Surigao del Norte Electric Cooperative Inc. , petitioner, vs. Energy Regulatory Commission, respondent.

FACTS

(Topic : Elements for Valid Exercise)

ISSUE

RULLING
1.

The Association of Mindanao Rural Electric Cooperatives, as representative

of SURNECO and of the other 33 rural electric cooperatives in Mindanao,
filed a petition before the then Energy Regulatory Board (ERB) for the
approval of the formula for automatic cost adjustment and adoption of the
National Power Corporation (NPC) restructured rate adjustment to comply
with Republic Act (R.A.) No. 7832.
The ERB granted SURNECO and other rural electric cooperatives
provisional authority to use and implement the Purchased Power Adjustment
(PPA). In the meantime, the passage of R.A. No. 9136 led to the creation of
the Energy Regulatory Commission (ERC), replacing and succeeding the
ERB. All pending cases before the ERB were transferred to the ERC.
Thereafter, the ERC continued its review, verification, and confirmation of the
electric cooperatives implementation of the PPA formula based on the
available data and information submitted by the latter.
The ERC issued its assailed Order, mandating that the discounts earned by
SURNECO from its power supplier should be deducted from the computation
of the power cost. SURNECO filed a motion for reconsideration, but it was
denied. Aggrieved, SURNECO filed a petition for review to the CA but the
same was denied. Upon denial of the motion for reconsideration, SURNECO
files the instant petition.

Whether or not the CA

erred in affirming the
ERC Decision?

NO

POLITICAL LAW- The State, in its exercise of police power, can regulate the rates imposed by a public utility such as SURNECO
The ERC was merely implementing the system loss caps in R.A. No. 7832 when it reviewed and confirmed SURNECOS PPA charges,
and ordered the refund of the amount collected in excess of the allowable system loss caps through its continued use of the
multiplier scheme. The Commission deemed it appropriate to clarify its PPA confirmation process particularly on the treatment of
the Prompt Payment Discount (PPD) granted to distribution utilities (DUs) by their power suppliers. The foregoing clarification was
intended to ensure that only the actual costs of purchased power are recovered by the DUs.
In directing SURNECO to refund its over-recoveries based on PPA policies, which only ensured that the PPA mechanism remains a
purely cost-recovery mechanism and not a revenue-generating scheme for the electric cooperatives, the ERC merely exercised its
authority to regulate and approve the rates imposed by the electric cooperatives on their consumers. The ERC simply performed its
mandate to protect the public interest imbued in those rates.
As held in the case of Republic v. Manila Electric Company, the regulation of rates to be charged by public utilities is founded upon
the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise
thereof. When private property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and
becomes subject to regulation. The regulation is to promote the common good. Submission to regulation may be withdrawn by the
owner by discontinuing use; but as long as use of the property is continued, the same is subject to public regulation.
Likewise, SURNECO cannot validly assert that the caps set by R.A. No. 7832 are arbitrary, or that they violate the non-impairment
clause of the Constitution for allegedly traversing the loan agreement between NEA and ADB. Striking down a legislative enactment,
or any of its provisions, can be done only by way of a direct action, not through a collateral attack, and more so, not for the first time
on appeal in order to avoid compliance. The challenge to the laws constitutionality should also be raised at the earliest opportunity.
Even assuming, merely for arguments sake, that the ERC issuances violated the NEA and ADB covenant, the contract had to yield to
the greater authority of the States exercise of police power. It has long been settled that police power legislation, adopted by the
State to promote the health, morals, peace, education, good order, safety, and general welfare of the people prevail not only over
future contracts but even over those already in existence, for all private contracts must yield to the superior and legitimate
measures taken by the State to promote public welfare.
POLITICAL LAW- Administrative due process simply requires an opportunity to explain ones side or to seek reconsideration of the
action or ruling complained of.
Verily, the PPA confirmation necessitated a review of the electric cooperatives monthly documentary submissions to substantiate
their PPA charges. The cooperatives were duly informed of the need for other required supporting documents and were allowed to
submit them accordingly. In fact, hearings were conducted. Moreover, the ERC conducted exit conferences with the electric
cooperatives representatives, SURNECO included, to discuss preliminary figures and to double-check these figures for
inaccuracies, if there were any. In addition, after the issuance of the ERC Orders, the electric cooperatives were allowed to file their
respective motions for reconsideration. It cannot be gainsaid, therefore, that SURNECO was not denied due process

