. The subsequent inauguration and development of transportation by motor vehicles on the public highways by common carriers of freight and passengers created even greater risks to the safety of occupants of the vehicles and of danger of injury and death of domestic animals. Yet, under the law the operators of that mode of competitive transportation are not subject to the same extraordinary legal responsibility for killing such animals on the public roads as are railroad companies for killing them on their private rights of way. The Supreme Court, speaking through Justice Brandeis in Nashville, C. & St. L. Ry. Co. v. Walters, 294 U.S. 405, 55 S.Ct. 486, 488, 79 L.Ed. 949, stated, "A statute valid when enacted may become invalid by change in the conditions to which it is applied. The police power is subject to the constitutional limitation that it may not be exerted arbitrarily or unreasonably." A number of prior opinions of that court are cited in support of the statement. The State of Florida for many years had a statute, F.S.A. 356.01 et seq. imposing extraordinary and special duties upon railroad companies, among which was that a railroad

company was liable for double damages and an attorney's fee for killing livestock by a train without the owner having to prove any act of negligence on the part of the carrier in the operation of its train. In Atlantic Coast Line Railroad Co. v. Ivey, it was held that the changed conditions brought about by motor vehicle transportation rendered the statute unconstitutional since if a common carrier by motor vehicle had killed the same animal, the owner would have been required to prove negligence in the operation of its equipment. Said the court, "This certainly is not equal protection of the law."34 (emphasis supplied) Echoes of these rulings resonate in our case law, viz: [C]ourts are not confined to the language of the statute under challenge in determining whether that statute has any discriminatory effect. A statute nondiscriminatory on its face may be grossly discriminatory in its operation. Though the law itself be fair on its face and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the Constitution.35 (emphasis supplied, citations omitted) [W]e see no difference between a law which denies equal protection and a law which permits of such denial. A law may appear to be fair on its face and impartial in appearance, yet, if it permits of unjust and illegal discrimination, it is within the constitutional prohibition.. In other words, statutes may be adjudged unconstitutional because of their effect in operation. If a law has the effect of denying the equal protection of the law it is unconstitutional. .36 (emphasis supplied, citations omitted 3. Enactment of R.A. Nos. 7907 + 8282 + 8289 + 8291 + 8523 + 8763 + 9302 = consequential unconstitutionality of challenged proviso. According to petitioner, the last proviso of Section 15(c), Article II of R.A. No. 7653 is also violative of the equal protection clause because after it was enacted, the charters of the GSIS, LBP, DBP and SSS were also amended, but the personnel of the latter GFIs were all exempted from the coverage of the SSL.37 Thus, within the class of rank-and-file personnel of GFIs, the BSP rank-and-file are also discriminated upon. Indeed, we take judicial notice that after the new BSP charter was enacted in 1993, Congress also undertook the amendment of the charters of the GSIS, LBP, DBP and SSS, and three other GFIs, from 1995 to 2004, viz: 1. R.A. No. 7907 (1995) for Land Bank of the Philippines (LBP); 2. R.A. No. 8282 (1997) for Social Security System (SSS); 3. R.A. No. 8289 (1997) for Small Business Guarantee and Finance Corporation, (SBGFC); 4. R.A. No. 8291 (1997) for Government Service Insurance System (GSIS); 5. R.A. No. 8523 (1998) for Development Bank of the Philippines (DBP); 6. R.A. No. 8763 (2000) for Home Guaranty Corporation (HGC);38 and 7. R.A. No. 9302 (2004) for Philippine Deposit Insurance Corporation (PDIC). It is noteworthy, as petitioner points out, that the subsequent charters of the seven other GFIs share this common proviso: a blanket exemption of all their employees from the coverage of the SSL, expressly or impliedly, as illustrated below: 1. LBP (R.A. No. 7907) Section 10. Section 90 of [R.A. No. 3844] is hereby amended to read as follows: Section 90. Personnel. xxx xxx xxx
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All positions in the Bank shall be governed by a compensation, position classification system and qualification standards approved by the Bank's Board of Directors based on a comprehensive job analysis and audit of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing compensation plans in the private sector and shall be subject to periodic review by the Board no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and profitability. The Bank shall therefore be exempt from existing laws, rules and regulations on compensation, position classification and qualification standards. It shall however endeavor to make its system conform as closely as possible with the principles under Republic Act No. 6758. (emphasis supplied) xxx xxx xxx 2. SSS (R.A. No. 8282) Section 1. [Amending R.A. No. 1161, Section 3(c)]: xxx xxx xxx (c)The Commission, upon the recommendation of the SSS President, shall appoint an actuary and such other personnel as may [be] deemed necessary; fix their reasonable compensation, allowances and other benefits; prescribe their duties and establish such methods and procedures as may be necessary to insure the efficient, honest and economical administration of the provisions and purposes of this Act: Provided, however, That the personnel of the SSS below the rank of Vice President shall be appointed by the SSS President: Provided, further, That the personnel appointed by the SSS President, except those below the rank of assistant manager, shall be subject to the confirmation by the Commission; Provided further, That the personnel of the SSS shall be selected only from civil service eligibles and be subject to civil service rules and regulations: Provided, finally, That the SSS shall be exempt from the provisions of Republic Act No. 6758 and Republic Act No. 7430. (emphasis supplied) 3. SBGFC (R.A. No. 8289) Section 8. [Amending R.A. No. 6977, Section 11]: xxx xxx xxx The Small Business Guarantee and Finance Corporation shall: xxx xxx xxx (e) notwithstanding the provisions of Republic Act No. 6758, and Compensation Circular No. 10, series of 1989 issued by the Department of Budget and Management, the Board of Directors of SBGFC shall have the authority to extend to the employees and personnel thereof the allowance and fringe benefits similar to those extended to and currently enjoyed by the employees and personnel of other government financial institutions. (emphases supplied) 4. GSIS (R.A. No. 8291) Section 1. [Amending Section 43(d)]. xxx xxx xxx Sec. 43. Powers and Functions of the Board of Trustees. - The Board of Trustees shall have the following powers and functions: xxx xxx xxx (d) upon the recommendation of the President and General Manager, to approve the GSIS' organizational and administrative structures and staffing pattern, and to establish, fix, review, revise and adjust the appropriate compensation package for the officers and employees of the GSIS with reasonable allowances, incentives, bonuses, privileges and other benefits as

may be necessary or proper for the effective management, operation and administration of the GSIS, which shall be exempt from Republic Act No. 6758, otherwise known as the Salary Standardization Law and Republic Act No. 7430, otherwise known as the Attrition Law. (emphasis supplied) xxx xxx xxx 5. DBP (R.A. No. 8523) Section 6. [Amending E.O. No. 81, Section 13]: Section 13. Other Officers and Employees. - The Board of Directors shall provide for an organization and staff of officers and employees of the Bank and upon recommendation of the President of the Bank, fix their remunerations and other emoluments. All positions in the Bank shall be governed by the compensation, position classification system and qualification standards approved by the Board of Directors based on a comprehensive job analysis of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing compensation plans in the private sector and shall be subject to periodic review by the Board of Directors once every two (2) years, without prejudice to yearly merit or increases based on the Bank's productivity and profitability. The Bank shall, therefore, be exempt from existing laws, rules, and regulations on compensation, position classification and qualification standards. The Bank shall however, endeavor to make its system conform as closely as possible with the principles under Compensation and Position Classification Act of 1989 (Republic Act No. 6758, as amended). (emphasis supplied) 6. HGC (R.A. No. 8763) Section 9. Powers, Functions and Duties of the Board of Directors. - The Board shall have the following powers, functions and duties: xxx xxx xxx (e) To create offices or positions necessary for the efficient management, operation and administration of the Corporation: Provided, That all positions in the Home Guaranty Corporation (HGC) shall be governed by a compensation and position classification system and qualifications standards approved by the Corporation's Board of Directors based on a comprehensive job analysis and audit of actual duties and responsibilities: Provided, further, That the compensation plan shall be comparable with the prevailing compensation plans in the private sector and which shall be exempt from Republic Act No. 6758, otherwise known as the Salary Standardization Law, and from other laws, rules and regulations on salaries and compensations; and to establish a Provident Fund and determine the Corporation's and the employee's contributions to the Fund; (emphasis supplied) xxx xxx xxx 7. PDIC (R.A. No. 9302) Section 2. Section 2 of [Republic Act No. 3591, as amended] is hereby further amended to read: xxx xxx xxx 3. xxx xxx xxx A compensation structure, based on job evaluation studies and wage surveys and subject to the Board's approval, shall be instituted as an integral component of the Corporation's human resource development program: Provided, That all positions in the Corporation shall be governed by a compensation, position classification system and qualification standards approved by the Board based on a comprehensive job analysis and audit of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing
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compensation plans of other government financial institutions and shall be subject to review by the Board no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and profitability. The Corporation shall therefore be exempt from existing laws, rules and regulations on compensation, position classification and qualification standards. It shall however endeavor to make its system conform as closely as possible with the principles under Republic Act No. 6758, as amended. (emphases supplied) Thus, eleven years after the amendment of the BSP charter, the rank-and-file of seven other GFIs were granted the exemption that was specifically denied to the rank-and-file of the BSP. And as if to add insult to petitioner's injury, even the Securities and Exchange Commission (SEC) was granted the same blanket exemption from the SSL in 2000!39 The prior view on the constitutionality of R.A. No. 7653 was confined to an evaluation of its classification between the rank-and-file and the officers of the BSP, found reasonable because there were substantial distinctions that made real differences between the two classes. The above-mentioned subsequent enactments, however, constitute significant changes in circumstance that considerably alter the reasonability of the continued operation of the last proviso of Section 15(c), Article II of Republic Act No. 7653, thereby exposing the proviso to more serious scrutiny. This time, the scrutiny relates to the constitutionality of the classification - albeit made indirectly as a consequence of the passage of eight other laws - between the rank-and-file of the BSP and the seven other GFIs. The classification must not only be reasonable, but must also apply equally to all members of the class. The proviso may be fair on its face and impartial in appearance but it cannot be grossly discriminatory in its operation, so as practically to make unjust distinctions between persons who are without differences.40 Stated differently, the second level of inquiry deals with the following questions: Given that Congress chose to exempt other GFIs (aside the BSP) from the coverage of the SSL, can the exclusion of the rank-and-file employees of the BSP stand constitutional scrutiny in the light of the fact that Congress did not exclude the rank-and-file employees of the other GFIs? Is Congress' power to classify so unbridled as to sanction unequal and discriminatory treatment, simply because the inequity manifested itself, not instantly through a single overt act, but gradually and progressively, through seven separate acts of Congress? Is the right to equal protection of the law bounded in time and space that: (a) the right can only be invoked against a classification made directly and deliberately, as opposed to a discrimination that arises indirectly, or as a consequence of several other acts; and (b) is the legal analysis confined to determining the validity within the parameters of the statute or ordinance (where the inclusion or exclusion is articulated), thereby proscribing any evaluation vis--vis the grouping, or the lack thereof, among several similar enactments made over a period of time? In this second level of scrutiny, the inequality of treatment cannot be justified on the mere assertion that each exemption (granted to the seven other GFIs) rests "on a policy determination by the legislature." All legislative enactments necessarily rest on a policy determination - even those that have been declared to contravene the Constitution. Verily, if this could serve as a magic wand to sustain the validity of a statute, then no due process and equal protection challenges would ever prosper. There is nothing inherently sacrosanct in a policy determination made by Congress or by the Executive; it cannot run riot and overrun the ramparts of protection of the Constitution. In fine, the "policy determination" argument may support the inequality of treatment between the rankand-file and the officers of the BSP, but it cannot justify the inequality of treatment between BSP rankand-file and other GFIs' who are similarly situated. It fails to appreciate that what is at issue in the second level of scrutiny is not the declared policy of each law per se, but the oppressive results of Congress' inconsistent and unequal policy towards the BSP rank-and-file and those of the seven other GFIs. At bottom, the second challenge to the constitutionality of Section 15(c), Article II of Republic Act No. 7653 is premised precisely on the irrational discriminatory policy adopted by Congress in its treatment of persons similarly situated. In the field of equal protection, the guarantee that "no

person shall be denied the equal protection of the laws" includes the prohibition against enacting laws that allow invidious discrimination, directly or indirectly. If a law has the effect of denying the equal protection of the law, or permits such denial, it is unconstitutional.41 It is against this standard that the disparate treatment of the BSP rank-and-file from the other GFIs cannot stand judicial scrutiny. For as regards the exemption from the coverage of the SSL, there exist no substantial distinctions so as to differentiate, the BSP rank-and-file from the other rank-and-file of the seven GFIs. On the contrary, our legal history shows that GFIs have long been recognized as comprising one distinct class, separate from other governmental entities. Before the SSL, Presidential Decree (P.D.) No. 985 (1976) declared it as a State policy (1) to provide equal pay for substantially equal work, and (2) to base differences in pay upon substantive differences in duties and responsibilities, and qualification requirements of the positions. P.D. No. 985 was passed to address disparities in pay among similar or comparable positions which had given rise to dissension among government employees. But even then, GFIs and government-owned and/or controlled corporations (GOCCs) were already identified as a distinct class among government employees. Thus, Section 2 also provided, "[t]hat notwithstanding a standardized salary system established for all employees, additional financial incentives may be established by government corporation and financial institutions for their employees to be supported fully from their corporate funds and for such technical positions as may be approved by the President in critical government agencies."42 The same favored treatment is made for the GFIs and the GOCCs under the SSL. Section 3(b) provides that one of the principles governing the Compensation and Position Classification System of the Government is that: "[b]asic compensation for all personnel in the government and government-owned or controlled corporations and financial institutions shall generally be comparable with those in the private sector doing comparable work, and must be in accordance with prevailing laws on minimum wages." Thus, the BSP and all other GFIs and GOCCs were under the unified Compensation and Position Classification System of the SSL,43 but rates of pay under the SSL were determined on the basis of, among others, prevailing rates in the private sector for comparable work. Notably, the Compensation and Position Classification System was to be governed by the following principles: (a) just and equitable wages, with the ratio of compensation between pay distinctions maintained at equitable levels;44 and (b) basic compensation generally comparable with the private sector, in accordance with prevailing laws on minimum wages.45 Also, the Department of Budget and Management was directed to use, as guide for preparing the Index of Occupational Services, the Benchmark Position Schedule, and the following factors:46 (1) the education and experience required to perform the duties and responsibilities of the positions; (2) the nature and complexity of the work to be performed; (3) the kind of supervision received; (4) mental and/or physical strain required in the completion of the work; (5) nature and extent of internal and external relationships; (6) kind of supervision exercised; (7) decision-making responsibility; (8) responsibility for accuracy of records and reports; (9) accountability for funds, properties and equipment; and (10) hardship, hazard and personal risk involved in the job. The Benchmark Position Schedule enumerates the position titles that fall within Salary Grades 1 to 20.

Clearly, under R.A. No. 6758, the rank-and-file of all GFIs were similarly situated in all aspects pertaining to compensation and position classification, in consonance with Section 5, Article IX-B of the 1997 Constitution.47 Then came the enactment of the amended charter of the BSP, implicitly exempting the Monetary Board from the SSL by giving it express authority to determine and institute its own compensation and wage structure. However, employees whose positions fall under SG 19 and below were specifically limited to the rates prescribed under the SSL. Subsequent amendments to the charters of other GFIs followed. Significantly, each government financial institution (GFI) was not only expressly authorized to determine and institute its own compensation and wage structure, but also explicitly exempted - without distinction as to salary grade or position - all employees of the GFI from the SSL. It has been proffered that legislative deliberations justify the grant or withdrawal of exemption from the SSL, based on the perceived need "to fulfill the mandate of the institution concerned considering, among others, that: (1) the GOCC or GFI is essentially proprietary in character; (2) the GOCC or GFI is in direct competition with their [sic] counterparts in the private sector, not only in terms of the provisions of goods or services, but also in terms of hiring and retaining competent personnel; and (3) the GOCC or GFI are or were [sic] experiencing difficulties filling up plantilla positions with competent personnel and/or retaining these personnel. The need for the scope of exemption necessarily varies with the particular circumstances of each institution, and the corresponding variance in the benefits received by the employees is merely incidental." The fragility of this argument is manifest. First, the BSP is the central monetary authority,48 and the banker of the government and all its political subdivisions.49 It has the sole power and authority to issue currency;50 provide policy directions in the areas of money, banking, and credit; and supervise banks and regulate finance companies and non-bank financial institutions performing quasi-banking functions, including the exempted GFIs.51 Hence, the argument that the rank-and-file employees of the seven GFIs were exempted because of the importance of their institution's mandate cannot stand any more than an empty sack can stand. Second, it is certainly misleading to say that "the need for the scope of exemption necessarily varies with the particular circumstances of each institution." Nowhere in the deliberations is there a cogent basis for the exclusion of the BSP rank-and-file from the exemption which was granted to the rank-and-file of the other GFIs and the SEC. As point in fact, the BSP and the seven GFIs are similarly situated in so far as Congress deemed it necessary for these institutions to be exempted from the SSL. True, the SSLexemption of the BSP and the seven GFIs was granted in the amended charters of each GFI, enacted separately and over a period of time. But it bears emphasis that, while each GFI has a mandate different and distinct from that of another, the deliberations show that the raison d'tre of the SSL-exemption was inextricably linked to and for the most part based on factors common to the eight GFIs, i.e., (1) the pivotal role they play in the economy; (2) the necessity of hiring and retaining qualified and effective personnel to carry out the GFI's mandate; and (3) the recognition that the compensation package of these GFIs is not competitive, and fall substantially below industry standards. Considering further that (a) the BSP was the first GFI granted SSL exemption; and (b) the subsequent exemptions of other GFIs did not distinguish between the officers and the rank-and-file; it is patent that the classification made between the BSP rank-and-file and those of the other seven GFIs was inadvertent, and NOT intended, i.e., it was not based on any substantial distinction vis--vis the particular circumstances of each GFI. Moreover, the exemption granted to two GFIs makes express reference to allowance and fringe benefits similar to those extended to and currently enjoyed by the employees and personnel of other GFIs,52 underscoring that GFIs are a particular class within the realm of government entities. It is precisely this unpremeditated discrepancy in treatment of the rank-and-file of the BSP - made manifest and glaring with each and every consequential grant of blanket exemption from the SSL to the other GFIs - that cannot be rationalized or justified. Even more so, when the SEC - which is not a GFI was given leave to have a compensation plan that "shall be comparable with the prevailing
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compensation plan in the [BSP] and other [GFIs],"53 then granted a blanket exemption from the SSL, and its rank-and-file endowed a more preferred treatment than the rank-and-file of the BSP. The violation to the equal protection clause becomes even more pronounced when we are faced with this undeniable truth: that if Congress had enacted a law for the sole purpose of exempting the eight GFIs from the coverage of the SSL, the exclusion of the BSP rank-and-file employees would have been devoid of any substantial or material basis. It bears no moment, therefore, that the unlawful discrimination was not a direct result arising from one law. "Nemo potest facere per alium quod non potest facere per directum." No one is allowed to do indirectly what he is prohibited to do directly. It has also been proffered that "similarities alone are not sufficient to support the conclusion that rankand-file employees of the BSP may be lumped together with similar employees of the other GOCCs for purposes of compensation, position classification and qualification standards. The fact that certain persons have some attributes in common does not automatically make them members of the same class with respect to a legislative classification." Cited is the ruling in Johnson v. Robinson:54 "this finding of similarity ignores that a common characteristic shared by beneficiaries and nonbeneficiaries alike, is not sufficient to invalidate a statute when other characteristics peculiar to only one group rationally explain the statute's different treatment of the two groups." The reference to Johnson is inapropos. In Johnson, the US Court sustained the validity of the classification as there were quantitative and qualitative distinctions, expressly recognized by Congress, which formed a rational basis for the classification limiting educational benefits to military service veterans as a means of helping them readjust to civilian life. The Court listed the peculiar characteristics as follows: First, the disruption caused by military service is quantitatively greater than that caused by alternative civilian service. A conscientious objector performing alternative service is obligated to work for two years. Service in the Armed Forces, on the other hand, involves a six-year commitment xxx xxx xxx Second, the disruptions suffered by military veterans and alternative service performers are qualitatively different. Military veterans suffer a far greater loss of personal freedom during their service careers. Uprooted from civilian life, the military veteran becomes part of the military establishment, subject to its discipline and potentially hazardous duty. Congress was acutely aware of the peculiar disabilities caused by military service, in consequence of which military servicemen have a special need for readjustment benefits55 (citations omitted) In the case at bar, it is precisely the fact that as regards the exemption from the SSL, there are no characteristics peculiar only to the seven GFIs or their rank-and-file so as to justify the exemption which BSP rank-and-file employees were denied (not to mention the anomaly of the SEC getting one). The distinction made by the law is not only superficial,56 but also arbitrary. It is not based on substantial distinctions that make real differences between the BSP rank-and-file and the seven other GFIs. Moreover, the issue in this case is not - as the dissenting opinion of Mme. Justice Carpio-Morales would put it - whether "being an employee of a GOCC or GFI is reasonable and sufficient basis for exemption" from R.A. No. 6758. It is Congress itself that distinguished the GFIs from other government agencies, not once but eight times, through the enactment of R.A. Nos. 7653, 7907, 8282, 8289, 8291, 8523, 8763, and 9302. These laws may have created a "preferred sub-class within government employees," but the present challenge is not directed at the wisdom of these laws. Rather, it is a legal conundrum involving the exercise of legislative power, the validity of which must be measured not only by looking at the specific exercise in and by itself (R.A. No. 7653), but also as to the legal effects brought about by seven separate exercises - albeit indirectly and without intent. Thus, even if petitioner had not alleged "a comparable change in the factual milieu as regards the compensation, position classification and qualification standards of the employees of the BSP (whether
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of the executive level or of the rank-and-file) since the enactment of the new Central Bank Act" is of no moment. In GSIS v. Montesclaros,57 this Court resolved the issue of constitutionality notwithstanding that claimant had manifested that she was no longer interested in pursuing the case, and even when the constitutionality of the said provision was not squarely raised as an issue, because the issue involved not only the claimant but also others similarly situated and whose claims GSIS would also deny based on the challenged proviso. The Court held that social justice and public interest demanded the resolution of the constitutionality of the proviso. And so it is with the challenged proviso in the case at bar. It bears stressing that the exemption from the SSL is a "privilege" fully within the legislative prerogative to give or deny. However, its subsequent grant to the rank-and-file of the seven other GFIs and continued denial to the BSP rank-and-file employees breached the latter's right to equal protection. In other words, while the granting of a privilege per se is a matter of policy exclusively within the domain and prerogative of Congress, the validity or legality of the exercise of this prerogative is subject to judicial review.58 So when the distinction made is superficial, and not based on substantial distinctions that make real differences between those included and excluded, it becomes a matter of arbitrariness that this Court has the duty and the power to correct.59 As held in the United Kingdom case of Hooper v. Secretary of State for Work and Pensions,60 once the State has chosen to confer benefits, "discrimination" contrary to law may occur where favorable treatment already afforded to one group is refused to another, even though the State is under no obligation to provide that favorable treatment. 61 The disparity of treatment between BSP rank-and-file and the rank-and-file of the other seven GFIs definitely bears the unmistakable badge of invidious discrimination - no one can, with candor and fairness, deny the discriminatory character of the subsequent blanket and total exemption of the seven other GFIs from the SSL when such was withheld from the BSP. Alikes are being treated as unalikes without any rational basis. Again, it must be emphasized that the equal protection clause does not demand absolute equality but it requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances which, if not identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion; whatever restrictions cast on some in the group is equally binding on the rest.62 In light of the lack of real and substantial distinctions that would justify the unequal treatment between the rank-and-file of BSP from the seven other GFIs, it is clear that the enactment of the seven subsequent charters has rendered the continued application of the challenged proviso anathema to the equal protection of the law, and the same should be declared as an outlaw. IV. Equal Protection Under International Lens In our jurisdiction, the standard and analysis of equal protection challenges in the main have followed the "rational basis" test, coupled with a deferential attitude to legislative classifications63 and a reluctance to invalidate a law unless there is a showing of a clear and unequivocal breach of the Constitution. 64 A. Equal Protection in the United States In contrast, jurisprudence in the U.S. has gone beyond the static "rational basis" test. Professor Gunther highlights the development in equal protection jurisprudential analysis, to wit: 65 Traditionally, equal protection supported only minimal judicial intervention in most contexts. Ordinarily, the command of equal protection was only that government must not impose differences in treatment "except upon some reasonable differentiation fairly related to the object of regulation." The old variety of equal protection scrutiny focused solely on the means used by the legislature: it insisted merely that the classification in the statute reasonably relates to the legislative purpose. Unlike substantive due process, equal

protection scrutiny was not typically concerned with identifying "fundamental values" and restraining legislative ends. And usually the rational classification requirement was readily satisfied: the courts did not demand a tight fit between classification and purpose; perfect congruence between means and ends was not required. xxx xxx xxx [From marginal intervention to major cutting edge: The Warren Court's "new equal protection" and the two-tier approach.] From its traditional modest role, equal protection burgeoned into a major intervention tool during the Warren era, especially in the 1960s. The Warren Court did not abandon the deferential ingredients of the old equal protection: in most areas of economic and social legislation, the demands imposed by equal protection remained as minimal as everBut the Court launched an equal protection revolution by finding large new areas for strict rather than deferential scrutiny. A sharply differentiated two-tier approach evolved by the late 1960s: in addition to the deferential "old" equal protection, a "new" equal protection, connoting strict scrutiny, arose. The intensive review associated with the new equal protection imposed two demands - a demand not only as to means but also one as to ends. Legislation qualifying for strict scrutiny required a far closer fit between classification and statutory purpose than the rough and ready flexibility traditionally tolerated by the old equal protection: means had to be shown "necessary" to achieve statutory ends, not merely "reasonably related" ones. Moreover, equal protection became a source of ends scrutiny as well: legislation in the areas of the new equal protection had to be justified by "compelling" state interests, not merely the wide spectrum of "legitimate" state ends. The Warren Court identified the areas appropriate for strict scrutiny by searching for two characteristics: the presence of a "suspect" classification; or an impact on "fundamental" rights or interests. In the category of "suspect classifications," the Warren Court's major contribution was to intensify the strict scrutiny in the traditionally interventionist area of racial classifications. But other cases also suggested that there might be more other suspect categories as well: illegitimacy and wealth for example. But it was the 'fundamental interests" ingredient of the new equal protection that proved particularly dynamic, open-ended, and amorphous.. [Other fundamental interests included voting, criminal appeals, and the right of interstate travel .] xxx xxx xxx The Burger Court and Equal Protection. The Burger Court was reluctant to expand the scope of the new equal protection, although its best established ingredient retains vitality. There was also mounting discontent with the rigid two-tier formulations of the Warren Court's equal protection doctrine. It was prepared to use the clause as an interventionist tool without resorting to the strict language of the new equal protection. [Among the fundamental interests identified during this time were voting and access to the ballot, while "suspect" classifications included sex, alienage and illegitimacy.] xxx xxx xxx Even while the two-tier scheme has often been adhered to in form, there has also been an increasingly noticeable resistance to the sharp difference between deferential "old" and interventionist "new" equal protection. A number of justices sought formulations that would blur the sharp distinctions of the two-tiered approach or that would narrow the gap between strict scrutiny and deferential review. The most elaborate attack came from Justice Marshall, whose frequently stated position was developed most elaborately in his dissent in the Rodriguez case: 66
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The Court apparently seeks to establish [that] equal protection cases fall into one of two neat categories which dictate the appropriate standard of review - strict scrutiny or mere rationality. But this (sic) Court's [decisions] defy such easy categorization. A principled reading of what this Court has done reveals that it has applied a spectrum of standards in reviewing discrimination allegedly violative of the equal protection clause. This spectrum clearly comprehends variations in the degree of care with which Court will scrutinize particular classification, depending, I believe, on the constitutional and societal importance of the interests adversely affected and the recognized invidiousness of the basis upon which the particular classification is drawn. Justice Marshall's "sliding scale" approach describes many of the modern decisions, although it is a formulation that the majority refused to embrace. But the Burger Court's results indicate at least two significant changes in equal protection law: First, invocation of the "old" equal protection formula no longer signals, as it did with the Warren Court, an extreme deference to legislative classifications and a virtually automatic validation of challenged statutes. Instead, several cases, even while voicing the minimal "rationality" "hands-off" standards of the old equal protection, proceed to find the statute unconstitutional. Second, in some areas the modern Court has put forth standards for equal protection review that, while clearly more intensive than the deference of the "old" equal protection, are less demanding than the strictness of the "new" equal protection. Sex discrimination is the best established example of an "intermediate" level of review. Thus, in one case, the Court said that "classifications by gender must serve important governmental objectives and must be substantially related to achievement of those objectives." That standard is "intermediate" with respect to both ends and means: where ends must be "compelling" to survive strict scrutiny and merely "legitimate" under the "old" mode, "important" objectives are required here; and where means must be "necessary" under the "new" equal protection, and merely "rationally related" under the "old" equal protection, they must be "substantially related" to survive the "intermediate" level of review. (emphasis supplied, citations omitted) B. Equal Protection in Europe The United Kingdom and other members of the European Community have also gone forward in discriminatory legislation and jurisprudence. Within the United Kingdom domestic law, the most extensive list of protected grounds can be found in Article 14 of the European Convention on Human Rights (ECHR). It prohibits discrimination on grounds such as "sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status." This list is illustrative and not exhaustive. Discrimination on the basis of race, sex and religion is regarded as grounds that require strict scrutiny. A further indication that certain forms of discrimination are regarded as particularly suspect under the Covenant can be gleaned from Article 4, which, while allowing states to derogate from certain Covenant articles in times of national emergency, prohibits derogation by measures that discriminate solely on the grounds of "race, colour, language, religion or social origin."67 Moreover, the European Court of Human Rights has developed a test of justification which varies with the ground of discrimination. In the Belgian Linguistics case68 the European Court set the standard of justification at a low level: discrimination would contravene the Convention only if it had no legitimate aim, or there was no reasonable relationship of proportionality between the means employed and the aim sought to be realised.69 But over the years, the European Court has developed a hierarchy of grounds covered by Article 14 of the ECHR, a much higher level of justification being required in respect of those regarded as "suspect" (sex, race, nationality, illegitimacy, or sexual orientation) than of others. Thus, in Abdulaziz, 70 the European Court declared that: . . . [t]he advancement of the equality of the sexes is today a major goal in the member States of the Council of Europe. This means that very weighty reasons would have to be advanced

before a difference of treatment on the ground of sex could be regarded as compatible with the Convention. And in Gaygusuz v. Austria,71 the European Court held that "very weighty reasons would have to be put forward before the Court could regard a difference of treatment based exclusively on the ground of nationality as compatible with the Convention."72 The European Court will then permit States a very much narrower margin of appreciation in relation to discrimination on grounds of sex, race, etc., in the application of the Convention rights than it will in relation to distinctions drawn by states between, for example, large and small land-owners. 73 C. Equality under International Law The principle of equality has long been recognized under international law. Article 1 of the Universal Declaration of Human Rights proclaims that all human beings are born free and equal in dignity and rights. Non-discrimination, together with equality before the law and equal protection of the law without any discrimination, constitutes basic principles in the protection of human rights. 74 Most, if not all, international human rights instruments include some prohibition on discrimination and/or provisions about equality.75 The general international provisions pertinent to discrimination and/or equality are the International Covenant on Civil and Political Rights (ICCPR);76 the International Covenant on Economic, Social and Cultural Rights (ICESCR); the International Convention on the Elimination of all Forms of Racial Discrimination (CERD);77 the Convention on the Elimination of all Forms of Discrimination against Women (CEDAW); and the Convention on the Rights of the Child (CRC). In the broader international context, equality is also enshrined in regional instruments such as the American Convention on Human Rights;78 the African Charter on Human and People's Rights;79 the European Convention on Human Rights;80 the European Social Charter of 1961 and revised Social Charter of 1996; and the European Union Charter of Rights (of particular importance to European states). Even the Council of the League of Arab States has adopted the Arab Charter on Human Rights in 1994, although it has yet to be ratified by the Member States of the League.81 The equality provisions in these instruments do not merely function as traditional "first generation" rights, commonly viewed as concerned only with constraining rather than requiring State action. Article 26 of the ICCPR requires "guarantee[s]" of "equal and effective protection against discrimination" while Articles 1 and 14 of the American and European Conventions oblige States Parties "to ensure ... the full and free exercise of [the rights guaranteed] ... without any discrimination" and to "secure without discrimination" the enjoyment of the rights guaranteed.82 These provisions impose a measure of positive obligation on States Parties to take steps to eradicate discrimination. In the employment field, basic detailed minimum standards ensuring equality and prevention of discrimination, are laid down in the ICESCR83 and in a very large number of Conventions administered by the International Labour Organisation, a United Nations body. 84 Additionally, many of the other international and regional human rights instruments have specific provisions relating to employment.85 The United Nations Human Rights Committee has also gone beyond the earlier tendency to view the prohibition against discrimination (Article 26) as confined to the ICCPR rights.86 In Broeks87 and Zwaan-de Vries,88 the issue before the Committee was whether discriminatory provisions in the Dutch Unemployment Benefits Act (WWV) fell within the scope of Article 26. The Dutch government submitted that discrimination in social security benefit provision was not within the scope of Article 26, as the right was contained in the ICESCR and not the ICCPR. They accepted that Article 26 could go beyond the rights contained in the Covenant to other civil and political rights, such as discrimination in the field of taxation, but contended that Article 26 did not extend to the social, economic, and cultural rights contained in ICESCR. The Committee rejected this argument. In its view, Article 26 applied to rights beyond the Covenant including the rights in other international treaties such as the right to social security found in ICESCR:
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Although Article 26 requires that legislation should prohibit discrimination, it does not of itself contain any obligation with respect to the matters that may be provided for by legislation. Thus it does not, for example, require any state to enact legislation to provide for social security. However, when such legislation is adopted in the exercise of a State's sovereign power, then such legislation must comply with Article 26 of the Covenant.89 Breaches of the right to equal protection occur directly or indirectly. A classification may be struck down if it has the purpose or effect of violating the right to equal protection. International law recognizes that discrimination may occur indirectly, as the Human Rights Committee90 took into account the definitions of discrimination adopted by CERD and CEDAW in declaring that: . . . "discrimination" as used in the [ICCPR] should be understood to imply any distinction, exclusion, restriction or preference which is based on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status, and which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise by all persons, on an equal footing, of all rights and freedoms. 91 (emphasis supplied) Thus, the two-tier analysis made in the case at bar of the challenged provision, and its conclusion of unconstitutionality by subsequent operation, are in cadence and in consonance with the progressive trend of other jurisdictions and in international law. There should be no hesitation in using the equal protection clause as a major cutting edge to eliminate every conceivable irrational discrimination in our society. Indeed, the social justice imperatives in the Constitution, coupled with the special status and protection afforded to labor, compel this approach.92 Apropos the special protection afforded to labor under our Constitution and international law, we held in International School Alliance of Educators v. Quisumbing: 93 That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith." International law, which springs from general principles of law, likewise proscribes discrimination. General principles of law include principles of equity, i.e., the general principles of fairness and justice, based on the test of what is reasonable. The Universal Declaration of Human Rights, the International Covenant on Economic, Social, and Cultural Rights, the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention against Discrimination in Education, the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation - all embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws. In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more reprehensible. The Constitution specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which employers treat their employees. The Constitution also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and ensure equal

employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. xxx xxx xxx Notably, the International Covenant on Economic, Social, and Cultural Rights, in Article 7 thereof, provides: The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and [favorable] conditions of work, which ensure, in particular: a. Remuneration which provides all workers, as a minimum, with: i. Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; xxx xxx xxx The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. (citations omitted) Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution.94 The deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice. Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support many of our decisions.95 We should not place undue and fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments. We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice.96 Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others.97 In the 2003 case of Francisco v. House of Representatives, this Court has stated that: "[A]merican jurisprudence and authorities, much less the American Constitution, are of dubious application for these are no longer controlling within our jurisdiction and have only limited persuasive merit insofar as Philippine constitutional law is concerned....[I]n resolving constitutional disputes, [this Court] should not be beguiled by foreign jurisprudence some of which are hardly applicable because they have been dictated by different constitutional settings and needs."98 Indeed, although the Philippine Constitution can trace its origins to that of the United States, their paths of development have long since diverged. 99 Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial intervention. Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are clear commands to
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the State to take affirmative action in the direction of greater equality. [T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality.100 Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of society, including labor.101 Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law.102 And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality.103 Social justice calls for the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated.104 V. A Final Word Finally, concerns have been raised as to the propriety of a ruling voiding the challenged provision. It has been proffered that the remedy of petitioner is not with this Court, but with Congress, which alone has the power to erase any inequity perpetrated by R.A. No. 7653. Indeed, a bill proposing the exemption of the BSP rank-and-file from the SSL has supposedly been filed. Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be given deferential treatment. 105 But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict. A weak and watered down view would call for the abdication of this Court's solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the actor. 106 Accordingly, when the grant of power is qualified, conditional or subject to limitations, the issue on whether or not the prescribed qualifications or conditions have been met, or the limitations respected, is justiciable or non-political, the crux of the problem being one of legality or validity of the contested act, not its wisdom. Otherwise, said qualifications, conditions or limitations - particularly those prescribed or imposed by the Constitution - would be set at naught. What is more, the judicial inquiry into such issue and the settlement thereof are the main functions of courts of justice under the Presidential form of government adopted in our 1935 Constitution, and the system of checks and balances, one of its basic predicates. As a consequence, We have neither the authority nor the discretion to decline passing upon said issue, but are under the ineluctable obligation - made particularly more exacting and peremptory by our oath, as members of the highest Court of the land, to support and defend the Constitution - to settle it. This explains why, in Miller v. Johnson, it was held that courts have a "duty, rather than a power", to determine whether another branch of the government has "kept within constitutional limits." Not satisfied with this postulate, the court went farther and stressed that, if the Constitution provides how it may be amended - as it is in our 1935 Constitution - "then, unless the manner is followed, the judiciary as the interpreter of that constitution, will declare the amendment invalid." In fact, this very Court - speaking through Justice Laurel, an outstanding authority on Philippine Constitutional Law, as well as one of the highly respected and foremost leaders of the Convention that drafted the 1935 Constitution - declared, as early as July 15, 1936, that "(i)n times of social disquietude or political excitement, the great landmarks of the Constitution are apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial

department is the only constitutional organ which can be called upon to determine the proper allocation of powers between the several departments" of the government.107 (citations omitted; emphasis supplied) In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing higher and better education and opportunities for career advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist of people whose status and rank in life are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real economic and financial need for the adjustment This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent standard of living, and improve the quality of life for all."108 Any act of Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. To be sure, the BSP rank-and-file employees merit greater concern from this Court. They represent the more impotent rank-and-file government employees who, unlike employees in the private sector, have no specific right to organize as a collective bargaining unit and negotiate for better terms and conditions of employment, nor the power to hold a strike to protest unfair labor practices. Not only are they impotent as a labor unit, but their efficacy to lobby in Congress is almost nil as R.A. No. 7653 effectively isolated them from the other GFI rank-and-file in compensation. These BSP rank-and-file employees represent the politically powerless and they should not be compelled to seek a political solution to their unequal and iniquitous treatment. Indeed, they have waited for many years for the legislature to act. They cannot be asked to wait some more for discrimination cannot be given any waiting time. Unless the equal protection clause of the Constitution is a mere platitude, it is the Court's duty to save them from reasonless discrimination. IN VIEW WHEREOF, we hold that the continued operation and implementation of the last proviso of Section 15(c), Article II of Republic Act No. 7653 is unconstitutional.

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G.R. No. 74457 March 20, 1987 RESTITUTO YNOT, petitioner, vs. INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY, respondents. Ramon A. Gonzales for petitioner. CRUZ, J.: The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades "Strike but hear me first!" It is this cry that the petitioner in effect repeats here as he challenges the constitutionality of Executive Order No. 626-A. The said executive order reads in full as follows: WHEREAS, the President has given orders prohibiting the interprovincial movement of carabaos and the slaughtering of carabaos not complying with the requirements of Executive Order No. 626 particularly with respect to age; WHEREAS, it has been observed that despite such orders the violators still manage to circumvent the prohibition against inter-provincial movement of carabaos by transporting carabeef instead; and WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and the prohibition against interprovincial movement of carabaos, it is necessary to strengthen the said Executive Order and provide for the disposition of the carabaos and carabeef subject of the violation; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby promulgate the following: SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao regardless of age, sex, physical condition or purpose and no carabeef shall be transported from one province to another. The carabao or carabeef transported in violation of this Executive Order as amended shall be subject to confiscation and forfeiture by the government, to be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may ay see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos. SECTION 2. This Executive Order shall take effect immediately. Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen hundred and eighty. ( S G D . ) e s
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The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January 13, 1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for violation of the above measure. 1 The petitioner sued for recovery, and the Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After considering the merits of the case, the court sustained the confiscation of the carabaos and, since they could no longer be produced, ordered the confiscation of the bond. The court also declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack of authority and also for its presumed validity. 2 The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which upheld the trial court, ** and he has now come before us in this petition for review on certiorari. The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes outright confiscation of the carabao or carabeef being transported across provincial boundaries. His claim is that the penalty is invalid because it is imposed without according the owner a right to be heard before a competent and impartial court as guaranteed by due process. He complains that the measure should not have been presumed, and so sustained, as constitutional. There is also a challenge to the improper exercise of the legislative power by the former President under Amendment No. 6 of the 1973 Constitution. 4 While also involving the same executive order, the case of Pesigan v. Angeles 5 is not applicable here. The question raised there was the necessity of the previous publication of the measure in the Official Gazette before it could be considered enforceable. We imposed the requirement then on the basis of due process of law. In doing so, however, this Court did not, as contended by the Solicitor General, impliedly affirm the constitutionality of Executive Order No. 626-A. That is an entirely different matter. This Court has declared that while lower courts should observe a becoming modesty in examining constitutional questions, they are nonetheless not prevented from resolving the same whenever warranted, subject only to review by the highest tribunal. 6 We have jurisdiction under the Constitution to "review, revise, reverse, modify or affirm on appeal or certiorari, as the law or rules of court may provide," final judgments and orders of lower courts in, among others, all cases involving the constitutionality of certain measures. 7 This simply means that the resolution of such cases may be made in the first instance by these lower courts. And while it is true that laws are presumed to be constitutional, that presumption is not by any means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their invalidity, and of the need to declare them so, then "will be the time to make the hammer fall, and heavily," 8 to recall Justice Laurel's trenchant warning. Stated otherwise, courts should not follow the path of least resistance by simply presuming the constitutionality of a law when it is questioned. On the contrary, they should probe the issue more deeply, to relieve the abscess, paraphrasing another distinguished jurist, 9 and so heal the wound or excise the affliction. Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition unworthy of the bench, especially this Court. The challenged measure is denominated an executive order but it is really presidential decree, promulgating a new rule instead of merely implementing an existing law. It was issued by President Marcos not for the purpose of taking care that the laws were faithfully executed but in the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that whenever in his judgment there existed a grave emergency or a threat or imminence thereof or whenever the legislature failed or was unable to act adequately on any matter that in his judgment required immediate action, he could, in order to meet the exigency, issue decrees, orders or letters of instruction that were to have the force and effect of law. As there is no showing of any exigency to justify the exercise of that extraordinary power then, the petitioner has reason, indeed, to question the validity of the executive order. Nevertheless, since the determination of the grounds was supposed to have been made by the President "in his judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we reserve

resolution of this matter until a more appropriate occasion. For the nonce, we confine ourselves to the more fundamental question of due process. It is part of the art of constitution-making that the provisions of the charter be cast in precise and unmistakable language to avoid controversies that might arise on their correct interpretation. That is the Ideal. In the case of the due process clause, however, this rule was deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He was sustained by the body. 10 The due process clause was kept intentionally vague so it would remain also conveniently resilient. This was felt necessary because due process is not, like some provisions of the fundamental law, an "iron rule" laying down an implacable and immutable command for all seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity of the due process clause was meant to make it adapt easily to every situation, enlarging or constricting its protection as the changing times and circumstances may require. Aware of this, the courts have also hesitated to adopt their own specific description of due process lest they confine themselves in a legal straitjacket that will deprive them of the elbow room they may need to vary the meaning of the clause whenever indicated. Instead, they have preferred to leave the import of the protection open-ended, as it were, to be "gradually ascertained by the process of inclusion and exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go no farther than to define due process and in so doing sums it all up as nothing more and nothing less than "the embodiment of the sporting Idea of fair play." 12 When the barons of England extracted from their sovereign liege the reluctant promise that that Crown would thenceforth not proceed against the life liberty or property of any of its subjects except by the lawful judgment of his peers or the law of the land, they thereby won for themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the free society. The solemn vow that King John made at Runnymede in 1215 has since then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every person, when confronted by the stern visage of the law, is entitled to have his say in a fair and open hearing of his cause. The closed mind has no place in the open society. It is part of the sporting Idea of fair play to hear "the other side" before an opinion is formed or a decision is made by those who sit in judgment. Obviously, one side is only one-half of the question; the other half must also be considered if an impartial verdict is to be reached based on an informed appreciation of the issues in contention. It is indispensable that the two sides complement each other, as unto the bow the arrow, in leading to the correct ruling after examination of the problem not from one or the other perspective only but in its totality. A judgment based on less that this full appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power. The minimum requirements of due process are notice and hearing 13 which, generally speaking, may not be dispensed with because they are intended as a safeguard against official arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this country is rich with applications of this guaranty as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have consistently declared that every person, faced by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It has to be so if the rights of every person are to be secured beyond the reach of officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and empty catchword. This is not to say that notice and hearing are imperative in every case for, to be sure, there are a number of admitted exceptions. The conclusive presumption, for example, bars the admission of contrary
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evidence as long as such presumption is based on human experience or there is a rational connection between the fact proved and the fact ultimately presumed therefrom. 15 There are instances when the need for expeditions action will justify omission of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and may be summarily destroyed. The passport of a person sought for a criminal offense may be cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing may be omitted without violation of due process in view of the nature of the property involved or the urgency of the need to protect the general welfare from a clear and present danger. The protection of the general welfare is the particular function of the police power which both restraints and is restrained by due process. The police power is simply defined as the power inherent in the State to regulate liberty and property for the promotion of the general welfare. 18 By reason of its function, it extends to all the great public needs and is described as the most pervasive, the least limitable and the most demanding of the three inherent powers of the State, far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed in by the police power, which affects him even before he is born and follows him still after he is dead from the womb to beyond the tomb in practically everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as the activity or the property has some relevance to the public welfare, its regulation under the police power is not only proper but necessary. And the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the subordination of individual interests to the benefit of the greater number. It is this power that is now invoked by the government to justify Executive Order No. 626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except under certain conditions. The original measure was issued for the reason, as expressed in one of its Whereases, that "present conditions demand that the carabaos and the buffaloes be conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at the outset the need for such a measure. In the face of the worsening energy crisis and the increased dependence of our farms on these traditional beasts of burden, the government would have been remiss, indeed, if it had not taken steps to protect and preserve them. A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the registration, branding and slaughter of large cattle was claimed to be a deprivation of property without due process of law. The defendant had been convicted thereunder for having slaughtered his own carabao without the required permit, and he appealed to the Supreme Court. The conviction was affirmed. The law was sustained as a valid police measure to prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had stricken many of these animals and the reduction of their number had resulted in an acute decline in agricultural output, which in turn had caused an incipient famine. Furthermore, because of the scarcity of the animals and the consequent increase in their price, cattle-rustling had spread alarmingly, necessitating more effective measures for the registration and branding of these animals. The Court held that the questioned statute was a valid exercise of the police power and declared in part as follows: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. ... From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class" and that the prohibition

of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon individuals, again following the abovecited doctrine. There is no doubt that by banning the slaughter of these animals except where they are at least seven years old if male and eleven years old if female upon issuance of the necessary permit, the executive order will be conserving those still fit for farm work or breeding and preventing their improvident depletion. But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on the slaughter of the carabaos but on their movement, providing that "no carabao regardless of age, sex, physical condition or purpose (sic) and no carabeef shall be transported from one province to another." The object of the prohibition escapes us. The reasonable connection between the means employed and the purpose sought to be achieved by the questioned measure is missing We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in one province than in another. Obviously, retaining the carabaos in one province will not prevent their slaughter there, any more than moving them to another province will make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says executive order, it could be easily circumvented by simply killing the animal. Perhaps so. However, if the movement of the live animals for the purpose of preventing their slaughter cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as, not to be flippant dead meat. Even if a reasonable relation between the means and the end were to be assumed, we would still have to reckon with the sanction that the measure applies for violation of the prohibition. The penalty is outright confiscation of the carabao or carabeef being transported, to be meted out by the executive authorities, usually the police only. In the Toribio Case, the statute was sustained because the penalty prescribed was fine and imprisonment, to be imposed by the court after trial and conviction of the accused. Under the challenged measure, significantly, no such trial is prescribed, and the property being transported is immediately impounded by the police and declared, by the measure itself, as forfeited to the government. In the instant case, the carabaos were arbitrarily confiscated by the police station commander, were returned to the petitioner only after he had filed a complaint for recovery and given a supersedeas bond of P12,000.00, which was ordered confiscated upon his failure to produce the carabaos when ordered by the trial court. The executive order defined the prohibition, convicted the petitioner and immediately imposed punishment, which was carried out forthright. The measure struck at once and pounced upon the petitioner without giving him a chance to be heard, thus denying him the centuries-old guaranty of elementary fair play. It has already been remarked that there are occasions when notice and hearing may be validly dispensed with notwithstanding the usual requirement for these minimum guarantees of due process. It is also conceded that summary action may be validly taken in administrative proceedings as procedural due process is not necessarily judicial only. 20 In the exceptional cases accepted, however. there is a
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justification for the omission of the right to a previous hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the need to correct it. In the case before us, there was no such pressure of time or action calling for the petitioner's peremptory treatment. The properties involved were not even inimical per se as to require their instant destruction. There certainly was no reason why the offense prohibited by the executive order should not have been proved first in a court of justice, with the accused being accorded all the rights safeguarded to him under the Constitution. Considering that, as we held in Pesigan v. Angeles, 21 Executive Order No. 626-A is penal in nature, the violation thereof should have been pronounced not by the police only but by a court of justice, which alone would have had the authority to impose the prescribed penalty, and only after trial and conviction of the accused. We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall "be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide and sweeping authority that is not "canalized within banks that keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of legislative powers. To sum up then, we find that the challenged measure is an invalid exercise of the police power because the method employed to conserve the carabaos is not reasonably necessary to the purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner of the property confiscated is denied the right to be heard in his defense and is immediately condemned and punished. The conferment on the administrative authorities of the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and militates against the doctrine of separation of powers. There is, finally, also an invalid delegation of legislative powers to the officers mentioned therein who are granted unlimited discretion in the distribution of the properties arbitrarily taken. For these reasons, we hereby declare Executive Order No. 626-A unconstitutional. We agree with the respondent court, however, that the police station commander who confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order in accordance with its mandate. The law was at that time presumptively valid, and it was his obligation, as a member of the police, to enforce it. It would have been impertinent of him, being a mere subordinate of the President, to declare the executive order unconstitutional and, on his own responsibility alone, refuse to execute it. Even the trial court, in fact, and the Court of Appeals itself did not feel they had the competence, for all their superior authority, to question the order we now annul. The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw them, this case would never have reached us and the taking of his property under the challenged measure would have become a fait accompli despite its invalidity. We commend him for his spirit. Without the present challenge, the matter would have ended in that pump boat in Masbate and another violation of the Constitution, for all its obviousness, would have been perpetrated, allowed without protest, and soon forgotten in the limbo of relinquished rights. The strength of democracy lies not in the rights it guarantees but in the courage of the people to invoke them whenever they are ignored or violated. Rights are but weapons on the wall if, like expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a promise of protection.

They become truly meaningful, and fulfill the role assigned to them in the free society, if they are kept bright and sharp with use by those who are not afraid to assert them. WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as affirmed above, the decision of the Court of Appeals is reversed. The supersedeas bond is cancelled and the amount thereof is ordered restored to the petitioner. No costs. SO ORDERED.