Petition Denied

Executive Secretary,Petitioner vs. Forerunner Multi Resources, Respondents

(Topic : Elements for Valid Exercise)

FACTS
Executive Order No. 156 (EO 156)3, issued by President Gloria MacapagalArroyo (President Arroyo) on 12 December 2002, imposes a partial ban on
the importation of used motor vehicles.4 The ban is part of several measures
EO 156 adopts to "accelerate the sound development of the motor vehicle
industry in the Philippines."In Executive Secretary v. Southwing Heavy
Industries, Inc. and two related petitions6 (collectively, Southwing), we
found EO 156 a valid executive issuance enforceable throughout the
Philippine customs territory, except in the Subic Special Economic and
Freeport Zone in Zambales (Subic Freeport) by virtue of its status as a
"separate customs territory" under Republic Act No. 7227.
Respondent Forerunner Multi Resources, Inc. (respondent), a corporation
engaged in the importation of used motor vehicles via the ports of Aparri,
Cagayan and San Fernando, La Union, sued the government in the Regional
Trial Court of Aparri, Cagayan (trial court) to declare invalid EO 156,
impleading petitioner public officials as respondents.8 Respondent attacked
EO 156 for (1) having been issued by President Arroyo ultra vires; (2)
trenching the Due Process and Equal Protection Clauses of the Constitution;
and (3) having been superseded by Executive Order No. 418 (EO 418),9
issued by President Arroyo on 4 April 2005, modifying the tariff rates of
imported used motor vehicles. Respondent sought a preliminary injunctive
writ to enjoin, litis pendentia, the enforcement of EO 156.
The Trial court granted relief, initially by issuing a temporary restraining order
followed by a writ of preliminary injunction granted in its Order of 27
November 2008.10 On petitioners motion, however, the trial court
reconsidered its Order and lifted the injunctive writ on 7 July 2010. The trial
court grounded its ruling on Southwing which it considered as negating any
"clear and unmistakable legal right" on the part of respondent to receive the
"protection of a writ of preliminary injunction.
Respondent elevated the case to the Court of Appeals in a certiorari petition.
The Court of Appeals granted certiorari, set aside the trial courts Order of 7
July 2010 and reinstated its Order of 27 November 2008. In the appellate
courts estimation, the trial court committed grave abuse of discretion in lifting
the preliminary injunctive writ it earlier issued. The appellate court held that
the implementation of EO 156 "would put petitioner in a financial crisis."12 As
authority, the appellate court invoked by analogy this Courts ruling in Filipino
Metals Corporation v. Secretary of the Department of Trade and Industry

ISSUE

RULLING
Yes

Whether the Court of Appeals

erred in granting preliminary
injunctive relief to respondent to
enjoin enforcement of EO 156?