BROKENSHIRE MEMORIAL HOSPITAL, INC., petitioner, vs. THE HONORABLE MINISTER OF LABOR & EMPLOYMENT AND BROKENSHIRE MEMORIAL HOSPITAL EMPLOYEES AND WORKER'S UNION-FFW Represented by EDUARDO A. AFUAN, respondents. Renato B. Pagatpatan for petitioner. PARAS, J.: This petition for review by certiorari seeks the annulment or modification of the Order of public respondent Minister of Labor dated December 9, 1985 in a case for non-compliance with Wage Order Nos. 5 and 6 docketed as ROXI-LSED Case No. 14-85 which 1) denied petitioner's Motion for Reconsideration dated February 3, 1986 and 2) affirmed the Order of Regional Director Eugenio I. Sagmit, Jr., Regional Office No. XI Davao City, dated April 12, 1985, the dispositive portion of which reads as follows: WHEREFORE, premises considered, respondent Brokenshire Memorial Hospital, Incorporated is hereby ordered to pay the above-named workers, through this Office, within fifteen (15) days from receipt hereof, the total sum of TWO HUNDRED EIGHTY- FOUR THOUSAND SIX HUNDRED TWENTY FIVE (P284,625.00) PESOS representing their living allowance under Wage Order No. 5 covering the period from October 16, 1984 to February 28, 1985 and under Wage Order No. 6 effective November 1, 1984 to February 28, 1985. Respondent is further ordered to pay the employees who are likewise entitled to the claims here presented, but whose names were inadvertently omitted in the list and computation. (Rollo, p. 7) Petitioner contends that the respondent Minister of Labor and Employment acted without, or in excess of his jurisdiction or with grave abuse of discretion in failing to hold: A) That the Regional Director committed grave abuse of discretion in asserting exclusive jurisdiction and in not certifying this case to the Arbitration Branch of the National Labor Relations Commission for a full-blown hearing on the merits; B) That the Regional Director erred in not ruling on the counterclaim raised by the respondent (in the labor case, and now petitioner in this case); C) That the Regional Director erred -in skirting the constitutional and legal issues raised. (Rollo, p. 4) This case originated from a complaint filed by private respondents against petitioner on September 21, 1984 with the Regional Office of the MOLE, Region XI, Davao City for non-compliance with the provisions of Wage Order No. 5. After due healing the Regional Director rendered a decision dated November 16, 1984 in favor of private respondents. Judgment having become final and executory, the Regional Director issued a Writ of Execution whereby some movable properties of the hospital (petitioner herein) were levied upon and its operating expenses kept with the bank were garnished. The levy and garnishment were lifted when petitioner hospital paid the claim of the private respondents (281 hospital employees) directly, in the total amount of P163,047.50 covering the period from June 16 to October 15, 1984. After making said payment, petitioner hospital failed to continue to comply with Wage Order No. 5 and likewise, failed to comply with the new Wage Order No. 6 which took effect on November 1, 1984, prompting private respondents to file against petitioner another complaint docketed as ROXI-LSED-1485, which is now the case at bar. In its answer, petitioner raised the following affirmative defenses:

G.R. No. 74621 February 7, 1990

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1) That the Regional Office of the Ministry of Labor did not acquire jurisdiction over it for want of allegation that it has the capacity to be sued and 2) That Wage Order Nos. 5 and 6 are non-constitutional and therefore void. Significantly petitioner never averred any counterclaim in its Answer. After the complainants had filed their reply, petitioner filed a Motion for the Certification of the case to the National Labor Relations Commission for a full-blown hearing on the matter, including the counterclaim interposed that the complainants had unpaid obligations with the Hospital which might be offset with the latter's alleged obligation to the former. Issues having been joined, the Regional Director rendered a decision on April 12, 1985 in favor of the complainants (private respondents herein) declaring that petitioner (respondent therein) is estopped from questioning the acquisition of jurisdiction because its appearance in the hearing is in itself submission to jurisdiction and that this case is merely a continuance of a previous case where the hospital already willingly paid its obligations to the workers on orders of the Regional Office. On the matter of the constitutionality of the Wage Order Nos. 5 and 6, the Regional Director declared that only the court can declare a law or order unconstitutional and until so declared by the court, the Office of the Regional Director is duly bound to enforce the law or order. Aggrieved, petitioner appealed to the Office of the Minister of Labor, which dismissed the appeal for lack of merit. A motion for reconsideration was likewise denied by said Office, giving rise to the instant petition reiterating the issues earlier mentioned. The crucial issue We are tasked to resolve is whether or not the Regional Director has jurisdiction over money claims of workers concurrent with the Labor Arbiter. It is worthy of note that the instant case was deliberated upon by this Court at the same time that Briad Agro Development Corporation v. de la Cerna, G.R. No. 82805 and L.M. Camus Engineering Corporation v. Hon. Secretary of Labor, et al. G.R. No. 83225, promulgated on June 29,1989 and Maternity Children's Hospital vs. Hon. Secretary of Labor, et al., G.R. No. 78909, promulgated 30 June 1989, where deliberated upon; for all three (3) cases raised the same issue of jurisdiction of the Regional Director of the Department of Labor to pass upon money claims of employees. Hence, we will be referring to these cases, most especially the case of Briad Agro which, as will be seen later, was reconsidered by the court. Contrary to the claim of petitioners that the original and exclusive jurisdiction over said money claims is properly lodged in the Labor Arbiter (relying on the case of Zambales Base Metals Inc. v. Minister of Labor, 146 SCRA 50) and the Regional Director has no jurisdiction over workers' money claims, the Court in the three (3) cases above-mentioned ruled that in view of the promulgation of Executive Order No. 111, the ruling in the earlier case of Zambales Base Metals is already abandoned. In accordance with the rulings in Briad Agro, L.M. Camus, and Maternity Children's Hospital, the Regional Director exercises concurrent jurisdiction with the Labor Arbiter over money claims. Thus, . . . . Executive Order No. 111 is in the character of a curative law, that is to say, it was intended to remedy a defect that, in the opinion of the legislative (the incumbent Chief Executive in this case, in the exercise of her lawmaking power under the Freedom Constitution) had attached to the provision subject of the amendment. This is clear from the proviso: "The provisions of Article 217 to the contrary notwithstanding . . ." Plainly, the amendment was meant to make both the Secretary of Labor (or the various Regional Directors) and the Labor Arbiter share jurisdiction. (Briad Agro Dev. Corp. v. Sec. of Labor, supra). Under the present rules, a Regional Director exercises both visitorial and enforcement power over labor standards cases, and is therefore empowered to adj udicate money claims, provided there still exists an employer-employee relationship, and the findings of the regional office is not contested by the employer concerned. (Maternity Children's Hospital v. Sec. of Labor, supra).
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However, it is very significant to note, at this point, that the decision in the consolidated cases of Briad Agro Development Corp. and L.M. Camus Engineering Corp. was reconsidered and set aside by this Court in a Resolution promulgated on November 9,1989. In view of the enactment of Republic Act No. 6715, approved on March 2, 1989, the Court found that reconsideration was proper. RA 6715 amended Art. 129 and Art. 217 of the Labor Code, to read as follows: ART. 129. Recovery of wages, simple money claims and other benefits.Upon complaint of any interested party, the Regional Director of the Department of Labor and Employment or any of the duly authorized hearing officers of the Department is empowered, through summary proceeding and after due notice, to hear and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal interest, owing to an employee or person employed in domestic or household service or househelper under this code, arising from employer-employee relations, Provided, That such complaint does not include a claim for reinstatement; Provided, further, That the aggregate money claims of each employee or househelper do not exceed five thousand pesos (P5,000.00). The Regional Director or hearing officer shall decide or resolve the complaint within thirty (30) calendar days from the date of the filing of the same . . . Any decision or resolution of the Regional Director or hearing officer pursuant to this provision may be appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days from 11 receipt of a copy of said decision or resolution, to the National Labor Relations Commission which shall resolve the appeal within ten (10) calendar days from the submission of the last pleading required or allowed under its rules. ART. 217. Jurisdiction of Labor Arbiters and the Commission. Except as otherwise provided under this code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of steno graphic notes, the following cases involving all workers, whether agricultural or non-agricultural: (1) Unfair labor practice cases; (2) Termination disputes; (3) If accompanied with a claim of reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relation; (5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and (6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount not exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim for reinstatement. It will be observed that what in fact conferred upon Regional Directors and other hearing officers of the Department of Labor (aside from the Labor Arbiters) adjudicative powers, i.e., the power to try and decide, or hear and determine any claim brought before them for recovery of wages, simple money claims, and other benefits, is Republic Act 6715, provided that the following requisites concur, to wit:

1) The claim is presented by an employee or person employed in domestic or household service, or househelper under the code; 2) The claimant, no longer being employed, does not seek reinstatement; and 3) The aggregate money claim of the employee or househelper does not exceed five thousand pesos (P5,000.00). In the absence of any of the three (3) requisites, the Labor Arbiters have exclusive original jurisdiction over all claims arising from employer-employee relations, other than claims for employee's compensation, social security, medicare and maternity benefits. We hereby adopt the view taken by Mr. Justice Andres Narvasa in his Separate Opinion in the case of Briad Agro Dev. Corp., as reconsidered, a portion of which reads: In the resolution, therefore, of any question of jurisdiction over a money claim arising from employer-employee relations, the first inquiry should be into whether the employment relation does indeed still exist between the claimant and the respondent. If the relation no longer exists, and the claimant does not seek reinstatement, the case is cognizable by the Labor Arbiter, not by the Regional Director. On the other hand, if the employment relation still exists, or reinstatement is sought, the next inquiry should be into the amount involved. If the amount involved does not exceed P5,000.00, the Regional Director undeniably has jurisdiction. But even if the amount of the claim exceeds P5,000.00, the claim is not on that account necessary removed from the Regional Director's competence. In respect thereof, he may still exercise the visitorial and enforcement powers vested in him by Article 128 of the Labor Code, as amended, supra; that is to say, he may still direct his labor regulations officers or industrial safety engineers to inspect the employer's premises and examine his records; and if the officers should find that there have been violations of labor standards provisions, the Regional Director may, after due notice and hearing, order compliance by the employer therewith and issue a writ of execution to the appropriate authority for the enforcement thereof. However, this power may not, to repeat, be exercised by him where the employer contests the labor regulation officers' findings and raises issues which cannot be resolved without considering evidentiary matters not verifiable in the normal course of inspection. In such an event, the case will have to be referred to the corresponding Labor Arbiter for adjudication, since it falls within the latter's exclusive original jurisdiction. Anent the other issue involved in the instant case, petitioner's contention that the constitutionality of Wage Order Nos. 5 and 6 should be passed upon by the National Labor Relations Commission, lacks merit. The Supreme Court is vested by the Constitution with the power to ultimately declare a law unconstitutional. Without such declaration, the assailed legislation remains operative and can be the source of rights and duties especially so in the case at bar when petitioner complied with Wage Order No. 5 by paying the claimants the total amount of P163,047.50, representing the latter's minimum wage increases up to October 16, 1984, instead of questioning immediately at that stage before paying the amount due, the validity of the order on grounds of constitutionality. The Regional Director is plainly ,without the authority to declare an order or law unconstitutional and his duty is merely to enforce the law which stands valid, unless otherwise declared by this Tribunal to be unconstitutional. On our part, We hereby declare the assailed Wage Orders as constitutional, there being no provision of the 1973 Constitution (or even of both the Freedom Constitution and the 1987 Constitution) violated by said Wage Orders, which Orders are without doubt for the benefit of labor. Based on the foregoing considerations, it is our shared view that the findings of the labor regulations officers may not be deemed uncontested as to bring the case at bar within the competence of the
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Regional Director, as duly authorized representative of the Secretary of Labor, pursuant to Article 128 of the Labor Code, as amended. Considering further that the aggregate claims involve an amount in excess of P5,000.00, We find it more appropriate that the issue of petitioner hospital's liability therefor, including the proposal of petitioner that the obligation of private respondents to the former in the aggregate amount of P507,237.57 be used to offset its obligations to them, be ventilated and resolved, not in a summary proceeding before the Regional Director under Article 128 of the Labor Code, as amended, but in accordance With the more formal and extensive proceeding before the Labor Arbiter. Nevertheless, it should be emphasized that the amount of the employer's liability is not quite a factor in determining the jurisdiction of the Regional Director. However, the power to order compliance with labor standards provisions may not be exercised where the employer contends or questions the findings of the labor regulation officers and raises issues which cannot be determined without taking into account evidentiary matters not verifiable in the normal course of inspection, as in the case at bar. Viewed in the light of RA 6715 and read in consonance with the case of Briad Agro Development Corp., as reconsidered, We hold that the instant case falls under the exclusive original jurisdiction of the Labor Arbiter RA 6715 is in the nature of a curative statute. Curative statutes have long been considered valid in our jurisdiction, as long as they do not affect vested rights. In this case, We do not see any vested right that will be impaired by the application of RA 6715. Inasmuch as petitioner had already paid the claims of private respondents in the amount of P163,047.50 pursuant to the decision rendered in the first complaint, the only claim that should be deliberated upon by the Labor Arbiter should be limited to the second amount given by the Regional Director in the second complaint together with the proposal to offset the obligations. WHEREFORE, the assailed decision of the Regional Director dated April 12, 1985, is SET ASIDE. The case is REFERRED, if the respondents are so minded, to the Labor Arbiter for proper proceedings. SO ORDERED.

G.R. No. 182065

October 27, 2009

EVELYN ONGSUCO and ANTONIA SALAYA, Petitioners, vs. HON. MARIANO M. MALONES, both in his private and official capacity as Mayor of the Municipality of Maasin, Iloilo, Respondent. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated 28 November 2006, rendered by the Court of Appeals in CA-G.R. SP No. 86182, which affirmed the Decision2 dated 15 July 2003, of the Regional Trial Court (RTC), Branch 39, of Iloilo City, in Civil Case No. 25843, dismissing the special civil action for Mandamus/Prohibition with Prayer for Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, filed by petitioners Evelyn Ongsuco and Antonia Salaya against respondent Mayor Mariano Malones of the Municipality of Maasin, Iloilo. Petitioners are stall holders at the Maasin Public Market, which had just been newly renovated. In a letter3 dated 6 August 1998, the Office of the Municipal Mayor informed petitioners of a meeting scheduled on 11 August 1998 concerning the municipal public market. Revenue measures were discussed during the said meeting, including the increase in the rentals for the market stalls and the imposition of "goodwill fees" in the amount of P20,000.00,4 payable every month. On 17 August 1998, the Sangguniang Bayan of Maasin approved Municipal Ordinance No. 98-01, entitled "The Municipal Revised Revenue Code." The Code contained a provision for increased rentals for the stalls and the imposition of goodwill fees in the amount of P20,000.00 and P15,000.00 for stalls located on the first and second floors of the municipal public market, respectively. The same Code authorized respondent to enter into lease contracts over the said market stalls,5 and incorporated a standard contract of lease for the stall holders at the municipal public market. Only a month later, on 18 September 1998, the Sangguniang Bayan of Maasin approved Resolution No. 68, series of 1998,6 moving to have the meeting dated 11 August 1998 declared inoperative as a public hearing, because majority of the persons affected by the imposition of the goodwill fee failed to agree to the said measure. However, Resolution No. 68, series of 1998, of the Sangguniang Bayan of Maasin was vetoed by respondent on 30 September 1998.7 After Municipal Ordinance No. 98-01 was approved on 17 August 1998, another purported public hearing was held on 22 January 1999.8 On 9 June 1999, respondent wrote a letter to petitioners informing them that they were occupying stalls in the newly renovated municipal public market without any lease contract, as a consequence of which, the stalls were considered vacant and open for qualified and interested applicants.9 This prompted petitioners, together with other similarly situated stall holders at the municipal public market,10 to file before the RTC on 25 June 1999 a Petition for Prohibition/Mandamus, with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction,11 against respondent. The Petition was docketed as Civil Case No. 25843. Petitioners alleged that they were bona fide occupants of the stalls at the municipal public market, who had been religiously paying the monthly rentals for the stalls they occupied. Petitioners argued that public hearing was mandatory in the imposition of goodwill fees. Section 186 of the Local Government Code of 1991 provides that an ordinance levying taxes, fees, or charges shall not be enacted without any prior hearing conducted for the purpose. Municipal Ordinance No. 98-01, imposing goodwill fees, is invalid on the ground that the conferences held on 11 August 1998 and 22 January 1999 could not be considered public hearings. According to Article 277(b)(3) of the Implementing Rules and Regulations of the Local Government Code: (3) The notice or notices shall specify the date or dates and venue of the public hearing or hearings. The initial public hearing shall be held not earlier than ten (10) days from the sending out of the notice or notices, or the last day of publication, or date of posting thereof, whichever is later. (Emphasis ours.)
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The letter from the Office of the Municipal Mayor was sent to stall holders on 6 August 1998, informing the latter of the meeting to be held, as was in fact held, on 11 August 1998, only five days after notice.12 Hence, petitioners prayed that respondent be enjoined from imposing the goodwill fees pending the determination of the reasonableness thereof, and from barring petitioners from occupying the stalls at the municipal public market and continuing with the operation of their businesses. Respondent, in answer, maintained that Municipal Ordinance No. 98-01 is valid. He reasoned that Municipal Ordinance No. 98-01 imposed goodwill fees to raise income to pay for the loan obtained by the Municipality of Maasin for the renovation of its public market. Said ordinance is not per se a tax or revenue measure, but involves the operation and management of an economic enterprise of the Municipality of Maasin as a local government unit; thus, there was no mandatory requirement to hold a public hearing for the enactment thereof. And, even granting that a public hearing was required, respondent insisted that public hearings take place on 11 August 1998 and 22 January 1999. Respondent further averred that petitioners were illegally occupying the market stalls, and the only way petitioners could legitimize their occupancy of said market stalls would be to execute lease contracts with the Municipality of Maasin. While respondent admitted that petitioners had been paying rentals for their market stalls in the amount of P45.00 per month prior to the renovation of the municipal public market, respondent asserted that no rentals were paid or collected from petitioners ever since the renovation began. Respondent sought from the RTC an award for moral damages in the amount of not less than P500,000.00, for the social humiliation and hurt feelings he suffered by reason of the unjustified filing by petitioners of Civil Case No. 25843; and an order for petitioners to vacate the renovated market stalls and pay reasonable rentals from the date they began to occupy said stalls until they vacate the same. 13 The RTC subsequently rendered a Decision14 on 15 July 2003 dismissing the Petition in Civil Case No. 25843. The RTC found that petitioners could not avail themselves of the remedy of mandamus or prohibition. It reasoned that mandamus would not lie in this case where petitioners failed to show a clear legal right to the use of the market stalls without paying the goodwill fees imposed by the municipal government. Prohibition likewise would not apply to the present case where respondents acts, sought to be enjoined, did not involve the exercise of judicial or quasi-judicial functions. The RTC also dismissed the Petition in Civil Case No. 25843 on the ground of non-exhaustion of administrative remedies. Petitioners failure to question the legality of Municipal Ordinance No. 98-01 before the Secretary of Justice, as provided under Section 187 of the Local Government Code,15 rendered the Petition raising the very same issue before the RTC premature. The dispositive part of the RTC Decision dated 15 July 2003 reads: WHEREFORE, in view of all the foregoing, and finding the petition without merit, the same is, as it is hereby ordered, dismissed. 16 On 12 August 2003, petitioners and their co-plaintiffs filed a Motion for Reconsideration.17 The RTC denied petitioners Motion for Reconsideration in a Resolution dated 18 June 2004.18 While Civil Case No. 25843 was pending, respondent filed before the 12th Municipal Circuit Trial Court (MCTC) of Cabatuan-Maasin, Iloilo City a case in behalf of the Municipality of Maasin against petitioner Evelyn Ongsuco, entitled Municipality of Maasin v. Ongsuco, a Complaint for Unlawful Detainer with Damages, docketed as MCTC Civil Case No. 257. On 18 June 2002, the MCTC decided in favor of the Municipality of Maasin and ordered petitioner Ongsuco to vacate the market stalls she occupied, Stall No. 1-03 and Stall No. 1-04, and to pay monthly rentals in the amount of P350.00 for each stall from October 2001 until she vacates the said market stalls.19 On appeal, Branch 36 of the RTC of Maasin, Iloilo City, promulgated a Decision, dated 29 April 2003, in a case docketed as Civil Case No. 02-27229 affirming the decision of the MCTC. A Writ of Execution was issued by the MCTC on 8 December 2003.20

Petitioners, in their appeal before the Court of Appeals, docketed as CA-G.R. SP No. 86182, challenged the dismissal of their Petition for Prohibition/Mandamus docketed as Civil Case No. 25843 by the RTC. Petitioners explained that they did appeal the enactment of Municipal Ordinance No. 98-01 before the Department of Justice, but their appeal was not acted upon because of their failure to attach a copy of said municipal ordinance. Petitioners claimed that one of their fellow stall holders, Ritchelle Mondejar, wrote a letter to the Officer-in-Charge (OIC), Municipal Treasurer of Maasin, requesting a copy of Municipal Ordinance No. 98-01, but received no reply.21 In its Decision dated 28 November 2006 in CA-G.R. SP No. 86182, the Court of Appeals again ruled in respondents favor. The Court of Appeals declared that the "goodwill fee" was a form of revenue measure, which the Municipality of Maasin was empowered to impose under Section 186 of the Local Government Code. Petitioners failed to establish any grave abuse of discretion committed by respondent in enforcing goodwill fees. The Court of Appeals additionally held that even if respondent acted in grave abuse of discretion, petitioners resort to a petition for prohibition was improper, since respondents acts in question herein did not involve the exercise of judicial, quasi-judicial, or ministerial functions, as required under Section 2, Rule 65 of the Rules of Court. Also, the filing by petitioners of the Petition for Prohibition/Mandamus before the RTC was premature, as they failed to exhaust administrative remedies prior thereto. The appellate court did not give any weight to petitioners assertion that they filed an appeal challenging the legality of Municipal Ordinance No. 98-01 before the Secretary of Justice, as no proof was presented to support the same. In the end, the Court of Appeals decreed: WHEREFORE, in view of the foregoing, this Court finds the instant appeal bereft of merit. The assailed decision dated July 15, 2003 as well as the subsequent resolution dated 18 June 2004 are hereby AFFIRMED and the instant appeal is hereby DISMISSED. 22 Petitioners filed a Motion for Reconsideration23 of the foregoing Decision, but it was denied by the Court of Appeals in a Resolution24 dated 8 February 2008. Hence, the present Petition, where petitioners raise the following issues: I WHETHER OR NOT THE PETITIONERS HAVE EXHAUSTED ADMINISTRATIVE REMEDIES BEFORE FILING THE INSTANT CASE IN COURT; II WHETHER OR NOT EXHAUSTION OF ADMINISTRATIVE REMEDIES IS APPLICABLE IN THIS CASE; AND III WHETHER OR NOT THE APPELLEE MARIANO MALONES WHO WAS THEN THE MUNICIPAL MAYOR OF MAASIN, ILOILO HAS COMMITTED GRAVE ABUSE OF DISCRETION.25 After a close scrutiny of the circumstances that gave rise to this case, the Court determines that there is no need for petitioners to exhaust administrative remedies before resorting to the courts. The findings of both the RTC and the Court of Appeals that petitioners Petition for Prohibition/Mandamus in Civil Case No. 25843 was premature is anchored on Section 187 of the Local Government Code, which reads: Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings.The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the
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constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. (Emphasis ours.) It is true that the general rule is that before a party is allowed to seek the intervention of the court, he or she should have availed himself or herself of all the means of administrative processes afforded him or her. Hence, if resort to a remedy within the administrative machinery can still be made by giving the administrative officer concerned every opportunity to decide on a matter that comes within his or her jurisdiction, then such remedy should be exhausted first before the courts judicial power can be sought. The premature invocation of the intervention of the court is fatal to ones cause of action. The doctrine of exhaustion of administrative remedies is based on practical and legal reasons. The availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. Furthermore, the courts of justice, for reasons of comity and convenience, will shy away from a dispute until the system of administrative redress has been completed and complied with, so as to give the administrative agency concerned every opportunity to correct its error and dispose of the case. However, there are several exceptions to this rule. 26 The rule on the exhaustion of administrative remedies is intended to preclude a court from arrogating unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. Thus, a case where the issue raised is a purely legal question, well within the competence; and the jurisdiction of the court and not the administrative agency, would clearly constitute an exception.27 Resolving questions of law, which involve the interpretation and application of laws, constitutes essentially an exercise of judicial power that is exclusively allocated to the Supreme Court and such lower courts the Legislature may establish. 28 In this case, the parties are not disputing any factual matter on which they still need to present evidence. The sole issue petitioners raised before the RTC in Civil Case No. 25843 was whether Municipal Ordinance No. 98-01 was valid and enforceable despite the absence, prior to its enactment, of a public hearing held in accordance with Article 276 of the Implementing Rules and Regulations of the Local Government Code. This is undoubtedly a pure question of law, within the competence and jurisdiction of the RTC to resolve. Paragraph 2(a) of Section 5, Article VIII of the Constitution, expressly establishes the appellate jurisdiction of this Court, and impliedly recognizes the original jurisdiction of lower courts over cases involving the constitutionality or validity of an ordinance: Section 5. The Supreme Court shall have the following powers: xxxx (2) Review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in: (a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. (Emphases ours.) In J.M. Tuason and Co., Inc. v. Court of Appeals,29 Ynot v. Intermediate Appellate Court,30 and Commissioner of Internal Revenue v. Santos,31 the Court has affirmed the jurisdiction of the RTC to resolve questions of constitutionality and validity of laws (deemed to include local ordinances) in the first instance, without deciding questions which pertain to legislative policy. Although not raised in the Petition at bar, the Court is compelled to discuss another procedural issue, specifically, the declaration by the RTC, and affirmed by the Court of Appeals, that petitioners availed themselves of the wrong remedy in filing a Petition for Prohibition/Mandamus before the RTC.

Sections 2 and 3, Rule 65 of the Rules of the Rules of Court lay down under what circumstances petitions for prohibition and mandamus may be filed, to wit: SEC. 2. Petition for prohibition. When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require. SEC. 3. Petition for mandamus. When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent, immediately or at some other time to be specified by the court, to do the act required to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts of the respondent. (Emphases ours.) In a petition for prohibition against any tribunal, corporation, board, or person -- whether exercising judicial, quasi-judicial, or ministerial functions -- who has acted without or in excess of jurisdiction or with grave abuse of discretion, the petitioner prays that judgment be rendered, commanding the respondent to desist from further proceeding in the action or matter specified in the petition.32 On the other hand, the remedy of mandamus lies to compel performance of a ministerial duty.33 The petitioner for such a writ should have a well-defined, clear and certain legal right to the performance of the act, and it must be the clear and imperative duty of respondent to do the act required to be done.34 In this case, petitioners primary intention is to prevent respondent from implementing Municipal Ordinance No. 98-01, i.e., by collecting the goodwill fees from petitioners and barring them from occupying the stalls at the municipal public market. Obviously, the writ petitioners seek is more in the nature of prohibition (commanding desistance), rather than mandamus (compelling performance). For a writ of prohibition, the requisites are: (1) the impugned act must be that of a "tribunal, corporation, board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions"; and (2) there is no plain, speedy, and adequate remedy in the ordinary course of law."35 The exercise of judicial function consists of the power to determine what the law is and what the legal rights of the parties are, and then to adjudicate upon the rights of the parties. The term quasi-judicial function applies to the action and discretion of public administrative officers or bodies that are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature. In implementing Municipal Ordinance No. 98-01, respondent is not called upon to adjudicate the rights of contending parties or to exercise, in any manner, discretion of a judicial nature. A ministerial function is one that an officer or tribunal performs in the context of a given set of facts, in a prescribed manner and without regard for the exercise of his or its own judgment, upon the propriety or impropriety of the act done.36 The Court holds that respondent herein is performing a ministerial function. It bears to emphasize that Municipal Ordinance No. 98-01 enjoys the presumption of validity, unless declared otherwise. Respondent has the duty to carry out the provisions of the ordinance under Section 444 of the Local Government Code:

Section 444. The Chief Executive: Powers, Duties, Functions and Compensation. (a) The Municipal mayor, as the chief executive of the municipal government, shall exercise such powers and perform such duties and functions as provided by this Code and other laws. (b) For efficient, effective and economical governance the purpose of which is the general welfare of the municipality and its inhabitants pursuant to Section 16 of this Code, the Municipal mayor shall: xxxx (2) Enforce all laws and ordinances relative to the governance of the municipality and the exercise of its corporate powers provided for under Section 22 of this Code, implement all approved policies, programs, projects, services and activities of the municipality x x x. xxxx (3) Initiate and maximize the generation of resources and revenues, and apply the same to the implementation of development plans, program objectives sand priorities as provided for under Section 18 of this Code, particularly those resources and revenues programmed for agro-industrial development and country-wide growth and progress, and relative thereto, shall: xxxx (iii) Ensure that all taxes and other revenues of the municipality are collected, and that municipal funds are applied in accordance with law or ordinance to the payment of expenses and settlement of obligations of the municipality; x x x. (Emphasis ours.) Municipal Ordinance No. 98-01 imposes increased rentals and goodwill fees on stall holders at the renovated municipal public market, leaving respondent, or the municipal treasurer acting as his alter ego, no discretion on whether or not to collect the said rentals and fees from the stall holders, or whether or to collect the same in the amounts fixed by the ordinance. The Court further notes that respondent already deemed petitioners stalls at the municipal public market vacated. Without such stalls, petitioners would be unable to conduct their businesses, thus, depriving them of their means of livelihood. It is imperative on petitioners part to have the implementation of Municipal Ordinance No. 98-01 by respondent stopped the soonest. As this Court has established in its previous discussion, there is no more need for petitioners to exhaust administrative remedies, considering that the fundamental issue between them and respondent is one of law, over which the courts have competence and jurisdiction. There is no other plain, speedy, and adequate remedy for petitioners in the ordinary course of law, except to seek from the courts the issuance of a writ of prohibition commanding respondent to desist from continuing to implement what is allegedly an invalid ordinance.1 a vv p h i 1 This brings the Court to the substantive issue in this Petition on the validity of Municipal Ordinance N. 98-01. Respondent maintains that the imposition of goodwill fees upon stall holders at the municipal public market is not a revenue measure that requires a prior public hearing. Rentals and other consideration for occupancy of the stalls at the municipal public market are not matters of taxation. Respondents argument is specious. Article 219 of the Local Government Code provides that a local government unit exercising its power to impose taxes, fees and charges should comply with the requirements set in Rule XXX, entitled "Local Government Taxation": Article 219. Power to Create Sources of Revenue.Consistent with the basic policy of local autonomy, each LGU shall exercise its power to create its own sources of revenue and to levy taxes, fees, or charges, subject to the provisions of this Rule. Such taxes, fees, or charges shall accrue exclusively to the LGU. (Emphasis ours.) Article 221(g) of the Local Government Code of 1991 defines "charges" as: Article 221. Definition of Terms.
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xxxx (g) Charges refer to pecuniary liability, as rents or fees against persons or property. (Emphasis ours.) Evidently, the revenues of a local government unit do not consist of taxes alone, but also other fees and charges. And rentals and goodwill fees, imposed by Municipal Ordinance No. 98-01 for the occupancy of the stalls at the municipal public market, fall under the definition of charges. For the valid enactment of ordinances imposing charges, certain legal requisites must be met. Section 186 of the Local Government Code identifies such requisites as follows: Section 186. Power to Levy Other Taxes, Fees or Charges.Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose. (Emphasis ours.) Section 277 of the Implementing Rules and Regulations of the Local Government Code establishes in detail the procedure for the enactment of such an ordinance, relevant provisions of which are reproduced below: Section 277. Publication of Tax Ordinance and Revenue Measures.x x x. xxxx (b) The conduct of public hearings shall be governed by the following procedure: xxxx (2) In addition to the requirement for publication or posting, the sanggunian concerned shall cause the sending of written notices of the proposed ordinance, enclosing a copy thereof, to the interested or affected parties operating or doing business within the territorial jurisdiction of the LGU concerned. (3) The notice or notices shall specify the date or dates and venue of the public hearing or hearings. The initial public hearing shall be held not earlier than ten (10) days from the sending out of the notice or notices, or the last day of publication, or date of posting thereof, whichever is later; xxxx (c) No tax ordinance or revenue measure shall be enacted or approved in the absence of a public hearing duly conducted in the manner provided under this Article. (Emphases ours.) It is categorical, therefore, that a public hearing be held prior to the enactment of an ordinance levying taxes, fees, or charges; and that such public hearing be conducted as provided under Section 277 of the Implementing Rules and Regulations of the Local Government Code. There is no dispute herein that the notices sent to petitioners and other stall holders at the municipal public market were sent out on 6 August 1998, informing them of the supposed "public hearing" to be held on 11 August 1998. Even assuming that petitioners received their notice also on 6 August 1998, the "public hearing" was already scheduled, and actually conducted, only five days later, on 11 August 1998. This contravenes Article 277(b)(3) of the Implementing Rules and Regulations of the Local Government Code which requires that the public hearing be held no less than ten days from the time the notices were sent out, posted, or published. When the Sangguniang Bayan of Maasin sought to correct this procedural defect through Resolution No. 68, series of 1998, dated 18 September 1998, respondent vetoed the said resolution. Although the Sangguniang Bayan may have had the power to override respondents veto,37 it no longer did so. The defect in the enactment of Municipal Ordinance No. 98 was not cured when another public hearing was held on 22 January 1999, after the questioned ordinance was passed by the Sangguniang Bayan and approved by respondent on 17 August 1998. Section 186 of the Local Government Code prescribes
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that the public hearing be held prior to the enactment by a local government unit of an ordinance levying taxes, fees, and charges. Since no public hearing had been duly conducted prior to the enactment of Municipal Ordinance No. 9801, said ordinance is void and cannot be given any effect. Consequently, a void and ineffective ordinance could not have conferred upon respondent the jurisdiction to order petitioners stalls at the municipal public market vacant. IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision dated 28 November 2006 of the Court of Appeals in CA-G.R. SP No. 86182 is REVERSED and SET ASIDE. Municipal Ordinance No. 98-01 is DECLARED void and ineffective, and a writ of prohibition is ISSUED commanding the Mayor of the Municipality of Maasin, Iloilo, to permanently desist from enforcing the said ordinance. Petitioners are also DECLARED as lawful occupants of the market stalls they occupied at the time they filed the Petition for Mandamus/Prohibition docketed as Civil Case No. 25843. In the event that they were deprived of possession of the said market stalls, petitioners are entitled to recover possession of these stalls. SO ORDERED.

G.R. No. L-23127 April 29, 1971 FRANCISCO SERRANO DE AGBAYANI, plaintiff-appellee, vs. PHILIPPINE NATIONAL BANK and THE PROVINCIAL SHERIFF OF PANGASINAN, defendants, PHILIPPINE NATIONAL BANK, defendant-appellant. Dionisio E. Moya for plaintiff-appellee.

Ramon B. de los Reyes for defendant-appellant. FERNANDO, J.: A correct appreciation of the controlling doctrine as to the effect, if any, to be attached to a statute subsequently adjudged invalid, is decisive of this appeal from a lower court decision. Plaintiff Francisco Serrano de Agbayani, now appellee, was able to obtain a favorable judgment in her suit against defendant, now appellant Philippine National Bank, permanently enjoining the other defendant, the Provincial Sheriff of Pangasinan, from proceeding with an extra-judicial foreclosure sale of land belonging to plaintiff mortgaged to appellant Bank to secure a loan declared no longer enforceable, the prescriptive period having lapsed. There was thus a failure to sustain the defense raised by appellant that if the moratorium under an Executive Order and later an Act subsequently found unconstitutional were to be counted in the computation, then the right to foreclose the mortgage was still subsisting. In arriving at such a conclusion, the lower court manifested a tenacious adherence to the inflexible view that an unconstitutional act is not a law, creating no rights and imposing no duties, and thus as inoperative as if it had never been. It was oblivious to the force of the principle adopted by this Court that while a statute's repugnancy to the fundamental law deprives it of its character as a juridical norm, its having been operative prior to its being nullified is a fact that is not devoid of legal consequences. As will hereafter be explained, such a failing of the lower court resulted in an erroneous decision. We find for appellant Philippine National Bank, and we reverse. There is no dispute as to the facts. Plaintiff obtained the loan in the amount of P450.00 from defendant Bank dated July 19, 1939, maturing on July 19, 1944, secured by real estate mortgage duly registered covering property described in T.C.T. No. 11275 of the province of Pangasinan. As of November 27, 1959, the balance due on said loan was in the amount of P1,294.00. As early as July 13 of the same year, defendant instituted extra-judicial foreclosure proceedings in the office of defendant Provincial Sheriff of Pangasinan for the recovery of the balance of the loan remaining unpaid. Plaintiff countered with his suit against both defendants on August 10, 1959, her main allegation being that the mortgage sought to be foreclosed had long prescribed, fifteen years having elapsed from the date of maturity, July 19, 1944. She sought and was able to obtain a writ of preliminary injunction against defendant Provincial Sheriff, which was made permanent in the decision now on appeal. Defendant Bank in its answer prayed for the dismissal of the suit as even on plaintiff's own theory the defense of prescription would not be available if the period from March 10, 1945, when Executive Order No. 32 1 was issued, to July 26, 1948, when the subsequent legislative act 2 extending the period of moratorium was declared invalid, were to be deducted from the computation of the time during which the bank took no legal steps for the recovery of the loan. As noted, the lower court did not find such contention persuasive and decided the suit in favor of plaintiff. Hence this appeal, which, as made clear at the outset, possesses merit, there being a failure on the part of the lower court to adhere to the applicable constitutional doctrine as to the effect to be given to a statute subsequently declared invalid. 1. The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. 3 It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive. Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary,
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in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official." 4 This language has been quoted with approval in a resolution in Araneta v. Hill 5 and the decision in Manila Motor Co., Inc. v. Flores. 6 An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. 7 2. Such an approach all the more commends itself whenever police power legislation intended to promote public welfare but adversely affecting property rights is involved. While subject to be assailed on due process, equal protection and non-impairment grounds, all that is required to avoid the corrosion of invalidity is that the rational basis or reasonableness test is satisfied. The legislature on the whole is not likely to allow an enactment suffering, to paraphrase Cardozo, from the infirmity of out running the bounds of reason and resulting in sheer oppression. It may be of course that if challenged, an adverse judgment could be the result, as its running counter to the Constitution could still be shown. In the meanwhile though, in the normal course of things, it has been acted upon by the public and accepted as valid. To ignore such a fact would indeed be the fruitful parent of injustice. Moreover, as its constitutionality is conditioned on its being fair or reasonable, which in turn is dependent on the actual situation, never static but subject to change, a measure valid when enacted may subsequently, due to altered circumstances, be stricken down. That is precisely what happened in connection with Republic Act No. 342, the moratorium legislation, which continued Executive Order No. 32, issued by the then President Osmea, suspending the enforcement of payment of all debts and other monetary obligations payable by war sufferers. So it was explicitly held in Rutter v. Esteban 8 where such enactment was considered in 1953 "unreasonable and oppressive, and should not be prolonged a minute longer, and, therefore, the same should be declared null and void and without effect." 9 At the time of the issuance of the above Executive Order in 1945 and of the passage of such Act in 1948, there was a factual justification for the moratorium. The Philippines was confronted with an emergency of impressive magnitude at the time of her liberation from the Japanese military forces in 1945. Business was at a standstill. Her economy lay prostrate. Measures, radical measures, were then devised to tide her over until some semblance of normalcy could be restored and an improvement in her economy noted. No wonder then that the suspension of enforcement of payment of the obligations then existing was declared first by executive order and then by legislation. The Supreme Court was right therefore in rejecting the contention that on its face, the Moratorium Law was unconstitutional, amounting as it did to the impairment of the obligation of contracts. Considering the circumstances confronting the legitimate government upon its return to the Philippines, some such remedial device was needed and badly so. An unyielding insistence then on the rights to property on the part of the creditors was not likely to meet with judicial sympathy. Time passed however, and conditions did change. When the legislation was before this Court in 1953, the question before it was its satisfying the rational basis test, not as of the time of its enactment but as of such date. Clearly, if then it were found unreasonable, the right to non-impairment of contractual obligations must prevail over the assertion of

community power to remedy an existing evil. The Supreme Court was convinced that such indeed was the case. As stated in the opinion of Justice Bautista Angelo: "But we should not lose sight of the fact that these obligations had been pending since 1945 as a result of the issuance of Executive Orders Nos. 25 and 32 and at present their enforcement is still inhibited because of the enactment of Republic Act No. 342 and would continue to be unenforceable during the eight-year period granted to prewar debtors to afford them an opportunity to rehabilitate themselves, which in plain language means that the creditors would have to observe a vigil of at least twelve (12) years before they could affect a liquidation of their investment dating as far back as 1941. This period seems to us unreasonable, if not oppressive. While the purpose of Congress is plausible, and should be commended, the relief accorded works injustice to creditors who are practically left at the mercy of the debtors. Their hope to effect collection becomes extremely remote, more so if the credits are unsecured. And the injustice is more patent when, under the law the debtor is not even required to pay interest during the operation of the relief, unlike similar statutes in the United States. 10 The conclusion to which the foregoing considerations inevitably led was that as of the time of adjudication, it was apparent that Republic Act No. 342 could not survive the test of validity. Executive Order No. 32 should likewise be nullified. That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. 3. Precisely though because of the judicial recognition that moratorium was a valid governmental response to the plight of the debtors who were war sufferers, this Court has made clear its view in a series of cases impressive in their number and unanimity that during the eight-year period that Executive Order No. 32 and Republic Act No. 342 were in force, prescription did not run. So it has been held from Day v. Court of First Instance, 11 decided in 1954, to Republic v. Hernaez, 12 handed down only last year. What is deplorable is that as of the time of the lower court decision on January 27, 1960, at least eight decisions had left no doubt as to the prescriptive period being tolled in the meanwhile prior to such adjudication of invalidity. 13 Speaking of the opposite view entertained by the lower court, the present Chief Justice, in Liboro v. Finance and Mining Investments Corp. 14 has categorized it as having been "explicitly and consistently rejected by this Court." 15 The error of the lower court in sustaining plaintiff's suit is thus manifest. From July 19, 1944, when her loan matured, to July 13, 1959, when extra-judicial foreclosure proceedings were started by appellant Bank, the time consumed is six days short of fifteen years. The prescriptive period was tolled however, from March 10, 1945, the effectivity of Executive Order No. 32, to May 18, 1953, when the decision of Rutter v. Esteban was promulgated, covering eight years, two months and eight days. Obviously then, when resort was had extra-judicially to the foreclosure of the mortgage obligation, there was time to spare before prescription could be availed of as a defense. WHEREFORE, the decision of January 27, 1960 is reversed and the suit of plaintiff filed August 10, 1959 dismissed. No costs.

Isagani M. Jungco, Valeriano S. Peralta, Miguel Famularcano, Jr. and Virgilio E. Acierto for petitioners. BELLOSILLO, J.: The constitutionality of Sec. 13, par. (d), of R.A. 7227, 1 otherwise known as the "Bases Conversion and Development Act of 1992," under which respondent Mayor Richard J. Gordon of Olongapo City was appointed Chairman and Chief Executive Officer of the Subic Bay Metropolitan Authority (SBMA), is challenged in this original petition with prayer for prohibition, preliminary injunction and temporary restraining order "to prevent useless and unnecessary expenditures of public funds by way of salaries and other operational expenses attached to the office . . . ." 2 Paragraph (d) reads (d) Chairman administrator The President shall appoint a professional manager as administrator of the Subic Authority with a compensation to be determined by the Board subject to the approval of the Secretary of Budget, who shall be the ex oficio chairman of the Board and who shall serve as the chief executive officer of the Subic Authority: Provided, however, That for the first year of its operations from the effectivity of this Act, the mayor of the City of Olongapo shall be appointed as the chairman and chief executive officer of the Subic Authority (emphasis supplied). Petitioners, who claim to be taxpayers, employees of the U.S. Facility at the Subic, Zambales, and officers and members of the Filipino Civilian Employees Association in U.S. Facilities in the Philippines, maintain that the proviso in par. (d) of Sec. 13 herein-above quoted in italics infringes on the following constitutional and statutory provisions: (a) Sec. 7, first par., Art. IX-B, of the Constitution, which states that "[n]o elective official shall be eligible for appointment or designation in any capacity to any public officer or position during his tenure," 3 because the City Mayor of Olongapo City is an elective official and the subject posts are public offices; (b) Sec. 16, Art. VII, of the Constitution, which provides that "[t]he President shall . . . . appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint", 4 since it was Congress through the questioned proviso and not the President who appointed the Mayor to the subject posts; 5 and, (c) Sec. 261, par. (g), of the Omnibus Election Code, which says: Sec. 261. Prohibited Acts. The following shall be guilty of an election offense: . . . (g) Appointment of new employees, creation of new position, promotion, or giving salary increases. During the period of forty-five days before a regular election and thirty days before a special election, (1) any head, official or appointing officer of a government office, agency or instrumentality, whether national or local, including government-owned or controlled corporations, who appoints or hires any new employee, whether provisional, temporary or casual, or creates and fills any new position, except upon prior authority of the Commission. The Commission shall not grant the authority sought unless it is satisfied that the position to be filled is essential to the proper functioning of the office or agency concerned, and that the position shall not be filled in a manner that may influence the election. As an exception to the foregoing provisions, a new employee may be appointed in case of urgent need: Provided, however, That notice of the appointment shall be given to the Commission within three days from the date of the appointment. Any appointment or hiring in violation of this provision shall be null and void. (2) Any government official who promotes, or gives any increase of salary or remuneration or privilege to any government official or employee, including those in governmentowned or controlled corporations . . . . for the reason that the appointment of respondent Gordon to the subject posts made by respondent Executive Secretary on 3 April 1992 was within the prohibited 45-day period prior to the 11 May 1992 Elections.
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G.R. No. 104732 June 22, 1993 ROBERTO A. FLORES, DANIEL Y. FIGUEROA, ROGELIO T. PALO, DOMINGO A. JADLOC, CARLITO T. CRUZ and MANUEL P. REYES, petitioner, vs. HON. FRANKLIN M. DRILON, Executive Secretary, and RICHARD J. GORDON, respondents.

The principal question is whether the proviso in Sec. 13, par. (d), of R.A. 7227 which states, "Provided, however, That for the first year of its operations from the effectivity of this Act, the mayor of the City of Olongapo shall be appointed as the chairman and chief executive officer of the Subic Authority," violates the constitutional proscription against appointment or designation of elective officials to other government posts. In full, Sec. 7 of Art. IX-B of the Constitution provides: No elective official shall be eligible for appointment or designation in any capacity to any public office or position during his tenure. Unless otherwise allowed by law or by the primary functions of his position, no appointive official shall hold any other office or employment in the Government or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries. The section expresses the policy against the concentration of several public positions in one person, so that a public officer or employee may serve full-time with dedication and thus be efficient in the delivery of public services. It is an affirmation that a public office is a full-time job. Hence, a public officer or employee, like the head of an executive department described in Civil Liberties Union v. Executive Secretary, G.R. No. 83896, and Anti-Graft League of the Philippines, Inc. v. Philip Ella C. Juico, as Secretary of Agrarian Reform, G.R. No. 83815, 6 ". . . . should be allowed to attend to his duties and responsibilities without the distraction of other governmental duties or employment. He should be precluded from dissipating his efforts, attention and energy among too many positions of responsibility, which may result in haphazardness and inefficiency . . . ." Particularly as regards the first paragraph of Sec. 7, "(t)he basic idea really is to prevent a situation where a local elective official will work for his appointment in an executive position in government, and thus neglect his constituents . . . ." 7 In the case before us, the subject proviso directs the President to appoint an elective official, i.e., the Mayor of Olongapo City, to other government posts (as Chairman of the Board and Chief Executive Officer of SBMA). Since this is precisely what the constitutional proscription seeks to prevent, it needs no stretching of the imagination to conclude that the proviso contravenes Sec. 7, first par., Art. IX-B, of the Constitution. Here, the fact that the expertise of an elective official may be most beneficial to the higher interest of the body politic is of no moment. It is argued that Sec. 94 of the Local Government Code (LGC) permits the appointment of a local elective official to another post if so allowed by law or by the primary functions of his office. 8 But, the contention is fallacious. Section 94 of the LGC is not determinative of the constitutionality of Sec. 13, par. (d), of R.A. 7227, for no legislative act can prevail over the fundamental law of the land. Moreover, since the constitutionality of Sec. 94 of LGC is not the issue here nor is that section sought to be declared unconstitutional, we need not rule on its validity. Neither can we invoke a practice otherwise unconstitutional as authority for its validity. In any case, the view that an elective official may be appointed to another post if allowed by law or by the primary functions of his office, ignores the clear-cut difference in the wording of the two (2) paragraphs of Sec. 7, Art. IX-B, of the Constitution. While the second paragraph authorizes holding of multiple offices by an appointive official when allowed by law or by the primary functions of his position, the first paragraph appears to be more stringent by not providing any exception to the rule against appointment or designation of an elective official to the government post, except as are particularly recognized in the Constitution itself, e.g., the President as head of the economic and planning agency; 9 the VicePresident, who may be appointed Member of the Cabinet; 10 and, a member of Congress who may be designated ex officio member of the Judicial and Bar Council. 11

The distinction between the first and second paragraphs of Sec. 7, Art. IX-B, was not accidental when drawn, and not without reason. It was purposely sought by the drafters of the Constitution as shown in their deliberation, thus MR. MONSOD. In other words, what then Commissioner is saying, Mr. Presiding Officer, is that the prohibition is more strict with respect to elective officials, because in the case of appointive officials, there may be a law that will allow them to hold other positions. MR. FOZ. Yes, I suggest we make that difference, because in the case of appointive officials, there will be certain situations where the law should allow them to hold some other positions. 12 The distinction being clear, the exemption allowed to appointive officials in the second paragraph cannot be extended to elective officials who are governed by the first paragraph. It is further argued that the SBMA posts are merely ex officio to the position of Mayor of Olongapo City, hence, an excepted circumstance, citing Civil Liberties Union v. Executive Secretary, 13 where we stated that the prohibition against the holding of any other office or employment by the President, VicePresident, Members of the Cabinet, and their deputies or assistants during their tenure, as provided in Sec. 13, Art. VII, of the Constitution, does not comprehend additional duties and functions required by the primary functions of the officials concerned, who are to perform them in an ex officio capacity as provided by law, without receiving any additional compensation therefor. This argument is apparently based on a wrong premise. Congress did not contemplate making the subject SBMA posts as ex officio or automatically attached to the Office of the Mayor of Olongapo City without need of appointment. The phrase "shall be appointed" unquestionably shows the intent to make the SBMA posts appointive and not merely adjunct to the post of Mayor of Olongapo City. Had it been the legislative intent to make the subject positions ex officio, Congress would have, at least, avoided the word "appointed" and, instead, "ex officio" would have been used. 14 Even in the Senate deliberations, the Senators were fully aware that subject proviso may contravene Sec. 7, first par., Art. IX-B, but they nevertheless passed the bill and decided to have the controversy resolved by the courts. Indeed, the Senators would not have been concerned with the effects of Sec. 7, first par., had they considered the SBMA posts as ex officio. Cognizant of the complication that may arise from the way the subject proviso was stated, Senator Rene Saguisag remarked that "if the Conference Committee just said "the Mayor shall be the Chairman" then that should foreclose the issue. It is a legislative choice." 15 The Senator took a view that the constitutional proscription against appointment of elective officials may have been sidestepped if Congress attached the SBMA posts to the Mayor of Olongapo City instead of directing the President to appoint him to the post. Without passing upon this view of Senator Saguisag, it suffices to state that Congress intended the posts to be appointive, thus nibbling in the bud the argument that they are ex officio. The analogy with the position of Chairman of the Metro Manila Authority made by respondents cannot be applied to uphold the constitutionality of the challenged proviso since it is not put in issue in the present case. In the same vein, the argument that if no elective official may be appointed or designated to another post then Sec. 8, Art. IX-B, of the Constitution allowing him to receive double compensation 16 would be useless, is non sequitur since Sec. 8 does not affect the constitutionality of the subject proviso. In any case, the Vice-President for example, an elective official who may be appointed to a cabinet post under Sec. 3, Art. VII, may receive the compensation attached to the cabinet position if specifically authorized by law. Petitioners also assail the legislative encroachment on the appointing authority of the President. Section 13, par. (d), itself vests in the President the power to appoint the Chairman of the Board and the Chief Executive Officer of SBMA, although he really has no choice under the law but to appoint the Mayor of Olongapo City.
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As may be defined, an "appointment" is "[t]he designation of a person, by the person or persons having authority therefor, to discharge the duties of some office or trust," 17 or "[t]he selection or designation of a person, by the person or persons having authority therefor, to fill an office or public function and discharge the duties of the same. 18 In his treatise, Philippine Political Law, 19 Senior Associate Justice Isagani A. Cruz defines appointment as "the selection, by the authority vested with the power, of an individual who is to exercise the functions of a given office." Considering that appointment calls for a selection, the appointing power necessarily exercises a discretion. According to Woodbury, J., 20 "the choice of a person to fill an office constitutes the essence of his appointment," 21 and Mr. Justice Malcolm adds that an "[a]ppointment to office is intrinsically an executive act involving the exercise of discretion." 22 In Pamantasan ng Lungsod ng Maynila v. Intermediate Appellate Court 23 we held: The power to appoint is, in essence, discretionary. The appointing power has the right of choice which he may exercise freely according to his judgment, deciding for himself who is best qualified among those who have the necessary qualifications and eligibilities. It is a prerogative of the appointing power . . . . Indeed, the power of choice is the heart of the power to appoint. Appointment involves an exercise of discretion of whom to appoint; it is not a ministerial act of issuing appointment papers to the appointee. In other words, the choice of the appointee is a fundamental component of the appointing power. Hence, when Congress clothes the President with the power to appoint an officer, it (Congress) cannot at the same time limit the choice of the President to only one candidate. Once the power of appointment is conferred on the President, such conferment necessarily carries the discretion of whom to appoint. Even on the pretext of prescribing the qualifications of the officer, Congress may not abuse such power as to divest the appointing authority, directly or indirectly, of his discretion to pick his own choice. Consequently, when the qualifications prescribed by Congress can only be met by one individual, such enactment effectively eliminates the discretion of the appointing power to choose and constitutes an irregular restriction on the power of appointment. 24 In the case at bar, while Congress willed that the subject posts be filled with a presidential appointee for the first year of its operations from the effectivity of R.A. 7227, the proviso nevertheless limits the appointing authority to only one eligible, i.e., the incumbent Mayor of Olongapo City. Since only one can qualify for the posts in question, the President is precluded from exercising his discretion to choose whom to appoint. Such supposed power of appointment, sans the essential element of choice, is no power at all and goes against the very nature itself of appointment. While it may be viewed that the proviso merely sets the qualifications of the officer during the first year of operations of SBMA, i.e., he must be the Mayor of Olongapo City, it is manifestly an abuse of congressional authority to prescribe qualifications where only one, and no other, can qualify. Accordingly, while the conferment of the appointing power on the President is a perfectly valid legislative act, the proviso limiting his choice to one is certainly an encroachment on his prerogative. Since the ineligibility of an elective official for appointment remains all throughout his tenure or during his incumbency, he may however resign first from his elective post to cast off the constitutionally-attached disqualification before he may be considered fit for appointment. The deliberation in the Constitutional Commission is enlightening: MR. DAVIDE. On Section 4, page 3, line 8, I propose the substitution of the word "term" with TENURE. MR. FOZ. The effect of the proposed amendment is to make possible for one to resign from his position. MR. DAVIDE. Yes, we should allow that prerogative. MR. FOZ. Resign from his position to accept an executive position.
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MR. DAVIDE. Besides, it may turn out in a given case that because of, say, incapacity, he may leave the service, but if he is prohibited from being appointed within the term for which he was elected, we may be depriving the government of the needed expertise of an individual. 25 Consequently, as long as he is an incumbent, an elective official remains ineligible for appointment to another public office. Where, as in the case of respondent Gordon, an incumbent elective official was, notwithstanding his ineligibility, appointed to other government posts, he does not automatically forfeit his elective office nor remove his ineligibility imposed by the Constitution. On the contrary, since an incumbent elective official is not eligible to the appointive position, his appointment or designation thereto cannot be valid in view of his disqualification or lack of eligibility. This provision should not be confused with Sec. 13, Art. VI, of the Constitution where "(n)o Senator or Member of the House of Representatives may hold any other office or employment in the Government . . . during his term without forfeiting his seat . . . ." The difference between the two provisions is significant in the sense that incumbent national legislators lose their elective posts only after they have been appointed to another government office, while other incumbent elective officials must first resign their posts before they can be appointed, thus running the risk of losing the elective post as well as not being appointed to the other post. It is therefore clear that ineligibility is not directly related with forfeiture of office. ". . . . The effect is quite different where it is expressly provided by law that a person holding one office shall be ineligible to another. Such a provision is held to incapacitate the incumbent of an office from accepting or holding a second office (State ex rel. Van Antwerp v Hogan, 283 Ala. 445, 218 So 2d 258; McWilliams v Neal, 130 Ga 733, 61 SE 721) and to render his election or appointment to the latter office void (State ex rel. Childs v Sutton, 63 Minn 147, 65 NW 262. Annotation: 40 ALR 945) or voidable (Baskin v State, 107 Okla 272, 232 p 388, 40 ALR 941)." 26 "Where the constitution, or statutes declare that persons holding one office shall be ineligible for election or appointment to another office, either generally or of a certain kind, the prohibition has been held to incapacitate the incumbent of the first office to hold the second so that any attempt to hold the second is void (Ala. State ex rel. Van Antwerp v. Hogan, 218 So 2d 258, 283 Ala 445)." 27 As incumbent elective official, respondent Gordon is ineligible for appointment to the position of Chairman of the Board and Chief Executive of SBMA; hence, his appointment thereto pursuant to a legislative act that contravenes the Constitution cannot be sustained. He however remains Mayor of Olongapo City, and his acts as SBMA official are not necessarily null and void; he may be considered a de facto officer, "one whose acts, though not those of a lawful officer, the law, upon principles of policy and justice, will hold valid so far as they involve the interest of the public and third persons, where the duties of the office were exercised . . . . under color of a known election or appointment, void because the officer was not eligible, or because there was a want of power in the electing or appointing body, or by reason of some defect or irregularity in its exercise, such ineligibility, want of power or defect being unknown to the public . . . . [or] under color of an election, or appointment, by or pursuant to a public unconstitutional law, before the same is adjudged to be such (State vs. Carroll, 38 Conn., 499; Wilcox vs. Smith, 5 Wendell [N.Y.], 231; 21 Am. Dec., 213; Sheehan's Case, 122 Mass, 445, 23 Am. Rep., 323)." 28 Conformably with our ruling in Civil Liberties Union, any and all per diems, allowances and other emoluments which may have been received by respondent Gordon pursuant to his appointment may be retained by him. The illegality of his appointment to the SBMA posts being now evident, other matters affecting the legality of the questioned proviso as well as the appointment of said respondent made pursuant thereto need no longer be discussed. In thus concluding as we do, we can only share the lament of Sen. Sotero Laurel which he expressed in the floor deliberations of S.B. 1648, precursor of R.A. 7227, when he articulated . . . . (much) as we would like to have the present Mayor of Olongapo City as the Chief Executive of this Authority that we are creating; (much) as I, myself, would

like to because I know the capacity, integrity, industry and dedication of Mayor Gordon; (much) as we would like to give him this terrific, burdensome and heavy responsibility, we cannot do it because of the constitutional prohibition which is very clear. It says: "No elective official shall be appointed or designated to another position in any capacity." 29 For, indeed, "a Constitution must be firm and immovable, like a mountain amidst the strife of storms or a rock in the ocean amidst the raging of the waves." 30 One of the characteristics of the Constitution is permanence, i.e., "its capacity to resist capricious or whimsical change dictated not by legitimate needs but only by passing fancies, temporary passions or occasional infatuations of the people with ideas or personalities . . . . Such a Constitution is not likely to be easily tampered with to suit political expediency, personal ambitions or ill-advised agitation for change." 31 Ergo, under the Constitution, Mayor Gordon has a choice. We have no choice. WHEREFORE, the proviso in par. (d), Sec. 13, of R.A. 7227, which states: ". . . Provided, however, That for the first year of its operations from the effectivity of this Act, the Mayor of the City of Olongapo shall be appointed as the chairman and chief executive officer of the Subic Authority," is declared unconstitutional; consequently, the appointment pursuant thereto of the Mayor of Olongapo City, respondent Richard J. Gordon, is INVALID, hence NULL and VOID. However, all per diems, allowances and other emoluments received by respondent Gordon, if any, as such Chairman and Chief Executive Officer may be retained by him, and all acts otherwise legitimate done by him in the exercise of his authority as officer de facto of SBMA are hereby UPHELD. SO ORDERED.

vs. SECRETARY RAFAEL ALUNAN III, DEPARTMENT OF TOURISM and SECRETARY GUILLERMO M. CARAGUE, DEPARTMENT OF BUDGET AND MANAGEMENT, respondents. JOSEPHINE G. ANDAYA, ROSALINDA T. ATIENZA, JOSE M. BALDOVINO, JR., ASUNCION C. BRIONES, RIZALINA P. ESPIRITU, MARIBELLE A. GARCIA, ABDULIA T. LANDINGIN, FLORITA O. OCAMPO, ROLANDO SISON, LOURDES V. TAMAYO, and ROLANDO VALDEZ, intervenors. ERLINDA PIZA, ELEONOR SAGNIT, FIDEL SEVIDAL, CONCEPCION TIMARIO, ELOISA ALONZO, ANGELITO DELA CRUZ, ROLANDO C. CAGASCA, LYNIE ARCENAS, MARIA EMMA JASMIN, ALFONSO ANGELES, MACACUNA PANGANDAMAN, ROSALITA MAUNA, ROMEO PADILLA, ASCENSION PADILLA, CRISPULO PADILLA, VIRGILIO DEJERO, MEDARDO ILAO, ROSITA SOMERA, ARMANDO CRUZ, CATALINO DABU, FRANCISCO VILLARAIZ, NORMA JUMILLA, KENNEDY BASA, and ARMANDO MENDOZA, intervenors. ANICITA S. BALUYUT, ANTONINO D. EDRALIN, EVELYN A. ENRIQUEZ, MA. VICTORIA L. JACOBO, DANIEL M. MANAMTAM, JESSIE C. MANRIQUE, ENCARNACION T. RADAZA, and MARIO P. RUIVIVAR, intervenors. AMOR T. MEDINA and FELIX L. POLIQUIT, intervenors. Leven S. Puno for petitioners. The Solicitor General for respondents. BELLOSILLO, J.: ASSERTING that their plight is similar to petitioners' in Mandani v. Gonzales, 1 and in the consolidated cases of Abrogar v. Garrucho, Jr., and Arnaldo v. Garrucho, Jr., 2 herein petitioners and intervenors seek reinstatement and payment of back wages. Section 29 of Executive Order No. 120, which took effect upon its approval on 30 January 1987, reorganizing the then Ministry of Tourism, provides that incumbents whose positions are not included in the new position structure and staffing pattern or who are not reappointed are deemed separated from the service. Pursuant thereto, the then Ministry of Tourism (MOT, now Department of Tourism, DOT) issued various office orders and memoranda declaring all positions thereat vacant, 3 and effecting the separation of many of its employees, 4 which led to the Mandani, Abrogar and Arnaldo cases, as well as the instant petition. In Mandani, we declared null and void all office orders and memoranda issued pursuant to E.O. 120 and directed "public respondents or their successors . . . to immediately restore the petitioners to their positions without loss of seniority rights and with back salaries computed under the new staffing pattern from the dates of their invalid terminations at rates not lower than their former salaries." 5 In Abrogar and Arnaldo, we ordered the reinstatement of petitioners "to their former positions without loss of seniority rights and with back salaries computed under the new staffing pattern from the dates of their invalid dismissals at rates not lower than their former salaries, provided, however, that no supervening event shall have occured which would otherwise disqualify them for such reinstatement, and provided, further, that whatever benefits they may have received from the Government by reason of their termination shall be reimbursed through reasonable salary deduction." 6 Herein petitioners and intervenors claiming that they should not be deprived of the relief granted to their former co-employees plead for reinstatement "without loss of seniority rights and with back salaries computed under the new staffing pattern from dates of their invalid termination at rates not lower than their former salaries." 7 Decisive in this recourse is the determination of whether the separation of herein petitioners and intervenors from service was pursuant to office orders and memoranda declared void in Mandani.
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G.R. No. 102232 March 9, 1994 VIOLETA ALDOVINO, ALI ALIBASA, FELIX BALINO, DIONISIO BALLESTEROS, JOSE N. BALEIN, JR., FREDDIE CAUTON, JANE CORROS, ROBERTO CRUZ, TRINIDAD DACUMOS, ANGELITA DIMAPILIS, ANDREA ESTONILO, EFREN FONTANILLA, MARY PAZ FRIGILLANA, MANUEL HENSON, SAMUEL HIPOL, MERLENE IBALIO, MAGDALENA JAMILLA, ALEXANDER JUSTINIANI, ROMULO MIRADOR, JULIO MIRAVITE, DANTE NAGTALON, CLARITA NAMUCO, ALICIA ORBITA, ANGELITA PUCAN, MYRNA P. SALVADOR, LIBRADA TANTAY, and ARACELI J. DE VEYRA, petitioners,

Except for petitioners Samuel Hipol, Jane Corros and Myrna Salvador, intervenors Concepcion Timario, Efren Fontanilla, Ascension Padilla and Evelyn Enriquez, public respondents do not dispute that petitioners and intervenors were unseated from the then Ministry of Tourism, pursuant to office orders and memoranda issued under E.O. No. 120. Public respondents nevertheless pray for the denial of the petition not only because petitioners and intervenors failed to exhaust administrative remedies and that their claims are barred by laches, but also in view of the disruption of the present organizational set-up if reinstatement is directed. The Solicitor General argues that while petitioners and intervenors (except petitioners Samuel Hipol, Jane Corros and Efren Fontanilla) were dismissed contemporaneously with their colleagues in Mandani (filed 3 June 1987 and decided 4 June 1990), Abrogar (filed 31 October 1990 and decided 6 August 1991) and Arnaldo (filed 7 January 1991 and decided 6 August 1991), they filed this petition and the interventions only in October 1991, and February, March, May and July 1992, or more than four (4) years later, hence, laches has set in. In reply, petitioners and intervenors explain . . . since the time these DOT employees were illegally dismissed in May, 1987, most of them returned to the far away provinces of their origin because they became jobless. It was only by the slow and unreliable communication of word of mouth that they came to know much later on that they are (sic) entitled to be reinstated to the DOT . . . 8 The doctrine of laches is "principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in . . . the relation of parties." 9 In the case at bar, equity, if ever invoked, must lean in favor of petitioners and intervenors who were unjustly injured by public respondents' unlawful acts. The prejudice from the high-handed violation of the rights of petitioners and intervenors resulting in their loss of employment is far more serious than the inconvenience to public respondents in rectifying their own mistakes. Moreover, petitioners and intervenors cannot be deemed to have slept on their rights considering, as we should, the following unrebutted allegations in the main petition: 7. Petitioners protested their illegal termination from the DOT. Many of them questioned their termination with the Department of Labor and Employment where they filed a Complaint against the DOT and its top officials for illegal dismissal. . . . Some of them questioned their illegal termination before the Civil Service Commission. 8. Many of petitioners joined a picket and demonstration held by illegally terminated employees of the DOT before its office at the DOT building at the Luneta Park. 9. Petitioners were forced to receive their separation or retirement benefits from the DOT, but all under protest. The others continued to fight their cases with the Department of Labor and Employment even if they got their separation and/or retirement benefits. xxx xxx xxx 11. After the finality of this Decision (Mandani) . . . many other terminated employees of the DOT wrote to then DOT Secretary Peter D. Garrucho, Jr., as the successor-in-interest of former Sec. Jose U. Gonzales, and DBM Secretary Guillermo Carague, asking that following the Decision in this Mandani vs. Gonzalez case and being similarly situated as the twenty-eight (28) petitioners therein, that they be reinstated to their former or equivalent positions in the DOT and/or to be paid their back wages. Then . . . DOT Secretary Garrucho and DBM Sec. Carague never responded to these letters and did not reinstate and/or pay any of their back wages. xxx xxx xxx
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16. Following the Decision of this Honorable Court in the Mandani vs. Gonzalez case and its Resolution in the consolidated cases of Abrogar vs. Garrucho and Arnaldo vs. Garrucho, petitioners made representations with the DOT to be reinstated and/or paid their back wages . . . . 10 Neither could petitioners and intervenors be faulted for not joining in the previous petitions because, as we held in Cristobal v. Melchor (No. L- 43203, 29 July 1977; 78 SCRA 175, 183, 187) More importantly, Cristobal could be expected without necessarily spending time and money by going to court to relie upon the outcome of the case filed by his co-employees to protect his interests considering the similarity of his situation to that of the plaintiffs therein and the identical relief being sought. On this point, We find a statement of Justice Louis Brandeis of the United States Supreme Court in Southern Pacific vs. Bogert, relevant and persuasive, and We quote; The essence of laches is not merely lapse of time. It is essential that there be also acquiescence in the alleged wrong or lack of diligence in seeking a remedy. Here plaintiffs, or others representing them, protested . . . and ever since they have . . . persisted in the diligent pursuit of a remedy . . . Where the cause of action is of such a nature that a suit to enforce it would be brought on behalf, not only of the plaintiff, but of all persons similarly situated, it is not essential that each such person should intervened (sic) in the suit brought in order that he be deemed thereafter free from the laches which bars those who sleep on their rights (citations omitted). xxx xxx xxx This Court, applying the principle of equity, need not be bound by the rigid application of the law, but rather its action should conform to the conditions or exigencies to a given problem or situation in order to grant a relief that will serve the ends of justice. To paraphrase then Chief Justice John Edwin Marshall of the United States Supreme Court, let us to (do) complete justice and not do justice by halves ("The court of equity in all cases delights to do complete justice and not by halves." Marshall, C. J. Knight vs. Knight, 3 P. Wms. 331, 334; Corbet v. Johnson, 1 Brock, 77, 81 both cited in Hefner, et al. vs. Northwestern Mutual Life Insurance Co., 123 U.S., 309, 313). We emphasize that prescription was never raised here as an issue; at most, it is deemed waived. In Fernandez v. Grolier International, Inc., 11 we stated: In the case of Director of Lands v. Dano (96 SCRA 161, 165), this Court held that "inasmuch as petitioner had never pleaded the statute of limitations, he is deemed to have waived the same". In the cited case of Directors of Lands v. Dano, the Director of Lands, who was similarly situated as public respondents herein who represent the Government, was deemed to have waived the defense of prescription "inasmuch as petitioner had never pleaded the statute of limitations." The matter of prescription, we reiterate, may not be considered at this late stage, not only because it was never raised and therefore now foreclosed, but more importantly, because it must yield to the higher interest of justice. Incidentally, it is only in the dissent that the question of prescription is introduced. Not even the Government raised it. In 1977, we in fact relaxed the rule on prescription in Cristobal v. Melchor 12 to give way to a determination of the case on the merits where, like in this case, "[i]t was an act of the government through its responsible

officials . . . which contributed to the alleged delay in the filing of . . . complaint for reinstatement." But, we need not go back that far. On 15 August 1991, the Court En Banc granted the related petition in intervention of Alberto A. Peralta, et al., 13 in the consolidated cases of Abrogar v. Garrucho, and Arnaldo v. Garrucho, even if filed on 1 August 1991 or two months after the four-year prescriptive period, which lapsed on the 14th and 28th of May 1991. As we ruled in Cristobal v. Melchor, 14 "it is indeed the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when to do so manifest wrong and injustice would result." The principle that prescription does not run against the State, which contemplates a situation where a private party cannot defeat the claim of the State by raising the defense of prescription, is inapplicable because in this case the private parties are the ones filing a suit against the State. Consequently, we reiterate our pronouncement in Fernandez v. Grolier International, Inc., 15 that "[i]t is true that there are exceptions to the rule that an action will not be declared to have prescribed if prescription is not expressly invoked (Garcia vs. Mathis, 100 SCRA 250). However, where considerations of substantial justice come in (as in this case when the very employment, and therefore the lifeblood, of each petitioner/intervenor is involved), it is better to resolve the issues on the basic merits of the case instead of applying the rule on prescription which the private respondent waived when it was not pleaded." Anyhow, it was public respondents who created the problem of petitioners and intervenors by illegally abolishing their positions and terminating their services in outrageous disregard of the basic protection accorded civil servants, hence our repeated pronouncement that it was unconstitutional. An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, inoperative, as if it had not been passed. It is therefore stricken from the statute books and considered never to have existed at all. Not only the parties but all persons are bound by the declaration of unconstitutionality which means that no one may thereafter invoke it nor may the courts be permitted to apply it in subsequent cases. It is, in other words, a total nullity. 16 Plainly, it was as if petitioners and intervenors were never served their termination orders and, consequently, were never separated from the service, The fact that they were not able to assume office and exercise their duties is attributable to the continuing refusal of public respondents to take them in unless they first obtained court orders, perhaps, for government budgetary and accounting purposes. Under the circumstances, the more prudent thing that public respondents could have done upon receipt of the decision in Mandani, if they were earnest in making amends and restoring petitioners and intervenors to their positions, was to inform the latter of the nullification of their termination orders and to return to work and resume their functions. After all, many of them were supposed to be waiting for instructions from the DOT because in their termination orders it promised to directly contact them by telephone, telegram or written notice as soon as funds for their separation would be available. 17 Furthermore, the representations to DOT made by petitioners and intervenors for their reinstatement partook of the nature of an administrative proceeding, and public respondents also failed to raise the issue of prescription therein. As already adverted to, that issue was never raised before us. In reciting the alleged instances of delay in bringing up this suit, the Solicitor General simply referred to laches, not prescription. Since this case is an original action, and if we treat the petition and interventions as ordinary complaints, the failure of public respondents to raise the issue of prescription in their comments cannot be interpreted any less than a waiver of that defense. For, defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except the failure to state a cause of action which may be alleged in a later pleading, if one is permitted. 18 Above all, what public respondents brought up was the doctrine of laches, not prescription; and laches is different from prescription. The defense of laches applies independently of prescription. While prescription is concerned with the fact of delay, laches is concerned with the effect of delay. Prescription is a matter of time; laches is a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is
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based on fixed time, laches is not. 19 In any case, it can be said that the prescriptive period was tolled with the filing of the termination cases before the Department of Labor and Employment and the Civil Service Commission, the pendency of which is acknowledged in the Comment and Memorandum of public respondents. Incidentally, even the picketing of the premises and the placards demanding their immediate reinstatement could not be any less than written demands sufficient to interrupt the period of prescription. As we noted earlier, "[a]fter the finality of this Decision (Mandani) . . . many other terminated employees of the DOT wrote to then DOT Secretary Peter D. Garrucho, Jr . . . and DBM Secretary Guillermo Carague asking that following the Decision in this Mandani vs. Gonzalez case and being similarly situated as the twenty-eight (28) petitioners therein . . . they be reinstated to their former or equivalent positions in the DOT and/or to be paid their back wages." But "[t]hen . . . DOT Secretary Garrucho and DBM Sec. Carague never responded to these letters," 20 so that it may be said that the period that was interrupted never started to run again against petitioner and intervenors. The requirement of prior resort to administrative remedies is not an absolute rule and this did not bar direct access to this Court in the analogous cases of Dario v. Mison, 21 and Mandani v. Gonzalez, 22 thus The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of certain parties to sue (this was raised by the Civil Service Commission in G.R. No. 86241, and failure to exhaust administrative remedies was raised in G.R. Nos. 81954 and 81917 by the Solicitor General), and other technical objections, for two reasons, "[b]ecause of the demands of public interest, including the need for stability in the public service" (Sarmiento III v. Mison, G.R. No. 79974, December 17, 1987, 153 SCRA 549, 551-552) and because of the serious implications of these cases on the administration of the Philippine civil service and the rights of public servants. On the argument that existing organizational set-up would be disrupted if reinstatement be directed, we need only reiterate our 18 October 1990 Resolution in Mandani that An erring head of a Department, Bureau, or Office cannot avoid reinstatement, payment of back pay, and other acts of compliance with the orders of this Court by interposing changes effected subsequent to his unlawful acts and claiming that such changes make it difficult to obey this Court's orders. The basic principle to be applied whenever the Court declares an administrative official to have acted in an unlawful manner is for that official to undo the harmful effects of his illegal act and to accord to the aggrieved parties restoration or restitution in good faith to make up for the deprivations which may have been suffered because of his act. 23 Petitioners and intervenors, who are similarly situated as their counterparts in Mandani, Abrogar and Arnaldo, deserve no less than equal treatment. The Solicitor General takes exception to petitioner Samuel Hipol who was separated from the service under an order of 19 May 1986 issued pursuant to Sec. 2, Art. III, of Proclamation No. 3, and not under E.O. No. 120. 24 In reply, petitioner Hipol admits that he was "in the process of working for his reinstatement/reappointment at the DOT when . . . all positions thereat were declared vacant . . ." 25 Since his separation from service was not under void orders issued pursuant to E.O. No. 120 and, worse, he was not even an incumbent when E.O. No. 120 was issued, Hipol could not be considered as in the same situation as the petitioners in Mandani, Abrogar and Arnaldo. A parallel case is that of intervenor Concepcion Timario who, according to the Solicitor General, resigned effective 28 May 1987 and was not separated under any of the invalid orders. 26 Intervenor Timario however contends that she is entitled to relief because her courtesy resignation was accepted

on 9 June 1987 or during the period positions were declared vacant pursuant to MOT Office Order No. 9-87. 27 It is significant to note that Timario's letter of resignation cited "professional reasons" as cause for her abdication 28 which, obviously, pertains to the nature of her work. Moreover, conspicuously absent is the customary order requiring the filing of courtesy resignations. Timario may not be permitted to characterize, by way of self-serving assertions, that her resignation was merely a courtesy resignation pursuant to any of the voided office orders or memoranda. The claim of the Solicitor General that petitioners Jane Corros and Efren Fontanilla were not employees of the Ministry of Tourism because their names did not appear in the regular plantilla of the Ministry of Tourism, 29 is specious since the listing of names in the plantilla is not a conclusive evidence of employment. Nonetheless, in view of the incessant allegation of the Solicitor General that Corros and Fontanilla were not employees of the Ministry, and considering the photocopies of Fontanilla's appointment papers and termination order submitted by him, 30 as well as the bare assertion of petitioner Corros that she was for 11 years PRO I in the Licensing Division of the Ministry and that her name could not be found in the plantilla because she is now Jane Ombawa in view of her marriage, 31 the fact of employment should be threshed out first in a proper forum as this Court is not a trier of facts. The Solicitor General contends that since petitioner Myrna Salvador was a casual employee, 32 intervenor Ascension Padilla was a temporary appointee whose appointment expired 20 February 1987, 33 and intervenor Evelyn Enriquez was also a temporary appointee, 34 their appointments are terminable at the pleasure of the appointing authority. Considering however that the office orders and memoranda which directed the separation of petitioners and intervenors were annulled, hence in legal contemplation did not exist, the effect is, as if the termination did not occur. However, since the determination in this case is limited only to the extent of the nullity of said orders and memoranda, the reinstatement of Salvador, Padilla and Enriquez cannot be ordered in the instant proceeding. The Solicitor General also seeks dismissal of the petition and intervention against intervenors Rizalina T. Espiritu, Abdulia T. Landingin, Medardo Ilao, Rosita Somera, Armando Cruz, Catalino Dabu, Francisco Villaraiz, Norma Jumilia, Kennedy Basa, Rolando G. Cagasca and Alfonso Angeles because they were already reinstated. However, because of the unrefuted allegation that these employees were not yet paid their respective back wages, then to that extent, their petitions must be granted. In computing back wages, we cannot blindly accept the allegation of petitioners and intervenors that since their separation from the service in 1987, or about seven (7) years ago, they have been jobless hence entitled to full back wages. Conformably with existing jurisprudence, the award of back wages should not exceed a period of five (5) years. 35 In the final analysis, the dissent admits that petitioners and intervenors truly deserve the reliefs they pray for except that their cause of action has allegedly prescribed. Shall we now frustrate their rightful claims on a ground that was never raised, nor even hinted at, by public respondents in the entire proceeding? That would be antithetic to our concept of social justice; at the very least, it is subversive of the rudiments of fairplay. WHEREFORE, the instant petition is GRANTED. Petitioners Violeta Aldovino, Ali Alibasa, Felix Balino, Dionisio Ballesteros, Jose N. Balein, Jr., Freddie Cauton, Roberto Cruz, Trinidad Dacumos, Angelita Dimapilis, Andrea Estonilo, Mary Paz Frigillana, Manuel Henson, Merlene Ibalio, Magdalena Jamilla, Alexander Justiniani, Romulo Mirador, Julio Miravite, Dante Nagtalon, Clarita Namuco, Alicia Orbita, Angelita Pucan, Myrna P. Salvador, Librada Tantay, and Araceli De Veyra, and intervenors Josephine G. Andaya, Rosalinda T. Atienza, Jose M. Baldovino, Jr., Asuncion C. Briones, Maribelle A. Garcia, Florita O. Ocampo, Rolando Sison, Lourdes B. Tamayo, Rolando Valdez, Erlinda Piza, Eleonor Sagnit, Fidel Sevidal, Eloisa Alonzo, Angelito Dela Cruz, Lynie Arcenas, Maria Emma Jasmin, Macacuna Pangandaman, Rosalia Mauna, Romeo Padilla, Ascencion Padilla, Crispulo Padilla, Virgilio Dejero, Armando Mendoza, Anicita S. Baluyut, Antonio D. Edralin, Evelyn A. Enriquez, Ma. Victoria L. Jacobo, Daniel M. Manamtam, Jessie C. Manrique, Encarnacion T. Radaza, Mario P. Ruivivar, Amor T. Medina, and Felix L. Poliquit, are ordered REINSTATED immediately to their former
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positions without loss of seniority rights and with back salaries computed under the new staffing pattern from the dates of their invalid dismissals at rates not lower that their former salaries but not to exceed a period of five (5) years, provided, however, that no supervening event shall have occured which would otherwise disqualify then from such reinstatement, and provided, further, that whatever benefits they may have received from the Government by reason of their termination shall be reimbursed through reasonable salary deductions. Public respondents are likewise ordered to pay intervenors Rizalina P. Espiritu, Abdulia T. Landingin, Medardo Ilao, Rosita Somera, Armando Cruz, Catalino Dabu, Francisco Villaraiz, Norma Jumilia, Kennedy Basa, Rolando G. Cagasca and Alfonso Angeles their back salaries similarly under the abovequoted conditions. As regards petitioners Samuel Hipol, Jane Corros and Efren Fontanilla, their petition is DISMISSED, as well as the petition in intervention of Concepcion Timario. SO ORDERED. Padilla, Bidin, Regalado, Romero, Nocon, Melo, Quiason, Vitug and Kapunan, JJ., concur. Puno, J., took no part.

G.R. Nos. 177857-58 January 24, 2012 PHILIPPINE COCONUT, PRODUCERS FEDERATION, INC. (COCOFED), MANUEL V. DEL ROSARIO, DOMINGO P. ESPINA, SALVADOR P. BALLARES, JOSELITO A. MORALEDA, PAZ M. YASON, VICENTE A. CADIZ, CESARIA DE LUNA TITULAR, and RAYMUNDO C. DE VILLA, Petitioners, vs. REPUBLIC OF THE PHILIPPINES, Respondent, WIGBERTO E. TAADA, OSCAR F. SANTOS, SURIGAO DEL SUR FEDERATION OF AGRICULTURAL COOPERATIVES (SUFAC) and MORO FARMERS ASSOCIATION OF ZAMBOANGA DEL SUR (MOFAZS), represented by ROMEO C. ROYANDOYAN, Intervenors. x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 178193 DANILO S. URSUA, Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent, DECISION VELASCO, JR., J.: The Case Cast against a similar backdrop, these consolidated petitions for review under Rule 45 of the Rules of Court assail and seek to annul certain issuances of the Sandiganbayan in its Civil Case No. 0033-A entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., Defendants, COCOFED, et al., BALLARES, et al., Class Action Movants," and Civil Case No. 0033-F entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., Defendants." Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting into eight (8) amended complaints of CC No. 0033 entitled, "Republic of the Philippines v. Eduardo Cojuangco, Jr., et al.," a suit for recovery of illgotten wealth commenced by the Presidential Commission on Good Government (PCGG), for the Republic of the Philippines (Republic), against Ferdinand E. Marcos and several individuals, among them, Ma. Clara Lobregat (Lobregat) and petitioner Danilo S. Ursua (Ursua). Lobregat and Ursua occupied, at one time or another, directorial or top management positions in either the Philippine Coconut Producers Federation, Inc. (COCOFED) or the Philippine Coconut Authority (PCA), or both.1 Each of the eight (8) subdivided complaints correspondingly impleaded as defendants only the alleged participants in the transaction/s subject of the suit, or who are averred as owner/s of the assets involved. The original complaint, CC No. 0033, as later amended to make the allegations more specific, is described in Republic v. Sandiganbayan2 (one of several ill-gotten suits of the same title disposed of by the Court) as revolving around the provisional take over by the PCGG of COCOFED, Cocomark, and Coconut Investment Company and their assets and the sequestration of shares of stock in United Coconut Planters Bank (UCPB) allegedly owned by, among others, over a million coconut farmers, and the six (6) Coconut Industry Investment Fund (CIIF) corporations,3 referred to in some pleadings as CIIF oil mills and the fourteen (14) CIIF holding companies4 (hereafter collectively called "CIIF companies"), so-called for having been either organized, acquired and/or funded as UCPB subsidiaries with the use of the CIIF levy. The basic complaint also contained allegations about the alleged misuse of the coconut levy funds to buy out the majority of the outstanding shares of stock of San Miguel Corporation (SMC). More particularly, in G.R. Nos. 177857-58, class action petitioners COCOFED and a group of purported coconut farmers and COCOFED members (hereinafter "COCOFED et al." collectively)5 seek the reversal of the following judgments and resolutions of the anti-graft court insofar as these issuances are adverse to their interests: 1) Partial Summary Judgment6 dated July 11, 2003, as reiterated in a resolution7 of December 28, 2004, denying COCOFEDs motion for reconsideration, and the May 11, 2007 resolution denying COCOFEDs motion to set case for trial and declaring the partial summary judgment final and appealable,8 all issued in Civil Case No. 0033-A; and 2) Partial Summary Judgment9 dated May 7, 2004, as also reiterated in a resolution10 of December 28, 2004, and the May 11, 2007 resolution11 issued in Civil Case No. 0033-F. The December 28, 2004 resolution denied COCOFEDs Class Action Omnibus Motion therein praying to dismiss CC Case No. 0033-F on jurisdictional ground and alternatively, reconsideration and to set case for trial. The May 11, 2007 resolution declared the judgment final and appealable. For convenience, the partial summary judgment (PSJ) rendered on July 11, 2003 in CC No. 0033-A shall hereinafter be referred to as PSJ-A, and that issued on May 7, 2004 in CC 0033-F, as PSJ-F. PSJ-A and PSJ-F basically granted the Republics separate motions for summary judgment.
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On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-A, which modified PSJ-A by ruling that no further trial is needed on the issue of ownership of the subject properties. Likewise, on May 11, 2007, the said court issued a Resolution in CC No. 0033-F amending PSJ-F in like manner. On the other hand, petitioner Ursua, in G.R. No. 178193, limits his petition for review on PSJ-A to the extent that it negates his claims over shares of stock in UCPB. Taada, et al. have intervened12 in G.R. Nos. 177857-58 in support of the governments case. Another petition was filed and docketed as G.R. No. 180705. It involves questions relating to Eduardo M. Cojuangco, Jr.s (Cojuangco, Jr.s) ownership of the UCPB shares, which he allegedly received as option shares, and which is one of the issues raised in PSJ-A.13 G.R. No. 180705 was consolidated with G.R. Nos. 177857-58 and 178193. On September 28, 2011, respondent Republic filed a Motion to Resolve G.R. Nos. 177857-58 and 178193.14 On January 17, 2012, the Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and 178193 from G.R. No. 180705. This Decision is therefore separate and distinct from the decision to be rendered in G.R. No. 180705. The Facts The relevant facts, as culled from the records and as gathered from Decisions of the Court in a batch of coco levy and illegal wealth cases, are: In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment Company (CIC) to administer the Coconut Investment Fund (CIF), which, under Section 815 thereof, was to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55 levy of which the copra seller was, or ought to be, issued COCOFUND receipts, PhP 0.02 was placed at the disposition of COCOFED, the national association of coconut producers declared by the Philippine Coconut Administration (PHILCOA, now PCA16 ) as having the largest membership.17 The declaration of martial law in September 1972 saw the issuance of several presidential decrees ("P.Ds.") purportedly designed to improve the coconut industry through the collection and use of the coconut levy fund. While coming generally from impositions on the first sale of copra, the coconut levy fund came under various names, the different establishing laws and the stated ostensible purpose for the exaction explaining the differing denominations. Charged with the duty of collecting and administering the Fund was PCA.18 Like COCOFED with which it had a legal linkage,19 the PCA, by statutory provisions scattered in different coco levy decrees, had its share of the coco levy.20 The following were some of the issuances on the coco levy, its collection and utilization, how the proceeds of the levy will be managed and by whom, and the purpose it was supposed to serve: 1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and declared the proceeds of the CCSF levy as trust fund,21 to be utilized to subsidize the sale of coconutbased products, thus stabilizing the price of edible oil.22 2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the operation of a hybrid coconut seed farm. 3. Then came P.D. No. 755 providing under its Section 1 the following: It is hereby declared that the policy of the State is to provide readily available credit facilities to the coconut farmers at a preferential rates; that this policy can be expeditiously and efficiently realized by the implementation of the "Agreement for the Acquisition of a Commercial Bank for the benefit of Coconut Farmers" executed by the [PCA]; and that the [PCA] is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers. Towards achieving the policy thus declared, P.D. No. 755, under its Section 2, authorized PCA to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF levy collections in said bank, interest free, the deposit withdrawable only when the bank has attained a certain level of sufficiency in its equity capital. The same section also decreed that all levies PCA

is authorized to collect shall not be considered as special and/or fiduciary funds or form part of the general funds of the government within the contemplation of P.D. No. 711.23 4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil industries. 5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised Coconut Industry Code), read: ARTICLE III Levies Section 1. Coconut Consumers Stabilization Fund Levy. The [PCA] is hereby empowered to impose and collect the Coconut Consumers Stabilization Fund Levy . . Section 5. Exemption. The [CCSF] and the [CIDF] as well as all disbursements as herein authorized, shall not be construed as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of PD 711; the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their private capacities: . (Emphasis supplied.) 6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation, out of other coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468 and entrusted a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil mills and other private corporations, with the following equity ownership structure:24 Section 2. Organization of the Cooperative Endeavor. The [UCPB], in its capacity as the investment arm of the coconut farmers thru the [CIIF] is hereby directed to invest, on behalf of the coconut farmers, such portion of the CIIF in private corporations under the following guidelines: a) The coconut farmers shall own or control at least (50%) of the outstanding voting capital stock of the private corporation [acquired] thru the CIIF and/or corporation owned or controlled by the farmers thru the CIIF . (Words in bracket added.) Through the years, a part of the coconut levy funds went directly or indirectly to various projects and/or was converted into different assets or investments.25 Of particular relevance to this case was their use to acquire the First United Bank (FUB), later renamed UCPB, and the acquisition by UCPB, through the CIIF companies, of a large block of SMC shares. 26 Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it would appear that FUB was the bank of choice which the Pedro Cojuangco group (collectively, "Pedro Cojuangco") had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos shares in FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to PCA did not ensue as it was made to appear that Cojuangco, Jr. had the exclusive option to acquire the formers FUB controlling interests. Emerging from this elaborate, circuitous arrangement were two deeds; the first, simply denominated as Agreement,27 dated May 1975,28 entered into by and between Cojuangco, Jr., for and in his behalf and in behalf of "certain other buyers," and Pedro Cojuangco, purportedly accorded Cojuangco, Jr. the option to buy 72.2% of FUBs outstanding capital stock, or 137,866 shares (the "option shares," for brevity), at PhP 200 per share. The second but related contract, dated May 25, 1975, was denominated as Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines.29 It had PCA,30 for itself and for the benefit of the coconut farmers, purchase from Cojuangco, Jr. the shares of stock subject of the First Agreement for PhP 200 per share. As additional consideration for PCAs buyout of what Cojuangco, Jr. would later claim to be his exclusive and personal option,31 it was stipulated that, from PCA, Cojuangco, Jr. shall receive equity in FUB amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares.
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Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders 6,534 shares. While the 64.98% portion of the option shares (72.2% 7.22% = 64.98%) ostensibly pertained to the farmers, the corresponding stock certificates supposedly representing the farmers equity were in the name of and delivered to PCA.32 There were, however, shares forming part of the aforesaid 64.98% portion, which ended up in the hands of non-farmers.33 The remaining 27.8% of the FUB capital stock were not covered by any of the agreements. Under paragraph 8 of the second agreement, PCA agreed to expeditiously distribute the FUB shares purchased to such "coconut farmers holding registered COCOFUND receipts" on equitable basis. As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount for the purchase of the said 72.2% equity, albeit it would later reimburse itself from the coconut levy fund.34 As of June 30, 1975, the list of FUB stockholders shows PCA with 129,955 shares.35 Shortly after the execution of the PCA Cojuangco, Jr. Agreement, President Marcos issued, on July 29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and CIDF to acquire a commercial bank to provide coco farmers with "readily available credit facilities at preferential rate," and PCA "to distribute, for free," the bank shares to coconut farmers. Then came the 1986 EDSA event. One of the priorities of then President Corazon C. Aquinos revolutionary government was the recovery of ill-gotten wealth reportedly amassed by the Marcos family and close relatives, their nominees and associates. Apropos thereto, she issued Executive Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O. 1 created the PCGG and provided it with the tools and processes it may avail of in the recovery efforts;36 E.O. No. 2 asserted that the ill-gotten assets and properties come in the form of shares of stocks, etc.; while E.O. No. 14 conferred on the Sandiganbayan exclusive and original jurisdiction over ill-gotten wealth cases, with the proviso that "technical rules of procedure and evidence shall not be applied strictly" to the civil cases filed under the E.O. Pursuant to these issuances, the PCGG issued numerous orders of sequestration, among which were those handed out, as earlier mentioned, against shares of stock in UCPB purportedly owned by or registered in the names of (a) more than a million coconut farmers and (b) the CIIF companies, including the SMC shares held by the CIIF companies. On July 31, 1987, the PCGG instituted before the Sandiganbayan a recovery suit docketed thereat as CC No. 0033. After the filing and subsequent amendments of the complaint in CC 0033, Lobregat, COCOFED et al., and Ballares et al., purportedly representing over a million coconut farmers, sought and were allowed to intervene.37 Meanwhile, the following incidents/events transpired: 1. On the postulate, inter alia, that its coco-farmer members own at least 51% of the outstanding capital stock of UCPB, the CIIF companies, etc., COCOFED et al., on November 29, 1989, filed Class Action Omnibus Motion praying for the lifting of the orders of sequestration referred to above and for a chance to present evidence to prove the coconut farmers ownership of the UCPB and CIIF shares. The plea to present evidence was denied; 2. Later, the Republic moved for and secured approval of a motion for separate trial which paved the way for the subdivision of the causes of action in CC 0033, each detailing how the assets subject thereof were acquired and the key roles the principal played; 3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be subdivided into eight complaints, docketed as CC 0033-A to CC 0033-H.38 Lobregat, Ballares et al., COCOFED, et al., on the strength of their authority to intervene in CC 0033, continued to participate in CC 0033-A where one of the issues raised was the misuse of the names/identities of the over a million coconut farmers;39 4. On February 23, 2001, Lobregat, COCOFED, Ballares et al., filed a Class Action Omnibus Motion to enjoin the PCGG from voting the sequestered UCPB shares and the SMC shares registered in the names of the CIIF companies. The Sandiganbayan, by Order of February

28, 2001, granted the motion, sending the Republic to come to this Court on certiorari, docketed as G.R. Nos. 147062-64, to annul said order; and 5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v. COCOFED), 40 the Court declared the coco levy funds as prima facie public funds. And purchased as the sequestered UCPB shares were by such funds, beneficial ownership thereon and the corollary voting rights prima facie pertain, according to the Court, to the government. The instant proceedings revolve around CC 0033-A (Re: Anomalous Purchase and Use of [FUB] now [UCPB])41 and CC 0033-F (Re: Acquisition of San Miguel Corporation Shares of Stock), the first case pivoting mainly on the series of transactions culminating in the alleged anomalous purchase of 72.2% of FUBs outstanding capital stock and the transfer by PCA of a portion thereof to private individuals. COCOFED, et al. and Ballares, et al. participated in CC No. 0033-A as class action movants. Petitioners COCOFED et al.42 and Ursua43 narrate in their petitions how the farmers UCPB shares in question ended up in the possession of those as hereunder indicated: 1) The farmers UCPB shares were originally registered in the name of PCA for the eventual free distribution thereof to and registration in the individual names of the coconut farmers in accordance with PD 755 and the IRR that PCA shall issue; 2) Pursuant to the stock distribution procedures set out in PCA Administrative Order No. 1, s. of 1975, (PCA AO 1),44 farmers who had paid to the CIF under RA 6260 and registered their COCOFUND (CIF) receipts with PCA were given their corresponding UCPB stock certificates. As of June 1976, the cut-off date for the extended registration, only 16 million worth of COCOFUND receipts were registered, leaving over 50 million shares undistributed; 3) PCA would later pass Res. 074-78, s. of 1978, to allocate the 50 million undistributed shares to (a) farmers who were already recipients thereof and (b) qualified farmers to be identified by COCOFED after a national census. 4) As of May 1981, some 15.6 million shares were still held by and registered in the name of COCOFED "in behalf of coconut farmers" for distribution immediately after the completion of the national census, to all those determined by the PCA to be bonafide coconut farmers, but who have not received the bank shares;45 and 5) Prior to June 1986, a large number of coconut farmers opted to sell all/part of their UCPB shares below their par value. This prompted the UCPB Board to authorize the CIIF companies to buy these shares. Some 40.34 million common voting shares of UCPB ended up with these CIIF companies albeit initially registered in the name of UCPB. On the other hand, the subject of CC 0033-F are two (2) blocks of SMC shares of stock, the first referring to shares purchased through and registered in the name of the CIIF holding companies. The purported ownership of the second block of SMC shares is for the nonce irrelevant to the disposition of this case. During the time material, the CIIF block of SMC shares represented 27% of the outstanding capital stock of SMC. Civil Case No. 0033-A After the pre-trial, but before the Republic, as plaintiff a quo, could present, as it committed to, a list of UCPB stockholders as of February 25, 1986,46 among other evidence, COCOFED, et al., on the premise that the sequestered farmers UCPB shares are not unlawfully acquired assets, filed in April 2001 their Class Action Motion for a Separate Summary Judgment. In it, they prayed for a judgment dismissing the complaint in CC 0033-A, for the reason that the over than a million unimpleaded coconut farmers own the UCPB shares. In March 2002, they filed Class Action Motion for Partial Separate Trial on the issue of whether said UCPB shares have legitimately become the private property of the million coconut farmers. Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic v. COCOFED47 and on the argument, among others, that the claim of COCOFED and Ballares et al. over the subject UCPB shares is based solely on the supposed COCOFUND receipts issued for payment of the R.A.
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6260 CIF levy, filed a Motion for Partial Summary Judgment [RE: COCOFED, et al. and Ballares, et al.] dated April 22, 2002, praying that a summary judgment be rendered declaring: a. That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5, Article III of P.D. No. 1468 are unconstitutional; b. That (CIF) payments under (R.A.) No. 6260 are not valid and legal bases for ownership claims over UCPB shares; and c. That COCOFED, et al., and Ballares, et al. have not legally and validly obtained title over the subject UCPB shares. After an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be conclusively held to be the true and absolute owner of the coconut levy funds and the UCPB shares acquired therefrom.48 A joint hearing on the separate motions for summary judgment to determine what material facts exist with or without controversy followed.49 By Order50 of March 11, 2003, the Sandiganbayan detailed, based on this Courts ruling in related cases, the parties manifestations made in open court and the pleadings and evidence on record, the facts it found to be without substantial controversy, together with the admissions and/or extent of the admission made by the parties respecting relevant facts, as follows: As culled from the exhaustive discussions and manifestations of the parties in open court of their respective pleadings and evidence on record, the facts which exist without any substantial controversy are set forth hereunder, together with the admissions and/or the extent or scope of the admissions made by the parties relating to the relevant facts: 1. The late President Ferdinand E. Marcos was President for two terms . . . and, during the second term, declared Martial Law through Proclamation No. 1081 dated September 21, 1972. 2. On January 17, 1973, [he] issued Proclamation No. 1102 announcing the ratification of the 1973 Constitution. 3. From January 17, 1973 to April 7, 1981, [he] . . .exercised the powers and prerogative of President under the 1935 Constitution and the powers and prerogative of President . . . the 1973 Constitution. [He] promulgated various [P.D.s], among which were P.D. No. 232, P.D. No. 276, P.D. No. 414, P.D. No. 755, P.D. No. 961 and P.D. No. 1468. 4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on June 30, 1981, [he], after being elected President, "reassumed the title and exercised the powers of the President until 25 February 1986." 5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were [PCA] Directors during the period 1970 to 1986. 6. Plaintiff admits the existence of the following agreements which are attached as Annexes "A" and "B" to the Opposition dated October 10, 2002 of defendant Eduardo M. Cojuangco, Jr. to the above-cited Motion for Partial Summary Judgment: a) "Agreement made and entered into this ______ day of May, 1975 at Makati, Rizal, Philippines, by and between: PEDRO COJUANGCO, Filipino, x x x, for and in his own behalf and in behalf of certain other stockholders of First United Bank listed in Annex "A" attached hereto (hereinafter collectively called the SELLERS); and EDUARDO COJUANGCO, JR., Filipino, x x x, represented in this act by his duly authorized attorney-in-fact, EDGARDO J. ANGARA, for and in his own behalf and in behalf of certain other buyers, (hereinafter collectively called the BUYERS)";