We hold that it was error for the Court of Appeals to grant preliminary injunctive relief to respondent. We set aside the Court of
Appeals ruling and reinstate the trial courts Order of 7 July 2010.
Respondent without Clear Legal Right to Import Used Motor Vehicles
It is a deeply ingrained doctrine in Philippine remedial law that a preliminary injunctive writ under Rule 5814 issues only upon a
showing of the applicants "clear legal right"15 being violated or under threat of violation by the defendant.16 "Clear legal right," within
the meaning of Rule 58, contemplates a right "clearly founded in or granted by law."17 Any hint of doubt or dispute on the asserted
legal right precludes the grant of preliminary injunctive relief.18 For suits attacking the validity of laws or issuances with the force
and effect of law, as here, the applicant for preliminary injunctive relief bears the added burden of overcoming the presumption of
validity inhering in such laws or issuances.19 These procedural barriers to the issuance of a preliminary injunctive writ are rooted on
the equitable nature of such relief, preserving the status quo while, at the same time, restricting the course of action of the
defendants even before adverse judgment is rendered against them.
Respondent sought preliminary injunctive relief as ancillary to its principal cause of action to invalidate EO 156. Respondents
attack on EO 156, however, comes on the heels of Southwing where we passed upon and found EO 156 legally sound, albeit
overextended in application. We found EO 156 a valid police power measure addressing an "urgent national concern"
There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The
deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern
that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly
proscribe the importation of these vehicles.
The narrow ambit of this review precludes us from passing upon the merits of the constitutional and administrative issues
respondent raised to attack EO 156. Nevertheless, we have no hesitation in holding that whatever legal right respondent may
possess vis vis the operation of EO 156, we find such legal right to be doubtful by force of the Southwing precedent. Until
reversed or modified by this Court, Southwing makes conclusive the presumption of EO 156s validity. Our holding is bolstered by
respondents failure to remove its case from the confines of such ruling.

Goldenway Merchandising Corporation, petitioner vs. Equitable PCI Bank, respondent.

FACTS

(Topic : Elements for Valid Exercise)

ISSUE

RULLING
No

Goldenway Merchandising Corporation (petitioner) executed a Real

Estate Mortgage in favor of Equitable PCI Bank (respondent) over its
real properties situated in Valenzuela, Bulacan (now Valenzuela City) to
secure the Two Million Pesos (P2,000,000.00) loan granted by
respondent to petitioner.As petitioner failed to settle its loan obligation,
respondent extrajudicially foreclosed the mortgage on December 13,
2000. During the public auction, the mortgaged properties were sold for
P3,500,000.00 to respondent. Accordingly, a Certificate of Sale was
issued to respondent on January 26, 2001.
On February 16, 2001, the Certificate of Sale was registered and
inscribed on TCT Nos. T-152630, T-151655 and T214528.5chanroblesvirtualawlibrary In a letter dated March 8, 2001,
petitioner's counsel offered to redeem the foreclosed properties by
tendering a check in the amount of P3,500,000.00. However, petitioner
was told that such redemption is no longer possible because the
certificate of sale had already been registered, consolidated and named
before the respondent.
Petitioner ( Golden Merchandising Corp.) filed a complaint for specific
performance and damages before the RTC-Venezuela City against the
respondent asserting that it has been deprived to exercise its right of
redemption prior to the registration of the certificate of sale and it is the
one-year period of redemption under Act No. 3135 which should apply
and not the shorter redemption period provided in Republic Act (R.A.)
No. 8791 In its Answer with Counterclaim, respondent pointed out that
petitioner cannot claim that it was unaware of the redemption price
which is clearly provided in Section 47 of R.A. No. 8791, and that
petitioner had all the opportune time to redeem the foreclosed
properties from the time it received the letter of demand and the notice
of sale before the registration of the certificate of sale.
The trial court rendered its decision dismissing the complaint as well as
the counterclaim. Aggrieved, petitioner appealed to the CA which
affirmed the trial court's decision. According to the CA, petitioner failed
to justify why Section 47 of R.A. No. 8791 should be declared
unconstitutional. Furthermore, the appellate court concluded that a
reading of Section 47 plainly reveals the intention to shorten the period
of redemption for juridical persons and that the foreclosure of the
mortgaged properties in this case when R.A. No. 8791 was already in
effect clearly falls within the purview of the said provision. Petitioner's

Whether or not Section

47 infringes the equal
protection clause?

1.