WITNESSETH: That WHEREAS, the SELLERS own of record and beneficially a total of 137,866 shares of stock, with a par value of P100.00 each, of the common stock of the First United Bank (the "Bank"), a commercial banking corporation existing under the laws of the Philippines; WHEREAS, the BUYERS desire to purchase, and the SELLERS are willing to sell, the aforementioned shares of stock totaling 137,866 shares (hereinafter called the "Contract Shares") owned by the SELLERS due to their special relationship to EDUARDO COJUANGCO, JR.; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: 1. Sale and Purchase of Contract Shares Subject to the terms and conditions of this Agreement, the SELLERS hereby sell, assign, transfer and convey unto the BUYERS, and the BUYERS hereby purchase and acquire, the Contract Shares free and clear of all liens and encumbrances thereon. 2. Contract Price The purchase price per share of the Contract Shares payable by the BUYERS is P200.00 or an aggregate price of P27,573,200.00 (the "Contract Price"). 3. Delivery of, and payment for, stock certificates Upon the execution of this Agreement, (i) the SELLERS shall deliver to the BUYERS the stock certificates representing the Contract Shares, free and clear of all liens, encumbrances, obligations, liabilities and other burdens in favor of the Bank or third parties, duly endorsed in blank or with stock powers sufficient to transfer the shares to bearer; and (ii) BUYERS shall deliver to the SELLERS P27,511,295.50 representing the Contract Price less the amount of stock transfer taxes payable by the SELLERS, which the BUYERS undertake to remit to the appropriate authorities. (Emphasis added.) 4. Representation and Warranties of Sellers The SELLERS respectively and independently of each other represent and warrant that: (a) The SELLERS are the lawful owners of, with good marketable title to, the Contract Shares and that (i) the certificates to be delivered pursuant thereto have been validly issued and are fully paid and no-assessable; (ii) the Contract Shares are free and clear of all liens, encumbrances, obligations, liabilities and other burdens in favor of the Bank or third parties This representation shall survive the execution and delivery of this Agreement and the consummation or transfer hereby contemplated. (b) The execution, delivery and performance of this Agreement by the SELLERS does not conflict with or constitute any breach of any provision in any agreement to which they are a party or by which they may be bound. (c) They have complied with the condition set forth in Article X of the Amended Articles of Incorporation of the Bank. 5. Representation of BUYERS . 6. Implementation
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The parties hereto hereby agree to execute or cause to be executed such documents and instruments as may be required in order to carry out the intent and purpose of this Agreement. 7. Notices . IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the place and on the date first above written. PEDRO COJUANGCO (on his own behalf and in behalf of the other Sellers listed in Annex "A" hereof) (SELLERS) By: EDGARDO J. ANGARA Attorney-in-Fact xxx xxx xxx b) "Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines, made and entered into this 25th day of May 1975 at Makati, Rizal, Philippines, by and between: EDUARDO M. COJUANGCO, JR., x x x, hereinafter referred to as the SELLER; and PHILIPPINE COCONUT AUTHORITY, a public corporation created by Presidential Decree No. 232, as amended, for itself and for the benefit of the coconut farmers of the Philippines, (hereinafter called the BUYER)" WITNESSETH: That WHEREAS, on May 17, 1975, the Philippine Coconut Producers Federation ("PCPF"), through its Board of Directors, expressed the desire of the coconut farmers to own a commercial bank which will be an effective instrument to solve the perennial credit problems and, for that purpose, passed a resolution requesting the PCA to negotiate with the SELLER for the transfer to the coconut farmers of the SELLERs option to buy the First United Bank (the "Bank") under such terms and conditions as BUYER may deem to be in the best interest of the coconut farmers and instructed Mrs. Maria Clara Lobregat to convey such request to the BUYER; WHEREAS, the PCPF further instructed Mrs. Maria Clara Lobregat to make representations with the BUYER to utilize its funds to finance the purchase of the Bank; WHEREAS, the SELLER has the exclusive and personal option to buy 144,400 shares (the "Option Shares") of the Bank, constituting 72.2% of the present outstanding shares of stock of the Bank, at the price of P200.00 per share, which option only the SELLER can validly exercise; WHEREAS, in response to the representations made by the coconut farmers, the BUYER has requested the SELLER to exercise his personal option for the benefit of the coconut farmers; WHEREAS, the SELLER is willing to transfer the Option Shares to the BUYER at a price equal to his option price of P200 per share; WHEREAS, recognizing that ownership by the coconut farmers of a commercial bank is a permanent solution to their perennial credit problems, that it will accelerate the growth and development of the coconut industry and that the policy of the state which the BUYER is required to implement is to achieve vertical integration thereof so that coconut farmers will become participants in, and beneficiaries of, the request of PCPF that it acquire a commercial bank to be owned by the coconut farmers and, appropriated, for that purpose, the sum of P150 Million to enable the farmers to buy the Bank and EDUARDO COJUANGCO, JR. (on his own behalf and in behalf of the other Buyers) (BUYERS)

capitalize the Bank to such an extension as to be in a position to adopt a credit policy for the coconut farmers at preferential rates; WHEREAS, x x x the BUYER is willing to subscribe to additional shares ("Subscribed Shares") and place the Bank in a more favorable financial position to extend loans and credit facilities to coconut farmers at preferential rates; NOW, THEREFORE, for and in consideration of the foregoing premises and the other terms and conditions hereinafter contained, the parties hereby declare and affirm that their principal contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding capital stock of the Bank; and (2) that the SELLER shall receive compensation for exercising his personal and exclusive option to acquire the Option Shares, for transferring such shares to the coconut farmers at the option price of P200 per share, and for performing the management services required of him hereunder. 1. To ensure that the transfer to the coconut farmers of the Option Shares is effected with the least possible delay and to provide for the faithful performance of the obligations of the parties hereunder, the parties hereby appoint the Philippine National Bank as their escrow agent (the "Escrow Agent"). Upon execution of this Agreement, the BUYER shall deposit with the Escrow Agent such amount as may be necessary to implement the terms of this Agreement. 2. As promptly as practicable after execution of this Agreement, the SELLER shall exercise his option to acquire the Option Share and SELLER shall immediately thereafter deliver and turn over to the Escrow Agent such stock certificates as are herein provided to be received from the existing stockholders of the Bank by virtue of the exercise on the aforementioned option. 3. To ensure the stability of the Bank and continuity of management and credit policies to be adopted for the benefit of the coconut farmers, the parties undertake to cause the stockholders and the Board of Directors of the Bank to authorize and approve a management contract between the Bank and the SELLER under the following terms: (a) The management contract shall be for a period of five (5) years, renewable for another five (5) years by mutual agreement of the SELLER and the Bank; (b) The SELLER shall be elected President and shall hold office at the pleasure of the Board of Directors. While serving in such capacity, he shall be entitled to such salaries and emoluments as the Board of Directors may determine; (c) The SELLER shall recruit and develop a professional management team to manage and operate the Bank under the control and supervision of the Board of Directors of the Bank; (d) The BUYER undertakes to cause three (3) persons designated by the SELLER to be elected to the Board of Directors of the Bank; (e) The SELLER shall receive no compensation for managing the Bank, other than such salaries or emoluments to which he may be entitled by virtue of the discharge of his function and duties as President, provided and (f) The management contract may be assigned to a management company owned and controlled by the SELLER. 4. As compensation for exercising his personal and exclusive option to acquire the Option Shares and for transferring such shares to the coconut farmers, as well as
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for performing the management services required of him, SELLER shall receive equity in the Bank amounting, in the aggregate, to 95,304 fully paid shares in accordance with the procedure set forth in paragraph 6 below; 5. In order to comply with the Central Bank program for increased capitalization of banks and to ensure that the Bank will be in a more favorable financial position to attain its objective to extend to the coconut farmers loans and credit facilities, the BUYER undertakes to subscribe to shares with an aggregate par value of P80,864,000 (the "Subscribed Shares"). The obligation of the BUYER with respect to the Subscribed Shares shall be as follows: (a) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an aggregate par value of P15,884,000 from the present authorized but unissued shares of the Bank; and (b) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an aggregate par value of P64,980,000 from the increased capital stock of the Bank, which subscriptions shall be deemed made upon the approval by the stockholders of the increase of the authorized capital stock of the Bank from P50 Million to P140 Million. The parties undertake to declare stock dividends of P8 Million out of the present authorized but unissued capital stock of P30 Million. 6. To carry into effect the agreement of the parties that the SELLER shall receive as his compensation 95,304 shares: (a) . (b) With respect to the Subscribed Shares, the BUYER undertakes, in order to prevent the dilution of SELLERs equity position, that it shall cede over to the SELLER 64,980 fully-paid shares out of the Subscribed Shares. Such undertaking shall be complied with in the following manner: . 7. The parties further undertake that the Board of Directors and management of the Bank shall establish and implement a loan policy for the Bank of making available for loans at preferential rates of interest to the coconut farmers . 8. The BUYER shall expeditiously distribute from time to time the shares of the Bank, that shall be held by it for the benefit of the coconut farmers of the Philippines under the provisions of this Agreement, to such, coconut farmers holding registered COCOFUND receipts on such equitable basis as may be determine by the BUYER in its sound discretion. 9. . 10. To ensure that not only existing but future coconut farmers shall be participants in and beneficiaries of the credit policies, and shall be entitled to the benefit of loans and credit facilities to be extended by the Bank to coconut farmers at preferential rates, the shares held by the coconut farmers shall not be entitled to pre-emptive rights with respect to the unissued portion of the authorized capital stock or any increase thereof. 11. After the parties shall have acquired two-thirds (2/3) of the outstanding shares of the Bank, the parties shall call a special stockholders meeting of the Bank: (a) To classify the present authorized capital stock of P50,000,000 divided into 500,000 shares, with a par value of P100.00 per share into: 361,000 Class A shares, with an aggregate par value of P36,100,000

and 139,000 Class B shares, with an aggregate par value of P13,900,000. All of the Option Shares constituting 72.2% of the outstanding shares, shall be classified as Class A shares and the balance of the outstanding shares, constituting 27.8% of the outstanding shares, as Class B shares; (b) To amend the articles of incorporation of the Bank to effect the following changes: (i) change of corporate name to First United Coconut Bank; (ii) replace the present provision restricting the transferability of the shares with a limitation on ownership by any individual or entity to not more than 10% of the outstanding shares of the Bank; (iii) provide that the holders of Class A shares shall not be entitled to pre-emptive rights with respect to the unissued portion of the authorized capital stock or any increase thereof; and (iv) provide that the holders of Class B shares shall be absolutely entitled to pre-emptive rights, with respect to the unissued portion of Class B shares comprising part of the authorized capital stock or any increase thereof, to subscribe to Class B shares in proportion t the subscriptions of Class A shares, and to pay for their subscriptions to Class B shares within a period of five (5) years from the call of the Board of Directors. (c) To increase the authorized capital stock of the Bank from P50 Million to P140 Million.; (d) To declare a stock dividend of P8 Million payable to the SELLER, the BUYER and other stockholders of the Bank out of the present authorized but unissued capital stock of P30 Million; (e) To amend the by-laws of the Bank accordingly; and (f) To authorize and approve the management contract provided in paragraph 2 above. The parties agree that they shall vote their shares and take all the necessary corporate action in order to carry into effect the foregoing provisions of this paragraph 11 . 12. It is the contemplation of the parties that the Bank shall achieve a financial and equity position to be able to lend to the coconut farmers at preferential rates. In order to achieve such objective, the parties shall cause the Bank to adopt a policy of reinvestment, by way of stock dividends, of such percentage of the profits of the Bank as may be necessary. 13. The parties agree to execute or cause to be executed such documents and instruments as may be required in order to carry out the intent and purpose of this Agreement. IN WITNESS WHEREOF, PHILIPPINE COCONUT AUTHORITY (BUYER) By:
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EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT (SELLER) xxx xxx xxx 7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the (PCA) was the "other buyers" represented by . Cojuangco, Jr. in the May 1975 Agreement entered into between Pedro Cojuangco (on his own behalf and in behalf of other sellers listed in Annex "A" of the agreement) and Cojuangco, Jr. (on his own behalf and in behalf of the other buyers). Defendant Cojuangco insists he was the "only buyer" under the aforesaid Agreement. 8. .. 9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al. admit that in addition to the 137,866 FUB shares of Pedro Cojuangco, et al. covered by the Agreement, other FUB stockholders sold their shares to PCA such that the total number of FUB shares purchased by PCA increased from 137,866 shares to 144,400 shares, the OPTION SHARES referred to in the Agreement of May 25, 1975. Defendant Cojuangco did not make said admission as to the said 6,534 shares in excess of the 137,866 shares covered by the Agreement with Pedro Cojuangco. 10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the Agreement, described in Section 1 of Presidential Decree (P.D.) No. 755 dated July 29, 1975 as the "Agreement for the Acquisition of a Commercial Bank for the Benefit of Coconut Farmers" executed by the Philippine Coconut Authority" and incorporated in Section 1 of P.D. No. 755 by reference, refers to the "AGREEMENT FOR THE ACQUISITION OF A COMMERCIAL BANK FOR THE BENEFIT OF THE COCONUT FARMERS OF THE PHILIPPINES" dated May 25, 1975 between defendant Eduardo M. Cojuangco, Jr. and the [PCA] (Annex "B" for defendant Cojuangcos OPPOSITION TO PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT [RE: EDUARDO M. COJUANGCO, JR.] dated September 18, 2002). Plaintiff refused to make the same admission. 11. the Court takes judicial notice that P.D. No. 755 was published [in] volume 71 of the Official Gazette but the text of the agreement was not so published with P.D. No. 755. 12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA used public funds, in the total amount of P150 million, to purchase the FUB shares amounting to 72.2% of the authorized capital stock of the FUB, although the PCA was later reimbursed from the coconut levy funds and that the PCA subscription in the increased capitalization of the FUB, which was later renamed the (UCPB), came from the said coconut levy funds. 13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the authorized and the increased capital stock of the FUB (later UCPB), entirely paid for by PCA, 64.98% of the shares were placed in the name of the "PCA for the benefit of the coconut farmers" and 7,22% were given to defendant Cojuangco. The remaining 27.8% shares of stock in the FUB which later became the UCPB were not covered by the two (2) agreements referred to in item no. 6, par. (a) and (b) above. "There were shares forming part of the aforementioned 64.98% which were later sold or transferred to non-coconut farmers. 14. Under the May 27, 1975 Agreement, defendant Cojuangcos equity in the FUB (now UCPB) was ten percent (10%) of the shares of stock acquired by the PCA for the benefit of the coconut farmers. 15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by defendant Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for by the PCA in accordance with the terms and conditions provided in the said Agreement. 16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the affidavits of the coconut farmers (specifically, Exhibit "1-Farmer" to "70-Farmer") uniformly state that: a. they are coconut farmers who sold coconut products;

b. in the sale thereof, they received COCOFUND receipts pursuant to R.A. No. 6260; c. they registered the said COCOFUND receipts; and d. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and 1468, they are allegedly entitled to the subject UCPB shares. but subject to the following qualifications: a. there were other coconut farmers who received UCPB shares although they did not present said COCOFUND receipt because the PCA distributed the unclaimed UCPB shares not only to those who already received their UCPB shares in exchange for their COCOFUND receipts but also to the coconut farmers determined by a national census conducted pursuant to PCA administrative issuances; b. [t]here were other affidavits executed by Lobregat, Eleazar, Ballares and Aldeguer relative to the said distribution of the unclaimed UCPB shares; and c. the coconut farmers claim the UCPB shares by virtue of their compliance not only with the laws mentioned in item (d) above but also with the relevant issuances of the PCA such as, PCA Administrative Order No. 1, dated August 20, 1975 (Exh. "298-Farmer"); PCA Resolution No. 033-78 dated February 16, 1978. The plaintiff did not make any admission as to the foregoing qualifications. 17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that the UCPB shares in question have legitimately become the private properties of the 1,405,366 coconut farmers solely on the basis of their having acquired said shares in compliance with R.A. No. 6260, P.D. Nos. 755, 961 and 1468 and the administrative issuances of the PCA cited above. 18. .. On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A finding for the Republic, the judgment accentuated by (a) the observation that COCOFED has all along manifested as representing over a million coconut farmers and (b) a declaration on the issue of ownership of UCPB shares and the unconstitutionality of certain provisions of P.D. No. 755 and its implementing regulations. On the matter of ownership in particular, the anti-graft court declared that the 64.98% sequestered "Farmers UCPB shares," plus other shares paid by PCA are "conclusively" owned by the Republic. In its pertinent parts, PSJ-A, resolving the separate motions for summary judgment in seriatim with separate dispositive portions for each, reads: WHEREFORE, in view of the foregoing, we rule as follows: xxx xxx xxx A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al. The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit. B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff. 1. a. Section 1 of P.D. No. 755, taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for having allowed the use of the CCSF to benefit directly private interest by the outright and unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the undefined "coconut farmers", which negated or circumvented the national policy or public purpose declared by P.D. No. 755 to accelerate the growth and development of
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the coconut industry and achieve its vertical integration; and (ii) for having unduly delegated legislative power to the PCA. b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise invalid for their failure to see to it that the distribution of shares serve exclusively or at least primarily or directly the aforementioned public purpose or national policy declared by P.D. No. 755. 2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered special and/or fiduciary funds nor part of the general funds of the national government and similar provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). 3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May 25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, Adm. Order No. 1, s. 1975 and Resolution No. 074-78. 4. The so-called "Farmers UCPB shares" covered by 64.98% of the UCPB shares of stock, which formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the entire consideration of which was charged by PCA to the CCSF, are hereby declared conclusively owned by, the Plaintiff Republic of the Philippines. C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. COJUANGCO, JR.) dated September 18, 2002 filed by Plaintiff. 1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law because of the non-publication of the said Agreement. 2. Regarding the questioned transfer of the shares of stock of FUB (later UCPB) by PCA to defendant Cojuangco or the so-called "Cojuangco UCPB shares" which cost the PCA more than Ten Million Pesos in CCSF in 1975, we declare, that the transfer of the following FUB/UCPB shares to defendant Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore null and void: a. The 14,400 shares from the "Option Shares"; b. Additional Bank Shares Subscribed and Paid by PCA, consisting of: 1. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out of the authorized but unissued shares of the bank, subscribed and paid by PCA; 2. Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock subscribed and paid by PCA; and 3. Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the Agreement. 3. The above-mentioned shares of stock of the FUB/UCPB transferred to defendant Cojuangco are hereby declared conclusively owned by the Republic of the Philippines. 4. The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo M. Cojuangco, Jr. which form part of the 72.2% shares of the

FUB/UCPB paid for by the PCA with public funds later charged to the coconut levy funds, particularly the CCSF, belong to the plaintiff Republic of the Philippines as their true and beneficial owner. Let trial of this Civil Case proceed with respect to the issues which have not been disposed of in this Partial Summary Judgment. For this purpose, the plaintiffs Motion Ad Cautelam to Present Additional Evidence dated March 28, 2001 is hereby GRANTED. From PSJ-A, Lobregat moved for reconsideration which COCOFED, et al. and Ballares, et al. adopted. All these motions were denied in the extended assailed Resolution51 of December 28, 2004. Civil Case No. 0033-F Here, the Republic, after filing its pre-trial brief, interposed a Motion for Judgment on the Pleadings and/or for [PSJ] (Re: Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.) praying that, in light of the parties submissions and the supervening ruling in Republic v. COCOFED52 which left certain facts beyond question, a judgment issue: 1) Declaring Section 5 of Article III of P.D. No. 961 (Coconut Industry Code) and Section 5 of Article III of P.D. No. 1468 (Revised Coconut Industry Code) to be unconstitutional; 2) Declaring that CIF payments under RA No. 6260 are not valid and legal bases for ownership claims over the CIIF companies and, ultimately, the CIIF block of SMC shares; and 3) Ordering the reconveyance of the CIIF companies, the 14 holding companies, and the 27% CIIF block of San Miguel Corporation shares of stocks in favor of the government and declaring the ownership thereof to belong to the government in trust for all the coconut farmers. At this juncture, it may be stated that, vis--vis CC 0033-F, Gabay Foundation, Inc. sought but was denied leave to intervene. But petitioners COCOFED, et al. moved and were allowed to intervene53 on the basis of their claim that COCOFED members beneficially own the block of SMC shares held by the CIIF companies, at least 51% of whose capitol stock such members own. The claim, as the OSG explained, arose from the interplay of the following: (a) COCOFED et al.s alleged majority ownership of the CIIF companies under Sections 954 and 1055 of P.D. No. 1468, and (b) their alleged entitlement to shares in the CIIF companies by virtue of their supposed registration of COCOFUND receipts allegedly issued to COCOFED members upon payment of the R.A. 6260 CIF levy.56 Just as in CC No. 0033-A, the Sandiganbayan also conducted a hearing in CC No. 0033-F to determine facts that appeared without substantial controversy as culled from the records and, by Order57 of February 23, 2004, outlined those facts. On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No. 0033-A and disposing of the issue on ownership of the CIIF oil and holding companies and their entire block of subject SMC shares, issued the assailed PSJ-F also finding for the Republic, the fallo of which pertinently reading: WHEREFORE, in view of the foregoing, we hold that: The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and Cocofed et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES, namely: 1. Southern Luzon Coconut Oil Mills (SOLCOM); 2. Cagayan de Oro Oil Co., Inc. (CAGOIL); 3. Iligan Coconut Industries, Inc. (ILICOCO); 4. San Pablo Manufacturing Corp. (SPMC); 5. Granexport Manufacturing Corp. (GRANEX); and 6. Legaspi Oil Co., Inc. (LEGOIL),
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AS WELL AS THE 14 HOLDING COMPANIES, NAMELY: 1. Soriano Shares, Inc.; 2. ACS Investors, Inc.; 3. Roxas Shares, Inc.; 4. Arc Investors, Inc.; 5. Toda Holdings, Inc.; 6. AP Holdings, Inc.; 7. Fernandez Holdings, Inc.; 8. SMC Officers Corps, Inc.; 9. Te Deum Resources, Inc.; 10. Anglo Ventures, Inc.; 11. Randy Allied Ventures, Inc.; 12. Rock Steel Resources, Inc.; 13. Valhalla Properties Ltd., Inc.; and 14. First Meridian Development, Inc. AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK TOTALLING 33,133,266 SHARES AS OF 1983 ARE DECLARED OWNED BY THE GOVERNMENT IN TRUST FOR ALL THE COCONUT FARMERS GOVERNMENT AND ORDERDED RECONVEYED TO THE GOVERNMENT.58 (Emphasis and capitalization in the original; underscoring added.) Let the trial of this Civil Case proceed with respect to the issues which have not been disposed of in this Partial Summary Judgment, including the determination of whether the CIIF Block of SMC Shares adjudged to be owned by the Government represents 27% of the issued and outstanding capital stock of SMC according to plaintiff or to 31.3% of said capital stock according to COCOFED, et al and Ballares, et al. SO ORDERED. Expressly covered by the declaration and the reconveyance directive are "all dividends declared, paid and issued thereon as well as any increments thereto arising from, but not limited to, exercise of preemptive rights." On May 26, 2004, COCOFED et al., filed an omnibus motion (to dismiss for lack of subject matter jurisdiction or alternatively for reconsideration and to set case for trial), but this motion was denied per the Sandiganbayans Resolution59 of December 28, 2004. On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a Resolution60 denying Lobregats and COCOFEDs separate motions to set the case for trial/hearing, noting that there is no longer any point in proceeding to trial when the issue of their claim of ownership of the sequestered UCPB shares and related sub-issues have already been resolved in PSJ-A. For ease of reference, PSJ-A and PSJ-F each originally decreed trial or further hearing on issues yet to be disposed of. However, the Resolution61 issued on June 5, 2007 in CC 0033-A and the Resolution62 of May 11, 2007 rendered in CC 0033-F effectively modified the underlying partial summary judgments by deleting that portions on the necessity of further trial on the issue of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of SMC shares and (3) the CIIF companies. As the anti-graft court stressed in both resolutions, the said issue of ownership has been finally resolved in the corresponding PSJs.63 Hence, the instant petitions. The Issues

COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on the Sandiganbayan for (a) assuming jurisdiction over CC Nos. 0033-A and 0033-F despite the Republics failure to establish below the jurisdictional facts, i.e., that the sequestered assets sought to be recovered are ill-gotten in the context of E.O. Nos. 1, 2, 14 and 14-A; (b) declaring certain provisions of coco levy issuances unconstitutional; and (c) denying the petitioners plea to prove that the sequestered assets belong to coconut farmers. Specifically, petitioners aver: I. The Sandiganbayan gravely erred when it refused to acknowledge that it did not have subject matter jurisdiction over the ill-gotten wealth cases because the respondent Republic failed to prove, and did not even attempt to prove, the jurisdictional fact that the sequestered assets constitute ill-gotten wealth of former President Marcos and Cojuangco. Being without subject matter jurisdiction over the illgotten wealth cases, a defect previously pointed out and repeatedly assailed by COCOFED, et al., the assailed PSJs and the assailed Resolutions are all null and void. A. Insofar as the ill-gotten wealth cases are concerned, the Sandiganbayans subject matter jurisdiction is limited to the recovery of "ill-gotten wealth" as defined in Eos 1, 2, 14 and 14-A. Consistent with that jurisdiction, the subdivided complaints in the ill-gotten wealth cases expressly alleged that the sequestered assets constitutes "ill-gotten wealth" of former President Marcos and Cojuangco, having been filed pursuant to, and in connection with, Eos 1, 2, 14 and 14-A, the Sandiganbayan gravely erred, if not exceeded its jurisdiction, when it refused to require the respondent Republic to prove the aforesaid jurisdictional fact. B. . Having no evidence on record to prove the said jurisdictional fact, the Sandiganbayan gravely erred, if not grossly exceeded its statutory jurisdiction, when it rendered the assailed PSJs instead of dismissing the ill-gotten wealth cases. C. Under Section 1 of Rule 9 of the Rules of Court, lack of jurisdiction over the subject matter may be raised at any stage of the proceedings. In any event, in pursuing its intervention in the ill-gotten wealth cases, COCOFED, et al precisely questioned the Sandiganbayans subject matter jurisdiction, asserted that the jurisdictional fact does not exist, moved to dismiss the ill-gotten wealth cases and even prayed that the writs of sequestration over the sequestered assets be lifted. In concluding that those actions constitute an "invocation" of its jurisdiction, the Sandiganbayan clearly acted whimsically, capriciously and in grave abuse of its discretion. II. Through the assailed PSJs and the assailed Resolutions, the Sandiganbayan declared certain provisions of the coconut levy laws as well as certain administrative issuances of the PCA as unconstitutional. In doing so, the Sandiganbayan erroneously employed, if not grossly abused, its power of judicial review. A. the Sandiganbayan gravely erred, if not brazenly exceeded its statutory jurisdiction and abused the judicial powers, when it concluded that the public purpose of certain coconut levy laws was not evident, when it thereupon formulated its own public policies and purposes for the coconut levy laws and at the same time disregarded the national policies specifically prescribed therein. B. In ruling that "it is not clear or evident how the means employed by the [coconut levy] laws" would "serve the avowed purpose of the law" or "can serve a public purpose", the Sandiganbayan erroneously examined, determined and evaluated the wisdom of such laws, a constitutional power within the exclusive province of the legislative department.

C. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of alleged but unproven and unsubstantiated flaws in their implementation. D. The Sandiganbayan gravely erred in concluding that Section 1 of PD 755 constitutes an undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution of the UCPB shares to the coconut farmers. Rather, taken in their proper context, Section 1 of PD 755 was complete in itself, [and] prescribed sufficient standards that circumscribed the discretion of the PCA. More importantly, this Honorable Court has, on three (3) separate occasions, rejected respondent Republics motion to declare the coconut levy laws unconstitutional. The Sandiganbayan gravely erred, if not acted in excess of its jurisdiction, when it ignored the settled doctrines of law of the case and/or stare decisis and granted respondent Republics fourth attempt to declare the coconut levy laws unconstitutional, despite fact that such declaration of unconstitutionality was not necessary to resolve the ultimate issue of ownership involved in the ill-gotten wealth cases. III. In rendering the assailed PSJs and thereafter refusing to proceed to trial on the merits, on the mere say-so of the respondent Republic, the Sandiganbayan committed gross and irreversible error, gravely abused its judicial discretion and flagrantly exceeded its jurisdiction as it effectively sanctioned the taking of COCOFED, et al.s property by the respondent Republic without due process of law and through retroactive application of the declaration of unconstitutionality of the coconut levy laws, an act that is not only illegal and violative of the settled Operative Fact Doctrine but, more importantly, inequitable to the coconut farmers whose only possible mistake, offense or misfortune was to follow the law. A. . 1. In the course of the almost twenty (20) years that the ill-gotten wealth cases were pending, COCOFED, et al. repeatedly asked to be allowed to present evidence to prove that the true, actual and beneficial owners of the sequestered assets are the coconut farmers and not Cojuangco, an alleged "crony" of former President Marcos. The Sandiganbayan grievously erred and clearly abused its judicial discretion when it repeatedly and continuously denied COCOFED, et al. the opportunity to present their evidence to disprove the baseless allegations of the IllGotten Wealth Cases that the sequestered assets constitute ill-gotten wealth of Cojuangco and of former President Marcos, an error that undeniably and illegally deprived COCOFED, et al of their constitutional right to be heard. 2. The Sandiganbayan erroneously concluded that the Assailed PSJs and Assailed Resolutions settled the ultimate issue of ownership of the Sequestered Assets and, more importantly, resolved all factual and legal issues involved in the ill-gotten wealth cases. Rather, as there are triable issues still to be resolved, it was incumbent upon the Sandiganbayan to receive evidence thereon and conduct trial on the merits. 3. Having expressly ordered the parties to proceed to trial and thereafter decreeing that trial is unnecessary as the Assailed PSJs were "final" and "appealable" judgments, the Sandiganbayan acted whimsically, capriciously and contrary to the Rules of Court, treated the parties in the ill-gotten wealth cases unfairly, disobeyed the dictate of this Honorable Court and, worse, violated COCOFED, et als right to due process and equal protection of the laws.
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B. The Sandiganbayan gravely erred if not grossly abused its discretion when it repeatedly disregarded, and outrightly refused to recognize, the operative facts that existed as well as the rights that vested from the time the coconut levy laws were enacted until their declaration of unconstitutionality in the assailed PSJs. As a result, the assailed PSJs constitute a proscribed retroactive application of the declaration of unconstitutionality, a taking of private property, and an impairment of vested rights of ownership, all without due process of law.64 Otherwise stated, the assailed PSJs and the assailed Resolutions effectively penalized the coconut farmers whose only possible mistake, offense or misfortune was to follow the laws that were then legal, valid and constitutional. IV. The voluminous records of these ill-gotten wealth cases readily reveal the various dilatory tactics respondent Republic resorted to. As a result, despite the lapse of almost twenty (20) years of litigation, the respondent Republic has not been required to, and has not even attempted to prove, the bases of its perjurious claim that the sequestered assets constitute ill-gotten wealth of former President Marcos and his crony, Cojuangco. In tolerating respondent Republics antics for almost twenty (20) years, the Sandiganbayan so glaringly departed from procedure and thereby flagrantly violated COCOFED, et al.s right to speedy trial. In G.R. No. 178193, petitioner Ursua virtually imputes to the Sandiganbayan the same errors attributed to it by petitioners in G.R. Nos. 177857-58.65 He replicates as follows: I The Sandiganbayan decided in a manner not in accord with the Rules of Court and settled jurisprudence in rendering the questioned PSJ as final and appealable thereafter taking the sequestered assets from their owners or record without presentation of any evidence, thus, the questioned PSJ and the questioned Resolutions are all null and void. A. The Sandiganbayans jurisdiction insofar as the ill-gotten wealth cases are concerned, is limited to the recovery of "ill-gotten wealth" as defined in Executive Orders No. 1, 2, 14 and 14-A. B. The Sandiganbayan should have decided to dismiss the case or continue to receive evidence instead of ruling against the constitutionality of some coconut levy laws and PCA issuances because it could decide on other grounds available to it. II The Sandiganbayan gravely erred when it declared PD. 755, Section 1 and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 as well as administrative issuances of the PCA as unconstitutional in effect, it abused it power of judicial review. A. The Sandiganbayan gravely erred in concluding that the purpose of PD 755 Section 1 and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 is not evident. It then proceeded to formulated its own purpose thereby intruding into the wisdom of the legislature in enacting [t]he law. B. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] No. 1 and PCA Resolution No. 074-78 unconstitutional due to alleged flaws in their implementation. C. The Sandiganbayan gravely erred in concluding that Section 1 of PD No. 755 constitutes an undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution of the UCPB shares to the coconut farmers. Section 1 of PD 755 was complete in itself, prescribed sufficient standards that circumscribed the discretion of the PCA and merely authorized the PCA to fill matters of detail an execution through promulgated rules and regulations. III
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The coconut levy laws, insofar as they allowed the PCA to promulgate rules and regulations governing the distribution of the UCPB to the coconut farmers, do not constitute an undue delegation of legislative power as they were complete in themselves and prescribed sufficient standards that circumscribed the discretion of the PCA. IV Assuming ex-gratia argumenti that the coconut levy laws are unconstitutional, still, the owners thereof cannot be deprived of their property without due process of law considering that they have in good faith acquired vested rights over the sequestered assets. In sum, the instant petitions seek to question the decisions of the Sandiganbayan in both CC Nos. 0033A and 0033-F, along with the preliminary issues of objection. We shall address at the outset, (1) the common preliminary questions, including jurisdictional issue, followed by (2) the common primary contentious issues (i.e. constitutional questions), and (3) the issues particular to each case. The Courts Ruling I The Sandiganbayan has jurisdiction over the subject matter ofthe subdivided amended complaints. The primary issue, as petitioners COCOFED, et al. and Ursua put forward, boils down to the Sandiganbayans alleged lack of jurisdiction over the subject matter of the amended complaints. Petitioners maintain that the jurisdictional facts necessary to acquire jurisdiction over the subject matter in CC No. 0033-A have yet to be established. In fine, the Republic, so petitioners claim, has failed to prove the ill-gotten nature of the sequestered coconut farmers UCPB shares. Accordingly, the controversy is removed from the subject matter jurisdiction of the Sandiganbayan and necessarily any decision rendered on the merits, such as PSJ-A and PSJ-F, is void. To petitioners, it behooves the Republic to prove the jurisdictional facts warranting the Sandiganbayans continued exercise of jurisdiction over ill-gotten wealth cases. Citing Manila Electric Company [Meralco] v. Ortaez,66 petitioners argue that the jurisdiction of an adjudicatory tribunal exercising limited jurisdiction, like the Sandiganbayan, "depends upon the facts of the case as proved at the trial and not merely upon the allegation in the complaint."67 Cited too is PCGG v. Nepumuceno,68 where the Court held: The determinations made by the PCGG at the time of issuing sequestration orders cannot be considered as final determinations; that the properties or entities sequestered or taken-over in fact constitute "ill-gotten wealth" according to [E.O.] No. 1 is a question which can be finally determined only by a court the Sandiganbayan. The PCGG has the burden of proving before the Sandiganbayan that the assets it has sequestered or business entity it has provisionally taken-over constitutes "ill-gotten wealth" within the meaning of [E.O.] No. 1 and Article No. XVIII (26) of the 1987 Constitution. Petitioners above posture is without merit. Justice Florenz D. Regalado explicates subject matter jurisdiction: 16. Basic is the doctrine that the jurisdiction of a court over the subject-matter of an action is conferred only by the Constitution or the law and that the Rules of Court yield to substantive law, in this case, the Judiciary Act and B.P. Blg. 129, both as amended, and of which jurisdiction is only a part. Jurisdiction cannot be acquired through, or waived, enlarged or diminished by, any act or omission of the parties; neither can it be conferred by the acquiescence of the court. Jurisdiction must exist as a matter of law. Consequently, questions of jurisdiction may be raised for the first time on appeal even if such issue was not raised in the lower court. 17. Nevertheless, in some case, the principle of estoppel by laches has been availed to bar attacks on jurisdiction.69 It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn, the question on whether a given suit comes within the pale of a statutory conferment is determined by the allegations in

the complaint, regardless of whether or not the plaintiff will be entitled at the end to recover upon all or some of the claims asserted therein.70 We said as much in Magay v. Estiandan:71 [J]urisdiction over the subject matter is determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein-a matter that can be resolved only after and as a result of the trial. Nor may the jurisdiction of the court be made to depend upon the defenses set up in the answer or upon the motion to dismiss, for, were we to be governed by such rule, the question of jurisdiction could depend almost entirely upon the defendant. Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v. Villon:72 Jurisdiction over the subject matter is the power to hear and determine the general class to which the proceedings in question belong. Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists. Basic is the rule that jurisdiction over the subject matter is determined by the cause or causes of action as alleged in the complaint. The material averments in subdivided CC No. 0033-A and CC No. 0033-F included the following: 12. Defendant Eduardo Cojuangco, Jr served as a public officer during the Marcos administration. 13. Defendant Eduardo Cojuangco, Jr., taking advantage of his association, influence and connection, acting in unlawful concert with the [Marcoses] and the individual defendants, embarked upon devices, schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich themselves as the expense of the Plaintiff and the Filipino people, such as when he a) manipulated, beginning the year 1975 with the active collaboration of Defendants , Marai Clara Lobregat, Danilo Ursua [etc.], the purchase by the (PCA) of 72.2% of the outstanding capital stock of the (FUB) which was subsequently converted into a universal bank named (UCPB) through the use of (CCSF) in a manner contrary to law and to the specific purposes for which said coconut levy funds were imposed and collected under P.D. 276 and under anomalous and sinister designs and circumstances, to wit: (i) Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds as a cheap, lucrative and risk-free source of funds with which to exercise his private option to buy the controlling interest in FUB. (ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government funds to advance his own private and commercial interests Defendant Eduardo Cojuangco, Jr. caused the issuance of PD 755 (a) declaring that the coconut levy funds shall not be considered special and fiduciary and trust funds conveniently repealing for that purpose a series of previous decrees establishing the character of the coconut levy funds as special, fiduciary, trust and governments; (b) confirming the agreement between Cojuangco and PCA on the purchase of FUB by incorporating by reference said private commercial agreement in PD 755; (iii) . (iv) To perpetuate his opportunity to build his economic empire, Cojuangco caused the issuance of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB interest free to the prejudice of the government and finally (v) Having fully established himself as the undisputed "coconut king" with unlimited powers to deal with the coconut levy funds, the stage was now set for Defendant Eduardo Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine activity namely . oil mills. (vi) In gross violation of their fiduciary positions and in contravention of the goal to create a bank for coconut farmers of the country, the capital stock of UCPB as of
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February 25, 1986 was actually held by the defendants, their lawyers, factotum and business associates, thereby finally gaining control of the UCPB by misusing the names and identities of the so-called "more than one million coconut farmers." (b) created and/or funded with the use of coconut levy funds various corporations, such as (COCOFED) with the active collaboration and participation of Defendants Juan Ponce Enrile, Maria Clara Lobregat most of whom comprised the interlocking officers and directors of said companies; dissipated, misused and/or misappropriated a substantial part of said coco levy funds FINALLY GAIN OWNERSHIP AND CONTROL OF THE UNITED COCONUT PLANTERS BANK BY MISUSING THE NAMES AND/OR IDENTIFIES OF THE SO-CALLLED "MORE THAN ONE MILLION COCONUT FARNMERS; (c) misappropriated, misused and dissipated P840 million of the (CIDF) levy funds deposited with the National Development Corporation (NIDC) as administrator trustee of said funds and later with UCPB, of which Defendant Eduardo Cojuangco, Jr. was the Chief Executive Officer. (d) established and caused to be funded with coconut levy fundfs, with the active collaboration of Defendants Ferdinand E. Marcos through the issuance of LOI 926 and of [other] defendants the United Coconut Oil Mills, Inc., a corporation controlled by Defendant Eduardo Cojuangco, Jr. and bought sixteen (16) certain competing oil mills at exorbitant prices then mothballed them. xxx xxx xxx (i) misused coconut levy funds to buy majority of the outstanding shares of stock of San Miguel Corporation. xxx xxx xxx 14. Defendants Eduardo Cojuangco, Jr. of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed, conspired and confederated with each other in setting up, through the use of the coconut levy funds the financial and corporate structures that led to the establishment of UCPB UNICOM [etc.] and more than twenty other coconut levy funded corporations including the acquisition of [SMC] shares and its institutionalization through presidential directives of the coconut monopoly. xxx xxx xxx 16. The acts of Defendants, singly or collectively, and /or in unlawful concert with one another, constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws to the grave and irreparable damage of the Plaintiff and the Filipino people. CC No. 0033-F 12. Defendant Eduardo Cojuangco, Jr., served as a public officer during the Marcos administration. 13. Having fully established himself as the undisputed "coconut king" with unlimited powers to deal with the coconut levy funds, the stage was now set for Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine economic activity namely oil mills . 14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his association, influence, and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and the individual defendants, embarked upon devices, schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and the Filipino people. (a) Having control over the coconut levy, Defendant Eduardo M. Cojuangco invested the funds in diverse activities, such as the various businesses SMC was engaged in.; xxx xxx xxx

(c) Later that year [1983], Cojuangco also acquired the Soriano stocks through a series of complicated and secret agreements, a key feature of which was a "voting trust agreement" that stipulated that Andres, Jr. or his heir would proxy over the vote of the shares owned by Soriano and Cojuangco. xxx xxx xxx (g) All together, Cojuangco purchased 33 million shares of the SMC through the 14 holding companies xxx xxx xxx 3.1. The same fourteen companies were in turn owned by the six (6) so -called CIIF Companies. (h) Defendant Corporations are but "shell" corporations owned by interlocking shareholders who have previously admitted that they are just "nominee stockholders" who do not have any proprietary interest over the shares in their names. [L]awyers of the Angara Abello Concepcion Regala & Cruz (ACCRA) Law offices, the previous counsel who incorporated said corporations, prove that they were merely nominee stockholders thereof. (l) These companies, which ACCRA Law Offices organized for Defendant Cojuangco to be able to control more than 60% of SMC shares, were funded by institutions which depended upon the coconut levy such as the UCPB, UNICOM, (COCOLIFE), among others. Cojuangco and his ACCRA lawyers used the funds from 6 large coconut oil mills and 10 copra trading companies to borrow money from the UCPB and purchase these holding companies and the SMC stocks. Cojuangco used $ 150 million from the coconut levy, broken down as follows: Amount Source Purpose (in million) $ 22.26 Oil Mills equity in holding Companies $ 65.6 Oil Mills loan to holding Companies $ 61.2 UCPB loan to holding Companies [164] The entire amount, therefore, came from the coconut levy, some passing through the Unicom Oil mills, others directly from the UCPB. (m) With his entry into the said Company, it began to get favors from the Marcos government, significantly the lowering of the excise taxes on beer, one of the main products of SMC. 15. Defendants plotted, devised, schemed, conspired and confederated with each other in setting up, through the use of coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, [etc.], and more than twenty other coconut levy-funded corporations, including the acquisition of [SMC] shares and its institutionalization through presidential directives of the coconut monopoly. 16. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another, constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the constitution and laws of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino people.73 Judging from the allegations of the defendants illegal acts thereat made, it is fairly obvious that both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series of 1986, the nature of ill-gotten wealth suits. Both deal with the recovery of sequestered shares, property or business
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enterprises claimed, as alleged in the corresponding basic complaints, to be ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking undue advantage of relationships or influence and/or through or as a result of improper use, conversion or diversion of government funds or property. Recovery of these assetsdetermined as shall hereinafter be discussed as prima facie illgottenfalls within the unquestionable jurisdiction of the Sandiganbayan.74 P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the Sandiganbayan with, among others, original jurisdiction over civil and criminal cases instituted pursuant to and in connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules and Regulations defines the term "Ill-Gotten Wealth" as "any asset, property, business enterprise or material possession of persons within the purview of [E.O.] Nos. 1 and 2, acquired by them directly, or indirectly thru dummies, nominees, agents, subordinates and/or business associates by any of the following means or similar schemes": (1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the public treasury; (2) .; (3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government or any of its subdivisions, agencies or instrumentalities or government-owned or controlled corporations; (4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation in any business enterprise or undertaking; (5) Through the establishment of agricultural, industrial or commercial monopolies or other combination and/or by the issuance, promulgation and/or implementation of decrees and orders intended to benefit particular persons or special interests; and (6) By taking undue advantage of official position, authority, relationship or influence for personal gain or benefit.75 (Emphasis supplied) Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in "[T]he recovery of all ill-gotten wealth accumulated by former [President] Marcos, his immediate family, relatives, subordinates and close associates including the takeover or sequestration of all business enterprises and entities owned or controlled by them, during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationship." Complementing the aforesaid Section 2(a) is Section 1 of E.O. No. 2 decreeing the freezing of all assets "in which the [Marcoses] their close relatives, subordinates, business associates, dummies, agents or nominees have any interest or participation." The Republics averments in the amended complaints, particularly those detailing the alleged wrongful acts of the defendants, sufficiently reveal that the subject matter thereof comprises the recovery by the Government of ill-gotten wealth acquired by then President Marcos, his cronies or their associates and dummies through the unlawful, improper utilization or diversion of coconut levy funds aided by P.D. No. 755 and other sister decrees. President Marcos himself issued these decrees in a brazen bid to legalize what amounts to private taking of the said public funds. Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed to prove the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as averred in the amended subdivided complaints. This contention is incorrect. There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the averments in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over the ill-gotten wealth complaints. As previously discussed, a perusal of the allegations easily reveals the sufficiency of the statement of matters disclosing the claim of the government against the coco levy funds and the assets

acquired directly or indirectly through said funds as ill-gotten wealth. Moreover, the Court finds no rule that directs the plaintiff to first prove the subject matter jurisdiction of the court before which the complaint is filed. Rather, such burden falls on the shoulders of defendant in the hearing of a motion to dismiss anchored on said ground or a preliminary hearing thereon when such ground is alleged in the answer. COCOFED et al. and Ursuas reliance on Manila Electric Company [Meralco] v. Ortanez76 is misplaced, there being a total factual dissimilarity between that and the case at bar. Meralco involved a labor dispute before the Court of Industrial Relations (CIR) requiring the interpretation of a collective bargaining agreement to determine which between a regular court and CIR has jurisdiction. There, it was held that in case of doubt, the case may not be dismissed for failure to state a cause of action as jurisdiction of CIR is not merely based on the allegations of the complaint but must be proved during the trial of the case. The factual milieu of Meralco shows that the said procedural holding is peculiar to the CIR. Thus, it is not and could not be a precedent to the cases at bar. Even PCGG v. Nepomuceno77 is not on all fours with the cases at bench, the issue therein being whether the regional trial court has jurisdiction over the PCGG and sequestered properties, vis--vis the present cases, which involve an issue concerning the Sandiganbayans jurisdiction. Like in Meralco, the holding in Nepomuceno is not determinative of the outcome of the cases at bar. While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Courts ruling in Tijam v. Sibonhonoy78 is the leading case on estoppel relating to jurisdiction. In Tijam, the Court expressed displeasure on "the undesirable practice of a party submitting his case for decision and then accepting judgment, only if favorable, and then attacking it for lack of jurisdiction, when adverse." Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat, Ballares, et al. and Ursua are already precluded from assailing the jurisdiction of the Sandiganbayan. Remember that the COCOFED and the Lobregat group were not originally impleaded as defendants in CC No. 0033. They later asked and were allowed by the Sandiganbayan to intervene. If they really believe then that the Sandiganbayan is without jurisdiction over the subject matter of the complaint in question, then why intervene in the first place? They could have sat idly by and let the proceedings continue and would not have been affected by the outcome of the case as they can challenge the jurisdiction of the Sandiganbayan when the time for implementation of the flawed decision comes. More importantly, the decision in the case will have no effect on them since they were not impleaded as indispensable parties. After all, the joinder of all indispensable parties to a suit is not only mandatory, but jurisdictional as well.79 By their intervention, which the Sandiganbayan allowed per its resolution dated September 30, 1991, COCOFED and Ursua have clearly manifested their desire to submit to the jurisdiction of the Sandiganbayan and seek relief from said court. Thereafter, they filed numerous pleadings in the subdivided complaints seeking relief and actively participated in numerous proceedings. Among the pleadings thus filed are the Oppositions to the Motion for Intervention interposed by the Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyogan and Gabay ng Mundo sa Kaunlaran Foundation, Inc., a Class Action Omnibus Motion to enjoin the PCGG from voting the SMC shares dated February 23, 2001 (granted by Sandiganbayan) and the Class Action Motion for a Separate Summary Judgment dated April 11, 2001. By these acts, COCOFED et al. are now legally estopped from asserting the Sandiganbayns want of jurisdiction, if that be the case, over the subject matter of the complaint as they have voluntarily yielded to the jurisdiction of the Sandiganbayan. Estoppel has now barred the challenge on Sandiganbayans jurisdiction. The ensuing excerpts from Macahilig v. Heirs of Magalit80 are instructive: We cannot allow her to attack its jurisdiction simply because it rendered a Decision prejudicial to her position. Participation in all stages of a case before a trial court effectively estops a party from challenging its jurisdiction. One cannot belatedly reject or repudiate its decision after voluntarily submitting to its jurisdiction, just to secure affirmative relief against ones opponent or after failing to obtain such relief. If, by deed or conduct, a party has induced another to act in a particular manner,
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estoppel effectively bars the former from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to the latter. Lest it be overlooked, this Court has already decided that the sequestered shares are prima facie illgotten wealth rendering the issue of the validity of their sequestration and of the jurisdiction of the Sandiganbayan over the case beyond doubt. In the case of COCOFED v. PCGG,81 We stated that: It is of course not for this Court to pass upon the factual issues thus raised. That function pertains to the Sandiganbayan in the first instance. For purposes of this proceeding, all that the Court needs to determine is whether or not there is prima facie justification for the sequestration ordered by the PCGG. The Court is satisfied that there is. The cited incidents, given the public character of the coconut levy funds, place petitioners COCOFED and its leaders and officials, at least prima facie, squarely within the purview of Executive Orders Nos. 1, 2 and 14, as construed and applied in BASECO, to wit: "1. that ill-gotten properties (were) amassed by the leaders and supporters of the previous regime; "a. more particularly, that (i)ll-gotten wealth was accumulated by Marcos, his immediate family, relatives, subordinates and close associates, . (and) business enterprises and entities (came to be) owned or controlled by them, during (the Marcos) administration, directly or through nominees, by taking undue advantage of their public office and using their powers, authority, influence, connections or relationships; "b. otherwise stated, that there are assets and properties purportedly pertaining to [the Marcoses], their close relatives, subordinates, business associates, dummies, agents or nominees which had been or were acquired by them directly or indirectly, through or as a result of the improper or illegal use of funds or properties owned by the Government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their office, authority, influence, connections or relationship, resulting in their unjust enrichment .; xxx xxx xxx 2. The petitioners claim that the assets acquired with the coconut levy funds are privately owned by the coconut farmers is founded on certain provisions of law, to wit [Sec. 7, RA 6260 and Sec. 5, Art. III, PD 1468] (Words in bracket added; italics in the original). In their attempt to dismiss the amended complaints in question, petitioners asseverate that (1) the coconut farmers cannot be considered as "subordinates, close and/or business associates, dummies, agents and nominees" of Cojuangco, Jr. or the Marcoses, and (2) the sequestered shares were not illegally acquired nor acquired "through or as result of improper or illegal use or conversion of funds belonging to the Government." While not saying so explicitly, petitioners are doubtless conveying the idea that wealth, however acquired, would not be considered "ill-gotten" in the context of EO 1, 2 and 14, s. of 1986, absent proof that the recipient or end possessor thereof is outside the Marcos circle of friends, associates, cronies or nominees. We are not convinced. As may be noted, E.O. 1 and 2 advert to President Marcos, or his associates nominees. In its most common signification, the term "nominee" refers to one who is designated to act for another usually in a limited way; 82 a person in whose name a stock or bond certificate is registered but who is not the actual owner thereof is considered a nominee."83 Corpus Juris Secundum describes a nominee as one: designated to act for another as his representative in a rather limited sense. It has no connotation, however, other than that of acting for another, in representation of another or as the grantee of another. In its commonly accepted meaning the term connoted the delegation of authority to the nominee in a representative or nominal capacity only, and does not connote the transfer or assignment to the nominee of any property in, or ownership of, the rights of the person nominating him.84 So, the next question that comes to the fore is: would the term "nominee" include the more than one million coconut farmers alleged to be the recipients of the UCPB shares?

Guided by the foregoing definitions, the query must be answered in the affirmative if only to give life to those executive issuances aimed at ensuring the recovery of ill-gotten wealth. It is basic, almost elementary, that: Laws must receive a sensible interpretation to promote the ends for which they are enacted. They should be so given reasonable and practical construction as will give life to them, if it can be done without doing violence to reason. Conversely, a law should not be so construed as to allow the doing of an act which is prohibited by law, not so interpreted as to afford an opportunity to defeat compliance with its terms, create an inconsistency, or contravene the plain words of the law. Interpretatio fienda est ut res magis valeat quam pereat or that interpretation as will give the thing efficacy is to be adopted.85 E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of ill-gotten assets amassed by the Marcoses, their associates, subordinates and cronies, or through their nominees. Be that as it may, it stands to reason that persons listed as associated with the Marcoses86 refer to those in possession of such ill-gotten wealth but holding the same in behalf of the actual, albeit undisclosed owner, to prevent discovery and consequently recovery. Certainly, it is well-nigh inconceivable that illgotten assets would be distributed to and left in the hands of individuals or entities with obvious traceable connections to Mr. Marcos and his cronies. The Court can take, as it has in fact taken, judicial notice of schemes and machinations that have been put in place to keep ill-gotten assets under wraps. These would include the setting up of layers after layers of shell or dummy, but controlled, corporations87 or manipulated instruments calculated to confuse if not altogether mislead would-be investigators from recovering wealth deceitfully amassed at the expense of the people or simply the fruits thereof. Transferring the illegal assets to third parties not readily perceived as Marcos cronies would be another. So it was that in PCGG v. Pena, the Court, describing the rule of Marcos as a "well entrenched plundering regime of twenty years," noted the magnitude of the past regimes organized pillage and the ingenuity of the plunderers and pillagers with the assistance of experts and the best legal minds in the market.88 Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term "nominee," as used in the above issuances, must be taken to mean to include any person or group of persons, natural or juridical, in whose name government funds or assets were transferred to by Pres. Marcos, his cronies or his associates. To this characterization must include what the Sandiganbayan considered the "unidentified" coconut farmers, more than a million of faceless and nameless coconut farmers, the alleged beneficiaries of the distributed UCPB shares, who, under the terms of Sec. 10 of PCA A.O. No. 1, s. of 1975, were required, upon the delivery of their respective stock certificates, to execute an irrevocable proxy in favor of the Banks manager. There is thus ample truth to the observations - "[That] the PCA provided this condition only indicates that the PCA had no intention to constitute the coconut farmer UCPB stockholder as a bona fide stockholder;" that the 1.5 million registered farmer-stockholders were "mere nominal stockholders."89 From the foregoing, the challenge on the Sandiganbayans subject matter jurisdiction at bar must fail. II Petitioners COCOFED et al. were not deprived of their right to be heard. As a procedural issue, COCOFED, et al. and Ursua next contend that in the course of almost 20 years that the cases have been with the anti-graft court, they have repeatedly sought leave to adduce evidence (prior to respondents complete presentation of evidence) to prove the coco farmers actual and beneficial ownership of the sequestered shares. The Sandiganbayan, however, had repeatedly and continuously disallowed such requests, thus depriving them of their constitutional right to be heard. This contention is untenable, their demand to adduce evidence being disallowable on the ground of prematurity. The records reveal that the Republic, after adducing its evidence in CC No. 0033-A, subsequently filed a Motion Ad Cautelam for Leave to Present Additional Evidence dated March 28, 2001. This motion
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remained unresolved at the time the Republic interposed its Motion for Partial Summary Judgment. The Sandiganbayan granted the later motion and accordingly rendered the Partial Summary Judgment, effectively preempting the presentation of evidence by the defendants in said case (herein petitioners COCOFED and Ursua). Section 5, Rule 30 the Rules of Court clearly sets out the order of presenting evidence: SEC. 5. Order of trial.Subject to the provisions of section 2 of Rule 31, and unless the court for special reasons otherwise directs, the trial shall be limited to the issues stated in the pre-trial order and shall proceed as follows: (a) The plaintiff shall adduce evidence in support of his complaint; (b) The defendant shall then adduce evidence in support of his defense, counterclaim, crossclaim and third-party complaint; xxx xxx xxx (g) Upon admission of the evidence, the case shall be deemed submitted for decision, unless the court directs the parties to argue or to submit their respective memoranda or any further pleadings. If several defendants or third-party defendants, and so forth. having separate defenses appear by different counsel, the court shall determine the relative order of presentation of their evidence. (Emphasis supplied.) Evidently, for the orderly administration of justice, the plaintiff shall first adduce evidence in support of his complaint and after the formal offer of evidence and the ruling thereon, then comes the turn of defendant under Section 3 (b) to adduce evidence in support of his defense, counterclaim, cross-claim and third party complaint, if any. Deviation from such order of trial is purely discretionary upon the trial court, in this case, the Sandiganbayan, which cannot be questioned by the parties unless the vitiating element of grave abuse of discretion supervenes. Thus, the right of COCOFED to present evidence on the main case had not yet ripened. And the rendition of the partial summary judgments overtook their right to present evidence on their defenses. It cannot be stressed enough that the Republic as well as herein petitioners were well within their rights to move, as they in fact separately did, for a partial summary judgment. Summary judgment may be allowed where, save for the amount of damages, there is, as shown by affidavits and like evidentiary documents, no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. A "genuine issue", as distinguished from one that is fictitious, contrived and set up in bad faith, means an issue of fact that calls for the presentation of evidence.90 Summary or accelerated judgment, therefore, is a procedural technique aimed at weeding out sham claims or defenses at an early stage of the litigation.91 Sections 1, 2 and 4 of Rule 35 of the Rules of Court on Summary Judgment, respectively provide: SECTION 1. Summary judgment for claimant.A party seeking to recover upon a claim, counterclaim, or cross-claim may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. SEC. 2. Summary judgment for defending party.A party against whom a claim, counterclaim or crossclaim is asserted is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his favor as to all or any part thereof. SEC. 4. Case not fully adjudicated on motion.If on motion under this Rule, judgment is not rendered upon the whole case or for all the reliefs sought and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel shall ascertain what material facts exist without substantial controversy and what are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy,

and directing such further proceedings in the action as are just. The facts so specified shall be deemed established, and the trial shall be conducted on the controverted facts accordingly. Clearly, petitioner COCOFEDs right to be heard had not been violated by the mere issuance of PSJ-A and PSJ-F before they can adduce their evidence. As it were, petitioners COCOFED et al. were able to present documentary evidence in conjunction with its "Class Action Omnibus Motion" dated February 23, 2001 where they appended around four hundred (400) documents including affidavits of alleged farmers. These petitioners manifested that said documents comprise their evidence to prove the farmers ownership of the UCPB shares, which were distributed in accordance with valid and existing laws.92 Lastly, COCOFED et al. even filed their own Motion for Separate Summary Judgment, an event reflective of their admission that there are no more factual issues left to be determined at the level of the Sandiganbayan. This act of filing a motion for summary judgment is a judicial admission against COCOFED under Section 26, Rule 130 which declares that the "act, declaration or omission of a party as to a relevant fact may be given in evidence against him." Viewed in this light, the Court has to reject petitioners self-serving allegations about being deprived the right to adduce evidence. III The right to speedy trial was not violated. This brings to the fore the alleged violation of petitioners right to a speedy trial and speedy disposition of the case. In support of their contention, petitioners cite Licaros v. Sandiganbayan,93 where the Court dismissed the case pending before the Sandiganbayan for violation of the accuseds right to a speedy trial. It must be clarified right off that the right to a speedy disposition of case and the accuseds right to a speedy trial are distinct, albeit kindred, guarantees, the most obvious difference being that a speedy disposition of cases, as provided in Article III, Section 16 of the Constitution, obtains regardless of the nature of the case: Section 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or administrative bodies. In fine, the right to a speedy trial is available only to an accused and is a peculiarly criminal law concept, while the broader right to a speedy disposition of cases may be tapped in any proceedings conducted by state agencies. Thus, in Licaros the Court dismissed the criminal case against the accused due to the palpable transgression of his right to a speedy trial. In the instant case, the appropriate right involved is the right to a speedy disposition of cases, the recovery of ill-gotten wealth being a civil suit. Nonetheless, the Court has had the occasion to dismiss several cases owing to the infringement of a partys right to a speedy disposition of cases.94 Dismissal of the case for violation of this right is the general rule. Bernat v. The Honorable Sandiganbayan (5th Division)95 expounds on the extent of the right to a speedy disposition of cases as follows: Section 16 of Article III of the Constitution guarantees the right of all persons to a "speedy disposition of their cases." Nevertheless, this right is deemed violated only when the proceedings are attended by vexatious, capricious and oppressive delays. Moreover, the determination of whether the delays are of said nature is relative and cannot be based on a mere mathematical reckoning of time. Particular regard must be taken of the facts and circumstances peculiar to each case. As a guideline, the Court in Dela Pea v. Sandiganbayan mentioned certain factors that should be considered and balanced, namely: 1) length of delay; 2) reasons for the delay; 3) assertion or failure to assert such right by the accused; and 4) prejudice caused by the delay. xxx xxx xxx
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While this Court recognizes the right to speedy disposition quite distinctly from the right to a speedy trial, and although this Court has always zealously espoused protection from oppressive and vexatious delays not attributable to the party involved, at the same time, we hold that a partys individual rights should not work against and preclude the peoples equally important right to public justice. In the instant case, three people died as a result of the crash of the airplane that the accused was flying. It appears to us that the delay in the disposition of the case prejudiced not just the accused but the people as well. Since the accused has completely failed to assert his right seasonably and inasmuch as the respondent judge was not in a position to dispose of the case on the merits we hold it proper and equitable to give the parties fair opportunity to obtain substantial justice in the premises. The more recent case of Tello v. People96 laid stress to the restrictive dimension to the right to speedy disposition of cases, i.e., it is lost unless seasonably invoked: In Bernat , the Court denied petitioners claim of denial of his right to a s peedy disposition of cases considering that [he] chose to remain silent for eight years before complaining of the delay in the disposition of his case. The Court ruled that petitioner failed to seasonably assert his right and he merely sat and waited from the time his case was submitted for resolution. In this case, petitioner similarly failed to assert his right to a speedy disposition of his case. He only invoked his right to a speedy disposition of cases after [his conviction]. Petitioners silence may be considered as a waiver of his right. An examination of the petitioners arguments and the cited indicia of delay would reveal the absence of any allegation that petitioners moved before the Sandiganbayan for the dismissal of the case on account of vexatious, capricious and oppressive delays that attended the proceedings. Following Tello, petitioners are deemed to have waived their right to a speedy disposition of the case. Moreover, delays, if any, prejudiced the Republic as well. What is more, the alleged breach of the right in question was not raised below. As a matter of settled jurisprudence, but subject to equally settled exception, an issue not raised before the trial court cannot be raised for the first time on appeal.97 The sporting idea forbidding one from pulling surprises underpins this rule. For these reasons, the instant case cannot be dismissed for the alleged violation of petitioners right to a speedy disposition of the case. IV Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468, are unconstitutional. The Court may pass upon the constitutionality of P.D. Nos. 755, 961 and 1468. Petitioners COCOFED et al. and Ursua uniformly scored the Sandiganbayan for abusing its power of judicial review and wrongly encroaching into the exclusive domain of Congress when it declared certain provisions of the coconut levy laws and PCA administrative issuances as unconstitutional. We are not persuaded. It is basic that courts will not delve into matters of constitutionality unless unavoidable, when the question of constitutionality is the very lis mota of the case, meaning, that the case cannot be legally resolved unless the constitutional issue raised is determined. This rule finds anchorage on the presumptive constitutionality of every enactment. Withal, to justify the nullification of a statute, there must be a clear and unequivocal breach of the Constitution. A doubtful or speculative infringement would simply not suffice.98 Just as basic is the precept that lower courts are not precluded from resolving, whenever warranted, constitutional questions, subject only to review by this Court. To Us, the present controversy cannot be peremptorily resolved without going into the constitutionality of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFED et al. and Ballares et al. predicate their claim over the sequestered shares and necessarily their cause on laws and martial law issuances assailed by the Republic on constitutional grounds. Indeed, as aptly observed by the Solicitor General, this case is for the recovery of shares grounded on the invalidity of certain enactments, which in turn is rooted in the shares being public in character, purchased as they were by funds raised by the taxing

and/or a mix of taxing and police powers of the state.99 As may be recalled, P.D. No. 755, under the policy-declaring provision, authorized the distribution of UCPB shares of stock free to coconut farmers. On the other hand, Section 2 of P.D. No. 755, hereunder quoted below, effectively authorized the PCA to utilize portions of the CCSF to pay the financial commitment of the farmers to acquire UCPB and to deposit portions of the CCSF levies with UCPB interest free. And as there also provided, the CCSF, CIDF and like levies that PCA is authorized to collect shall be considered as non-special or fiduciary funds to be transferred to the general fund of the Government, meaning they shall be deemed private funds. Section 2 of P.D. No. 755 reads: Section 2. Financial Assistance. To enable the coconut farmers to comply with their contractual obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the collections under the [CCSF] authorized to be levied by [PD] No. 232, as amended, to pay for the financial commitments of the coconut farmers under the said agreement and, except for [PCAs] budgetary requirements , all collections under the [CCSF] Levy and (50%) of the collections under the [CIDF] shall be deposited, interest free, with the said bank of the coconut farmers and such deposits shall not be withdrawn until the the bank has sufficient equity capital ; and since the operations, and activities of the [PCA] are all in accord with the present social economic plans and programs of the Government, all collections and levies which the [PCA] is authorized to levy and collect such as but not limited to the [CCS Levy] and the [CIDF] shall not be considered or construed, under any law or regulation, special and/or fiduciary funds and do not form part of the general funds of the national government within the contemplation of [P.D.] No. 711. (Emphasis supplied) A similar provision can also be found in Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468, which We shall later discuss in turn: P.D. No. 961 Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry Development Fund as well as all disbursements of said funds for the benefit of the coconut farmers as herein authorized shall not be construed or interpreted, under any law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment, or government share within the contemplation of P.D. 898, the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their own private capacities.100 (Emphasis Ours) P.D. No. 1468 Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all disbursement as herein authorized, shall not be construed or interpreted, under nay law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of PD 711; nor as subsidy, donation, levy government funded investment, or government share within the contemplation of PD 898, the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their private capacities.101 (Emphasis Ours.) In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos. 961 and 1468, could have been the only plausible means by which close to a purported million and a half coconut farmers could have acquired the said shares of stock. It has, therefore, become necessary to determine the validity of the authorizing law, which made the stock transfer and acquisitions possible. To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and 1468 in light of the constitutional proscription against the use of special funds save for the purpose it was established. Otherwise, petitioners claim of legitimate private ownership over UCPB shares and indirectly over SMC shares held by UCPBs subsidiaries will have no leg to stand on, P.D. No. 755 being the only law authorizing the distribution of the SMC and UCPB shares of stock to coconut farmers, and with the
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aforementioned provisions actually stating and holding that the coco levy fund shall not be considered as a special not even general fund, but shall be owned by the farmers in their private capacities.102 The Sandiganbayans ensuing ratiocination on the need to pass upon constitutional issues the Republic raised below commends itself for concurrence: This Court is convinced of the imperative need to pass upon the issues of constitutionality raised by Plaintiff. The issue of constitutionality of the provisions of P.D. No. 755 and the laws related thereto goes to the very core of Plaintiffs causes of action and defenses thereto. It will serve the best interest of justice to define this early the legal framework within which this case shall be heard and tried, taking into account the admission of the parties and the established facts, particularly those relating to the main substance of the defense of Lobregat, COCOFED, et al. and Ballares, et al., which is anchored on the laws being assailed by Plaintiff on constitutional grounds. xxx xxx xxx The Court is also mindful that lower courts are admonished to observe a becoming modesty in examining constitutional questions, but that they are nonetheless not prevented from resolving the same whenever warranted, subject only to review by the highest tribunal (Ynot v. Intermediate Appellate Court). xxx xxx xxx It is true that, as a general rule, the question of constitutionality must be raised at the earliest opportunity. The Honorable Supreme Court has clearly stated that the general rule admits of exceptions, thus: xxx xxx xxx For courts will pass upon a constitutional question only when presented before it in bona fide cases for determination, and the fact that the question has not been raised before is not a valid reason for refusing to allow it to be raised later. It has been held that the determination of a constitutional question is necessary whenever it is essential to the decision of the case as where the right of a party is founded solely on a statute, the validity of which is attacked. In the case now before us, the allegations of the Subdivided Complaint are consistent with those in the subject Motion, and they sufficiently raise the issue of constitutionality of the provisions of laws in question. The Third Amended Complaint (Subdivided) states: (ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government funds to advance his own private and commercial interests, Cojuangco, Jr. caused the issuance of PD 755 (a) declaring that the coconut levy funds shall not be considered special and fiduciary and trusts funds and do not form part of the general funds of the National Government, conveniently repealing for that purpose a series of coconut levy funds as special, fiduciary, trust and government funds. xxx xxx xxx (iv) To perpetuate his opportunity to deal with and make use the coconut levy funds to build his economic empire, Cojuangco, Jr. caused the issuance by Defendant Ferdinand E. Marcos of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB, interest free, to the prejudice of the government. The above-quoted allegations in the Third Amended Complaint (Subdivided) already question the "legitimacy" of the exercise by former President Marcos of his legislative authority when he issued P.D. Nos. 755 and 1468. The provision of Sec. 5, Art. III of P.D. 961 is substantially similar to the provisions of the aforesaid two [PDs]. P.D. No. 755 allegedly legitimized the "highly anomalous and irregular use and diversion of government funds to advance his [defendant Cojuangcos] own private and commercial interest." The issuance of the said [PD] which has the force and effect of a law can only be assailed on constitutional grounds. The merits of the grounds adverted to in the allegations of the Third Amended Complaint (Subdivided) can only be resolved by this Court by testing the questioned [PDs], which are considered part of the laws of the land.

As early as June 20, 1989, this Court in its Resolution expressed this Courts understanding of the import of the allegations of the complaint, as follows: "It is likewise alleged in the Complaint that in order to legitimize the diversion of funds, defendant Ferdinand E. Marcos issued the Presidential Decrees referred to by the movants. This is then the core of Plaintiffs complaint: that, insofar as the coconut levy is concerned, these decrees had been enacted as tools for the acquisition of ill-gotten wealth for specific favored individuals. "Even if Plaintiff may not have said so effectively, the complaint in fact disputes the legitimacy, and, if one pleases, the constitutionality of such enactments. "The issue is validly raised on the face of the complaint and defendants must respond to it." Since the question of constitutionality may be raised even on appeal if the determination of such a question is essential to the decision of the case, we find more reason to resolve this constitutional question at this stage of the proceedings, where the defense is grounded solely on the very laws the constitutionality of which are being questioned and where the evidence of the defendants would seek mainly to prove their faithful and good faith compliance with the said laws and their implementing rules and regulations.103 (Emphasis added.) The Courts rulings in COCOFED v. PCGG and Republic v. Sandiganbayan, as law of the case, are speciously invoked. To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners would sneak in the argument that the Court has, in three separate instances, upheld the validity, and thumbed down the Republics challenge to the constitutionality, of said laws imposing the different coconut levies and prescribing the uses of the fund collected. The separate actions of the Court, petitioners add, would conclude the Sandiganbayan on the issue of constitutionality of said issuances, following the law-of-thecase principle. Petitioners allege: Otherwise stated, the decision of this Honorable Court in the COCOFED Case overruling the strict public fund theory espoused by the Respondent Republic, upholding the propriety of the laws imposing the collections of the different Coconut Levies and expressly allowing COCOFED, et al., to prove that the Sequestered Assets have legitimately become their private properties had become final and immutable.104 Petitioners are mistaken. Yu v. Yu,105 as effectively reiterated in Vios v. Pantangco,106 defines and explains the ramifications of the law of the case principle as follows: Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. Otherwise put, the principle means that questions of law that have been previously raised and disposed of in the proceedings shall be controlling in succeeding instances where the same legal question is raised, provided that the facts on which the legal issue was predicated continue to be the facts of the case before the court. Guided by this definition, the law of the case principle cannot provide petitioners any comfort. We shall explain why. In the first instance, petitioners cite COCOFED v. PCGG.107 There, respondent PCGG questioned the validity of the coconut levy laws based on the limits of the states taxing and police power, as may be deduced from the ensuing observations of the Court: . Indeed, the Solicitor General suggests quite strongly that the laws operating or purporting to convert the coconut levy funds into private funds, are a transgression of the basic limitations for the licit exercise of the state's taxing and police powers, and that certain provisions of said laws are merely clever
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stratagems to keep away government audit in order to facilitate misappropriation of the funds in question. The utilization and proper management of the coconut levy funds, [to acquire shares of stocks for coconut farmers and workers] raised as they were by the States police and taxing power are certainly the concern of the Government. The coconut levy funds are clearly affected with public interest. Until it is demonstrated satisfactorily that they have legitimately become private funds, they must prima facie be accounted subject to measures prescribed in EO Nos. 1, 2, and 14 to prevent their concealment, dissipation, etc.108 [Words in bracket added.] The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the shares of stock bought with the coconut levy funds to coconut farmers. This must be distinguished with the issues in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of Article VI of the 1987 Constitution as well as to whether P.D. No. 755 constitutes undue delegation of legislative power. Clearly, the issues in both sets of cases are so different as to preclude the application of the law of the case rule. The second and third instances that petitioners draw attention to refer to the rulings in Republic v. Sandiganbayan, where the Court by Resolution of December 13, 1994, as reiterated in another resolution dated March 26, 1996, resolved to deny the separate motions of the Republic to resolve legal questions on the character of the coconut levy funds, more particularly to declare as unconstitutional (a) coconut levies collected pursuant to various issuances as public funds and (b) Article III, Section 5 of P.D. No. 1468. Prescinding from the foregoing considerations, petitioners would state: "Having filed at least three (3) motions seeking, among others, to declare certain provisions of the Coconut Levy Laws unconstitutional and having been rebuffed all three times by this Court," the Republic - and necessarily Sandiganbayan "should have followed as [they were] legally bound by this Courts prior determination" on that above issue of constitutionality under the doctrine of Law of the Case. Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the coconut levy laws or some of their provisions. It did not declare that the UCPB shares acquired with the use of coconut levy funds have legitimately become private. The coconut levy funds are in the nature of taxes and can only be used for public purpose. Consequently, they cannot be used to purchase shares of stocks to be given for free to private individuals. Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the States inherent power of taxation. As We wrote in Republic v. COCOFED:109 Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on its definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into these elements for the following reasons: (a) They were generated by virtue of statutory enactments imposed on the coconut farmers requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut Consumer[s] Stabilization Fund (CCSF), mandated the following: "a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut products, shall be imposed on every first sale, in accordance with the mechanics established under RA 6260, effective at the start of business hours on August 10, 1973.

"The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government." The coco levies were further clarified in amendatory laws, specifically PD No. 961 and PD No. 1468 in this wise: "The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products. The levy shall be paid by such copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products under such rules and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority, the current levy being collected shall be continued." Like other tax measures, they were not voluntary payments or donations by the people. They were enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276: "3. Any person or firm who violates any provision of this Decree or the rules and regulations promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or suffer cancellation of licenses to operate, or both, at the discretion of the Court." Such penalties were later amended thus: . (b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative authorities of the State. Indeed, the CCSF was collected under PD No. 276." (c) They were clearly imposed for a public purpose. There is absolutely no question that they were collected to advance the governments avowed policy of protecting the coconut industry. This Court takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our nation, and coconuts and their byproducts occupy a leading position among the countrys export products. Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State. Even if the money is allocated for a special purpose and raised by special means, it is still public in character. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises "were organized and financed with revenues derived from coconut levies imposed under a succession of law of the late dictatorship with deposed Ferdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resulting coconut industry monopoly." The Court continued: ". It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the States concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability.110 (Emphasis Ours) We have ruled time and again that taxes are imposed only for a public purpose.111 "They cannot be used for purely private purposes or for the exclusive benefit of private persons."112 When a law imposes taxes or levies from the public, with the intent to give undue benefit or advantage to private persons, or the promotion of private enterprises, that law cannot be said to satisfy the requirement of public purpose.113 In Gaston v. Republic Planters Bank, the petitioning sugar producers, sugarcane planters and millers sought the distribution of the shares of stock of the Republic Planters Bank, alleging that they are the true beneficial owners thereof.114 In that case, the investment, i.e., the purchase of the said bank, was funded by the deduction of PhP 1.00 per picul from the sugar proceeds of the sugar producers pursuant to P.D. No. 388.115 In ruling against the petitioners, the Court held that to rule in their favor would contravene the general principle that revenues received from the imposition of taxes or levies "cannot be used for purely private purposes or for the exclusive benefit of private persons."116 The Court amply
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reasoned that the Stabilization Fund must "be utilized for the benefit of the entire sugar industry, and all its components, stabilization of the domestic market including foreign market, the industry being of vital importance to the countrys economy and to national interest."117 Similarly in this case, the coconut levy funds were sourced from forced exactions decreed under P.D. Nos. 232, 276 and 582, among others,118 with the end-goal of developing the entire coconut industry.119 Clearly, to hold therefore, even by law, that the revenues received from the imposition of the coconut levies be used purely for private purposes to be owned by private individuals in their private capacity and for their benefit, would contravene the rationale behind the imposition of taxes or levies. Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of special funds into a private fund for the benefit of private individuals. In the same vein, We cannot subscribe to the idea of what appears to be an indirect if not exactly direct conversion of special funds into private funds, i.e., by using special funds to purchase shares of stocks, which in turn would be distributed for free to private individuals. Even if these private individuals belong to, or are a part of the coconut industry, the free distribution of shares of stocks purchased with special public funds to them, nevertheless cannot be justified. The ratio in Gaston,120 as expressed below, applies mutatis mutandis to this case: The stabilization fees in question are levied by the State for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market." The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them as state funds even though they are held for a special purpose. That the fees were collected from sugar producers,[etc.], and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are benefited from the expenditure of the funds derived from it. .121 (Emphasis Ours.) In this case, the coconut levy funds were being exacted from copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products.122 Likewise so, the funds here were channeled to the purchase of the shares of stock in UCPB. Drawing a clear parallelism between Gaston and this case, the fact that the coconut levy funds were collected from the persons or entities in the coconut industry, among others, does not and cannot entitle them to be beneficial owners of the subject funds or more bluntly, owners thereof in their private capacity. Parenthetically, the said private individuals cannot own the UCPB shares of stocks so purchased using the said special funds of the government.123 Coconut levy funds are special public funds of the government. Plainly enough, the coconut levy funds are public funds. We have ruled in Republic v. COCOFED that the coconut levy funds are not only affected with public interest; they are prima facie public funds.124 In fact, this pronouncement that the levies are government funds was admitted and recognized by respondents, COCOFED, et al., in G.R. No. 147062-64.125 And more importantly, in the same decision, We clearly explained exactly what kind of government fund the coconut levies are. We were categorical in saying that coconut levies are treated as special funds by the very laws which created them: Finally and tellingly, the very laws governing the coconut levies recognize their public character. Thus, the third Whereas clause of PD No. 276 treats them as special funds for a specific public purpose. Furthermore, PD No. 711 transferred to the general funds of the State all existing special and fiduciary funds including the CCSF. On the other hand, PD No. 1234 specifically declared the CCSF as a special fund for a special purpose, which should be treated as a special account in the National Treasury.126 (Emphasis Ours.) If only to stress the point, P.D. No. 1234 expressly stated that coconut levies are special funds to be remitted to the Treasury in the General Fund of the State, but treated as Special Accounts:

Section 1. All income and collections for Special or Fiduciary Funds authorized by law shall be remitted to the Treasury and treated as Special Accounts in the General Fund, including the following: (a) [PCA] Development Fund, including all income derived therefrom under Sections 13 and 14 of [RA] No. 1145; Coconut Investments Fund under Section 8 of [RA] No. 6260, including earnings, profits, proceeds and interests derived therefrom; Coconut Consumers Stabilization Funds under Section 3-A of PD No. 232, as inserted by Section 3 of P.D. No. 232, as inserted by Section 2 of P.D. No. 583; and all other fees accruing to the [PCA] under the provisions of Section 19 of [RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and all other income accruing to the [PCA] under existing laws.127 (Emphasis Ours) Moreover, the Court, in Gaston, stated the observation that the character of a stabilization fund as a special fund "is emphasized by the fact that the funds are deposited in the Philippine National Bank [PNB] and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law."128 Similarly in this case, Sec.1 (a) of P.D. No. 276 states that the proceeds from the coconut levy shall be deposited with the PNB, then a government bank, or any other government bank under the account of the CCSF, as a separate trust fund, which shall not form part of the governments general fund.129 And even assuming arguendo that the coconut levy funds were transferred to the general fund pursuant to P.D. No. 1234, it was with the specific directive that the same be treated as special accounts in the general fund.130 The coconut levy funds can only be used for the special purpose and the balance thereof should revert back to the general fund. Consequently, their subsequent reclassification as a private fund to be owned by private individuals in their private capacities under P.D. Nos. 755, 961 and 1468 are unconstitutional. To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution, restating a general principle on taxation, enjoins the disbursement of a special fund in accordance with the special purpose for which it was collected, the balance, if there be any, after the purpose has been fulfilled or is no longer forthcoming, to be transferred to the general funds of the government, thus: Section 29(3). (3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Emphasis Ours) Correlatively, Section 2 of P.D. No. 755 clearly states that: Section 2. Financial Assistance. To enable the coconut farmers to comply with their contractual obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the collections under the Coconut Consumers Stabilization Fund [CCSF] authorized to be levied by [P.D.] 232, as amended, to pay for the financial commitments of the coconut farmers under the said agreement. and the Coconut Industry Development Fund as prescribed by Presidential Decree No. 582 shall not be considered or construed, under any law or regulation, special and/or fiduciary funds and do not form part of the general funds of the national government within the contemplation of Presidential Decree No. 711. (Emphasis Ours) Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos. 961 and 1468 provides that the CCSF shall not be construed by any law as a special and/or trust fund, the stated intention being that actual ownership of the said fund shall pertain to coconut farmers in their private capacities.131 Thus, in order to determine whether the relevant provisions of P.D. Nos. 755, 961 and 1468 complied with Article VI, Section 29 (3) of the 1987 Constitution, a look at the public policy or the purpose for which the CCSF levy was imposed is necessary. The CCSF was established by virtue of P.D. No. 276 wherein it is stated that:

WHEREAS, an escalating crisis brought about by an abnormal situation in the world market for fats and oils has resulted in supply and price dislocations in the domestic market for coconut-based goods, and has created hardships for consumers thereof; WHEREAS, the representatives of the coconut industry have proposed the implementation of an industry-financed stabilization scheme which will permit socialized pricing of coconut-based commodities; WHEREAS, it is the policy of the State to promote the welfare and economic well-being of the consuming public; . 1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is hereby authorized to formulate and immediately implement a stabilization scheme for coconut-based consumer goods, along the following general guidelines: (a) .The proceeds of the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the CCSF as a separate trust fund. (b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by the Price Control Council.: . As couched, P.D. No. 276 created and exacted the CCSF "to advance the governments avowed policy of protecting the coconut industry."132 Evidently, the CCSF was originally set up as a special fund to support consumer purchases of coconut products. To put it a bit differently, the protection of the entire coconut industry, and even more importantly, for the consuming public provides the rationale for the creation of the coconut levy fund. There can be no quibbling then that the foregoing provisions of P.D. No. 276 intended the fund created and set up therein not especially for the coconut farmers but for the entire coconut industry, albeit the improvement of the industry would doubtless redound to the benefit of the farmers. Upon the foregoing perspective, the following provisions of P.D. Nos. 755, 961 and 1468 insofar as they declared, as the case may be, that: "[the coconut levy] fund and the disbursements thereof [shall be] authorized for the benefit of the coconut farmers and shall be owned by them in their private capacities;"133 or the coconut levy fund shall not be construed by any law to be a special and/or fiduciary fund, and do not therefore form part of the general fund of the national government later on;134 or the UCPB shares acquired using the coconut levy fund shall be distributed to the coconut farmers for free,135 violated the special public purpose for which the CCSF was established. In sum, not only were the challenged presidential issuances unconstitutional for decreeing the distribution of the shares of stock for free to the coconut farmers and, therefore, negating the public purpose declared by P.D. No. 276, i.e., to stabilize the price of edible oil136 and to protect the coconut industry.137 They likewise reclassified, nay treated, the coconut levy fund as private fund to be disbursed and/or invested for the benefit of private individuals in their private capacities, contrary to the original purpose for which the fund was created. To compound the situation, the offending provisions effectively removed the coconut levy fund away from the cavil of public funds which normally can be paid out only pursuant to an appropriation made by law.138 The conversion of public funds into private assets was illegally allowed, in fact mandated, by these provisions. Clearly therefore, the pertinent provisions of P.D. Nos. 755, 961 and 1468 are unconstitutional for violating Article VI, Section 29 (3) of the Constitution. In this context, the distribution by PCA of the UCPB shares purchased by means of the coconut levy fund a special fund of the government to the coconut farmers, is therefore void. We quote with approval the Sandiganbayans reasons for declaring the provisions of P.D. Nos. 755, 961 and 1468 as unconstitutional: It is now settled, in view of the ruling in Republic v. COCOFED, et al., supra, that "Coconut levy funds are raised with the use of the police and taxing powers of the State;" that "they are levies imposed by the
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State for the benefit of the coconut industry and its farmers" and that "they were clearly imposed for a public purpose." This public purpose is explained in the said case, as follows: . c) They were clearly imposed for a public purpose. There is absolutely no question that they were colleted to advance the governments avowed policy of protecting the coconut industry. "Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State, as held in Caltex Philippines v. COA and Osmea v. Orbos. xxx xxx xxx The avowed public purpose for the disbursement of the CCSF is contained in the perambulatory clauses and Section 1 of P.D. No. 755. The imperativeness of enunciating the public purpose of the expenditure of funds raised through taxation is underscored in the case of Pascual v. The Secretary of Public Works and Communications, et al, supra, which held: "As regards the legal feasibility of appropriating public funds for a private purpose the principle according to Ruling Case Law, is this: It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose it is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interests to be affected nor the degree to which the general advantage of the community, and thus the public welfare may be ultimately benefited by their promotion. Incidental advantage to the public or to the state, which results from the promotion of private interests and the prosperity of private enterprises or business, does not justify their aid by the use of public money. 25 R.L.C. pp. 398-400) "The rule is set forth in Corpus Juris Secundum in the following language: xxx xxx xxx The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interests, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. (81 C.J.S. p. 1147) "Needless to say, this Court is fully in accord with the foregoing views. Besides, reflecting as they do, the established jurisprudence in the United States, after whose constitutional system ours has been patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law." The gift of funds raised by the exercise of the taxing powers of the State which were converted into shares of stock in a private corporation, slated for free distribution to the coconut farmers, can only be accorded constitutional sanction if it will directly serve the public purpose declared by law.139 Section 1 of P.D. No. 755, as well as PCA Administrative Order No. 1, Series of 1975 (PCA AO 1), and Resolution No. 074-75, are invalid delegations of legislative power. Petitioners argue that the anti-graft court erred in declaring Section 1 of PD 755, PCA Administrative Order No. 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of alleged but unproven and unsubstantiated flaws in their implementation. Additionally, they explain that said court erred in concluding that Section 1 of PD No. 755 constitutes an undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution of the UCPB shares to the farmers. These propositions are meritless. The assailed PSJ-A noted the operational distribution nightmare faced by PCA and the mode of distribution of UCPB shares set in motion by that agency left much room for diversion. Wrote the Sandiganbayan: The actual distribution of the bank shares was admittedly an enormous operational problem which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided to it
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by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), "Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder discloses how the undistributed shares of stocks due to anonymous coconut farmers or payors of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank: "Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain undistributed shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be apportioned among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated. The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same problem of distribution of the bank shares.: xxx xxx xxx Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an additional share for each share owned by them and by converting their fractional shares into full shares. The rest of the shares were then transferred to a private organization, the COCOFED, for distribution to those determined to be "bona fide coconut farmers" who had "not received shares of stock of the Bank." . The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had complete authority to define who are the coconut farmers and to decide as to who among the coconut farmers shall be given the gift of bank shares; how many shares shall be given to them, and what basis it shall use to determine the amount of shares to be distributed for free to the coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm. Regarding the second requisite of standard, it is settled that legislative standard need not be expressed. We observed, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations 07478, did not take into consideration the accomplishment of the public purpose or the national standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the coconut industry and as a consequence thereof, to make the coconut farmers "participants in and beneficiaries" of such growth and development. The said PCA issuances did nothing more than provide guidelines as to whom the UCPB shares were to be distributed and how many bank shares shall be allotted to the beneficiaries. There was no mention of how the distributed shares shall be used to achieve exclusively or at least directly or primarily the aim or public purpose enunciated by P.D. No. 755. The numerical or quantitative distribution of shares contemplated by the PCA regulations which is a condition for the validly of said administrative issuances. There was a reversal of priorities. The narrow private interests prevailed over the laudable objectives of the law. However, under the May 25, 1975 agreement implemented by the PCA issuances, the PCA acquired only 64.98% of the shares of the bank and even the shares covering the said 64.98% were later on transferred to non-coconut farmers." The distribution for free of the shares of stock of the CIIF Companies is tainted with the abovementioned constitutional infirmities of the PCA administrative issuances. In view of the foregoing, we cannot consider the provision of P.D. No. 961 and P.D. No. 1468 and the implementing regulations issued by the PCA as valid legal basis to hold that assets acquired with public funds have legitimately become private properties." 140 (Emphasis added.) P.D. No. 755 involves an invalid delegation of legislative power, a concept discussed in Soriano v. Laguardia,141 citing the following excerpts from Edu v. Ericta: It is a fundamental that Congress may not delegate its legislative power. What cannot be delegated is the authority to make laws and to alter and repeal them; the test is the completeness of the statute in all its term and provisions when it leaves the hands of the legislature. To determine whether or not there is an undue delegation of legislative power, the inquiry must be directed to the scope and

definiteness of the measure enacted. The legislature does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his authority. To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations.142 (Emphasis supplied) Jurisprudence is consistent as regards the two tests, which must be complied with to determine the existence of a valid delegation of legislative power. In Abakada Guro Party List, et al. v. Purisima,143 We reiterated the discussion, to wit: Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried out or implemented by the delegate. It lays down a sufficient standard when it provides adequate guidelines or limitations in the law to map out the boundaries of the delegates authority and prevent the delegation from running riot. To be sufficient, the standard must specify the limits of the delegates authority, announce the legislative policy and identify the conditions under which it is to be implemented. In the instant case, the requisite standards or criteria are absent in P.D. No. 755. As may be noted, the decree authorizes the PCA to distribute to coconut farmers, for free, the shares of stocks of UCPB and to pay from the CCSF levy the financial commitments of the coconut farmers under the Agreement for the acquisition of such bank. Yet, the decree does not even state who are to be considered as coconut farmers. Would, say, one who plants a single coconut tree be already considered a coconut farmer and, therefore, entitled to own UCPB shares? If so, how many shares shall be given to him? The definition of a coconut farmer and the basis as to the number of shares a farmer is entitled to receive for free are important variables to be determined by law and cannot be left to the discretion of the implementing agency. Moreover, P.D. No. 755 did not identify or delineate any clear condition as to how the disposition of the UCPB shares or their conversion into private ownership will redound to the advancement of the national policy declared under it. To recall, P.D. No. 755 seeks to "accelerate the growth and development of the coconut industry and achieve a vertical integration thereof so that coconut farmers will become participants in, and beneficiaries of, such growth and development."144 The Sandiganbayan is correct in its observation and ruling that the said law gratuitously gave away public funds to private individuals, and converted them exclusively into private property without any restriction as to its use that would reflect the avowed national policy or public purpose. Conversely, the private individuals to whom the UCPB shares were transferred are free to dispose of them by sale or any other mode from the moment of their acquisition. In fact and true enough, the Sandiganbayan categorically stated in its Order dated March 11, 2003,145 that out of the 72.2% shares and increased capital stock of the FUB (later UCPB) allegedly covered by the May 25, 1975 Agreement,146 entirely paid for by PCA, 7.22% were given to Cojuangco and the remaining 64.98%, which were originally held by PCA for the benefit of the coconut farmers, were later sold or transferred to non-coconut farmers.147 Even the proposed rewording of the factual allegations of Lobregat, COCOFED, et al. and Ballares, et al., reveals that indeed, P.D. No. 755 did not provide for any guideline, standard, condition or restriction by which the said shares shall be distributed to the coconut farmers that would ensure that the same will be undertaken to accelerate the growth and development of the coconut industry pursuant to its national policy. The proposed rewording of admissions reads: There were shares forming part of the aforementioned 64.98% which were, after their distribution, for free, to the coconut farmers as required by P.D. No. 755, sold or transferred respectively by individual coconut farmers who were then the registered stockholders of those UCPB shares to non-coconut farmers.148
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Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte blanche to distribute to coconut farmers UCPB shares at the level it may determine, as well as the full disposition of such shares to private individuals in their private capacity without any conditions or restrictions that would advance the laws national policy or public purpose, present a case of undue delegation of legislative power. As such, there is even no need to discuss the validity of the administrative orders and resolutions of PCA implementing P.D. No. 755. Water cannot rise higher than its source. Even so, PCA AO 1 and PCA Resolution No. 078-74, are in themselves, infirm under the undue delegation of legislative powers. Particularly, Section 9 of PCA AO I provides: SECTION 9. Fractional and Undistributed Shares Fractional shares and shares which remain undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of COCOFUND receipts in the name of an unqualified individual, after the final distribution is made on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be appointed among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated. The foregoing provision directs and authorizes the distribution of fractional and undistributed shares as a consequence of the failure of the coconut farmers with Coco Fund receipts to register them, even without a clear mandate or instruction on the same in any pertinent existing law. PCA Resolution No. 078-74 had a similar provision, albeit providing more detailed information. The said Resolution identified 51,200,806 shares of the bank that remained undistributed and PCA devised its own rules as to how these undistributed and fractional shares shall be disposed of, notwithstanding the dearth as to the standards or parameters in the laws which it sought to implement. Eventually, what happened was that, as correctly pointed out by the Sandiganbayan, the PCA gave a "bonanza" to supposed coconut farmers who already got their bank shares, by giving them extra shares according to the rules established on its own by the PCA under PCA AO 1 and Resolution No. 07874. Because of the lack of adequate guidelines under P.D. No. 755 as to how the shares were supposed to be distributed to the coconut farmers, the PCA thus assumed that it could decide for itself how these shares will be distributed. This obviously paved the way to playing favorites, if not allowing outright shenanigans. In this regard, this poser raised in the Courts February 16, 1993 Resolution in G.R. No. 96073 is as relevant then as it is now: "How is it that shares of stocks in such entities which was organized and financed by revenues derived from coconut levy funds which were imbued with public interest ended up in private hands who are not farmers or beneficiaries; and whether or not the holders of said stock, who in one way or another had had some part in the collection, administration, disbursement or other disposition of the coconut levy funds were qualified to acquire stock in the corporations formed and operated from these funds." 149 Likewise, the said PCA issuances did not take note of the national policy or public purpose for which the coconut levy funds were imposed under P.D. No. 755, i.e. the acceleration of the growth and development of the entire coconut industry, and the achievement of a vertical integration thereof that could make the coconut farmers participants in, and beneficiaries of, such growth and development.150 Instead, the PCA prioritized the coconut farmers themselves by fully disposing of the bank shares, totally disregarding the national policy for which the funds were created. This is clearly an undue delegation of legislative powers. With this pronouncement, there is hardly any need to establish that the sequestered assets are ill-gotten wealth. The documentary evidence, the P.D.s and Agreements, prove that the transfer of the shares to the more than one million of supposed coconut farmers was tainted with illegality. Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468 violate Article IX (D) (2) of the 1987 Constitution.

Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut levy funds from the coffer of the public funds, or, to be precise, privatized revenues derived from the coco levy. Particularly, the aforesaid Section 5 provides: Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry Development fund as well as all disbursements of said funds for the benefit of the coconut farmers as herein authorized shall not be construed or interpreted, under any law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment, or government share within the contemplation of P.D. 898 the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned in their own private capacity.151 (Emphasis Ours) The same provision is carried over in Article III, Section 5 of P.D. No. 1468, the Revised Coconut Industry Code: These identical provisions of P.D. Nos. 961 and 1468 likewise violate Article IX (D), Section 2(1) of the Constitution, defining the powers and functions of the Commission on Audit ("COA") as a constitutional commission: Sec. 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries;.152 (Emphasis Ours) A similar provision was likewise previously found in Article XII (D), Section 2 (1) of the 1973 Constitution, thus: Section 2. The Commission on Audit shall have the following powers and functions: (1) Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the revenues and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations; keep the general accounts of the government and, for such period as may be provided by law, preserve the vouchers pertaining thereto; and promulgate accounting and auditing rules and regulations including those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or use of funds and property.153 (Emphasis Ours) The Constitution, by express provision, vests the COA with the responsibility for State audit.154 As an independent supreme State auditor, its audit jurisdiction cannot be undermined by any law. Indeed, under Article IX (D), Section 3 of the 1987 Constitution, "[n]o law shall be passed exempting any entity of the Government or its subsidiary in any guise whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit."155 Following the mandate of the COA and the parameters set forth by the foregoing provisions, it is clear that it has jurisdiction over the coconut levy funds, being special public funds. Conversely, the COA has the power, authority and duty to examine, audit and settle all accounts pertaining to the coconut levy funds and, consequently, to the UCPB shares purchased using the said funds. However, declaring the said funds as partaking the nature of private funds, ergo subject to private appropriation, removes them from the coffer of the public funds of the government, and consequently renders them impervious to the COA audit jurisdiction. Clearly, the pertinent provisions of P.D. Nos. 961 and 1468 divest the COA of its constitutionally-mandated function and undermine its constitutional independence. The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a classic example of an investment of public funds. The conversion of these special public funds into private funds by allowing private individuals to own them in their private capacities is something else. It effectively
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deprives the COA of its constitutionally-invested power to audit and settle such accounts. The conversion of the said shares purchased using special public funds into pure and exclusive private ownership has taken, or will completely take away the said funds from the boundaries with which the COA has jurisdiction. Obviously, the COA is without audit jurisdiction over the receipt or disbursement of private property. Accordingly, Article III, Section 5 of both P.D. Nos. 961 and 1468 must be struck down for being unconstitutional, be they assayed against Section 2(1), Article XII (D) of the 1973 Constitution or its counterpart provision in the 1987 Constitution. The Court, however, takes note of the dispositive portion of PSJ-A, which states that:156 xxx xxx xxx 2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered special and/or fiduciary funds nor part of the general funds of the national government and similar provisions of Sec. 3, Art. III, P.D. 961 and Sec. 5, Art. III, P.D. 1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). (Emphasis Ours) xxx xxx xxx However, a careful reading of the discussion in PSJ-A reveals that it is Section 5 of Article III of P.D. No. 961 and not Section 3 of said decree, which is at issue, and which was therefore held to be contrary to the Constitution. The dispositive portion of the said PSJ should therefore be corrected to reflect the proper provision that was declared as unconstitutional, which is Section 5 of Article III of P.D. No. 961 and not Section 3 thereof. V The CIIF Companies and the CIIF Block of SMC shares are public funds/assets From the foregoing discussions, it is fairly established that the coconut levy funds are special public funds. Consequently, any property purchased by means of the coconut levy funds should likewise be treated as public funds or public property, subject to burdens and restrictions attached by law to such property. In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds.157 On the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil Mills.158 Conversely, these companies were acquired using or whose capitalization comes from the coconut levy funds. However, as in the case of UCPB, UCPB itself distributed a part of its investments in the CIIF oil mills to coconut farmers, and retained a part thereof as administrator.159 The portion distributed to the supposed coconut farmers followed the procedure outlined in PCA Resolution No. 033-78.160 And as the administrator of the CIIF holding companies, the UCPB authorized the acquisition of the SMC shares.161 In fact, these companies were formed or organized solely for the purpose of holding the SMC shares.162 As found by the Sandiganbayan, the 14 CIIF holding companies used borrowed funds from the UCPB to acquire the SMC shares in the aggregate amount of P1.656 Billion.163 Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy funds funds, which have been established to be public in character it goes without saying that these acquired corporations and assets ought to be regarded and treated as government assets. Being government properties, they are accordingly owned by the Government, for the coconut industry pursuant to currently existing laws.164 It may be conceded hypothetically, as COCOFED et al. urge, that the 14 CIIF holding companies acquired the SMC shares in question using advances from the CIIF companies and from UCPB loans. But there can be no gainsaying that the same advances and UCPB loans are public in character, constituting as they do assets of the 14 holding companies, which in turn are wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized, capitalized and/or financed using coconut levy funds. In net effect, the CIIF block of SMC shares are simply the fruits of the coconut levy funds acquired at the expense of the coconut industry. In Republic v. COCOFED,165 the en banc Court, speaking

through Justice (later Chief Justice) Artemio Panganiban, stated: "Because the subject UCPB shares were acquired with government funds, the government becomes their prima facie beneficial and true owner." By parity of reasoning, the adverted block of SMC shares, acquired as they were with government funds, belong to the government as, at the very least, their beneficial and true owner. We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier discussed, reiterating our holding in Republic v. COCOFED, the States avowed policy or purpose in creating the coconut levy fund is for the development of the entire coconut industry, which is one of the major industries that promotes sustained economic stability, and not merely the livelihood of a significant segment of the population.166 Accordingly, We sustain the ruling of the Sandiganbayan in CC No. 0033-F that the CIIF companies and the CIIF block of SMC shares are public funds necessary owned by the Government. We, however, modify the same in the following wise: These shares shall belong to the Government, which shall be used only for the benefit of the coconut farmers and for the development of the coconut industry. Sandiganbayan did not err in ruling that PCA (AO) No. 1, Series of 1975 and PCA rules and regulations 074-78 did not comply with the national standard or policy of P.D. No. 755. According to the petitioners, the Sandiganbayan has identified the national policy sought to be enhanced by and expressed under Section 1 in relation to Section 2 of P.D. No. 755. Yet, so petitioners argue, that court, with grave abuse of discretion, disregarded such policy and thereafter, ruled that Section 1 in relation to Section 2 of P.D. No. 755 is unconstitutional as the decree failed to promote the purpose for which it was enacted in the first place. We are not persuaded. The relevant assailed portion of PSJ-A states: We observe, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations 074-78, did not take into consideration the accomplishment of the public purpose or the national standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the coconut industry and as a consequence thereof, to make the coconut farmers "participants in and beneficiaries" of such growth and development. It is a basic legal precept that courts do not look into the wisdom of the laws passed. The principle of separation of powers demands this hands-off attitude from the judiciary. Saguiguit v. People167 teaches why: [W]hat the petitioner asks is for the Court to delve into the policy behind or wisdom of a statute, which, under the doctrine of separation of powers, it cannot do,. Even with the best of motives, the Court can only interpret and apply the law and cannot, despite doubts about its wisdom, amend or repeal it. Courts of justice have no right to encroach on the prerogatives of lawmakers, as long as it has not been shown that they have acted with grave abuse of discretion. And while the judiciary may interpret laws and evaluate them for constitutional soundness and to strike them down if they are proven to be infirm, this solemn power and duty do not include the discretion to correct by reading into the law what is not written therein. We reproduce the policy-declaring provision of P.D. No. 755, thus: Section 1. Declaration of National Policy. It is hereby declared that the policy of the State is to provide readily available credit facilities to the coconut farmers at preferential rates; that this policy can be efficiently realized by the implementation of the "Agreement for the Acquisition of a Commercial Bank for the benefit of the Coconut Farmers" executed by the [PCA], the terms of which "Agreement" are hereby incorporated by reference; and that the [PCA] is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under such rules and regulations it may promulgate.
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P.D. No. 755 having stated in no uncertain terms that the national policy of providing cheap credit facilities to coconut farmers shall be achieved with the acquisition of a commercial bank, the Court is without discretion to rule on the wisdom of such an undertaking. It is abundantly clear, however, that the Sandiganbayan did not look into the policy behind, or the wisdom of, P.D. No. 755. In context, it did no more than to inquire whether the purpose defined in P.D. No. 755 and for which the coco levy fund was established would be carried out, obviously having in mind the (a) dictum that the power to tax should only be exercised for a public purpose and (b) command of Section 29, paragraph 3 of Article VI of the 1987 Constitution that: (3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Emphasis supplied) For the above reason, the above-assailed action of the Sandiganbayan was well within the scope of its sound discretion and mandate. Moreover, petitioners impute on the anti-graft court the commission of grave abuse of discretion for going into the validity of and in declaring the coco levy laws as unconstitutional, when there were still factual issues to be resolved in a full blown trial as directed by this Court.168 Petitioners COCOFED and the farmer representatives miss the point. They acknowledged that their alleged ownership of the sequestered shares in UCPB and SMC is predicated on the coco levy decrees. Thus, the legality and propriety of their ownership of these valuable assets are directly related to and must be assayed against the constitutionality of those presidential decrees. This is a primordial issue, which must be determined to address the validity of the rest of petitioners claims of ownership. Verily, the Sandiganbayan did not commit grave abuse of discretion, a phrase which, in the abstract, denotes the idea of capricious or whimsical exercise of judgment or the exercise of power in an arbitrary or despotic manner by reason of passion or personal hostility as to be equivalent to having acted without jurisdiction.169 The Operative Fact Doctrine does not apply Petitioners assert that the Sandiganbayans refusal to recognize the vested rights purportedly created under the coconut levy laws constitutes taking of private property without due process of law. They reason out that to accord retroactive application to a declaration of unconstitutionality would be unfair inasmuch as such approach would penalize the farmers who merely obeyed then valid laws. This contention is specious. In Yap v. Thenamaris Ships Management,170 the Operative Fact Doctrine was discussed in that: As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is supported by Article 7 of the Civil Code, which provides: Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products, Inc. v. Fertiphil Corporation, we held: The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it.171

In that case, this Court further held that the Operative Fact Doctrine will not be applied as an exception when to rule otherwise would be iniquitous and would send a wrong signal that an act may be justified when based on an unconstitutional provision of law.172 The Court had the following disquisition on the concept of the Operative Fact Doctrine in the case of Chavez v. National Housing Authority:173 The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus: As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution." It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive. Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (Emphasis supplied.) The principle was further explicated in the case of Rieta v. People of the Philippines, thus: In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.
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Moreover, the Court ruled in Chavez that: Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no reason to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the executive department lent validity to the implementation of the Project. The SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the "operative fact" principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated.174 In the case at bar, the Court rules that the dictates of justice, fairness and equity do not support the claim of the alleged farmer-owners that their ownership of the UCPB shares should be respected. Our reasons: 1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares distributed to them. It was not successfully refuted that said claimants were issued receipts under R.A. 6260 for the payment of the levy that went into the Coconut Investment Fund (CIF) upon which shares in the "Coconut Investment Company" will be issued. The Court upholds the finding of the Sandiganbayan that said investment company is a different corporate entity from the United Coconut Planters Bank. This was in fact admitted by petitioners during the April 17, 2001 oral arguments in G.R. Nos. 147062-64.175 The payments under R.A. 6260 cannot be equated with the payments under P.D. No. 276, the first having been made as contributions to the Coconut Investment Fund while the payments under P.D. No. 276 constituted the Coconut Consumers Stabilization Fund ("CCSF"). R.A. 6260 reads: Section 2. Declaration of Policy. It is hereby declared to be the national policy to accelerate the development of the coconut industry through the provision of adequate medium and long-term financing for capital investment in the industry, by instituting a Coconut Investment fund capitalized and administered by coconut farmers through a Coconut Investment Company.176 P.D. No. 276 provides: 1. In addition to its powers granted under Presidential Decree No. 232, the Philippine Coconut Authority is hereby authorized to formulate and immediately implement a stabilization scheme for coconut-based consumer goods, along the following general guidelines: (a) . The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government. (b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by the Price Control Council, under rules and regulations to be promulgated by the Philippine Consumers Stabilization Committee.177 The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the distinction between the CIF levy payments under R.A. 6260 and the CCSF levy paid pursuant to P.D. 276, thusly: It must be remembered that the receipts issued under R.A. No. 6260 were to be registered in exchange for shares of stock in the Coconut Investment Company (CIC), which obviously is a different corporate entity from UCPB. This fact was admitted by petitioners during the April 17, 2001 oral arguments in G.R. Nos. 147062-64. In fact, while the CIF levy payments claimed to have been paid by petitioners were meant for the CIC, the distribution of UCPB stock certificates to the coconut farmers, if at all, were meant for the payors of the CCSF in proportion to the coconut farmers CCSF contributions pursuant to PCA Resolution No. 045-75 dated May 21, 1975:

RESOLVED, FURTHER, That the amount of ONE HUNDRED FIFTY MILLION (P150,000,000.00) PESOS be appropriated and set aside from available funds of the PCA to be utilized in payment for the shares of stock of such existing commercial bank and that the Treasurer be instructed to disburse the said amount accordingly. xxx xxx xxx RESOLVED, FINALLY, That be directed to organize a team which shall prepare a list of coconut farmers who have paid the levy and contributed to the [CCSF] and to prepare a stock distribution plan to the end that the aforesaid coconut farmers shall receive certificates of stock of such commercial bank in proportion to their contributions to the Fund. Unfortunately, the said resolution was never complied with in the distribution of the so-called "farmers" UCPB shares. The payments therefore under R.A. 6260 are not the same as those under P.D. No. 276. The amounts of CIF contributions under R.A. 6260 which were collected starting 1971 are undeniably different from the CCSF levy under P.D. No. 276, which were collected starting 1973. The two (2) groups of claimants differ not only in identity but also in the levy paid, the amount of produce and the time the government started the collection. Thus, petitioners and the alleged farmers claiming them pursuant to R.A. 6260 do not have any legal basis to own the UCPB shares distributed to them, assuming for a moment the legal feasibility of transferring these shares paid from the R.A. 6260 levy to private individuals. 2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous and prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when in fact they also made payments to either the CIF or the CCSF but did not receive any receipt or who was not able to register their receipts or misplaced them. Section 1 of P.D. No. 755 which was declared unconstitutional cannot be considered to be the legal basis for the transfer of the supposed private ownership of the UCPB shares to petitioners who allegedly paid the same under R.A. 6260. The Solicitor General is correct in concluding that such unauthorized grant to petitioners constitutes illegal deprivation of property without due process of law. Due process of law would mean that the distribution of the UCPB shares should be made only to farmers who have paid the contribution to the CCSF pursuant to P.D. No. 276, and not to those who paid pursuant to R.A. 6260. What would have been the appropriate distribution scheme was violated by Section 1 of P.D. No. 755 when it required that the UCPB shares should be distributed to coconut farmers without distinction in fact, giving the PCA limitless power and free hand, to determine who these farmers are, or would be. We cannot sanction the award of the UCPB shares to petitioners who appear to represent only 1.4 million members without any legal basis to the extreme prejudice of the other 4.6 million coconut farmers (Executive Order No. 747 fixed the number of coconut farmers at 6 million in 1981). Indeed, petitioners constitute only a small percentage of the coconut farmers in the Philippines. Thus, the Sandiganbayan correctly declared that the UCPB shares are government assets in trust for the coconut farmers, which would be more beneficial to all the coconut farmers instead of a very few dubious claimants; 3. The Sandiganbayan made the finding that due to enormous operational problems and administrative complications, the intended beneficiaries of the UCPB shares were not able to receive the shares due to them. To reiterate what the anti-graft court said: The actual distribution of the bank shares was admittedly an enormous operational problem which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), "Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder discloses how the undistributed shares of stocks due to anonymous coconut farmers or payors of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank:
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"Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of the COCOFUND receipts in the name of an unqualified individual, after the final distribution is made on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be apportioned among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated. The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same problem of distribution of the bank shares. This latter Resolution is quoted as follows: RESOLUTION NO. 074-78 AMENDMENT OF ADMINISTRATIVE ORDER NO. 1, SERIES OF 1975, GOVERNING THE DISTRIBUTION OF SHARES WHEREAS, pursuant to PCA Board Resolution No. 246-75, the total par value of the shares of stock of the Bank purchased by the PCA for the benefit of the coconut farmers is P85,773,600.00 with a par value of P1.00 per share or equivalent to 85,773.600 shares; WHEREAS, out of the 85,773,600 shares, a total of 34,572,794 shares have already been distributed in accordance with Administrative Order No. 1, Series of 1975, to wit: First Distribution - 12,573,059 Second Distribution - 10,841,409 Third Distribution - 11,158,326 34,572,794 "WHEREAS, there is, therefore, a total of 51,200,806 shares still available for distribution among the coconut farmers; WHEREAS, it was determined by the PCA Board, in consonance with the policy of the state on the integration of the coconut industry, that the Bank shares must be widely distributed as possible among the coconut farmers, for which purpose a national census of coconut farmers was made through the Philippine Coconut Producers Federation (COCOFED); WHEREAS, to implement such determination of the PCA Board, there is a need to accordingly amend Administrative Order No. 1, Series of 1975; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the remaining 51,200,806 shares of stock of the Bank authorized to be acquired pursuant to the PCA Board Resolution No. 246-75 dated July 25, 1975 be distributed as follows: (1) All the coconut farmers who have received their shares in the equity of the Bank on the basis of Section 8 of Administrative Order No. 1, Series of 1975, shall receive additional share for each share presently owned by them; (2) Fractional shares shall be completed into full shares, and such full shares shall be distributed among the coconut farmers who qualified for the corresponding fractional shares; (3) The balance of the shares, after deducting those to be distributed in accordance with (1) and (2) above, shall be transferred to COCOFED for distribution, immediately after completion of the national census of coconut farmers prescribed under Resolution No. 033-78 of the PCA Board, to all those who are determined by the PCA Board to be bona fide coconut farmers and have not received shares of stock of the Bank. The shares shall be equally determined among them on the basis of per capita.

RESOLVED, FURTHER, That the rules and regulations under Administrative Order No. 1, Series of 1975, which are inconsistent with this Administrative Order be, as they are hereby, repealed and/or amended accordingly." Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an additional share for each share owned by them and by converting their fractional shares into full shares. The rest of the shares were then transferred to a private organization, the COCOFED, for distribution to those determined to be "bona fide coconut farmers" who had "not received shares of stock of the Bank." The distribution to the latter was made on the basis of "per capita", meaning without regard to the COCOFUND receipts. The PCA considered itself free to disregard the said receipts in the distribution of the shares although they were considered by the May 25, 1975 Agreement between the PCA and defendant Cojuangco (par. [8] of said Agreement) and by Sections 1, 3, 4, 6 and 9, PCA Administrative Order No. 1, Series of 1975 as the basis for the distribution of shares. The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had complete authority to define who are the coconut farmers and to decide as to who among the coconut farmers shall be given the gift of bank shares; how many shares shall be given to them, and what basis it shall use to determine the amount of shares to be distributed for free to the coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm. Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best for the interest of all coconut farmers to revert the ownership of the UCBP shares to the government for the entire coconut industry, which includes the farmers; 4. The Court also takes judicial cognizance of the fact that a number, if not all, of the coconut farmers who sold copra did not get the receipts for the payment of the coconut levy for the reason that the copra they produced were bought by traders or middlemen who in turn sold the same to the coconut mills. The reality on the ground is that it was these traders who got the receipts and the corresponding UCPB shares. In addition, some uninformed coconut farmers who actually got the COCOFUND receipts, not appreciating the importance and value of said receipts, have already sold said receipts to non-coconut farmers, thereby depriving them of the benefits under the coconut levy laws. Ergo, the coconut farmers are the ones who will not be benefited by the distribution of the UCPB shares contrary to the policy behind the coconut levy laws. The nullification of the distribution of the UCPB shares and their transfer to the government for the coconut industry will, therefore, ensure that the benefits to be deprived from the UCPB shares will actually accrue to the intended beneficiaries the genuine coconut farmers. From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the UCPB shares. Public funds, which were supposedly given utmost safeguard, were haphazardly distributed to private individuals based on statutory provisions that are found to be constitutionally infirm on not only one but on a variety of grounds. Worse still, the recipients of the UCPB shares may not actually be the intended beneficiaries of said benefit. Clearly, applying the Operative Fact Doctrine would not only be iniquitous but would also serve injustice to the Government, to the coconut industry, and to the people, who, whether willingly or unwillingly, contributed to the public funds, and therefore expect that their Government would take utmost care of them and that they would be used no less, than for public purpose. We clarify that PSJ-A is subject of another petition for review interposed by Eduardo Cojuangco, Jr., in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the Philippines, which shall be decided separately by this Court. Said petition should accordingly not be affected by this Decision save for determinatively legal issues directly addressed herein. WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are hereby DENIED. The Partial Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A as reiterated with modification in Resolution dated June 5, 2007, as well as the Partial Summary Judgment dated May 7, 2004 in Civil Case No. 0033-F, which was effectively amended in Resolution dated May 11, 2007, are AFFIRMED with modification, only with respect to those issues subject of the petitions in G.R. Nos. 177857-58 and
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178193. However, the issues raised in G.R. No. 180705 in relation to Partial Summary Judgment dated July 11, 2003 and Resolution dated June 5, 2007 in Civil Case No. 0033-A, shall be decided by this Court in a separate decision. The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is hereby MODIFIED, and shall read as follows: WHEREFORE, in view of the foregoing, We rule as follows: SUMMARY OF THE COURTS RULING. A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al. The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit. B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff. 1. a. The portion of Section 1 of P.D. No. 755, which reads: and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under such rules and regulations it may promulgate. taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for having allowed the use of the CCSF to benefit directly private interest by the outright and unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the undefined "coconut farmers", which negated or circumvented the national policy or public purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut industry and achieve its vertical integration; and (ii) for having unduly delegated legislative power to the PCA. b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise invalid for their failure to see to it that the distribution of shares serve exclusively or at least primarily or directly the aforementioned public purpose or national policy declared by P.D. No. 755. 2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered special and/or fiduciary funds nor part of the general funds of the national government and similar provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). 3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May 25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, Adm. Order No. 1, s. 1975 and Resolution No. 074-78. 4. The so-called "Farmers UCPB shares" covered by 64.98% of the UCPB shares of stock, which formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the entire consideration of which was charged by PCA to the CCSF, are hereby declared conclusively owned by, the Plaintiff Republic of the Philippines. xxx xxx xxx So ordered. The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is hereby MODIFIED, and shall read as follows: WHEREFORE, the Motion for Execution of Partial summary judgment (re: CIIF Block of Smc Shares of Stock) dated August 8, 2005 of the plaintiff is hereby denied for lack of merit. However, this Court orders the severance of this particular claim of Plaintiff. The Partial Summary Judgment dated May 7, 2004 is now considered a separate final and appealable judgment with respect to the said CIIF Block of SMC shares of stock.1avvphi1

The Partial Summary Judgment rendered on May 7, 2004 is modified by deleting the last paragraph of the dispositive portion, which will now read, as follows: Wherefore, in view of the foregoing, we hold that: The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and Cocofed, et al) filed by Plaintiff is hereby GRANTED. Accordingly, the CIIF Companies, namely: 1. Southern Luzon Coconut Oil Mills (SOLCOM); 2. Cagayan de Oro Oil Co., Inc. (CAGOIL); 3. Iligan Coconut Industries, Inc. (ILICOCO); 4. San Pablo Manufacturing Corp. (SPMC); 5. Granexport Manufacturing Corp. (GRANEX); and 6. Legaspi Oil Co., Inc. (LEGOIL), As well as the 14 Holding Companies, namely: 1. Soriano Shares, Inc.; 2. ACS Investors, Inc.; 3. Roxas Shares, Inc.; 4. Arc Investors; Inc.; 5. Toda Holdings, Inc.; 6. AP Holdings, Inc.; 7. Fernandez Holdings, Inc.; 8. SMC Officers Corps, Inc.; 9. Te Deum Resources, Inc.; 10. Anglo Ventures, Inc.; 11. Randy Allied Ventures, Inc.; 12. Rock Steel Resources, Inc.; 13. Valhalla Properties Ltd., Inc.; and 14. First Meridian Development, Inc. AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK TOTALING 33,133,266 SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS DECLARED, PAID AND ISSUED THEREON AS WELL AS ANY INCREMENTS THERETO ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE DECLARED OWNED BY THE GOVERNMENT TO BE USED ONLY FOR THE BENEFIT OF ALL COCONUT FARMERS AND FOR THE DEVELOPMENT OF THE COCONUT INDUSTRY, AND ORDERED RECONVEYED TO THE GOVERNMENT. The Court affirms the Resolutions issued by the Sandiganbayan on June 5, 2007 in civil case no. 0033-A and ON May 11, 2007 in civil case No. 0033-F, that there is no more necessity of further trial with respect to the issue of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of SMC shares, and (3) the CIIF companies. as they have finally been ADJUDICATED in the AFOREMENTIONED PARTIAL SUMMARY JUDGMENTS DATED jULY 11, 2003 AND mAY 7, 2004. SO ORDERED. Costs against petitioners COCOFED, et al. in G.R. Nos. 177857-58 and Danila S. Ursua in G.R. No. 178193.

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G.R. No. 101083 July 30, 1993 JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed OPOSA, minors, and represented by their parents ANTONIO and RIZALINA OPOSA, ROBERTA NICOLE SADIUA, minor, represented by her parents CALVIN and ROBERTA SADIUA, CARLO, AMANDA SALUD and PATRISHA, all surnamed FLORES, minors and represented by their parents ENRICO and NIDA FLORES, GIANINA DITA R. FORTUN, minor, represented by her parents SIGRID and DOLORES FORTUN, GEORGE II and MA. CONCEPCION, all surnamed MISA, minors and represented by their parents GEORGE and MYRA MISA, BENJAMIN ALAN V. PESIGAN, minor, represented by his parents ANTONIO and ALICE PESIGAN, JOVIE MARIE ALFARO, minor, represented by her parents JOSE and MARIA VIOLETA ALFARO, MARIA CONCEPCION T. CASTRO, minor, represented by her parents FREDENIL and JANE CASTRO, JOHANNA DESAMPARADO, minor, represented by her parents JOSE and ANGELA DESAMPRADO, CARLO JOAQUIN T. NARVASA, minor, represented by his parents GREGORIO II and CRISTINE CHARITY NARVASA, MA. MARGARITA, JESUS IGNACIO, MA. ANGELA and MARIE GABRIELLE, all surnamed SAENZ, minors, represented by their parents ROBERTO and AURORA SAENZ, KRISTINE, MARY ELLEN, MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING, minors, represented by their parents MARIO and HAYDEE KING, DAVID, FRANCISCO and THERESE VICTORIA, all surnamed ENDRIGA, minors, represented by their parents BALTAZAR and TERESITA ENDRIGA, JOSE MA. and REGINA MA., all surnamed ABAYA, minors, represented by their parents ANTONIO and MARICA ABAYA, MARILIN, MARIO, JR. and MARIETTE, all surnamed CARDAMA, minors, represented by their parents MARIO and LINA CARDAMA, CLARISSA, ANN MARIE, NAGEL, and IMEE LYN, all surnamed OPOSA, minors and represented by their parents RICARDO and MARISSA OPOSA, PHILIP JOSEPH, STEPHEN JOHN and ISAIAH JAMES, all surnamed QUIPIT, minors, represented by their parents JOSE MAX and VILMI QUIPIT, BUGHAW CIELO, CRISANTO, ANNA, DANIEL and FRANCISCO, all surnamed BIBAL, minors, represented by their parents FRANCISCO, JR. and MILAGROS BIBAL, and THE PHILIPPINE ECOLOGICAL NETWORK, INC., petitioners, vs. THE HONORABLE FULGENCIO S. FACTORAN, JR., in his capacity as the Secretary of the Department of Environment and Natural Resources, and THE HONORABLE ERIBERTO U. ROSARIO, Presiding Judge of the RTC, Makati, Branch 66, respondents. Oposa Law Office for petitioners. The Solicitor General for respondents. DAVIDE, JR., J.: In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful ecology which the petitioners dramatically associate with the twin concepts of "inter-generational responsibility" and "inter-generational justice." Specifically, it touches on the issue of whether the said petitioners have a cause of action to "prevent the misappropriation or impairment" of Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth." The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66 (Makati, Metro Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The principal plaintiffs therein, now the principal petitioners, are all minors duly represented and joined by their respective parents. Impleaded as an additional plaintiff is the Philippine Ecological Network, Inc. (PENI), a domestic, non-stock and non-profit corporation organized for the purpose of, inter alia, engaging in concerted action geared for the protection of our environment and natural resources. The original defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary of the Department of Environment and Natural Resources (DENR). His substitution in this petition by the new Secretary, the Honorable Angel C. Alcala, was subsequently ordered upon proper motion by the petitioners. 1 The
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complaint 2 was instituted as a taxpayers' class suit 3 and alleges that the plaintiffs "are all citizens of the Republic of the Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of the natural resource treasure that is the country's virgin tropical forests." The same was filed for themselves and others who are equally concerned about the preservation of said resource but are "so numerous that it is impracticable to bring them all before the Court." The minors further asseverate that they "represent their generation as well as generations yet unborn." 4 Consequently, it is prayed for that judgment be rendered: . . . ordering defendant, his agents, representatives and other persons acting in his behalf to (1) Cancel all existing timber license agreements in the country; (2) Cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements. and granting the plaintiffs ". . . such other reliefs just and equitable under the premises." 5 The complaint starts off with the general averments that the Philippine archipelago of 7,100 islands has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush and verdant rainforests in which varied, rare and unique species of flora and fauna may be found; these rainforests contain a genetic, biological and chemical pool which is irreplaceable; they are also the habitat of indigenous Philippine cultures which have existed, endured and flourished since time immemorial; scientific evidence reveals that in order to maintain a balanced and healthful ecology, the country's land area should be utilized on the basis of a ratio of fifty-four per cent (54%) for forest cover and forty-six per cent (46%) for agricultural, residential, industrial, commercial and other uses; the distortion and disturbance of this balance as a consequence of deforestation have resulted in a host of environmental tragedies, such as (a) water shortages resulting from drying up of the water table, otherwise known as the "aquifer," as well as of rivers, brooks and streams, (b) salinization of the water table as a result of the intrusion therein of salt water, incontrovertible examples of which may be found in the island of Cebu and the Municipality of Bacoor, Cavite, (c) massive erosion and the consequential loss of soil fertility and agricultural productivity, with the volume of soil eroded estimated at one billion (1,000,000,000) cubic meters per annum approximately the size of the entire island of Catanduanes, (d) the endangering and extinction of the country's unique, rare and varied flora and fauna, (e) the disturbance and dislocation of cultural communities, including the disappearance of the Filipino's indigenous cultures, (f) the siltation of rivers and seabeds and consequential destruction of corals and other aquatic life leading to a critical reduction in marine resource productivity, (g) recurrent spells of drought as is presently experienced by the entire country, (h) increasing velocity of typhoon winds which result from the absence of windbreakers, (i) the floodings of lowlands and agricultural plains arising from the absence of the absorbent mechanism of forests, (j) the siltation and shortening of the lifespan of multi-billion peso dams constructed and operated for the purpose of supplying water for domestic uses, irrigation and the generation of electric power, and (k) the reduction of the earth's capacity to process carbon dioxide gases which has led to perplexing and catastrophic climatic changes such as the phenomenon of global warming, otherwise known as the "greenhouse effect." Plaintiffs further assert that the adverse and detrimental consequences of continued and deforestation are so capable of unquestionable demonstration that the same may be submitted as a matter of judicial notice. This notwithstanding, they expressed their intention to present expert witnesses as well as documentary, photographic and film evidence in the course of the trial. As their cause of action, they specifically allege that: CAUSE OF ACTION 7. Plaintiffs replead by reference the foregoing allegations. 8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million hectares of rainforests constituting roughly 53% of the country's land mass.

9. Satellite images taken in 1987 reveal that there remained no more than 1.2 million hectares of said rainforests or four per cent (4.0%) of the country's land area. 10. More recent surveys reveal that a mere 850,000 hectares of virgin old-growth rainforests are left, barely 2.8% of the entire land mass of the Philippine archipelago and about 3.0 million hectares of immature and uneconomical secondary growth forests. 11. Public records reveal that the defendant's, predecessors have granted timber license agreements ('TLA's') to various corporations to cut the aggregate area of 3.89 million hectares for commercial logging purposes. A copy of the TLA holders and the corresponding areas covered is hereto attached as Annex "A". 12. At the present rate of deforestation, i.e. about 200,000 hectares per annum or 25 hectares per hour nighttime, Saturdays, Sundays and holidays included the Philippines will be bereft of forest resources after the end of this ensuing decade, if not earlier. 13. The adverse effects, disastrous consequences, serious injury and irreparable damage of this continued trend of deforestation to the plaintiff minor's generation and to generations yet unborn are evident and incontrovertible. As a matter of fact, the environmental damages enumerated in paragraph 6 hereof are already being felt, experienced and suffered by the generation of plaintiff adults. 14. The continued allowance by defendant of TLA holders to cut and deforest the remaining forest stands will work great damage and irreparable injury to plaintiffs especially plaintiff minors and their successors who may never see, use, benefit from and enjoy this rare and unique natural resource treasure. This act of defendant constitutes a misappropriation and/or impairment of the natural resource property he holds in trust for the benefit of plaintiff minors and succeeding generations. 15. Plaintiffs have a clear and constitutional right to a balanced and healthful ecology and are entitled to protection by the State in its capacity as the parens patriae. 16. Plaintiff have exhausted all administrative remedies with the defendant's office. On March 2, 1990, plaintiffs served upon defendant a final demand to cancel all logging permits in the country. A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex "B". 17. Defendant, however, fails and refuses to cancel the existing TLA's to the continuing serious damage and extreme prejudice of plaintiffs. 18. The continued failure and refusal by defendant to cancel the TLA's is an act violative of the rights of plaintiffs, especially plaintiff minors who may be left with a country that is desertified (sic), bare, barren and devoid of the wonderful flora, fauna and indigenous cultures which the Philippines had been abundantly blessed with. 19. Defendant's refusal to cancel the aforementioned TLA's is manifestly contrary to the public policy enunciated in the Philippine Environmental Policy which, in pertinent part, states that it is the policy of the State (a) to create, develop, maintain and improve conditions under which man and nature can thrive in productive and enjoyable harmony with each other;
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(b) to fulfill the social, economic and other requirements of present and future generations of Filipinos and; (c) to ensure the attainment of an environmental quality that is conductive to a life of dignity and well-being. (P.D. 1151, 6 June 1977) 20. Furthermore, defendant's continued refusal to cancel the aforementioned TLA's is contradictory to the Constitutional policy of the State to a. effect "a more equitable distribution of opportunities, income and wealth" and "make full and efficient use of natural resources (sic)." (Section 1, Article XII of the Constitution); b. "protect the nation's marine wealth." (Section 2, ibid); c. "conserve and promote the nation's cultural heritage and resources (sic)" (Section 14, Article XIV, id.); d. "protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature." (Section 16, Article II, id.) 21. Finally, defendant's act is contrary to the highest law of humankind the natural law and violative of plaintiffs' right to self-preservation and perpetuation. 22. There is no other plain, speedy and adequate remedy in law other than the instant action to arrest the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth. 6 On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against him and (2) the issue raised by the plaintiffs is a political question which properly pertains to the legislative or executive branches of Government. In their 12 July 1990 Opposition to the Motion, the petitioners maintain that (1) the complaint shows a clear and unmistakable cause of action, (2) the motion is dilatory and (3) the action presents a justiciable question as it involves the defendant's abuse of discretion. On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to dismiss. 7 In the said order, not only was the defendant's claim that the complaint states no cause of action against him and that it raises a political question sustained, the respondent Judge further ruled that the granting of the relief prayed for would result in the impairment of contracts which is prohibited by the fundamental law of the land. Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules of Court and ask this Court to rescind and set aside the dismissal order on the ground that the respondent Judge gravely abused his discretion in dismissing the action. Again, the parents of the plaintiffs-minors not only represent their children, but have also joined the latter in this case. 8 On 14 May 1992, We resolved to give due course to the petition and required the parties to submit their respective Memoranda after the Office of the Solicitor General (OSG) filed a Comment in behalf of the respondents and the petitioners filed a reply thereto. Petitioners contend that the complaint clearly and unmistakably states a cause of action as it contains sufficient allegations concerning their right to a sound environment based on Articles 19, 20 and 21 of the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192 creating the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental Policy), Section 16, Article II of the 1987 Constitution recognizing the right of the people to a balanced and healthful ecology, the concept of generational genocide in Criminal Law and the concept of man's inalienable right to selfpreservation and self-perpetuation embodied in natural law. Petitioners likewise rely on the respondent's correlative obligation per Section 4 of E.O. No. 192, to safeguard the people's right to a healthful environment.

It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion in granting Timber License Agreements (TLAs) to cover more areas for logging than what is available involves a judicial question. Anent the invocation by the respondent Judge of the Constitution's non-impairment clause, petitioners maintain that the same does not apply in this case because TLAs are not contracts. They likewise submit that even if TLAs may be considered protected by the said clause, it is well settled that they may still be revoked by the State when the public interest so requires. On the other hand, the respondents aver that the petitioners failed to allege in their complaint a specific legal right violated by the respondent Secretary for which any relief is provided by law. They see nothing in the complaint but vague and nebulous allegations concerning an "environmental right" which supposedly entitles the petitioners to the "protection by the state in its capacity as parens patriae." Such allegations, according to them, do not reveal a valid cause of action. They then reiterate the theory that the question of whether logging should be permitted in the country is a political question which should be properly addressed to the executive or legislative branches of Government. They therefore assert that the petitioners' resources is not to file an action to court, but to lobby before Congress for the passage of a bill that would ban logging totally. As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be done by the State without due process of law. Once issued, a TLA remains effective for a certain period of time usually for twenty-five (25) years. During its effectivity, the same can neither be revised nor cancelled unless the holder has been found, after due notice and hearing, to have violated the terms of the agreement or other forestry laws and regulations. Petitioners' proposition to have all the TLAs indiscriminately cancelled without the requisite hearing would be violative of the requirements of due process. Before going any further, We must first focus on some procedural matters. Petitioners instituted Civil Case No. 90-777 as a class suit. The original defendant and the present respondents did not take issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class suit. The subject matter of the complaint is of common and general interest not just to several, but to all citizens of the Philippines. Consequently, since the parties are so numerous, it, becomes impracticable, if not totally impossible, to bring all of them before the court. We likewise declare that the plaintiffs therein are numerous and representative enough to ensure the full protection of all concerned interests. Hence, all the requisites for the filing of a valid class suit under Section 12, Rule 3 of the Revised Rules of Court are present both in the said civil case and in the instant petition, the latter being but an incident to the former. This case, however, has a special and novel element. Petitioners minors assert that they represent their generation as well as generations yet unborn. We find no difficulty in ruling that they can, for themselves, for others of their generation and for the succeeding generations, file a class suit. Their personality to sue in behalf of the succeeding generations can only be based on the concept of intergenerational responsibility insofar as the right to a balanced and healthful ecology is concerned. Such a right, as hereinafter expounded, considers the "rhythm and harmony of nature." Nature means the created world in its entirety. 9 Such rhythm and harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural resources to the end that their exploration, development and utilization be equitably accessible to the present as well as future generations. 10 Needless to say, every generation has a responsibility to the next to preserve that rhythm and harmony for the full enjoyment of a balanced and healthful ecology. Put a little differently, the minors' assertion of their right to a sound environment constitutes, at the same time, the performance of their obligation to ensure the protection of that right for the generations to come. The locus standi of the petitioners having thus been addressed, We shall now proceed to the merits of the petition.
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After a careful perusal of the complaint in question and a meticulous consideration and evaluation of the issues raised and arguments adduced by the parties, We do not hesitate to find for the petitioners and rule against the respondent Judge's challenged order for having been issued with grave abuse of discretion amounting to lack of jurisdiction. The pertinent portions of the said order reads as follows: xxx xxx xxx After a careful and circumspect evaluation of the Complaint, the Court cannot help but agree with the defendant. For although we believe that plaintiffs have but the noblest of all intentions, it (sic) fell short of alleging, with sufficient definiteness, a specific legal right they are seeking to enforce and protect, or a specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2, RRC). Furthermore, the Court notes that the Complaint is replete with vague assumptions and vague conclusions based on unverified data. In fine, plaintiffs fail to state a cause of action in its Complaint against the herein defendant. Furthermore, the Court firmly believes that the matter before it, being impressed with political color and involving a matter of public policy, may not be taken cognizance of by this Court without doing violence to the sacred principle of "Separation of Powers" of the three (3) co-equal branches of the Government. The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and to cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by the fundamental law. 11 We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient definiteness a specific legal right involved or a specific legal wrong committed, and that the complaint is replete with vague assumptions and conclusions based on unverified data. A reading of the complaint itself belies these conclusions. The complaint focuses on one specific fundamental legal right the right to a balanced and healthful ecology which, for the first time in our nation's constitutional history, is solemnly incorporated in the fundamental law. Section 16, Article II of the 1987 Constitution explicitly provides: Sec. 16. The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature. This right unites with the right to health which is provided for in the preceding section of the same article: Sec. 15. The State shall protect and promote the right to health of the people and instill health consciousness among them. While the right to a balanced and healthful ecology is to be found under the Declaration of Principles and State Policies and not under the Bill of Rights, it does not follow that it is less important than any of the civil and political rights enumerated in the latter. Such a right belongs to a different category of rights altogether for it concerns nothing less than self-preservation and self-perpetuation aptly and fittingly stressed by the petitioners the advancement of which may even be said to predate all governments and constitutions. As a matter of fact, these basic rights need not even be written in the Constitution for they are assumed to exist from the inception of humankind. If they are now explicitly mentioned in the fundamental charter, it is because of the well-founded fear of its framers that unless the rights to a balanced and healthful ecology and to health are mandated as state policies by the Constitution itself, thereby highlighting their continuing importance and imposing upon the state a solemn obligation to preserve the first and protect and advance the second, the day would not be too far when all else would be lost not only for the present generation, but also for those to come generations which stand to inherit nothing but parched earth incapable of sustaining life.

The right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing the environment. During the debates on this right in one of the plenary sessions of the 1986 Constitutional Commission, the following exchange transpired between Commissioner Wilfrido Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question: MR. VILLACORTA: Does this section mandate the State to provide sanctions against all forms of pollution air, water and noise pollution? MR. AZCUNA: Yes, Madam President. The right to healthful (sic) environment necessarily carries with it the correlative duty of not impairing the same and, therefore, sanctions may be provided for impairment of environmental balance. 12 The said right implies, among many other things, the judicious management and conservation of the country's forests. Without such forests, the ecological or environmental balance would be irreversiby disrupted. Conformably with the enunciated right to a balanced and healthful ecology and the right to health, as well as the other related provisions of the Constitution concerning the conservation, development and utilization of the country's natural resources, 13 then President Corazon C. Aquino promulgated on 10 June 1987 E.O. No. 192, 14 Section 4 of which expressly mandates that the Department of Environment and Natural Resources "shall be the primary government agency responsible for the conservation, management, development and proper use of the country's environment and natural resources, specifically forest and grazing lands, mineral, resources, including those in reservation and watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural resources as may be provided for by law in order to ensure equitable sharing of the benefits derived therefrom for the welfare of the present and future generations of Filipinos." Section 3 thereof makes the following statement of policy: Sec. 3. Declaration of Policy. It is hereby declared the policy of the State to ensure the sustainable use, development, management, renewal, and conservation of the country's forest, mineral, land, off-shore areas and other natural resources, including the protection and enhancement of the quality of the environment, and equitable access of the different segments of the population to the development and the use of the country's natural resources, not only for the present generation but for future generations as well. It is also the policy of the state to recognize and apply a true value system including social and environmental cost implications relative to their utilization, development and conservation of our natural resources. This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code of 1987, 15 specifically in Section 1 thereof which reads: Sec. 1. Declaration of Policy. (1) The State shall ensure, for the benefit of the Filipino people, the full exploration and development as well as the judicious disposition, utilization, management, renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural resources, consistent with the necessity of maintaining a sound ecological balance and protecting and enhancing the quality of the environment and the objective of making the exploration, development and utilization of such natural resources equitably accessible to the different segments of the present as well as future generations.
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(2) The State shall likewise recognize and apply a true value system that takes into account social and environmental cost implications relative to the utilization, development and conservation of our natural resources. The above provision stresses "the necessity of maintaining a sound ecological balance and protecting and enhancing the quality of the environment." Section 2 of the same Title, on the other hand, specifically speaks of the mandate of the DENR; however, it makes particular reference to the fact of the agency's being subject to law and higher authority. Said section provides: Sec. 2. Mandate. (1) The Department of Environment and Natural Resources shall be primarily responsible for the implementation of the foregoing policy. (2) It shall, subject to law and higher authority, be in charge of carrying out the State's constitutional mandate to control and supervise the exploration, development, utilization, and conservation of the country's natural resources. Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve as the bases for policy formulation, and have defined the powers and functions of the DENR. It may, however, be recalled that even before the ratification of the 1987 Constitution, specific statutes already paid special attention to the "environmental right" of the present and future generations. On 6 June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine Environment Code) were issued. The former "declared a continuing policy of the State (a) to create, develop, maintain and improve conditions under which man and nature can thrive in productive and enjoyable harmony with each other, (b) to fulfill the social, economic and other requirements of present and future generations of Filipinos, and (c) to insure the attainment of an environmental quality that is conducive to a life of dignity and well-being." 16 As its goal, it speaks of the "responsibilities of each generation as trustee and guardian of the environment for succeeding generations." 17 The latter statute, on the other hand, gave flesh to the said policy. Thus, the right of the petitioners (and all those they represent) to a balanced and healthful ecology is as clear as the DENR's duty under its mandate and by virtue of its powers and functions under E.O. No. 192 and the Administrative Code of 1987 to protect and advance the said right. A denial or violation of that right by the other who has the corelative duty or obligation to respect or protect the same gives rise to a cause of action. Petitioners maintain that the granting of the TLAs, which they claim was done with grave abuse of discretion, violated their right to a balanced and healthful ecology; hence, the full protection thereof requires that no further TLAs should be renewed or granted. A cause of action is defined as: . . . an act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligation of the defendant, and act or omission of the defendant in violation of said legal right. 18 It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, 19 the question submitted to the court for resolution involves the sufficiency of the facts alleged in the complaint itself. No other matter should be considered; furthermore, the truth of falsity of the said allegations is beside the point for the truth thereof is deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such alleged facts to be true, may the court render a valid judgment in accordance with the prayer in the complaint? 20 In Militante vs. Edrosolano, 21 this Court laid down the rule that the judiciary should "exercise the utmost care and circumspection in passing upon a motion to dismiss on the ground of the absence thereof [cause of action] lest, by its failure to manifest a correct appreciation of the facts alleged and deemed hypothetically admitted, what the law grants or recognizes is effectively nullified. If that happens, there is a blot on the legal order. The law itself stands in disrepute."

After careful examination of the petitioners' complaint, We find the statements under the introductory affirmative allegations, as well as the specific averments under the sub-heading CAUSE OF ACTION, to be adequate enough to show, prima facie, the claimed violation of their rights. On the basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for. It bears stressing, however, that insofar as the cancellation of the TLAs is concerned, there is the need to implead, as party defendants, the grantees thereof for they are indispensable parties. The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy formulation or determination by the executive or legislative branches of Government is not squarely put in issue. What is principally involved is the enforcement of a right vis-a-vis policies already formulated and expressed in legislation. It must, nonetheless, be emphasized that the political question doctrine is no longer, the insurmountable obstacle to the exercise of judicial power or the impenetrable shield that protects executive and legislative actions from judicial inquiry or review. The second paragraph of section 1, Article VIII of the Constitution states that: Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A. Cruz, a distinguished member of this Court, says: The first part of the authority represents the traditional concept of judicial power, involving the settlement of conflicting rights as conferred as law. The second part of the authority represents a broadening of judicial power to enable the courts of justice to review what was before forbidden territory, to wit, the discretion of the political departments of the government. As worded, the new provision vests in the judiciary, and particularly the Supreme Court, the power to rule upon even the wisdom of the decisions of the executive and the legislature and to declare their acts invalid for lack or excess of jurisdiction because tainted with grave abuse of discretion. The catch, of course, is the meaning of "grave abuse of discretion," which is a very elastic phrase that can expand or contract according to the disposition of the judiciary. In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted: In the case now before us, the jurisdictional objection becomes even less tenable and decisive. The reason is that, even if we were to assume that the issue presented before us was political in nature, we would still not be precluded from revolving it under the expanded jurisdiction conferred upon us that now covers, in proper cases, even the political question. Article VII, Section 1, of the Constitution clearly provides: . . . The last ground invoked by the trial court in dismissing the complaint is the non-impairment of contracts clause found in the Constitution. The court a quo declared that: The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and to cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by the fundamental law. 24 We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even invoke in his motion to dismiss the non-impairment clause. If he had done so, he would have acted with utmost
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infidelity to the Government by providing undue and unwarranted benefits and advantages to the timber license holders because he would have forever bound the Government to strictly respect the said licenses according to their terms and conditions regardless of changes in policy and the demands of public interest and welfare. He was aware that as correctly pointed out by the petitioners, into every timber license must be read Section 20 of the Forestry Reform Code (P.D. No. 705) which provides: . . . Provided, That when the national interest so requires, the President may amend, modify, replace or rescind any contract, concession, permit, licenses or any other form of privilege granted herein . . . Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protested by the due process clause of the Constitution. In Tan vs. Director of Forestry, 25 this Court held: . . . A timber license is an instrument by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. A timber license is not a contract within the purview of the due process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by public interest or public welfare as in this case. A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights (People vs. Ong Tin, 54 O.G. 7576). We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary: 26 . . . Timber licenses, permits and license agreements are the principal instruments by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified entities, and do not vest in the latter a permanent or irrevocable right to the particular concession area and the forest products therein. They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so require. Thus, they are not deemed contracts within the purview of the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302]. Since timber licenses are not contracts, the non-impairment clause, which reads: Sec. 10. No law impairing, the obligation of contracts shall be passed. 27 cannot be invoked. In the second place, even if it is to be assumed that the same are contracts, the instant case does not involve a law or even an executive issuance declaring the cancellation or modification of existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked. Nevertheless, granting further that a law has actually been passed mandating cancellations or modifications, the same cannot still be stigmatized as a violation of the non-impairment clause. This is because by its very nature and purpose, such as law could have only been passed in the exercise of the police power of the state for the purpose of advancing the right of the people to a balanced and healthful ecology, promoting their health and enhancing the general welfare. In Abe vs. Foster Wheeler Corp. 28 this Court stated: The freedom of contract, under our system of government, is not meant to be absolute. The same is understood to be subject to reasonable legislative regulation aimed at the promotion of public health, moral, safety and welfare. In

other words, the constitutional guaranty of non-impairment of obligations of contract is limited by the exercise of the police power of the State, in the interest of public health, safety, moral and general welfare. The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine American Life Insurance Co. vs. Auditor General, 30 to wit: Under our form of government the use of property and the making of contracts are normally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. But neither property rights nor contract rights are absolute; for government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest. In short, the non-impairment clause must yield to the police power of the state. 31 Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply with respect to the prayer to enjoin the respondent Secretary from receiving, accepting, processing, renewing or approving new timber licenses for, save in cases of renewal, no contract would have as of yet existed in the other instances. Moreover, with respect to renewal, the holder is not entitled to it as a matter of right. WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is hereby set aside. The petitioners may therefore amend their complaint to implead as defendants the holders or grantees of the questioned timber license agreements. No pronouncement as to costs. SO ORDERED.

G.R. No. 159357

April 28, 2004

Brother MARIANO "MIKE" Z. VELARDE, petitioner, vs. SOCIAL JUSTICE SOCIETY, respondent. DECISION PANGANIBAN, J.: A decision that does not conform to the form and substance required by the Constitution and the law is void and deemed legally inexistent. To be valid, decisions should comply with the form, the procedure and the substantive requirements laid out in the Constitution, the Rules of Court and relevant circulars/orders of the Supreme Court. For the guidance of the bench and the bar, the Court hereby discusses these forms, procedures and requirements. The Case 1 Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the June 12, 2003 Decision2 and July 29, 2003 Order3 of the Regional Trial Court (RTC) of Manila (Branch 49).4 The challenged Decision was the offshoot of a Petition for Declaratory Relief5 filed before the RTCManila by herein Respondent Social Justice Society (SJS) against herein Petitioner Mariano "Mike" Z. Velarde, together with His Eminence, Jaime Cardinal Sin, Executive Minister Erao Manalo, Brother Eddie Villanueva and Brother Eliseo F. Soriano as co-respondents. The Petition prayed for the resolution of the question "whether or not the act of a religious leader like any of herein respondents, in endorsing the candidacy of a candidate for elective office or in urging or requiring the members of his flock to vote for a specified candidate, is violative of the letter or spirit of the constitutional provisions x x x."6 Alleging that the questioned Decision did not contain a statement of facts and a dispositive portion, herein petitioner filed a Clarificatory Motion and Motion for Reconsideration before the trial court. Soriano, his co-respondent, similarly filed a separate Motion for Reconsideration. In response, the trial court issued the assailed Order, which held as follows: "x x x [T]his Court cannot reconsider, because what it was asked to do, was only to clarify a Constitutional provision and to declare whether acts are violative thereof. The Decision did not make a dispositive portion because a dispositive portion is required only in coercive reliefs, where a redress from wrong suffered and the benefit that the prevailing party wronged should get. The step that these movants have to take, is direct appeal under Rule 45 of the Rules of Court, for a conclusive interpretation of the Constitutional provision to the Supreme Court."7 The Antecedent Proceedings On January 28, 2003, SJS filed a Petition for Declaratory Relief ("SJS Petition") before the RTC-Manila against Velarde and his aforesaid co-respondents. SJS, a registered political party, sought the interpretation of several constitutional provisions,8 specifically on the separation of church and state; and a declaratory judgment on the constitutionality of the acts of religious leaders endorsing a candidate for an elective office, or urging or requiring the members of their flock to vote for a specified candidate. The subsequent proceedings were recounted in the challenged Decision in these words: "x x x. Bro. Eddie Villanueva submitted, within the original period [to file an Answer], a Motion to Dismiss. Subsequently, Executive Minister Erao Manalo and Bro. Mike Velarde, filed their Motions to Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano, filed an Answer within the extended period and similarly prayed for the dismissal of the Petition. All sought the dismissal of the Petition on the common grounds that it does not state a cause of action and that there is no justiciable controversy. They were ordered to submit a pleading by way of advisement, which was closely followed by another Order denying all the Motions to Dismiss. Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Erao Manalo moved to reconsider the denial. His Eminence Jaime Cardinal L. Sin,
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asked for extension to file memorandum. Only Bro. Eli Soriano complied with the first Order by submitting his Memorandum. x x x. "x x x the Court denied the Motions to Dismiss, and the Motions for Reconsideration filed by Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Erao Manalo, which raised no new arguments other than those already considered in the motions to dismiss x x x."9 After narrating the above incidents, the trial court said that it had jurisdiction over the Petition, because "in praying for a determination as to whether the actions imputed to the respondents are violative of Article II, Section 6 of the Fundamental Law, [the Petition] has raised only a question of law."10 It then proceeded to a lengthy discussion of the issue raised in the Petition the separation of church and state even tracing, to some extent, the historical background of the principle. Through its discourse, the court a quo opined at some point that the "[e]ndorsement of specific candidates in an election to any public office is a clear violation of the separation clause."11 After its essay on the legal issue, however, the trial court failed to include a dispositive portion in its assailed Decision. Thus, Velarde and Soriano filed separate Motions for Reconsideration which, as mentioned earlier, were denied by the lower court. Hence, this Petition for Review.12 This Court, in a Resolution13 dated September 2, 2003, required SJS and the Office of the Solicitor General (OSG) to submit their respective comments. In the same Resolution, the Court gave the other parties -- impleaded as respondents in the original case below --the opportunity to comment, if they so desired. On April 13, 2004, the Court en banc conducted an Oral Argument.14 The Issues In his Petition, Brother Mike Velarde submits the following issues for this Courts resolution: "1. Whether or not the Decision dated 12 June 2003 rendered by the court a quo was proper and valid; "2. Whether or not there exists justiceable controversy in herein respondents Petition for declaratory relief; "3. Whether or not herein respondent has legal interest in filing the Petition for declaratory relief; "4. Whether or not the constitutional question sought to be resolved by herein respondent is ripe for judicial determination; "5. Whether or not there is adequate remedy other than the declaratory relief; and, "6. Whether or not the court a quo has jurisdiction over the Petition for declaratory relief of herein respondent."15 During the Oral Argument, the issues were narrowed down and classified as follows: "A. Procedural Issues "Did the Petition for Declaratory Relief raise a justiciable controversy? Did it state a cause of action? Did respondent have any legal standing to file the Petition for Declaratory Relief? "B. Substantive Issues "1. Did the RTC Decision conform to the form and substance required by the Constitution, the law and the Rules of Court? "2. May religious leaders like herein petitioner, Bro. Mike Velarde, be prohibited from endorsing candidates for public office? Corollarily, may they be banned from campaigning against said candidates?" The Courts Ruling
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The Petition of Brother Mike Velarde is meritorious. Procedural Issues: Requisites of Petitions for Declaratory Relief Section 1 of Rule 63 of the Rules of Court, which deals with petitions for declaratory relief, provides in part: "Section 1. Who may file petition.- Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder." Based on the foregoing, an action for declaratory relief should be filed by a person interested under a deed, a will, a contract or other written instrument, and whose rights are affected by a statute, an executive order, a regulation or an ordinance. The purpose of the remedy is to interpret or to determine the validity of the written instrument and to seek a judicial declaration of the parties rights or duties thereunder.16 The essential requisites of the action are as follows: (1) there is a justiciable controversy; (2) the controversy is between persons whose interests are adverse; (3) the party seeking the relief has a legal interest in the controversy; and (4) the issue is ripe for judicial determination.17 Justiciable Controversy Brother Mike Velarde contends that the SJS Petition failed to allege, much less establish before the trial court, that there existed a justiciable controversy or an adverse legal interest between them; and that SJS had a legal right that was being violated or threatened to be violated by petitioner. On the contrary, Velarde alleges that SJS premised its action on mere speculations, contingent events, and hypothetical issues that had not yet ripened into an actual controversy. Thus, its Petition for Declaratory Relief must fail. A justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.18 The SJS Petition for Declaratory Relief fell short of this test. It miserably failed to allege an existing controversy or dispute between the petitioner and the named respondents therein. Further, the Petition did not sufficiently state what specific legal right of the petitioner was violated by the respondents therein; and what particular act or acts of the latter were in breach of its rights, the law or the Constitution. As pointed out by Brother Eliseo F. Soriano in his Comment,19 what exactly has he done that merited the attention of SJS? He confesses that he does not know the answer, because the SJS Petition (as well as the assailed Decision of the RTC) "yields nothing in this respect." His Eminence, Jaime Cardinal Sin, adds that, at the time SJS filed its Petition on January 28, 2003, the election season had not even started yet; and that, in any event, he has not been actively involved in partisan politics. An initiatory complaint or petition filed with the trial court should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim x x x."20 Yet, the SJS Petition stated no ultimate facts. Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for elective offices; and that such actual or threatened endorsement "will enable [them] to elect men to public office who [would] in turn be forever beholden to their leaders, enabling them to control the government"[;]21 and "pos[ing] a clear and present danger of serious erosion of the peoples faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the ultimate result of elections,"22 which would then be violative of the separation clause. Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent on the part of any of the respondents below to champion an electoral candidate, or to urge their so-

called flock to vote for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does not give rise to an actionable right. Obviously, there is no factual allegation that SJS rights are being subjected to any threatened, imminent and inevitable violation that should be prevented by the declaratory relief sought. The judicial power and duty of the courts to settle actual controversies involving rights that are legally demandable and enforceable23 cannot be exercised when there is no actual or threatened violation of a legal right. All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be resolved."24 In other words, it merely sought an opinion of the trial court on whether the speculated acts of religious leaders endorsing elective candidates for political offices violated the constitutional principle on the separation of church and state. SJS did not ask for a declaration of its rights and duties; neither did it pray for the stoppage of any threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory opinion.25 Cause of Action Respondent SJS asserts that in order to maintain a petition for declaratory relief, a cause of action need not be alleged or proven. Supposedly, for such petition to prosper, there need not be any violation of a right, breach of duty or actual wrong committed by one party against the other. Petitioner, on the other hand, argues that the subject matter of an action for declaratory relief should be a deed, a will, a contract (or other written instrument), a statute, an executive order, a regulation or an ordinance. But the subject matter of the SJS Petition is "the constitutionality of an act of a religious leader to endorse the candidacy of a candidate for elective office or to urge or require the members of the flock to vote for a specified candidate."26 According to petitioner, this subject matter is "beyond the realm of an action for declaratory relief."27 Petitioner avers that in the absence of a valid subject matter, the Petition fails to state a cause of action and, hence, should have been dismissed outright by the court a quo. A cause of action is an act or an omission of one party in violation of the legal right or rights of another, causing injury to the latter.28 Its essential elements are the following: (1) a right in favor of the plaintiff; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) such defendants act or omission that is violative of the right of the plaintiff or constituting a breach of the obligation of the former to the latter.29 The failure of a complaint to state a cause of action is a ground for its outright dismissal.30 However, in special civil actions for declaratory relief, the concept of a cause of action under ordinary civil actions does not strictly apply. The reason for this exception is that an action for declaratory relief presupposes that there has been no actual breach of the instruments involved or of rights arising thereunder.31 Nevertheless, a breach or violation should be impending, imminent or at least threatened. A perusal of the Petition filed by SJS before the RTC discloses no explicit allegation that the former had any legal right in its favor that it sought to protect. We can only infer the interest, supposedly in its favor, from its bare allegation that it "has thousands of members who are citizens-taxpayers-registered voters and who are keenly interested in a judicial clarification of the constitutionality of the partisan participation of religious leaders in Philippine politics and in the process to insure adherence to the Constitution by everyone x x x."32 Such general averment does not, however, suffice to constitute a legal right or interest. Not only is the presumed interest not personal in character; it is likewise too vague, highly speculative and uncertain.33 The Rules require that the interest must be material to the issue and affected by the questioned act or instrument, as distinguished from simple curiosity or incidental interest in the question raised.34 To bolster its stance, SJS cites the Corpus Juris Secundum and submits that the "[p]laintiff in a declaratory judgment action does not seek to enforce a claim against [the] defendant, but seeks a judicial declaration of [the] rights of the parties for the purpose of guiding [their] future conduct, and the essential distinction between a declaratory judgment action and the usual action is that no actual wrong need have been committed or loss have occurred in order to sustain the declaratory judgment
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action, although there must be no uncertainty that the loss will occur or that the asserted rights will be invaded."35 SJS has, however, ignored the crucial point of its own reference that there must be no uncertainty that the loss will occur or that the asserted rights will be invaded. Precisely, as discussed earlier, it merely conjectures that herein petitioner (and his co-respondents below) might actively participate in partisan politics, use "the awesome voting strength of its faithful flock [to] enable it to elect men to public office x x x, enabling [it] to control the government."36 During the Oral Argument, though, Petitioner Velarde and his co-respondents below all strongly asserted that they had not in any way engaged or intended to participate in partisan politics. They all firmly assured this Court that they had not done anything to trigger the issue raised and to entitle SJS to the relief sought. Indeed, the Court finds in the Petition for Declaratory Relief no single allegation of fact upon which SJS could base a right of relief from the named respondents. In any event, even granting that it sufficiently asserted a legal right it sought to protect, there was nevertheless no certainty that such right would be invaded by the said respondents. Not even the alleged proximity of the elections to the time the Petition was filed below (January 28, 2003) would have provided the certainty that it had a legal right that would be jeopardized or violated by any of those respondents. Legal Standing Legal standing or locus standi has been defined as a personal and substantial interest in the case, such that the party has sustained or will sustain direct injury as a result of the challenged act.37 Interest means a material interest in issue that is affected by the questioned act or instrument, as distinguished from a mere incidental interest in the question involved.38 Petitioner alleges that "[i]n seeking declaratory relief as to the constitutionality of an act of a religious leader to endorse, or require the members of the religious flock to vote for a specific candidate, herein Respondent SJS has no legal interest in the controversy";39 it has failed to establish how the resolution of the proffered question would benefit or injure it. Parties bringing suits challenging the constitutionality of a law, an act or a statute must show "not only that the law [or act] is invalid, but also that [they have] sustained or [are] in immediate or imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that [they] suffer thereby in some indefinite way."40 They must demonstrate that they have been, or are about to be, denied some right or privilege to which they are lawfully entitled, or that they are about to be subjected to some burdens or penalties by reason of the statute or act complained of.41 First, parties suing as taxpayers must specifically prove that they have sufficient interest in preventing the illegal expenditure of money raised by taxation.42 A taxpayers action may be properly brought only when there is an exercise by Congress of its taxing or spending power.43 In the present case, there is no allegation, whether express or implied, that taxpayers money is being illegally disbursed. Second, there was no showing in the Petition for Declaratory Relief that SJS as a political party or its members as registered voters would be adversely affected by the alleged acts of the respondents below, if the question at issue was not resolved. There was no allegation that SJS had suffered or would be deprived of votes due to the acts imputed to the said respondents. Neither did it allege that any of its members would be denied the right of suffrage or the privilege to be voted for a public office they are seeking. Finally, the allegedly keen interest of its "thousands of members who are citizens-taxpayers-registered voters" is too general44 and beyond the contemplation of the standards set by our jurisprudence. Not only is the presumed interest impersonal in character; it is likewise too vague, highly speculative and uncertain to satisfy the requirement of standing.45 Transcendental Importance

In any event, SJS urges the Court to take cognizance of the Petition, even sans legal standing, considering that "the issues raised are of paramount public interest." In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue of transcendental significance or paramount importance to the people.46 Recently, after holding that the IBP had no locus standi to bring the suit, the Court in IBP v. Zamora47 nevertheless entertained the Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents."48 Similarly in the instant case, the Court deemed the constitutional issue raised in the SJS Petition to be of paramount interest to the Filipino people. The issue did not simply concern a delineation of the separation between church and state, but ran smack into the governance of our country. The issue was both transcendental in importance and novel in nature, since it had never been decided before. The Court, thus, called for Oral Argument to determine with certainty whether it could resolve the constitutional issue despite the barren allegations in the SJS Petition as well as the abbreviated proceedings in the court below. Much to its chagrin, however, counsels for the parties -- particularly for Respondent SJS -- made no satisfactory allegations or clarifications that would supply the deficiencies hereinabove discussed. Hence, even if the Court would exempt this case from the stringent locus standi requirement, such heroic effort would be futile because the transcendental issue cannot be resolved anyway. Proper Proceedings Before the Trial Court To prevent a repetition of this waste of precious judicial time and effort, and for the guidance of the bench and the bar, the Court reiterates the elementary procedure49 that must be followed by trial courts in the conduct of civil cases.50 Prefatorily, the trial court may -- motu proprio or upon motion of the defendant -- dismiss a complaint51 (or petition, in a special civil action) that does not allege the plaintiffs (or petitioners) cause or causes of action.52 A complaint or petition should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim or defense."53 It should likewise clearly specify the relief sought.54 Upon the filing of the complaint/petition and the payment of the requisite legal fees, the clerk of court shall forthwith issue the corresponding summons to the defendants or the respondents, with a directive that the defendant answer55 within 15 days, unless a different period is fixed by the court.56 The summons shall also contain a notice that if such answer is not filed, the plaintiffs/petitioners shall take a judgment by default and may be granted the relief applied for.57 The court, however, may -- upon such terms as may be just -- allow an answer to be filed after the time fixed by the Rules.58 If the answer sets forth a counterclaim or cross-claim, it must be answered within ten (10) days from service.59 A reply may be filed within ten (10) days from service of the pleading responded to.60 When an answer fails to tender an issue or admits the material allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading (except in actions for declaration of nullity or annulment of marriage or for legal separation).61 Meanwhile, a party seeking to recover upon a claim, a counterclaim or crossclaim -- or to obtain a declaratory relief -- may, at any time after the answer thereto has been served, move for a summary judgment in its favor.62 Similarly, a party against whom a claim, a counterclaim or crossclaim is asserted -- or a declaratory relief sought -- may, at any time, move for a summary judgment in its favor.63 After the motion is heard, the judgment sought shall be rendered forthwith if there is a showing that, except as to the amount of damages, there is no genuine issue as to any material fact; and that the moving party is entitled to a judgment as a matter of law.64 Within the time for -- but before -- filing the answer to the complaint or petition, the defendant may file a motion to dismiss based on any of the grounds stated in Section 1 of Rule 16 of the Rules of Court. During the hearing of the motion, the parties shall submit their arguments on the questions of law, and their evidence on the questions of fact.65 After the hearing, the court may dismiss the action or claim,
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deny the motion, or order the amendment of the pleadings. It shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor.66 If the motion is denied, the movant may file an answer within the balance of the period originally prescribed to file an answer, but not less than five (5) days in any event, computed from the receipt of the notice of the denial. If the pleading is ordered to be amended, the defendant shall file an answer within fifteen (15) days, counted from the service of the amended pleading, unless the court provides a longer period.67 After the last pleading has been served and filed, the case shall be set for pretrial,68 which is a mandatory proceeding.69 A plaintiffs/ petitioners (or its duly authorized representatives) nonappearance at the pretrial, if without valid cause, shall result in the dismissal of the action with prejudice, unless the court orders otherwise. A similar failure on the part of the defendant shall be a cause for allowing the plaintiff/petitioner to present evidence ex parte, and the court to render judgment on the basis thereof.70 The parties are required to file their pretrial briefs; failure to do so shall have the same effect as failure to appear at the pretrial.71 Upon the termination thereof, the court shall issue an order reciting in detail the matters taken up at the conference; the action taken on them, the amendments allowed to the pleadings; and the agreements or admissions, if any, made by the parties regarding any of the matters considered.72 The parties may further avail themselves of any of the modes of discovery,73 if they so wish. Thereafter, the case shall be set for trial,74 in which the parties shall adduce their respective evidence in support of their claims and/or defenses. By their written consent or upon the application of either party, or on its own motion, the court may also order any or all of the issues to be referred to a commissioner, who is to be appointed by it or to be agreed upon by the parties.75 The trial or hearing before the commissioner shall proceed in all respects as it would if held before the court.76 Upon the completion of such proceedings, the commissioner shall file with the court a written report on the matters referred by the parties.77 The report shall be set for hearing, after which the court shall issue an order adopting, modifying or rejecting it in whole or in part; or recommitting it with instructions; or requiring the parties to present further evidence before the commissioner or the court.78 Finally, a judgment or final order determining the merits of the case shall be rendered. The decision shall be in writing, personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by the issuing magistrate, and filed with the clerk of court.79 Based on these elementary guidelines, let us examine the proceedings before the trial court in the instant case. First, with respect to the initiatory pleading of the SJS. Even a cursory perusal of the Petition immediately reveals its gross inadequacy. It contained no statement of ultimate facts upon which the petitioner relied for its claim. Furthermore, it did not specify the relief it sought from the court, but merely asked it to answer a hypothetical question. Relief, as contemplated in a legal action, refers to a specific coercive measure prayed for as a result of a violation of the rights of a plaintiff or a petitioner.80 As already discussed earlier, the Petition before the trial court had no allegations of fact81 or of any specific violation of the petitioners rights, which the respondents had a duty to respect. Such deficiency amounted to a failure to state a cause of action; hence, no coercive relief could be sought and adjudicated. The Petition evidently lacked substantive requirements and, we repeat, should have been dismissed at the outset. Second, with respect to the trial court proceedings. Within the period set to file their respective answers to the SJS Petition, Velarde, Villanueva and Manalo filed Motions to Dismiss; Cardinal Sin, a Comment; and Soriano, within a priorly granted extended period, an Answer in which he likewise prayed for the dismissal of the Petition.82 SJS filed a Rejoinder to the Motion of Velarde, who subsequently filed a SurRejoinder. Supposedly, there were "several scheduled settings, in which the "[c]ourt was apprised of the

respective positions of the parties."83 The nature of such settings -- whether pretrial or trial hearings -was not disclosed in the records. Before ruling on the Motions to Dismiss, the trial court issued an Order84 dated May 8, 2003, directing the parties to submit their memoranda. Issued shortly thereafter was another Order85 dated May 14, 2003, denying all the Motions to Dismiss. In the latter Order, the trial court perfunctorily ruled: "The Court now resolves to deny the Motions to Dismiss, and after all the memoranda are submitted, then, the case shall be deemed as submitted for resolution."86 Apparently, contrary to the requirement of Section 2 of Rule 16 of the Rules of Court, the Motions were not heard. Worse, the Order purportedly resolving the Motions to Dismiss did not state any reason at all for their denial, in contravention of Section 3 of the said Rule 16. There was not even any statement of the grounds relied upon by the Motions; much less, of the legal findings and conclusions of the trial court. Thus, Velarde, Villanueva and Manalo moved for reconsideration. Pending the resolution of these Motions for Reconsideration, Villanueva filed a Motion to suspend the filing of the parties memoranda. But instead of separately resolving the pending Motions fairly and squarely, the trial court again transgressed the Rules of Court when it immediately proceeded to issue its Decision, even before tackling the issues raised in those Motions. Furthermore, the RTC issued its "Decision" without allowing the parties to file their answers. For this reason, there was no joinder of the issues. If only it had allowed the filing of those answers, the trial court would have known, as the Oral Argument revealed, that the petitioner and his co-respondents below had not committed or threatened to commit the act attributed to them (endorsing candidates) -- the act that was supposedly the factual basis of the suit. Parenthetically, the court a quo further failed to give a notice of the Petition to the OSG, which was entitled to be heard upon questions involving the constitutionality or validity of statutes and other measures.87 Moreover, as will be discussed in more detail, the questioned Decision of the trial court was utterly wanting in the requirements prescribed by the Constitution and the Rules of Court. All in all, during the loosely abbreviated proceedings of the case, the trial court indeed acted with inexplicable haste, with total ignorance of the law -- or, worse, in cavalier disregard of the rules of procedure -- and with grave abuse of discretion. Contrary to the contentions of the trial judge and of SJS, proceedings for declaratory relief must still follow the process described above -- the petition must state a cause of action; the proceedings must undergo the procedure outlined in the Rules of Court; and the decision must adhere to constitutional and legal requirements. First Substantive Issue: Fundamental Requirements of a Decision The Constitution commands that "[n]o decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the basis therefor."88 Consistent with this constitutional mandate, Section 1 of Rule 36 of the Rules on Civil Procedure similarly provides: "Sec. 1. Rendition of judgments and final orders. A judgment or final order determining the merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by him and filed with the clerk of court." In the same vein, Section 2 of Rule 120 of the Rules of Court on Criminal Procedure reads as follows:
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"Sec. 2. Form and contents of judgments. -- The judgment must be written in the official language, personally and directly prepared by the judge and signed by him and shall contain clearly and distinctly a statement of the facts proved or admitted by the accused and the law upon which the judgment is based. "x x x xxx x x x." Pursuant to the Constitution, this Court also issued on January 28, 1988, Administrative Circular No. 1, prompting all judges "to make complete findings of facts in their decisions, and scrutinize closely the legal aspects of the case in the light of the evidence presented. They should avoid the tendency to generalize and form conclusions without detailing the facts from which such conclusions are deduced." In many cases,89 this Court has time and time again reminded "magistrates to heed the demand of Section 14, Article VIII of the Constitution." The Court, through Chief Justice Hilario G. Davide Jr. in Yao v. Court of Appeals,90 discussed at length the implications of this provision and strongly exhorted thus: "Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is indisputably a paramount component of due process and fair play. It is likewise demanded by the due process clause of the Constitution. The parties to a litigation should be informed of how it was decided, with an explanation of the factual and legal reasons that led to the conclusions of the court. The court cannot simply say that judgment is rendered in favor of X and against Y and just leave it at that without any justification whatsoever for its action. The losing party is entitled to know why he lost, so he may appeal to the higher court, if permitted, should he believe that the decision should be reversed. A decision that does not clearly and distinctly state the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is precisely prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal. More than that, the requirement is an assurance to the parties that, in reaching judgment, the judge did so through the processes of legal reasoning. It is, thus, a safeguard against the impetuosity of the judge, preventing him from deciding ipse dixit. Vouchsafed neither the sword nor the purse by the Constitution but nonetheless vested with the sovereign prerogative of passing judgment on the life, liberty or property of his fellowmen, the judge must ultimately depend on the power of reason for sustained public confidence in the justness of his decision." In People v. Bugarin,91 the Court also explained: "The requirement that the decisions of courts must be in writing and that they must set forth clearly and distinctly the facts and the law on which they are based serves many functions. It is intended, among other things, to inform the parties of the reason or reasons for the decision so that if any of them appeals, he can point out to the appellate court the finding of facts or the rulings on points of law with which he disagrees. More than that, the requirement is an assurance to the parties that, in reaching judgment, the judge did so through the processes of legal reasoning. x x x." Indeed, elementary due process demands that the parties to a litigation be given information on how the case was decided, as well as an explanation of the factual and legal reasons that led to the conclusions of the court.92 In Madrid v. Court of Appeals,93 this Court had instructed magistrates to exert effort to ensure that their decisions would present a comprehensive analysis or account of the factual and legal findings that would substantially address the issues raised by the parties. In the present case, it is starkly obvious that the assailed Decision contains no statement of facts -much less an assessment or analysis thereof -- or of the courts findings as to the probable facts. The assailed Decision begins with a statement of the nature of the action and the question or issue presented. Then follows a brief explanation of the constitutional provisions involved, and what the Petition sought to achieve. Thereafter, the ensuing procedural incidents before the trial court are tracked. The Decision proceeds to a full-length opinion on the nature and the extent of the separation of church

and state. Without expressly stating the final conclusion she has reached or specifying the relief granted or denied, the trial judge ends her "Decision" with the clause "SO ORDERED." What were the antecedents that necessitated the filing of the Petition? What exactly were the distinct facts that gave rise to the question sought to be resolved by SJS? More important, what were the factual findings and analysis on which the trial court based its legal findings and conclusions? None were stated or implied. Indeed, the RTCs Decision cannot be upheld for its failure to express clearly and distinctly the facts on which it was based. Thus, the trial court clearly transgressed the constitutional directive. The significance of factual findings lies in the value of the decision as a precedent. How can it be so if one cannot apply the ruling to similar circumstances, simply because such circumstances are unknown? Otherwise stated, how will the ruling be applied in the future, if there is no point of factual comparison? Moreover, the court a quo did not include a resolutory or dispositive portion in its so-called Decision. The importance of such portion was explained in the early case Manalang v. Tuason de Rickards,94 from which we quote: "The resolution of the Court on a given issue as embodied in the dispositive part of the decision or order is the investitive or controlling factor that determines and settles the rights of the parties and the questions presented therein, notwithstanding the existence of statements or declaration in the body of said order that may be confusing." The assailed Decision in the present case leaves us in the dark as to its final resolution of the Petition. To recall, the original Petition was for declaratory relief. So, what relief did the trial court grant or deny? What rights of the parties did it conclusively declare? Its final statement says, "SO ORDERED." But what exactly did the court order? It had the temerity to label its issuance a "Decision," when nothing was in fact decided. Respondent SJS insists that the dispositive portion can be found in the body of the assailed Decision. It claims that the issue is disposed of and the Petition finally resolved by the statement of the trial court found on page 10 of its 14-page Decision, which reads: "Endorsement of specific candidates in an election to any public office is a clear violation of the separation clause."95 We cannot agree. In Magdalena Estate, Inc. v. Caluag,96 the obligation of the party imposed by the Court was allegedly contained in the text of the original Decision. The Court, however, held: "x x x The quoted finding of the lower court cannot supply deficiencies in the dispositive portion. It is a mere opinion of the court and the rule is settled that where there is a conflict between the dispositive part and the opinion, the former must prevail over the latter on the theory that the dispositive portion is the final order while the opinion is merely a statement ordering nothing." (Italics in the original) Thus, the dispositive portion cannot be deemed to be the statement quoted by SJS and embedded in the last paragraph of page 10 of the assailed 14-page Decision. If at all, that statement is merely an answer to a hypothetical legal question and just a part of the opinion of the trial court. It does not conclusively declare the rights (or obligations) of the parties to the Petition. Neither does it grant any -- much less, the proper -- relief under the circumstances, as required of a dispositive portion. Failure to comply with the constitutional injunction is a grave abuse of discretion amounting to lack or excess of jurisdiction. Decisions or orders issued in careless disregard of the constitutional mandate are a patent nullity and must be struck down as void.97 Parts of a Decision In general, the essential parts of a good decision consist of the following: (1) statement of the case; (2) statement of facts; (3) issues or assignment of errors; (4) court ruling, in which each issue is, as a rule, separately considered and resolved; and, finally, (5) dispositive portion. The ponente may also opt to include an introduction or a prologue as well as an epilogue, especially in cases in which controversial or novel issues are involved.98
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An introduction may consist of a concise but comprehensive statement of the principal factual or legal issue/s of the case. In some cases -- particularly those concerning public interest; or involving complicated commercial, scientific, technical or otherwise rare subject matters -- a longer introduction or prologue may serve to acquaint readers with the specific nature of the controversy and the issues involved. An epilogue may be a summation of the important principles applied to the resolution of the issues of paramount public interest or significance. It may also lay down an enduring philosophy of law or guiding principle. Let us now, again for the guidance of the bench and the bar, discuss the essential parts of a good decision. 1. Statement of the Case The Statement of the Case consists of a legal definition of the nature of the action. At the first instance, this part states whether the action is a civil case for collection, ejectment, quieting of title, foreclosure of mortgage, and so on; or, if it is a criminal case, this part describes the specific charge -- quoted usually from the accusatory portion of the information -- and the plea of the accused. Also mentioned here are whether the case is being decided on appeal or on a petition for certiorari, the court of origin, the case number in the trial court, and the dispositive portion of the assailed decision. In a criminal case, the verbatim reproduction of the criminal information serves as a guide in determining the nature and the gravity of the offense for which the accused may be found culpable. As a rule, the accused cannot be convicted of a crime different from or graver than that charged. Also, quoting verbatim the text of the information is especially important when there is a question on the sufficiency of the charge, or on whether qualifying and modifying circumstances have been adequately alleged therein. To ensure that due process is accorded, it is important to give a short description of the proceedings regarding the plea of the accused. Absence of an arraignment, or a serious irregularity therein, may render the judgment void, and further consideration by the appellate court would be futile. In some instances, especially in appealed cases, it would also be useful to mention the fact of the appellants detention, in order to dispose of the preliminary query -- whether or not they have abandoned their appeal by absconding or jumping bail. Mentioning the court of origin and the case number originally assigned helps in facilitating the consolidation of the records of the case in both the trial and the appellate courts, after entry of final judgment. Finally, the reproduction of the decretal portion of the assailed decision informs the reader of how the appealed case was decided by the court a quo. 2. Statement of Facts There are different ways of relating the facts of the case. First, under the objective or reportorial method, the judge summarizes -- without comment -- the testimony of each witness and the contents of each exhibit. Second, under the synthesis method, the factual theory of the plaintiff or prosecution and then that of the defendant or defense is summarized according to the judges best light. Third, in the subjective method, the version of the facts accepted by the judge is simply narrated without explaining what the parties versions are. Finally, through a combination of objective and subjective means, the testimony of each witness is reported and the judge then formulates his or her own version of the facts. In criminal cases, it is better to present both the version of the prosecution and that of the defense, in the interest of fairness and due process. A detailed evaluation of the contentions of the parties must follow. The resolution of most criminal cases, unlike civil and other cases, depends to a large extent on the factual issues and the appreciation of the evidence. The plausibility or the implausibility of each version can sometimes be initially drawn from a reading of the facts. Thereafter, the bases of the court in arriving at its findings and conclusions should be explained.

On appeal, the fact that the assailed decision of the lower court fully, intelligently and correctly resolved all factual and legal issues involved may partly explain why the reviewing court finds no reason to reverse the findings and conclusions of the former. Conversely, the lower courts patent misappreciation of the facts or misapplication of the law would aid in a better understanding of why its ruling is reversed or modified. In appealed civil cases, the opposing sets of facts no longer need to be presented. Issues for resolution usually involve questions of law, grave abuse of discretion, or want of jurisdiction; hence, the facts of the case are often undisputed by the parties. With few exceptions, factual issues are not entertained in noncriminal cases. Consequently, the narration of facts by the lower court, if exhaustive and clear, may be reproduced; otherwise, the material factual antecedents should be restated in the words of the reviewing magistrate. In addition, the reasoning of the lower court or body whose decision is under review should be laid out, in order that the parties may clearly understand why the lower court ruled in a certain way, and why the reviewing court either finds no reason to reverse it or concludes otherwise. 3. Issues or Assignment of Errors Both factual and legal issues should be stated. On appeal, the assignment of errors, as mentioned in the appellants brief, may be reproduced in toto and tackled seriatim, so as to avoid motions for reconsideration of the final decision on the ground that the court failed to consider all assigned errors that could affect the outcome of the case. But when the appellant presents repetitive issues or when the assigned errors do not strike at the main issue, these may be restated in clearer and more coherent terms. Though not specifically questioned by the parties, additional issues may also be included, if deemed important for substantial justice to be rendered. Note that appealed criminal cases are given de novo review, in contrast to noncriminal cases in which the reviewing court is generally limited to issues specifically raised in the appeal. The few exceptions are errors of jurisdiction; questions not raised but necessary in arriving at a just decision on the case; or unassigned errors that are closely related to those properly assigned, or upon which depends the determination of the question properly raised. 4. The Courts Ruling This part contains a full discussion of the specific errors or issues raised in the complaint, petition or appeal, as the case may be; as well as of other issues the court deems essential to a just disposition of the case. Where there are several issues, each one of them should be separately addressed, as much as practicable. The respective contentions of the parties should also be mentioned here. When procedural questions are raised in addition to substantive ones, it is better to resolve the former preliminarily. 5. The Disposition or Dispositive Portion In a criminal case, the disposition should include a finding of innocence or guilt, the specific crime committed, the penalty imposed, the participation of the accused, the modifying circumstances if any, and the civil liability and costs. In case an acquittal is decreed, the court must order the immediate release of the accused, if detained, (unless they are being held for another cause) and order the director of the Bureau of Corrections (or wherever the accused is detained) to report, within a maximum of ten (10) days from notice, the exact date when the accused were set free. In a civil case as well as in a special civil action, the disposition should state whether the complaint or petition is granted or denied, the specific relief granted, and the costs. The following test of completeness may be applied. First, the parties should know their rights and obligations. Second, they should know how to execute the decision under alternative contingencies. Third, there should be no need for further proceedings to dispose of the issues. Fourth, the case should be terminated by according the proper relief. The "proper relief" usually depends upon what the parties seek in their pleadings. It may declare their rights and duties, command the performance of positive prestations, or order them to abstain from specific acts. The disposition must also adjudicate costs.
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The foregoing parts need not always be discussed in sequence. But they should all be present and plainly identifiable in the decision. Depending on the writers character, genre and style, the language should be fresh and free-flowing, not necessarily stereotyped or in a fixed form; much less highfalutin, hackneyed and pretentious. At all times, however, the decision must be clear, concise, complete and correct. Second Substantive Issue: Religious Leaders Endorsement of Candidates for Public Office The basic question posed in the SJS Petition -- WHETHER ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS UNCONSTITUTIONAL -- undoubtedly deserves serious consideration. As stated earlier, the Court deems this constitutional issue to be of paramount interest to the Filipino citizenry, for it concerns the governance of our country and its people. Thus, despite the obvious procedural transgressions by both SJS and the trial court, this Court still called for Oral Argument, so as not to leave any doubt that there might be room to entertain and dispose of the SJS Petition on the merits. Counsel for SJS has utterly failed, however, to convince the Court that there are enough factual and legal bases to resolve the paramount issue. On the other hand, the Office of the Solicitor General has sided with petitioner insofar as there are no facts supporting the SJS Petition and the assailed Decision. We reiterate that the said Petition failed to state directly the ultimate facts that it relied upon for its claim. During the Oral Argument, counsel for SJS candidly admitted that there were no factual allegations in its Petition for Declaratory Relief. Neither were there factual findings in the assailed Decision. At best, SJS merely asked the trial court to answer a hypothetical question. In effect, it merely sought an advisory opinion, the rendition of which was beyond the courts constitutional mandate and jurisdiction.99 Indeed, the assailed Decision was rendered in clear violation of the Constitution, because it made no findings of facts and final disposition. Hence, it is void and deemed legally inexistent. Consequently, there is nothing for this Court to review, affirm, reverse or even just modify. Regrettably, it is not legally possible for the Court to take up, on the merits, the paramount question involving a constitutional principle. It is a time-honored rule that "the constitutionality of a statute [or act] will be passed upon only if, and to the extent that, it is directly and necessarily involved in a justiciable controversy and is essential to the protection of the rights of the parties concerned."100 WHEREFORE, the Petition for Review of Brother Mike Velarde is GRANTED. The assailed June 12, 2003 Decision and July 29, 2003 Order of the Regional Trial Court of Manila (Branch 49) are hereby DECLARED NULL AND VOID and thus SET ASIDE. The SJS Petition for Declaratory Relief is DISMISSED for failure to state a cause of action. Let a copy of this Decision be furnished the Office of the Court Administrator to evaluate and recommend whether the trial judge may, after observing due process, be held administratively liable for rendering a decision violative of the Constitution, the Rules of Court and relevant circulars of this Court. No costs. SO ORDERED.

G.R. No. 186616 November 20, 2009 COMMISSION ON ELECTIONS, Petitioner, vs. CONRADO CRUZ, SANTIAGO P. GO, RENATO F. BORBON, LEVVINO CHING, CARLOS C.

FLORENTINO, RUBEN G. BALLEGA, LOIDA ALCEDO, MARIO M. CAJUCOM, EMMANUEL M. CALMA, MANUEL A. RAYOS, WILMA L. CHUA, EUFEMIO S. ALFONSO, JESUS M. LACANILAO, BONIFACIO N. ALCAPA, JOSE H. SILVERIO, RODRIGO DEVELLES, NIDA R. PAUNAN, MARIANO B. ESTUYE, JR., RAFAEL C. AREVALO, ARTURO T. MANABAT, RICARDO O. LIZARONDO, LETICIA C. MATURAN, RODRIGO A. ALAYAN, LEONILO N. MIRANDA, DESEDERIO O. MONREAL, FRANCISCO M. BAHIA, NESTOR R. FORONDA, VICENTE B. QUE, JR., AURELIO A. BILUAN, DANILO R. GATCHALIAN, LOURDES R. DEL MUNDO, EMMA O. CALZADO, FELIMON DE LEON, TANY V. CATACUTAN, AND CONCEPCION P. JAO, Respondents. DECISION BRION, J.: We resolve in this Decision the constitutional challenge, originally filed before the Regional Trial Court of Caloocan City, Branch 128 (RTC), against the following highlighted portion of Section 2 of Republic Act (RA) No. 9164 (entitled "An Act Providing for Synchronized Barangay and Sangguniang Kabataan Elections, amending RA No. 7160, as amended, otherwise known as the Local Government Code of 1991"): Sec. 2. Term of Office. The term of office of all barangay and sangguniang kabataan officials after the effectivity of this Act shall be three (3) years. No barangay elective official shall serve for more than three (3) consecutive terms in the same position: Provided, however, That the term of office shall be reckoned from the 1994 barangay elections. Voluntary renunciation of office for any length of time shall not be considered as an interruption in the continuity of service for the full term for which the elective official was elected. The RTC granted the petition and declared the challenged proviso constitutionally infirm. The present petition, filed by the Commission on Elections (COMELEC), seeks a review of the RTC decision.1 THE ANTECEDENTS Before the October 29, 2007 Synchronized Barangay and Sangguniang Kabataan (SK) Elections, some of the then incumbent officials of several barangays of Caloocan City2 filed with the RTC a petition for declaratory relief to challenge the constitutionality of the above-highlighted proviso, based on the following arguments: I. The term limit of Barangay officials should be applied prospectively and not retroactively. II. Implementation of paragraph 2 Section 2 of RA No. 9164 would be a violation of the equal protection of the law. III. Barangay officials have always been apolitical. The RTC agreed with the respondents contention that the challenged proviso retroactively applied the three-term limit for barangay officials under the following reasoning: When the Local Government Code of 1991 took effect abrogating all other laws inconsistent therewith, a different term was ordained. Here, this Court agrees with the position of the petitioners that Section 43 of the Code specifically exempted barangay elective officials from the coverage of the three (3) consecutive term limit rule considering that the provision applicable to these (sic) class of elective officials was significantly separated from the provisions of paragraphs (a) and (b) thereof. Paragraph (b) is indeed intended to qualify paragraph (a) of Section 43 as regards to (sic) all local elective officials except barangay officials. Had the intention of the framers of the Code is (sic) to include barangay elective officials, then no excepting proviso should have been expressly made in paragraph (a) thereof or, by implication, the contents of paragraph (c) should have been stated ahead of the contents of paragraph (b). xxxx Clearly, the intent of the framers of the constitution (sic) is to exempt the barangay officials from the three (3) term limits (sic) which are otherwise applicable to other elected public officials from the
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Members of the House of Representatives down to the members of the sangguniang bayan/panlungsod. It is up for the Congress whether the three (3) term limit should be applied by enacting a law for the purpose. The amendment introduced by R.A. No. 8524 merely increased the term of office of barangay elective officials from three (3) years to five (5) years. Like the Local Government Code, it can be noted that no consecutive term limit for the election of barangay elective officials was fixed therein. The advent of R.A. 9164 marked the revival of the consecutive term limit for the election of barangay elective officials after the Local Government Code took effect. Under the assailed provision of this Act, the term of office of barangay elective officials reverted back to three (3) years from five (5) years, and, this time, the legislators expressly declared that no barangay elective official shall serve for more than three (3) consecutive terms in the same position. The petitioners are very clear that they are not assailing the validity of such provision fixing the three (3) consecutive term limit rule for the election of barangay elective officials to the same position. The particular provision the constitutionality of which is under attack is that portion providing for the reckoning of the three (3) consecutive term limit of barangay elective officials beginning from the 1994 barangay elections. xxx Section 2, paragraph 2 of R.A. 9164 is not a mere restatement of Section 43(c) of the Local Government Code. As discussed above, Section 43(c) of the Local Government Code does not provide for the consecutive term limit rule of barangay elective officials. Such specific provision of the Code has in fact amended the previous enactments (R.A. 6653 and R.A. 6679) providing for the consecutive term limit rule of barangay elective officials. But, such specific provision of the Local Government Code was amended by R.A. 9164, which reverted back to the previous policy of fixing consecutive term limits of barangay elective officials." 3 In declaring this retroactive application unconstitutional, the RTC explained that: By giving a retroactive reckoning of the three (3) consecutive term limit rule for barangay officials to the 1994 barangay elections, Congress has violated not only the principle of prospective application of statutes but also the equal protection clause of the Constitution inasmuch as the barangay elective officials were singled out that their consecutive term limit shall be counted retroactively. There is no rhyme or reason why the consecutive limit for these barangay officials shall be counted retroactively while the consecutive limit for other local and national elective officials are counted prospectively. For if the purpose of Congress is [sic] to classify elective barangay officials as belonging to the same class of public officers whose term of office are limited to three (3) consecutive terms, then to discriminate them by applying the proviso retroactively violates the constitutionally enshrined principle of equal protection of the laws. Although the Constitution grants Congress the power to determine such successive term limit of barangay elective officials, the exercise of the authority granted shall not otherwise transgress other constitutional and statutory privileges. This Court cannot subscribe to the position of the respondent that the legislature clearly intended that the provision of RA No. 9164 be made effective in 1994 and that such provision is valid and constitutional. If we allow such premise, then the term of office for those officials elected in the 1997 barangay elections should have ended in year 2000 and not year 2002 considering that RA No. 9164 provides for a three-year term of barangay elective officials. The amendment introduced by R.A. No. 8524 would be rendered nugatory in view of such retroactive application. This is absurd and illusory. True, no person has a vested right to a public office, the same not being property within the contemplation of constitutional guarantee. However, a cursory reading of the petition would show that the petitioners are not claiming vested right to their office but their right to be voted upon by the electorate without being burdened by the assailed provision of the law that, in effect, rendered them ineligible to run for their incumbent positions. Such right to run for office and be voted for by the electorate is the right being sought to be protected by assailing the otherwise unconstitutional provision.

Moreover, the Court likewise agrees with the petitioners that the law violated the one-act-one subject rule embodied in the Constitution. x x x x The challenged laws title is "AN ACT PROVIDING FOR THE SYNCHRONIZED BARANGAY AND SANGGUNIANG KABATAAN ELECTIONS, AMENDING REPUBLIC ACT 7160 OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991 AND FOR OTHER PURPOSES." x x x x xxxx To this court, the non-inclusion in the title of the act on the retroactivity of the reckoning of the term limits posed a serious constitutional breach, particularly on the provision of the constitution [sic] that every bill must embrace only one subject to be expressed in the title thereof. x x x the Court is of the view that the affected barangay officials were not sufficiently given notice that they were already disqualified by a new act, when under the previous enactments no such restrictions were imposed. Even if this Court would apply the usual test in determining the sufficiency of the title of the bill, the challenged law would still be insufficient for how can a retroactivity of the term limits be germane to the synchronization of an election x x x x.4 The COMELEC moved to reconsider this decision but the RTC denied the motion. Hence, the present petition on a pure question of law. The Petition The COMELEC takes the position that the assailed law is valid and constitutional. RA No. 9164 is an amendatory law to RA No. 7160 (the Local Government Code of 1991 or LGC) and is not a penal law; hence, it cannot be considered an ex post facto law. The three-term limit, according to the COMELEC, has been specifically provided in RA No. 7160, and RA No. 9164 merely restated the three-term limitation. It further asserts that laws which are not penal in character may be applied retroactively when expressly so provided and when it does not impair vested rights. As there is no vested right to public office, much less to an elective post, there can be no valid objection to the alleged retroactive application of RA No. 9164. The COMELEC also argues that the RTCs invalidation of RA No. 9164 essentially involves the wisdom of the law the aspect of the law that the RTC has no right to inquire into under the constitutional separation of powers principle. The COMELEC lastly argues that there is no violation of the one subjectone title rule, as the matters covered by RA No. 9164 are related; the assailed provision is actually embraced within the title of the law. THE COURTS RULING We find the petition meritorious. The RTC legally erred when it declared the challenged proviso unconstitutional. Preliminary Considerations We find it appropriate, as a preliminary matter, to hark back to the pre-1987 Constitution history of the barangay political system as outlined by this Court in David v. COMELEC,5 and we quote: As a unit of government, the barangay antedated the Spanish conquest of the Philippines. The word "barangay" is derived from the Malay "balangay," a boat which transported them (the Malays) to these shores. Quoting from Juan de Plasencia, a Franciscan missionary in 1577, Historian Conrado Benitez wrote that the barangay was ruled by a dato who exercised absolute powers of government. While the Spaniards kept the barangay as the basic structure of government, they stripped the dato or rajah of his powers. Instead, power was centralized nationally in the governor general and locally in the encomiendero and later, in the alcalde mayor and the gobernadorcillo. The dato or rajah was much later renamed cabeza de barangay, who was elected by the local citizens possessing property. The position degenerated from a title of honor to that of a "mere government employee. Only the poor who needed a salary, no matter how low, accepted the post."
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After the Americans colonized the Philippines, the barangays became known as "barrios." For some time, the laws governing barrio governments were found in the Revised Administrative Code of 1916 and later in the Revised Administrative Code of 1917. Barrios were granted autonomy by the original Barrio Charter, RA 2370, and formally recognized as quasi-municipal corporations by the Revised Barrio Charter, RA 3590. During the martial law regime, barrios were "declared" or renamed "barangays" -- a reversion really to their pre-Spanish names -- by PD. No. 86 and PD No. 557. Their basic organization and functions under RA 3590, which was expressly "adopted as the Barangay Charter," were retained. However, the titles of the officials were changed to "barangay captain," "barangay councilman," "barangay secretary" and "barangay treasurer." Pursuant to Sec. 6 of Batas Pambansa Blg. 222, "a Punong Barangay (Barangay Captain) and six Kagawads ng Sangguniang Barangay (Barangay Councilmen), who shall constitute the presiding officer and members of the Sangguniang Barangay (Barangay Council) respectively" were first elected on May 17, 1982. They had a term of six years which began on June 7, 1982. The Local Government Code of 1983 also fixed the term of office of local elective officials at six years. Under this Code, the chief officials of the barangay were the punong barangay, six elective sangguniang barangay members, the kabataang barangay chairman, a barangay secretary and a barangay treasurer. B.P. Blg. 881, the Omnibus Election Code, reiterated that barangay officials "shall hold office for six years," and stated that their election was to be held "on the second Monday of May nineteen hundred and eighty eight and on the same day every six years thereafter." [Emphasis supplied.] The 1987 Philippine Constitution extended constitutional recognition to barangays under Article X, Section 1 by specifying barangays as one of the territorial and political subdivisions of the country, supplemented by Section 8 of the same Article X, which provides: SEC. 8. The term of office of elective local officials, except barangay officials, which shall be determined by law, shall be three years and no such official shall serve for more than three consecutive terms. Voluntary renunciation of the office for any length of time shall not be considered as an interruption in the continuity of his service for the full term for which he was elected. [Emphasis supplied.] The Constitutional Commissions deliberations on Section 8 show that the authority of Congress to legislate relates not only to the fixing of the term of office of barangay officials, but also to the application of the three-term limit. The following deliberations of the Constitutional Commission are particularly instructive on this point: MR. NOLLEDO: One clarificatory question, Madam President. What will be the term of the office of barangay officials as provided for? MR. DAVIDE: As may be determined by law. MR. NOLLEDO: As provided for in the Local Government Code? MR. DAVIDE: Yes. xxx xxx xxx THE PRESIDENT: Is there any other comment? Is there any objection to this proposed new section as submitted by Commissioner Davide and accepted by the Committee? MR. RODRIGO: Madam President, does this prohibition to serve for more than three consecutive terms apply to barangay officials? MR. DAVIDE: Madam President, the voting that we had on the terms of office did not include the barangay officials because it was then the stand of the Chairman of the Committee on Local Governments that the term of barangay officials must be determined by law. So it is now for the law to determine whether the restriction on the number of reelections will be included in the Local Government Code. MR. RODRIGO: So that is up to Congress to decide. MR. DAVIDE: Yes.

MR. RODRIGO: I just wanted that clear in the record."6 [Emphasis supplied.] After the effectivity of the 1987 Constitution, the barangay election originally scheduled by Batas Pambansa Blg. 8817 on the second Monday of May 1988 was reset to "the second Monday of November 1988 and every five years thereafter by RA No. 6653."8 Section 2 of RA No. 6653 changed the term of office of barangay officials and introduced a term limitation as follows: SEC. 2. The term of office of barangay officials shall be for five (5) years from the first day of January following their election. Provided, however, That no kagawad shall serve for more than two (2) consecutive terms. [Emphasis supplied] Under Section 5 of RA No. 6653, the punong barangay was to be chosen by seven kagawads from among themselves, and they in turn, were to be elected at large by the barangay electorate. The punong barangay, under Section 6 of the law, may be recalled for loss of confidence by an absolute majority vote of the Sangguniang Barangay, embodied in a resolution that shall necessarily include the punong barangays successor. The election date set by RA No. 6653 on the second Monday of November 1988 was postponed yet again to March 28, 1989 by RA No. 6679 whose pertinent provision states: SEC. 1. The elections of barangay officials set on the second Monday of November 1988 by Republic Act No. 6653 are hereby postponed and reset to March 28, 1989. They shall serve a term which shall begin on the first day of May 1989 and ending on the thirty-first day of May 1994. There shall be held a regular election of barangay officials on the second Monday of May 1994 and on the same day every five (5) years thereafter. Their term shall be for five (5) years which shall begin on the first day of June following the election and until their successors shall have been elected and qualified: Provided, That no barangay official shall serve for more than three (3) consecutive terms. The barangay elections shall be nonpartisan and shall be conducted in an expeditious and inexpensive manner. Significantly, the manner of election of the punong barangay was changed Section 5 of the law provided that while the seven kagawads were to be elected by the registered voters of the barangay, "(t)he candidate who obtains the highest number of votes shall be the punong barangay and in the event of a tie, there shall be a drawing of lots under the supervision of the Commission on Elections." More than two (2) years after the 1989 barangay elections, RA No. 7160 (the LGC) introduced the following changes in the law: SEC. 41. Manner of Election. -- (a) The x x x punong barangay shall be elected at large x x x by the qualified voters" therein. SEC. 43. Term of Office. - (a) The term of office of all local elective officials elected after the effectivity of this Code shall be three (3) years, starting from noon of June 30, 1992 or such date as may be provided for by law, except that of elective barangay officials: Provided, That all local officials first elected during the local elections immediately following the ratification of the 1987 Constitution shall serve until noon of June 30, 1992. (b) No local elective official shall serve for more than three (3) consecutive terms in the same position. Voluntary renunciation of the office for any length of time shall not be considered as an interruption in the continuity of service for the full term for which the elective official concerned was elected. (c) The term of office of barangay officials and members of the sangguniang kabataan shall be for three (3) years, which shall begin after the regular election of barangay officials on the second Monday of May 1994.

SEC. 387. Chief Officials and Offices. -- (a) There shall be in each barangay a punong barangay, seven (7) sangguniang barangay members, the sangguniang kabataan chairman, a barangay secretary and a barangay treasurer. xxxxxxxxx SEC. 390. Composition. -- The Sangguniang barangay, the legislative body of the barangay, shall be composed of the punong barangay as presiding officer, and the seven (7) regular sanguniang barangay members elected at large and the sanguniang kabataan chairman as members. [Emphasis supplied.] This law started the direct and separate election of the punong barangay by the "qualified voters" in the barangay and not by the seven (7) kagawads from among themselves.9 Subsequently or on February 14, 1998, RA No. 8524 changed the three-year term of office of barangay officials under Section 43 of the LGC to five (5) years. On March 19, 2002, RA No. 9164 introduced the following significant changes: (1) the term of office of barangay officials was again fixed at three years on the reasoning that the barangay officials should not serve a longer term than their supervisors;10 and (2) the challenged proviso, which states that the 1994 election shall be the reckoning point for the application of the three-term limit, was introduced. Yet another change was introduced three years after or on July 25, 2005 when RA No. 9340 extended the term of the then incumbent barangay officials due to expire at noon of November 30, 2005 under RA No. 9164 to noon of November 30, 2007. The threeyear term limitation provision survived all these changes. Congress Plenary Power to Legislate Term Limits for Barangay Officials and Judicial Power In passing upon the issues posed to us, we clarify at the outset the parameters of our powers. As reflected in the above-quoted deliberations of the 1987 Constitution, Congress has plenary authority under the Constitution to determine by legislation not only the duration of the term of barangay officials, but also the application to them of a consecutive term limit. Congress invariably exercised this authority when it enacted no less than six (6) barangay-related laws since 1987. Through all these statutory changes, Congress had determined at its discretion both the length of the term of office of barangay officials and their term limitation. Given the textually demonstrable commitment by the 1987 Constitution to Congress of the authority to determine the term duration and limition of barangay officials under the Constitution, we consider it established that whatever Congress, in its wisdom, decides on these matters are political questions beyond the pale of judicial scrutiny,11 subject only to the certiorari jurisdiction of the courts provided under Section 1, Article VIII of the Constitution and to the judicial authority to invalidate any law contrary to the Constitution.12 Political questions refer "to those questions which, under the Constitution, are to be decided by the people in their sovereign capacity, or in regard to which full discretionary authority has been delegated to the legislative or executive branch of the government; it is concerned with issues dependent upon the wisdom, not legality of a particular measure."13 These questions, previously impervious to judicial scrutiny can now be inquired into under the limited window provided by Section 1, Article VIII. Estrada v. Desierto14 best describes this constitutional development, and we quote: To a great degree, the 1987 Constitution has narrowed the reach of the political doctrine when it expanded the power of judicial review of this court not only to settle actual controversies involving rights which are legally demandable and enforceable but also to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government. Heretofore, the judiciary has focused on the "thou shalt nots" of the Constitution directed against the exercise of its jurisdiction. With the new provision, however, courts are given a greater prerogative to determine what it can do to prevent grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government. Clearly, the new provision did not just grant the Court power of doing nothing. In sync and symmetry with this intent are other provisions of the 1987 Constitution trimming the so called political thicket. xxxx

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Thus, we can inquire into a congressional enactment despite the political question doctrine, although the window provided us is narrow; the challenge must show grave abuse of discretion to justify our intervention. Other than the Section 1, Article VIII route, courts can declare a law invalid when it is contrary to any provision of the Constitution. This requires the appraisal of the challenged law against the legal standards provided by the Constitution, not on the basis of the wisdom of the enactment. To justify its nullification, the breach of the Constitution must be clear and unequivocal, not a doubtful or equivocal one, as every law enjoys a strong presumption of constitutionality.15 These are the hurdles that those challenging the constitutional validity of a law must overcome. The present case, as framed by the respondents, poses no challenge on the issue of grave abuse of discretion. The legal issues posed relate strictly to compliance with constitutional standards. It is from this prism that we shall therefore resolve this case. The Retroactive Application Issue a. Interpretative / Historical Consideration The respondents first objection to the challenged provisos constitutionality is its purported retroactive application of the three-term limit when it set the 1994 barangay elections as a reckoning point in the application of the three-term limit. The respondents argued that the term limit, although present in the previous laws, was not in RA No. 7160 when it amended all previous barangay election laws. Hence, it was re-introduced for the first time by RA No. 9164 (signed into law on March 19, 2002) and was applied retroactively when it made the term limitation effective from the 1994 barangay elections. As the appealed ruling quoted above shows, the RTC fully agreed with the respondents position. Our first point of disagreement with the respondents and with the RTC is on their position that a retroactive application of the term limitation was made under RA No. 9164. Our own reading shows that no retroactive application was made because the three-term limit has been there all along as early as the second barangay law (RA No. 6679) after the 1987 Constitution took effect; it was continued under the LGC and can still be found in the current law. We find this obvious from a reading of the historical development of the law. The first law that provided a term limitation for barangay officials was RA No. 6653 (1988); it imposed a two-consecutive term limit. After only six months, Congress, under RA No. 6679 (1988), changed the two-term limit by providing for a three-consecutive term limit. This consistent imposition of the term limit gives no hint of any equivocation in the congressional intent to provide a term limitation. Thereafter, RA No. 7160 the LGC followed, bringing with it the issue of whether it provided, as originally worded, for a three-term limit for barangay officials. We differ with the RTC analysis of this issue. Section 43 is a provision under Title II of the LGC on Elective Officials. Title II is divided into several chapters dealing with a wide range of subject matters, all relating to local elective officials, as follows: a. Qualifications and Election (Chapter I); b. Vacancies and Succession (Chapter II), c. Disciplinary Actions (Chapter IV) and d. Recall (Chapter V). Title II likewise contains a chapter on Local Legislation (Chapter III). These Title II provisions are intended to apply to all local elective officials, unless the contrary is clearly provided. A contrary application is provided with respect to the length of the term of office under Section 43(a); while it applies to all local elective officials, it does not apply to barangay officials whose length of term is specifically provided by Section 43(c). In contrast to this clear case of an exception to a general rule, the three-term limit under Section 43(b) does not contain any exception; it applies to all local elective officials who must perforce include barangay officials. An alternative perspective is to view Sec. 43(a), (b) and (c) separately from one another as independently standing and self-contained provisions, except to the extent that they expressly relate to one another. Thus, Sec. 43(a) relates to the term of local elective officials, except barangay officials
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whose term of office is separately provided under Sec. 43(c). Sec. 43(b), by its express terms, relates to all local elective officials without any exception. Thus, the term limitation applies to all local elective officials without any exclusion or qualification. Either perspective, both of which speak of the same resulting interpretation, is the correct legal import of Section 43 in the context in which it is found in Title II of the LGC.1avvphi1 To be sure, it may be argued, as the respondents and the RTC did, that paragraphs (a) and (b) of Section 43 are the general law for elective officials (other than barangay officials); and paragraph (c) is the specific law on barangay officials, such that the silence of paragraph (c) on term limitation for barangay officials indicates the legislative intent to exclude barangay officials from the application of the three-term limit. This reading, however, is flawed for two reasons. First, reading Section 43(a) and (b) together to the exclusion of Section 43(c), is not justified by the plain texts of these provisions. Section 43(a) plainly refers to local elective officials, except elective barangay officials. In comparison, Section 43(b) refers to all local elective officials without exclusions or exceptions. Their respective coverages therefore vary so that one cannot be said to be of the same kind as the other. Their separate topics additionally strengthen their distinction; Section 43(a) refers to the term of office while Section 43(b) refers to the three-term limit. These differences alone indicate that Sections 43(a) and (b) cannot be read together as one organic whole in the way the RTC suggested. Significantly, these same distinctions apply between Sec. 43(b) and (c). Second, the RTC interpretation is flawed because of its total disregard of the historical background of Section 43(c) a backdrop that we painstakingly outlined above. From a historical perspective of the law, the inclusion of Section 43(c) in the LGC is an absolute necessity to clarify the length of term of barangay officials. Recall that under RA No. 6679, the term of office of barangay officials was five (5) years. The real concern was how Section 43 would interface with RA No. 6679. Without a categorical statement on the length of the term of office of barangay officials, a general three-year term for all local elective officials under Section 43(a), standing alone, may not readily and completely erase doubts on the intended abrogation of the 5-year term for barangay officials under RA No. 6679. Thus, Congress added Section 43(c) which provided a categorical three-year term for these officials. History tells us, of course, that the unequivocal provision of Section 43(c) notwithstanding, an issue on what is the exact term of office of barangay officials was still brought to us via a petition filed by no less than the President of the Liga ng Mga Barangay in 1997. We fully resolved the issue in the cited David v. Comelec. Section 43(c) should therefore be understood in this context and not in the sense that it intended to provide the complete rule for the election of barangay officials, so that in the absence of any term limitation proviso under this subsection, no term limitation applies to barangay officials. That Congress had the LGCs three-term limit in mind when it enacted RA No. 9164 is clear from the following deliberations in the House of Representatives (House) on House Bill No. 4456 which later became RA No. 9164: MARCH 5, 2002: THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). Majority Leader. REP. ESCUDERO. Mr. Speaker, next to interpellate is the Gentleman from Zamboanga City. I ask that the Honorable Lobregat be recognized. THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). The Honorable Lobregat is recognized. REP. LOBREGAT. Thank you very much, Mr. Speaker. Mr. Speaker, this is just REP. MACIAS. Willingly to the Gentleman from Zamboanga City. REP. LOBREGAT. points of clarification, Mr. Speaker, the term of office. It says in Section 4, "The term of office of all Barangay and sangguniang kabataan officials after the effectivity of this Act shall be three years." Then it says, "No Barangay elective official shall serve for more than three (3) consecutive terms in the same position."

Mr. Speaker, I think it is the position of the committee that the first term should be reckoned from election of what year, Mr. Speaker? REP. MACIAS. After the adoption of the Local Government Code, Your Honor. So that the first election is to be reckoned on, would be May 8, 1994, as far as the Barangay election is concerned. REP. LOBREGAT. Yes, Mr. Speaker. So there was an election in 1994. REP. MACIAS. Then an election in 1997. REP. LOBREGAT. There was an election in 1997. And there will be an election this year REP. LOBREGAT. election this year. REP. MACIAS. That is correct. This will be the third. xxx xxx xxx REP. SUMULONG. Mr. Speaker. THE DEPUTY SPEAKER (Rep. Espinosa, E.R.) The Honorable Sumulong is recognized. REP. SUMULONG. Again, with the permission of my Chairman, I would like to address the question of Congressman Lobregat. THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). Please proceed. REP. SUMULONG. With respect to the three-year consecutive term limits of Barangay Captains that is not provided for in the Constitution and that is why the election prior to 1991 during the enactment of the Local Government Code is not counted because it is not in the Constitution but in the Local Government Code where the three consecutive term limits has been placed. [Emphasis supplied.] which led to the following exchanges in the House Committee on Amendments: March 6, 2002 COMMITTEE ON AMENDMENTS REP. GONZALES. May we now proceed to committee amendment, if any, Mr. Speaker. THE DEPUTY SPEAKER (Rep. Gonzalez). The Chair recognizes the distinguished Chairman of the Committee on Suffrage and Electoral Reforms. REP. SYJUCO. Mr. Speaker, on page 2, line 7, after the word "position", substitute the period (.) and add the following: PROVIDED HOWEVER THAT THE TERM OF OFFICE SHALL BE RECKONED FROM THE 1994 BARANGAY ELECTIONS. So that the amended Section 4 now reads as follows: "SEC. 4. Term of Office. The term of office of all barangay and sangguniang kabataan officials after the effectivity of this Act shall be three (3) years. No barangay elective local official shall serve for more than three (3) consecutive terms in the same position COLON (:) PROVIDED, HOWEVER, THAT THE TERM OF OFFICE SHALL BE RECKONED FROM THE 1994 BARANGAY ELECTIONS. Voluntary renunciation of office for any length of time shall not be considered as an interruption in the continuity of service for the full term for which the elective official was elected. The House therefore clearly operated on the premise that the LGC imposed a three-term limit for barangay officials, and the challenged proviso is its way of addressing any confusion that may arise from the numerous changes in the law. All these inevitably lead to the conclusion that the challenged proviso has been there all along and does not simply retroact the application of the three-term limit to the barangay elections of 1994. Congress merely integrated the past statutory changes into a seamless whole by coming up with the challenged proviso. With this conclusion, the respondents constitutional challenge to the proviso based on retroactivity must fail. b. No Involvement of Any Constitutional Standard
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Separately from the above reason, the constitutional challenge must fail for a more fundamental reason the respondents retroactivity objection does not involve a violation of any constitutional standard. Retroactivity of laws is a matter of civil law, not of a constitutional law, as its governing law is the Civil Code,16 not the Constitution. Article 4 of the Civil Code provides that laws shall have no retroactive effect unless the contrary is provided. The application of the Civil Code is of course self-explanatory laws enacted by Congress may permissibly provide that they shall have retroactive effect. The Civil Code established a statutory norm, not a constitutional standard. The closest the issue of retroactivity of laws can get to a genuine constitutional issue is if a laws retroactive application will impair vested rights. Otherwise stated, if a right has already vested in an individual and a subsequent law effectively takes it away, a genuine due process issue may arise. What should be involved, however, is a vested right to life, liberty or property, as these are the ones that may be considered protected by the due process clause of the Constitution.1 a vv p h i 1 In the present case, the respondents never raised due process as an issue. But even assuming that they did, the respondents themselves concede that there is no vested right to public office.17 As the COMELEC correctly pointed out, too, there is no vested right to an elective post in view of the uncertainty inherent in electoral exercises. Aware of this legal reality, the respondents theorized instead that they had a right to be voted upon by the electorate without being burdened by a law that effectively rendered them ineligible to run for their incumbent positions. Again, the RTC agreed with this contention. We do not agree with the RTC, as we find no such right under the Constitution; if at all, this claimed right is merely a restatement of a claim of vested right to a public office. What the Constitution clearly provides is the power of Congress to prescribe the qualifications for elective local posts;18 thus, the question of eligibility for an elective local post is a matter for Congress, not for the courts, to decide. We dealt with a strikingly similar issue in Montesclaros v. Commission on Elections19 where we ruled that SK membership which was claimed as a property right within the meaning of the Constitution is a mere statutory right conferred by law. Montesclaros instructively tells us: Congress exercises the power to prescribe the qualifications for SK membership. One who is no longer qualified because of an amendment in the law cannot complain of being deprived of a proprietary right to SK membership. Only those who qualify as SK members can contest, based on a statutory right, any act disqualifying them from SK membership or from voting in the SK elections. SK membership is not a property right protected by the Constitution because it is a mere statutory right conferred by law. Congress may amend at any time the law to change or even withdraw the statutory right. A public office is not a property right. As the Constitution expressly states, a "[P]ublic office is a public trust." No one has a vested right to any public office, much less a vested right to an expectancy of holding a public office. In Cornejo v. Gabriel, decided in 1920, the Court already ruled: Again, for this petition to come under the due process of law prohibition, it would be necessary to consider an office a "property." It is, however, well settled x x x that a public office is not property within the sense of the constitutional guaranties of due process of law, but is a public trust or agency. x x x The basic idea of the government x x x is that of a popular representative government, the officers being mere agents and not rulers of the people, one where no one man or set of men has a proprietary or contractual right to an office, but where every officer accepts office pursuant to the provisions of the law and holds the office as a trust for the people he represents. Petitioners, who apparently desire to hold public office, should realize from the very start that no one has a proprietary right to public office. While the law makes an SK officer an ex-officio member of a local government legislative council, the law does not confer on petitioners a proprietary right or even a proprietary expectancy to sit in local legislative councils. The constitutional principle of a public office as a public trust precludes any proprietary claim to public office. Even the State policy directing "equal access to opportunities for public service" cannot bestow on petitioners a proprietary right to SK membership or a proprietary expectancy to ex-officio public offices.

Moreover, while the State policy is to encourage the youths involvement in public affairs, this policy refers to those who belong to the class of people defined as the youth. Congress has the power to define who are the youth qualified to join the SK, which itself is a creation of Congress. Those who do not qualify because they are past the age group defined as the youth cannot insist on being part of the youth. In government service, once an employee reaches mandatory retirement age, he cannot invoke any property right to cling to his office. In the same manner, since petitioners are now past the maximum age for membership in the SK, they cannot invoke any property right to cling to their SK membership. [Emphasis supplied.] To recapitulate, we find no merit in the respondents retroactivity arguments because: (1) the challenged proviso did not provide for the retroactive application to barangay officials of the three-term limit; Section 43(b) of RA No. 9164 simply continued what had been there before; and (2) the constitutional challenge based on retroactivity was not anchored on a constitutional standard but on a mere statutory norm. The Equal Protection Clause Issue The equal protection guarantee under the Constitution is found under its Section 2, Article III, which provides: "Nor shall any person be denied the equal protection of the laws." Essentially, the equality guaranteed under this clause is equality under the same conditions and among persons similarly situated. It is equality among equals, not similarity of treatment of persons who are different from one another on the basis of substantial distinctions related to the objective of the law; when things or persons are different in facts or circumstances, they may be treated differently in law.20 Appreciation of how the constitutional equality provision applies inevitably leads to the conclusion that no basis exists in the present case for an equal protection challenge. The law can treat barangay officials differently from other local elective officials because the Constitution itself provides a significant distinction between these elective officials with respect to length of term and term limitation. The clear distinction, expressed in the Constitution itself, is that while the Constitution provides for a three-year term and three-term limit for local elective officials, it left the length of term and the application of the three-term limit or any form of term limitation for determination by Congress through legislation. Not only does this disparate treatment recognize substantial distinctions, it recognizes as well that the Constitution itself allows a non-uniform treatment. No equal protection violation can exist under these conditions. From another perspective, we see no reason to apply the equal protection clause as a standard because the challenged proviso did not result in any differential treatment between barangay officials and all other elective officials. This conclusion proceeds from our ruling on the retroactivity issue that the challenged proviso does not involve any retroactive application. Violation of the Constitutional One Subject- One Title Rule Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof. Farias v. Executive Secretary21 provides the reasons for this constitutional requirement and the test for its application, as follows: The proscription is aimed against the evils of the so-called omnibus bills and log-rolling legislation as well as surreptitious and/or unconsidered encroaches. The provision merely calls for all parts of an act relating to its subject finding expression in its title. To determine whether there has been compliance with the constitutional requirement that the subject of an act shall be expressed in its title, the Court laid down the rule that Constitutional provisions relating to the subject matter and titles of statutes should not be so narrowly construed as to cripple or impede the power of legislation. The requirement that the subject of an act shall be expressed in its title should receive a reasonable and not a technical construction. It is sufficient if the title be comprehensive enough reasonably to include the general object which a statute seeks to effect, without expressing each and every end and means necessary or convenient for the
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accomplishing of that object. Mere details need not be set forth. The title need not be an abstract or index of the Act. xxxx x x x This Court has held that an act having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general subject. xxxx x x x Moreover, the avowed purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have not received the notice, action and study of the legislators and the public. We find, under these settled parameters, that the challenged proviso does not violate the one subjectone title rule. First, the title of RA No. 9164, "An Act Providing for Synchronized Barangay and Sangguniang Kabataang Elections, amending Republic Act No. 7160, as amended, otherwise known as the Local Government Code of 1991," states the laws general subject matter the amendment of the LGC to synchronize the barangay and SK elections and for other purposes. To achieve synchronization of the barangay and SK elections, the reconciliation of the varying lengths of the terms of office of barangay officials and SK officials is necessary. Closely related with length of term is term limitation which defines the total number of terms for which a barangay official may run for and hold office. This natural linkage demonstrates that term limitation is not foreign to the general subject expressed in the title of the law. Second, the congressional debates we cited above show that the legislators and the public they represent were fully informed of the purposes, nature and scope of the laws provisions. Term limitation therefore received the notice, consideration, and action from both the legislators and the public. Finally, to require the inclusion of term limitation in the title of RA No. 9164 is to make the title an index of all the subject matters dealt with by law; this is not what the constitutional requirement contemplates. WHEREFORE, premises considered, we GRANT the petition and accordingly AFFIRM the constitutionality of the challenged proviso under Section 2, paragraph 2 of Republic Act No. 9164. Costs against the respondents. SO ORDERED.

G.R. No. 162230 April 28, 2010 ISABELITA C. VINUYA, VICTORIA C. DELA PEA, HERMINIHILDA MANIMBO, LEONOR H. SUMAWANG, CANDELARIA L. SOLIMAN, MARIA L. QUILANTANG, MARIA L. MAGISA, NATALIA M. ALONZO, LOURDES M. NAVARO, FRANCISCA M. ATENCIO, ERLINDA MANALASTAS, TARCILA M. SAMPANG, ESTER M. PALACIO, MAXIMA R. DELA CRUZ, BELEN A. SAGUM, FELICIDAD TURLA, FLORENCIA M. DELA PEA, EUGENIA M. LALU, JULIANA G. MAGAT, CECILIA SANGUYO, ANA ALONZO, RUFINA P. MALLARI, ROSARIO M. ALARCON, RUFINA C. GULAPA, ZOILA B. MANALUS, CORAZON C. CALMA, MARTA A. GULAPA, TEODORA M. HERNANDEZ, FERMIN B. DELA PEA, MARIA DELA PAZ B. CULALA, ESPERANZA MANAPOL, JUANITA M. BRIONES, VERGINIA M. GUEVARRA, MAXIMA ANGULO, EMILIA SANGIL, TEOFILA R. PUNZALAN, JANUARIA G. GARCIA, PERLA B. BALINGIT, BELEN A. CULALA, PILAR Q.

GALANG, ROSARIO C. BUCO, GAUDENCIA C. DELA PEA, RUFINA Q. CATACUTAN, FRANCIA A. BUCO, PASTORA C. GUEVARRA, VICTORIA M. DELA CRUZ, PETRONILA O. DELA CRUZ, ZENAIDA P. DELA CRUZ, CORAZON M. SUBA, EMERINCIANA A. VINUYA, LYDIA A. SANCHEZ, ROSALINA M. BUCO, PATRICIA A. BERNARDO, LUCILA H. PAYAWAL, MAGDALENA LIWAG, ESTER C. BALINGIT, JOVITA A. DAVID, EMILIA C. MANGILIT, VERGINIA M. BANGIT, GUILLERMA S. BALINGIT, TERECITA PANGILINAN, MAMERTA C. PUNO, CRISENCIANA C. GULAPA, SEFERINA S. TURLA, MAXIMA B. TURLA, LEONICIA G. GUEVARRA, ROSALINA M. CULALA, CATALINA Y. MANIO, MAMERTA T. SAGUM, CARIDAD L. TURLA, et al. In their capacity and as members of the "Malaya Lolas Organization", Petitioners, vs. THE HONORABLE EXECUTIVE SECRETARY ALBERTO G. ROMULO, THE HONORABLE SECRETARY OF FOREIGN AFFAIRS DELIA DOMINGO-ALBERT, THE HONORABLE SECRETARY OF JUSTICE MERCEDITAS N. GUTIERREZ, and THE HONORABLE SOLICITOR GENERAL ALFREDO L. BENIPAYO, Respondents. DECISION DEL CASTILLO, J.: The Treaty of Peace with Japan, insofar as it barred future claims such as those asserted by plaintiffs in these actions, exchanged full compensation of plaintiffs for a future peace. History has vindicated the wisdom of that bargain. And while full compensation for plaintiffs' hardships, in the purely economic sense, has been denied these former prisoners and countless other survivors of the war, the immeasurable bounty of life for themselves and their posterity in a free society and in a more peaceful world services the debt.1 There is a broad range of vitally important areas that must be regularly decided by the Executive Department without either challenge or interference by the Judiciary. One such area involves the delicate arena of foreign relations. It would be strange indeed if the courts and the executive spoke with different voices in the realm of foreign policy. Precisely because of the nature of the questions presented, and the lapse of more than 60 years since the conduct complained of, we make no attempt to lay down general guidelines covering other situations not involved here, and confine the opinion only to the very questions necessary to reach a decision on this matter. Factual Antecedents This is an original Petition for Certiorari under Rule 65 of the Rules of Court with an application for the issuance of a writ of preliminary mandatory injunction against the Office of the Executive Secretary, the Secretary of the Department of Foreign Affairs (DFA), the Secretary of the Department of Justice (DOJ), and the Office of the Solicitor General (OSG). Petitioners are all members of the MALAYA LOLAS, a non-stock, non-profit organization registered with the Securities and Exchange Commission, established for the purpose of providing aid to the victims of rape by Japanese military forces in the Philippines during the Second World War.ten.lihpwal Petitioners narrate that during the Second World War, the Japanese army attacked villages and systematically raped the women as part of the destruction of the village. Their communities were bombed, houses were looted and burned, and civilians were publicly tortured, mutilated, and slaughtered. Japanese soldiers forcibly seized the women and held them in houses or cells, where they were repeatedly raped, beaten, and abused by Japanese soldiers. As a result of the actions of their Japanese tormentors, the petitioners have spent their lives in misery, having endured physical injuries, pain and disability, and mental and emotional suffering.2 Petitioners claim that since 1998, they have approached the Executive Department through the DOJ, DFA, and OSG, requesting assistance in filing a claim against the Japanese officials and military officers who ordered the establishment of the "comfort women" stations in the Philippines. However, officials of the Executive Department declined to assist the petitioners, and took the position that the individual
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claims of the comfort women for compensation had already been fully satisfied by Japans compliance with the Peace Treaty between the Philippines and Japan. Issues Hence, this petition where petitioners pray for this court to (a) declare that respondents committed grave abuse of discretion amounting to lack or excess of discretion in refusing to espouse their claims for the crimes against humanity and war crimes committed against them; and (b) compel the respondents to espouse their claims for official apology and other forms of reparations against Japan before the International Court of Justice (ICJ) and other international tribunals. Petitioners arguments Petitioners argue that the general waiver of claims made by the Philippine government in the Treaty of Peace with Japan is void. They claim that the comfort women system established by Japan, and the brutal rape and enslavement of petitioners constituted a crime against humanity,3 sexual slavery,4 and torture.5 They allege that the prohibition against these international crimes is jus cogens norms from which no derogation is possible; as such, in waiving the claims of Filipina comfort women and failing to espouse their complaints against Japan, the Philippine government is in breach of its legal obligation not to afford impunity for crimes against humanity. Finally, petitioners assert that the Philippine governments acceptance of the "apologies" made by Japan as well as funds from the Asian Womens Fund (AWF) were contrary to international law. Respondents Arguments Respondents maintain that all claims of the Philippines and its nationals relative to the war were dealt with in the San Francisco Peace Treaty of 1951 and the bilateral Reparations Agreement of 1956.6 Article 14 of the Treaty of Peace7 provides: Article 14. Claims and Property a) It is recognized that Japan should pay reparations to the Allied Powers for the damage and suffering caused by it during the war. Nevertheless it is also recognized that the resources of Japan are not presently sufficient, if it is to maintain a viable economy, to make complete reparation for all such damage and suffering and at the present time meet its other obligations. b) Except as otherwise provided in the present Treaty, the Allied Powers waive all reparations claims of the Allied Powers, other claims of the Allied Powers and their nationals arising out of any actions taken by Japan and its nationals in the course of the prosecution of the war, and claims of the Allied Powers for direct military costs of occupation. In addition, respondents argue that the apologies made by Japan8 have been satisfactory, and that Japan had addressed the individual claims of the women through the atonement money paid by the Asian Womens Fund.1avvphi1 Historical Background The comfort women system was the tragic legacy of the Rape of Nanking. In December 1937, Japanese military forces captured the city of Nanking in China and began a "barbaric campaign of terror" known as the Rape of Nanking, which included the rapes and murders of an estimated 20,000 to 80,000 Chinese women, including young girls, pregnant mothers, and elderly women.9 Document1zzF24331552898 In reaction to international outcry over the incident, the Japanese government sought ways to end international condemnation10 by establishing the "comfort women" system. Under this system, the military could simultaneously appease soldiers' sexual appetites and contain soldiers' activities within a regulated environment.11 Comfort stations would also prevent the spread of venereal disease among soldiers and discourage soldiers from raping inhabitants of occupied territories.12 Daily life as a comfort woman was "unmitigated misery."13 The military forced victims into barracks-style stations divided into tiny cubicles where they were forced to live, sleep, and have sex with as many 30

soldiers per day.14 The 30 minutes allotted for sexual relations with each soldier were 30-minute increments of unimaginable horror for the women.15 Disease was rampant.16 Military doctors regularly examined the women, but these checks were carried out to prevent the spread of venereal diseases; little notice was taken of the frequent cigarette burns, bruises, bayonet stabs and even broken bones inflicted on the women by soldiers. Document1zzF48331552898 Fewer than 30% of the women survived the war.17 Their agony continued in having to suffer with the residual physical, psychological, and emotional scars from their former lives. Some returned home and were ostracized by their families. Some committed suicide. Others, out of shame, never returned home.18 Efforts to Secure Reparation The most prominent attempts to compel the Japanese government to accept legal responsibility and pay compensatory damages for the comfort women system were through a series of lawsuits, discussion at the United Nations (UN), resolutions by various nations, and the Womens International Criminal Tribunal. The Japanese government, in turn, responded through a series of public apologies and the creation of the AWF.19 Lawsuits In December 1991, Kim Hak-Sun and two other survivors filed the first lawsuit in Japan by former comfort women against the Japanese government. The Tokyo District Court however dismissed their case.20 Other suits followed,21 but the Japanese government has, thus far, successfully caused the dismissal of every case.22 Undoubtedly frustrated by the failure of litigation before Japanese courts, victims of the comfort women system brought their claims before the United States (US). On September 18, 2000, 15 comfort women filed a class action lawsuit in the US District Court for the District of Columbia23 "seeking money damages for [allegedly] having been subjected to sexual slavery and torture before and during World War II," in violation of "both positive and customary international law." The case was filed pursuant to the Alien Tort Claims Act ("ATCA"),24 which allowed the plaintiffs to sue the Japanese government in a US federal district court.25 On October 4, 2001, the district court dismissed the lawsuit due to lack of jurisdiction over Japan, stating that "[t]here is no question that this court is not the appropriate forum in which plaintiffs may seek to reopen x x x discussions nearly half a century later x x x [E]ven if Japan did not enjoy sovereign immunity, plaintiffs' claims are non-justiciable and must be dismissed." The District of Columbia Court of Appeals affirmed the lower court's dismissal of the case.26 On appeal, the US Supreme Court granted the womens petition for writ of certiorari, vacated the judgment of the District of Columbia Court of Appeals, and remanded the case.27 On remand, the Court of Appeals affirmed its prior decision, noting that "much as we may feel for the plight of the appellants, the courts of the US simply are not authorized to hear their case."28 The women again brought their case to the US Supreme Court which denied their petition for writ of certiorari on February 21, 2006. Efforts at the United Nations In 1992, the Korean Council for the Women Drafted for Military Sexual Slavery by Japan (KCWS), submitted a petition to the UN Human Rights Commission (UNHRC), asking for assistance in investigating crimes committed by Japan against Korean women and seeking reparations for former comfort women.29 The UNHRC placed the issue on its agenda and appointed Radhika Coomaraswamy as the issue's special investigator. In 1996, Coomaraswamy issued a Report reaffirming Japan's responsibility in forcing Korean women to act as sex slaves for the imperial army, and made the following recommendations: A. At the national level 137. The Government of Japan should:

(a) Acknowledge that the system of comfort stations set up by the Japanese Imperial Army during the Second World War was a violation of its obligations under international law and accept legal responsibility for that violation; (b) Pay compensation to individual victims of Japanese military sexual slavery according to principles outlined by the Special Rapporteur of the Sub-Commission on Prevention of Discrimination and Protection of Minorities on the right to restitution, compensation and rehabilitation for victims of grave violations of human rights and fundamental freedoms. A special administrative tribunal for this purpose should be set up with a limited time-frame since many of the victims are of a very advanced age; (c) Make a full disclosure of documents and materials in its possession with regard to comfort stations and other related activities of the Japanese Imperial Army during the Second World War; (d) Make a public apology in writing to individual women who have come forward and can be substantiated as women victims of Japanese military sexual slavery; (e) Raise awareness of these issues by amending educational curricula to reflect historical realities; (f) Identify and punish, as far as possible, perpetrators involved in the recruitment and institutionalization of comfort stations during the Second World War. Gay J. McDougal, the Special Rapporteur for the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities, also presented a report to the Sub-Committee on June 22, 1998 entitled Contemporary Forms of Slavery: Systematic Rape, Sexual Slavery and Slavery-like Practices During Armed Conflict. The report included an appendix entitled An Analysis of the Legal Liability of the Government of Japan for 'Comfort Women Stations' established during the Second World War,30 which contained the following findings: 68. The present report concludes that the Japanese Government remains liable for grave violations of human rights and humanitarian law, violations that amount in their totality to crimes against humanity. The Japanese Governments arguments to the contrary, including arguments that seek to attack the underlying humanitarian law prohibition of enslavement and rape, remain as unpersuasive today as they were when they were first raised before the Nuremberg war crimes tribunal more than 50 years ago. In addition, the Japanese Governments argument that Japan has already settled all claims from the Second World War through peace treaties and reparations agreements following the war remains equally unpersuasive. This is due, in large part, to the failure until very recently of the Japanese Government to admit the extent of the Japanese militarys direct involvement in the establishment and maintenance of these rape centres. The Japanese Governments silence on this point during the period in which peace and reparations agreements between Japan and other Asian Governments were being negotiated following the end of the war must, as a matter of law and justice, preclude Japan from relying today on these peace treaties to extinguish liability in these cases. 69. The failure to settle these claims more than half a century after the cessation of hostilities is a testament to the degree to which the lives of women continue to be undervalued. Sadly, this failure to address crimes of a sexual nature committed on a massive scale during the Second World War has added to the level of impunity with which similar crimes are committed today. The Government of Japan has taken some steps to apologize and atone for the rape and enslavement of over 200,000 women and girls who were brutalized in "comfort stations" during the Second World War. However, anything less than full and unqualified acceptance by the Government of Japan of legal liability and the consequences that flow from such liability is wholly inadequate. It must now fall to the Government of Japan to take the necessary final steps to provide adequate redress. The UN, since then, has not taken any official action directing Japan to provide the reparations sought. Women's International War Crimes
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Tribunal The Women's International War Crimes Tribunal (WIWCT) was a "people's tribunal" established by a number of Asian women and human rights organizations, supported by an international coalition of nongovernmental organizations.31 First proposed in 1998, the WIWCT convened in Tokyo in 2000 in order to "adjudicate Japan's military sexual violence, in particular the enslavement of comfort women, to bring those responsible for it to justice, and to end the ongoing cycle of impunity for wartime sexual violence against women." After examining the evidence for more than a year, the "tribunal" issued its verdict on December 4, 2001, finding the former Emperor Hirohito and the State of Japan guilty of crimes against humanity for the rape and sexual slavery of women.32 It bears stressing, however, that although the tribunal included prosecutors, witnesses, and judges, its judgment was not legally binding since the tribunal itself was organized by private citizens. Action by Individual Governments On January 31, 2007, US Representative Michael Honda of California, along with six co-sponsor representatives, introduced House Resolution 121 which called for Japanese action in light of the ongoing struggle for closure by former comfort women. The Resolution was formally passed on July 30, 2007,33 and made four distinct demands: [I]t is the sense of the House of Representatives that the Government of Japan (1) should formally acknowledge, apologize, and accept historical responsibility in a clear and unequivocal manner for its Imperial Armed Forces' coercion of young women into sexual slavery, known to the world as "comfort women", during its colonial and wartime occupation of Asia and the Pacific Islands from the 1930s through the duration of World War II; (2) would help to resolve recurring questions about the sincerity and status of prior statements if the Prime Minister of Japan were to make such an apology as a public statement in his official capacity; (3) should clearly and publicly refute any claims that the sexual enslavement and trafficking of the "comfort women" for the Japanese Imperial Army never occurred; and (4) should educate current and future generations about this horrible crime while following the recommendations of the international community with respect to the "comfort women."34 In December 2007, the European Parliament, the governing body of the European Union, drafted a resolution similar to House Resolution 121.35 Entitled, "Justice for Comfort Women," the resolution demanded: (1) a formal acknowledgment of responsibility by the Japanese government; (2) a removal of the legal obstacles preventing compensation; and (3) unabridged education of the past. The resolution also stressed the urgency with which Japan should act on these issues, stating: "the right of individuals to claim reparations against the government should be expressly recognized in national law, and cases for reparations for the survivors of sexual slavery, as a crime under international law, should be prioritized, taking into account the age of the survivors." The Canadian and Dutch parliaments have each followed suit in drafting resolutions against Japan. Canada's resolution demands the Japanese government to issue a formal apology, to admit that its Imperial Military coerced or forced hundreds of thousands of women into sexual slavery, and to restore references in Japanese textbooks to its war crimes.36 The Dutch parliament's resolution calls for the Japanese government to uphold the 1993 declaration of remorse made by Chief Cabinet Secretary Yohei Kono. The Foreign Affairs Committee of the United Kingdoms Parliament also produced a report in November, 2008 entitled, "Global Security: Japan and Korea" which concluded that Japan should acknowledge the pain caused by the issue of comfort women in order to ensure cooperation between Japan and Korea. Statements of Remorse made by representatives of the Japanese government Various officials of the Government of Japan have issued the following public statements concerning the comfort system: a) Statement by the Chief Cabinet Secretary Yohei Kono in 1993:
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The Government of Japan has been conducting a study on the issue of wartime "comfort women" since December 1991. I wish to announce the findings as a result of that study. As a result of the study which indicates that comfort stations were operated in extensive areas for long periods, it is apparent that there existed a great number of comfort women. Comfort stations were operated in response to the request of the military authorities of the day. The then Japanese military was, directly or indirectly, involved in the establishment and management of the comfort stations and the transfer of comfort women. The recruitment of the comfort women was conducted mainly by private recruiters who acted in response to the request of the military. The Government study has revealed that in many cases they were recruited against their own will, through coaxing coercion, etc., and that, at times, administrative/military personnel directly took part in the recruitments. They lived in misery at comfort stations under a coercive atmosphere. As to the origin of those comfort women who were transferred to the war areas, excluding those from Japan, those from the Korean Peninsula accounted for a large part. The Korean Peninsula was under Japanese rule in those days, and their recruitment, transfer, control, etc., were conducted generally against their will, through coaxing, coercion, etc. Undeniably, this was an act, with the involvement of the military authorities of the day, that severely injured the honor and dignity of many women. The Government of Japan would like to take this opportunity once again to extend its sincere apologies and remorse to all those, irrespective of place of origin, who suffered immeasurable pain and incurable physical and psychological wounds as comfort women. It is incumbent upon us, the Government of Japan, to continue to consider seriously, while listening to the views of learned circles, how best we can express this sentiment. We shall face squarely the historical facts as described above instead of evading them, and take them to heart as lessons of history. We hereby reiterated our firm determination never to repeat the same mistake by forever engraving such issues in our memories through the study and teaching of history. As actions have been brought to court in Japan and interests have been shown in this issue outside Japan, the Government of Japan shall continue to pay full attention to this matter, including private researched related thereto. b) Prime Minister Tomiichi Murayamas Statement in 1994 On the issue of wartime "comfort women", which seriously stained the honor and dignity of many women, I would like to take this opportunity once again to express my profound and sincere remorse and apologies" c) Letters from the Prime Minister of Japan to Individual Comfort Women The issue of comfort women, with the involvement of the Japanese military authorities at that time, was a grave affront to the honor and dignity of a large number of women. As Prime Minister of Japan, I thus extend anew my most sincere apologies and remorse to all the women who endured immeasurable and painful experiences and suffered incurable physical and psychological wounds as comfort women. I believe that our country, painfully aware of its moral responsibilities, with feelings of apology and remorse, should face up squarely to its past history and accurately convey it to future generations. d) The Diet (Japanese Parliament) passed resolutions in 1995 and 2005 Solemnly reflecting upon the many instances of colonial rule and acts of aggression that occurred in modern world history, and recognizing that Japan carried out such acts in the past and inflicted suffering on the people of other countries, especially in Asia, the Members of this House hereby express deep remorse. (Resolution of the House of Representatives adopted on June 9, 1995) e) Various Public Statements by Japanese Prime Minister Shinzo Abe

I have talked about this matter in the Diet sessions last year, and recently as well, and to the press. I have been consistent. I will stand by the Kono Statement. This is our consistent position. Further, we have been apologizing sincerely to those who suffered immeasurable pain and incurable psychological wounds as comfort women. Former Prime Ministers, including Prime Ministers Koizumi and Hashimoto, have issued letters to the comfort women. I would like to be clear that I carry the same feeling. This has not changed even slightly. (Excerpt from Remarks by Prime Minister Abe at an Interview by NHK, March 11, 2007). I am apologizing here and now. I am apologizing as the Prime Minister and it is as stated in the statement by the Chief Cabinet Secretary Kono. (Excerpt from Remarks by Prime Minister Abe at the Budget Committee, the House of Councilors, the Diet of Japan, March 26, 2007). I am deeply sympathetic to the former comfort women who suffered hardships, and I have expressed my apologies for the extremely agonizing circumstances into which they were placed. (Excerpt from Telephone Conference by Prime Minister Abe to President George W. Bush, April 3, 2007). I have to express sympathy from the bottom of my heart to those people who were taken as wartime comfort women. As a human being, I would like to express my sympathies, and also as prime minister of Japan I need to apologize to them. My administration has been saying all along that we continue to stand by the Kono Statement. We feel responsible for having forced these women to go through that hardship and pain as comfort women under the circumstances at the time. (Excerpt from an interview article "A Conversation with Shinzo Abe" by the Washington Post, April 22, 2007). x x x both personally and as Prime Minister of Japan, my heart goes out in sympathy to all those who suffered extreme hardships as comfort women; and I expressed my apologies for the fact that they were forced to endure such extreme and harsh conditions. Human rights are violated in many parts of the world during the 20th Century; therefore we must work to make the 21st Century a wonderful century in which no human rights are violated. And the Government of Japan and I wish to make significant contributions to that end. (Excerpt from Prime Minister Abe's remarks at the Joint Press Availability after the summit meeting at Camp David between Prime Minister Abe and President Bush, April 27, 2007). The Asian Women's Fund Established by the Japanese government in 1995, the AWF represented the government's concrete attempt to address its moral responsibility by offering monetary compensation to victims of the comfort women system.37 The purpose of the AWF was to show atonement of the Japanese people through expressions of apology and remorse to the former wartime comfort women, to restore their honor, and to demonstrate Japans strong respect for women.38 The AWF announced three programs for former comfort women who applied for assistance: (1) an atonement fund paying 2 million (approximately $20,000) to each woman; (2) medical and welfare support programs, paying 2.5-3 million ($25,000-$30,000) for each woman; and (3) a letter of apology from the Japanese Prime Minister to each woman. Funding for the program came from the Japanese government and private donations from the Japanese people. As of March 2006, the AWF provided 700 million (approximately $7 million) for these programs in South Korea, Taiwan, and the Philippines; 380 million (approximately $3.8 million) in Indonesia; and 242 million (approximately $2.4 million) in the Netherlands. On January 15, 1997, the AWF and the Philippine government signed a Memorandum of Understanding for medical and welfare support programs for former comfort women. Over the next five years, these were implemented by the Department of Social Welfare and Development. Our Ruling Stripped down to its essentials, the issue in this case is whether the Executive Department committed grave abuse of discretion in not espousing petitioners claims for official apology and other forms of reparations against Japan. The petition lacks merit.
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From a Domestic Law Perspective, the Executive Department has the exclusive prerogative to determine whether to espouse petitioners claims against Japan. Baker v. Carr39 remains the starting point for analysis under the political question doctrine. There the US Supreme Court explained that: x x x Prominent on the surface of any case held to involve a political question is found a textually demonstrable constitutional commitment of the issue to a coordinate political department or a lack of judicially discoverable and manageable standards for resolving it, or the impossibility of deciding without an initial policy determination of a kind clearly for non-judicial discretion; or the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or an unusual need for unquestioning adherence to a political decision already made; or the potentiality of embarrassment from multifarious pronouncements by various departments on question. In Taada v. Cuenco,40 we held that political questions refer "to those questions which, under the Constitution, are to be decided by the people in their sovereign capacity, or in regard to which full discretionary authority has been delegated to the legislative or executive branch of the government. It is concerned with issues dependent upon the wisdom, not legality of a particular measure." Certain types of cases often have been found to present political questions.41 One such category involves questions of foreign relations. It is well-established that "[t]he conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative--'the political'-departments of the government, and the propriety of what may be done in the exercise of this political power is not subject to judicial inquiry or decision."42 The US Supreme Court has further cautioned that decisions relating to foreign policy are delicate, complex, and involve large elements of prophecy. They are and should be undertaken only by those directly responsible to the people whose welfare they advance or imperil. They are decisions of a kind for which the Judiciary has neither aptitude, facilities nor responsibility.43 To be sure, not all cases implicating foreign relations present political questions, and courts certainly possess the authority to construe or invalidate treaties and executive agreements.44 However, the question whether the Philippine government should espouse claims of its nationals against a foreign government is a foreign relations matter, the authority for which is demonstrably committed by our Constitution not to the courts but to the political branches. In this case, the Executive Department has already decided that it is to the best interest of the country to waive all claims of its nationals for reparations against Japan in the Treaty of Peace of 1951. The wisdom of such decision is not for the courts to question. Neither could petitioners herein assail the said determination by the Executive Department via the instant petition for certiorari. In the seminal case of US v. Curtiss-Wright Export Corp.,45 the US Supreme Court held that "[t]he President is the sole organ of the nation in its external relations, and its sole representative with foreign relations." It is quite apparent that if, in the maintenance of our international relations, embarrassment -- perhaps serious embarrassment -- is to be avoided and success for our aims achieved, congressional legislation which is to be made effective through negotiation and inquiry within the international field must often accord to the President a degree of discretion and freedom from statutory restriction which would not be admissible where domestic affairs alone involved. Moreover, he, not Congress, has the better opportunity of knowing the conditions which prevail in foreign countries, and especially is this true in time of war. He has his confidential sources of information. He has his agents in the form of diplomatic, consular and other officials. x x x This ruling has been incorporated in our jurisprudence through Bayan v. Executive Secretary46 and Pimentel v. Executive Secretary;47 its overreaching principle was, perhaps, best articulated in (now Chief) Justice Punos dissent in Secretary of Justice v. Lantion:48 x x x The conduct of foreign relations is full of complexities and consequences, sometimes with life and death significance to the nation especially in times of war. It can only be entrusted to that department of

government which can act on the basis of the best available information and can decide with decisiveness. x x x It is also the President who possesses the most comprehensive and the most confidential information about foreign countries for our diplomatic and consular officials regularly brief him on meaningful events all over the world. He has also unlimited access to ultra-sensitive military intelligence data. In fine, the presidential role in foreign affairs is dominant and the President is traditionally accorded a wider degree of discretion in the conduct of foreign affairs. The regularity, nay, validity of his actions are adjudged under less stringent standards, lest their judicial repudiation lead to breach of an international obligation, rupture of state relations, forfeiture of confidence, national embarrassment and a plethora of other problems with equally undesirable consequences. The Executive Department has determined that taking up petitioners cause would be inimical to our countrys foreign policy interests, and could disrupt our relations with Japan, thereby creating serious implications for stability in this region. For us to overturn the Executive Departments determination would mean an assessment of the foreign policy judgments by a coordinate political branch to which authority to make that judgment has been constitutionally committed. In any event, it cannot reasonably be maintained that the Philippine government was without authority to negotiate the Treaty of Peace with Japan. And it is equally true that, since time immemorial, when negotiating peace accords and settling international claims: x x x [g]overnments have dealt with x x x private claims as their own, treating them as national assets, and as counters, `chips', in international bargaining. Settlement agreements have lumped, or linked, claims deriving from private debts with others that were intergovernmental in origin, and concessions in regard to one category of claims might be set off against concessions in the other, or against larger political considerations unrelated to debts.49 Indeed, except as an agreement might otherwise provide, international settlements generally wipe out the underlying private claims, thereby terminating any recourse under domestic law. In Ware v. Hylton,50 a case brought by a British subject to recover a debt confiscated by the Commonwealth of Virginia during the war, Justice Chase wrote: I apprehend that the treaty of peace abolishes the subject of the war, and that after peace is concluded, neither the matter in dispute, nor the conduct of either party, during the war, can ever be revived, or brought into contest again. All violences, injuries, or damages sustained by the government, or people of either, during the war, are buried in oblivion; and all those things are implied by the very treaty of peace; and therefore not necessary to be expressed. Hence it follows, that the restitution of, or compensation for, British property confiscated, or extinguished, during the war, by any of the United States, could only be provided for by the treaty of peace; and if there had been no provision, respecting these subjects, in the treaty, they could not be agitated after the treaty, by the British government, much less by her subjects in courts of justice. (Emphasis supplied). This practice of settling claims by means of a peace treaty is certainly nothing new. For instance, in Dames & Moore v. Regan,51 the US Supreme Court held: Not infrequently in affairs between nations, outstanding claims by nationals of one country against the government of another country are "sources of friction" between the two sovereigns. United States v. Pink, 315 U.S. 203, 225, 62 S.Ct. 552, 563, 86 L.Ed. 796 (1942). To resolve these difficulties, nations have often entered into agreements settling the claims of their respective nationals. As one treatise writer puts it, international agreements settling claims by nationals of one state against the government of another "are established international practice reflecting traditional international theory." L. Henkin, Foreign Affairs and the Constitution 262 (1972). Consistent with that principle, the United States has repeatedly exercised its sovereign authority to settle the claims of its nationals against foreign countries. x x x Under such agreements, the President has agreed to renounce or extinguish claims of United States nationals against foreign governments in return for lump-sum payments or the establishment of arbitration procedures. To be sure, many of these settlements were encouraged by the United States claimants themselves, since a claimant's only hope of obtaining any payment at all might lie in having his Government negotiate a diplomatic settlement on his behalf. But it is also undisputed that the "United
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States has sometimes disposed of the claims of its citizens without their consent, or even without consultation with them, usually without exclusive regard for their interests, as distinguished from those of the nation as a whole." Henkin, supra, at 262-263. Accord, Restatement (Second) of Foreign Relations Law of the United States 213 (1965) (President "may waive or settle a claim against a foreign state x x x [even] without the consent of the [injured] national"). It is clear that the practice of settling claims continues today. Respondents explain that the Allied Powers concluded the Peace Treaty with Japan not necessarily for the complete atonement of the suffering caused by Japanese aggression during the war, not for the payment of adequate reparations, but for security purposes. The treaty sought to prevent the spread of communism in Japan, which occupied a strategic position in the Far East. Thus, the Peace Treaty compromised individual claims in the collective interest of the free world. This was also the finding in a similar case involving American victims of Japanese slave labor during the war.52 In a consolidated case in the Northern District of California,53 the court dismissed the lawsuits filed, relying on the 1951 peace treaty with Japan,54 because of the following policy considerations: The official record of treaty negotiations establishes that a fundamental goal of the agreement was to settle the reparations issue once and for all. As the statement of the chief United States negotiator, John Foster Dulles, makes clear, it was well understood that leaving open the possibility of future claims would be an unacceptable impediment to a lasting peace: Reparation is usually the most controversial aspect of peacemaking. The present peace is no exception. On the one hand, there are claims both vast and just. Japan's aggression caused tremendous cost, losses and suffering. On the other hand, to meet these claims, there stands a Japan presently reduced to four home islands which are unable to produce the food its people need to live, or the raw materials they need to work. x x x The policy of the United States that Japanese liability for reparations should be sharply limited was informed by the experience of six years of United States-led occupation of Japan. During the occupation the Supreme Commander of the Allied Powers (SCAP) for the region, General Douglas MacArthur, confiscated Japanese assets in conjunction with the task of managing the economic affairs of the vanquished nation and with a view to reparations payments. It soon became clear that Japan's financial condition would render any aggressive reparations plan an exercise in futility. Meanwhile, the importance of a stable, democratic Japan as a bulwark to communism in the region increased. At the end of 1948, MacArthur expressed the view that "[t]he use of reparations as a weapon to retard the reconstruction of a viable economy in Japan should be combated with all possible means" and "recommended that the reparations issue be settled finally and without delay." That this policy was embodied in the treaty is clear not only from the negotiations history but also from the Senate Foreign Relations Committee report recommending approval of the treaty by the Senate. The committee noted, for example: Obviously insistence upon the payment of reparations in any proportion commensurate with the claims of the injured countries and their nationals would wreck Japan's economy, dissipate any credit that it may possess at present, destroy the initiative of its people, and create misery and chaos in which the seeds of discontent and communism would flourish. In short, [it] would be contrary to the basic purposes and policy of x x x the United States x x x. We thus hold that, from a municipal law perspective, that certiorari will not lie. As a general principle and particularly here, where such an extraordinary length of time has lapsed between the treatys conclusion and our consideration the Executive must be given ample discretion to assess the foreign policy considerations of espousing a claim against Japan, from the standpoint of both the interests of the petitioners and those of the Republic, and decide on that basis if apologies are sufficient, and whether further steps are appropriate or necessary.

The Philippines is not under any international obligation to espouse petitioners claims. In the international sphere, traditionally, the only means available for individuals to bring a claim within the international legal system has been when the individual is able to persuade a government to bring a claim on the individuals behalf.55 Even then, it is not the individuals rights that are being asserted, but rather, the states own rights. Nowhere is this position more clearly reflected than in the dictum of the Permanent Court of International Justice (PCIJ) in the 1924 Mavrommatis Palestine Concessions Case: By taking up the case of one of its subjects and by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own right to ensure, in the person of its subjects, respect for the rules of international law. The question, therefore, whether the present dispute originates in an injury to a private interest, which in point of fact is the case in many international disputes, is irrelevant from this standpoint. Once a State has taken up a case on behalf of one of its subjects before an international tribunal, in the eyes of the latter the State is sole claimant.56 Since the exercise of diplomatic protection is the right of the State, reliance on the right is within the absolute discretion of states, and the decision whether to exercise the discretion may invariably be influenced by political considerations other than the legal merits of the particular claim.57 As clearly stated by the ICJ in Barcelona Traction: The Court would here observe that, within the limits prescribed by international law, a State may exercise diplomatic protection by whatever means and to whatever extent it thinks fit, for it is its own right that the State is asserting. Should the natural or legal person on whose behalf it is acting consider that their rights are not adequately protected, they have no remedy in international law. All they can do is resort to national law, if means are available, with a view to furthering their cause or obtaining redress. The municipal legislator may lay upon the State an obligation to protect its citizens abroad, and may also confer upon the national a right to demand the performance of that obligation, and clothe the right with corresponding sanctions.1awwphi1 However, all these questions remain within the province of municipal law and do not affect the position internationally.58 (Emphasis supplied) The State, therefore, is the sole judge to decide whether its protection will be granted, to what extent it is granted, and when will it cease. It retains, in this respect, a discretionary power the exercise of which may be determined by considerations of a political or other nature, unrelated to the particular case. The International Law Commissions (ILCs) Draft Articles on Diplomatic Protection fully support this traditional view. They (i) state that "the right of diplomatic protection belongs to or vests in the State,"59 (ii) affirm its discretionary nature by clarifying that diplomatic protection is a "sovereign prerogative" of the State;60 and (iii) stress that the state "has the right to exercise diplomatic protection on behalf of a national. It is under no duty or obligation to do so."61 It has been argued, as petitioners argue now, that the State has a duty to protect its nationals and act on his/her behalf when rights are injured.62 However, at present, there is no sufficient evidence to establish a general international obligation for States to exercise diplomatic protection of their own nationals abroad.63 Though, perhaps desirable, neither state practice nor opinio juris has evolved in such a direction. If it is a duty internationally, it is only a moral and not a legal duty, and there is no means of enforcing its fulfillment.641avvphi1 We fully agree that rape, sexual slavery, torture, and sexual violence are morally reprehensible as well as legally prohibited under contemporary international law.65 However, petitioners take quite a theoretical leap in claiming that these proscriptions automatically imply that that the Philippines is under a nonderogable obligation to prosecute international crimes, particularly since petitioners do not demand the imputation of individual criminal liability, but seek to recover monetary reparations from the state of Japan. Absent the consent of states, an applicable treaty regime, or a directive by the Security Council, there is no non-derogable duty to institute proceedings against Japan. Indeed, precisely because of states reluctance to directly prosecute claims against another state, recent developments support the modern trend to empower individuals to directly participate in suits against perpetrators of international
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crimes.66 Nonetheless, notwithstanding an array of General Assembly resolutions calling for the prosecution of crimes against humanity and the strong policy arguments warranting such a rule, the practice of states does not yet support the present existence of an obligation to prosecute international crimes.67 Of course a customary duty of prosecution is ideal, but we cannot find enough evidence to reasonably assert its existence. To the extent that any state practice in this area is widespread, it is in the practice of granting amnesties, immunity, selective prosecution, or de facto impunity to those who commit crimes against humanity."68 Even the invocation of jus cogens norms and erga omnes obligations will not alter this analysis. Even if we sidestep the question of whether jus cogens norms existed in 1951, petitioners have not deigned to show that the crimes committed by the Japanese army violated jus cogens prohibitions at the time the Treaty of Peace was signed, or that the duty to prosecute perpetrators of international crimes is an erga omnes obligation or has attained the status of jus cogens. The term erga omnes (Latin: in relation to everyone) in international law has been used as a legal term describing obligations owed by States towards the community of states as a whole. The concept was recognized by the ICJ in Barcelona Traction: x x x an essential distinction should be drawn between the obligations of a State towards the international community as a whole, and those arising vis--vis another State in the field of diplomatic protection. By their very nature, the former are the concern of all States. In view of the importance of the rights involved, all States can be held to have a legal interest in their protection; they are obligations erga omnes.http://www.search.com/reference/Erga_omnes - _note-0#_note-0 Such obligations derive, for example, in contemporary international law, from the outlawing of acts of aggression, and of genocide, as also from the principles and rules concerning the basic rights of the human person, including protection from slavery and racial discrimination. Some of the corresponding rights of protection have entered into the body of general international law others are conferred by international instruments of a universal or quasi-universal character. The Latin phrase, erga omnes, has since become one of the rallying cries of those sharing a belief in the emergence of a value-based international public order. However, as is so often the case, the reality is neither so clear nor so bright. Whatever the relevance of obligations erga omnes as a legal concept, its full potential remains to be realized in practice.69 The term is closely connected with the international law concept of jus cogens. In international law, the term "jus cogens" (literally, "compelling law") refers to norms that command peremptory authority, superseding conflicting treaties and custom. Jus cogens norms are considered peremptory in the sense that they are mandatory, do not admit derogation, and can be modified only by general international norms of equivalent authority.70 Early strains of the jus cogens doctrine have existed since the 1700s,71 but peremptory norms began to attract greater scholarly attention with the publication of Alfred von Verdross's influential 1937 article, Forbidden Treaties in International Law.72 The recognition of jus cogens gained even more force in the 1950s and 1960s with the ILCs preparation of the Vienna Convention on the Law of Treaties (VCLT).73 Though there was a consensus that certain international norms had attained the status of jus cogens,74 the ILC was unable to reach a consensus on the proper criteria for identifying peremptory norms. After an extended debate over these and other theories of jus cogens, the ILC concluded ruefully in 1963 that "there is not as yet any generally accepted criterion by which to identify a general rule of international law as having the character of jus cogens."75 In a commentary accompanying the draft convention, the ILC indicated that "the prudent course seems to be to x x x leave the full content of this rule to be worked out in State practice and in the jurisprudence of international tribunals."76 Thus, while the existence of jus cogens in international law is undisputed, no consensus exists on its substance,77 beyond a tiny core of principles and rules.78 Of course, we greatly sympathize with the cause of petitioners, and we cannot begin to comprehend the unimaginable horror they underwent at the hands of the Japanese soldiers. We are also deeply

concerned that, in apparent contravention of fundamental principles of law, the petitioners appear to be without a remedy to challenge those that have offended them before appropriate fora. Needless to say, our government should take the lead in protecting its citizens against violation of their fundamental human rights. Regrettably, it is not within our power to order the Executive Department to take up the petitioners cause. Ours is only the power to urge and exhort the Executive Department to take up petitioners cause. WHEREFORE, the Petition is hereby DISMISSED. SO ORDERED.

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