Petitioner's contention that Section 47 of R.A. 8791 violates the constitutional proscription against impairment of the obligation of contract has no
basis. Impairment is anything that diminishes the efficacy of the contract. There is impairment if a subsequent law changes the terms of a
contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws remedies for the enforcement of the
rights of the parties. Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for the
exercise of such right by reducing the one-year period originally provided in Act No. 3135. The new redemption period commences from the date
of foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise
no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed prior to its
effectivity and whose owners shall retain their redemption rights under Act No. 3135.
Petitioner's claim that Section 47 infringes the equal protection clause as it discriminates mortgagors/property owners who are
juridical persons is equally bereft of merit. We agree with the CA that the legislature clearly intended to shorten the period of redemption for
juridical persons whose properties were foreclosed and sold in accordance with the provisions of Act No. 3135.27. The difference in the
treatment of juridical persons and natural persons was based on the nature of the properties foreclosed whether these are used as residence, for
which the more liberal one-year redemption period is retained, or used for industrial or commercial purposes, in which case a shorter term is
deemed necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of these
acquired assets.
It must be underscored that the General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to
reform the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound banking system.28 In this context, the
amendment introduced by Section 47 embodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks.
It cannot therefore be disputed that the said provision amending the redemption period in Act 3135 was based on a reasonable classification and
germane to the purpose of the law.
Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no reversible error committed by the CA in holding that
petitioner can no longer exercise the right of redemption over its foreclosed properties after the certificate of sale in favor of respondent had been
registered. WHEREFORE, the petition for review on certiorari is DENIED for lack of merit. The Decision dated November 19, 2010 and
Resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. CV No. 91120 are hereby AFFIRMED. With costs against the petitioner.

motion for reconsideration was likewise denied by the CA. Thus the
present petition.

Carlos Superdrug Corporation, Petitioner, vs. DSWD, Respondents.

FACTS

(Topic : Elements for Valid Exercise)

ISSUE

DISCUSSION/ RULING

Petitioners, belonging to domestic corporations and proprietors operating

drugstores in the Philippines, are praying for preliminary injunction
assailing the constitutionality of Section4(a) of Republic Act (R.A.) No.
9257, otherwise known as theExpanded Senior Citizens Act of 2003.
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432, was
signed into law by President Gloria Macapagal-Arroyo and it became
effective on March 21, 2004. Section 4(a) of the Act states: SEC. 4.
Privileges for the Senior Citizens. The senior citizens shall be entitled to
the following: a) the grant of twenty percent (20%) discount from all
establishments relative to the utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers, and purchase
of medicines in all establishments for the exclusive use or enjoyment of
senior citizens, including funeral and burial services for the death of senior
citizens; The establishment may claim the discounts granted under (a), (f),
(g) and (h) as tax deduction based on the net cost of the goods sold or
services rendered Provided That the cost of the discount shall be allowed
as deduction from gross income for the same taxable year that the
discount is granted. Provided, further, That the total amount of the claimed
tax deduction net of value added tax if applicable, shall be included in their
gross sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue
Code, as amended.
The DSWD, on May 8, 2004, approved and adopted the Implementing
Rules and Regulations of RA No. 9275, Rule VI, Article 8 which contains
the proviso that the implementation of the tax deduction shall be subject to
the Revenue Regulations to be issued by the BIR and approved by the
DOF. With the new law, the Drug Stores Association of the Philippine
wanted a clarification of the meaning of tax deduction. The DOF clarified
that under a tax deduction scheme, the tax deduction on discounts was
subtracted from Net Sales together with other deductions which are
considered as operating expenses before the Tax Due was computed
based on the Net Taxable Income.
On the other hand, under a tax credit scheme, the amount of discounts
which is the tax credit item, was deducted directly from the tax due
amount. The DOH issued an Administrative Order that the twenty percent
discount shall include both prescription and non-prescription medicines,
whether branded or generic. It stated that such discount would be provided
in the purchase of medicines from all establishments supplying medicines
for the exclusive use of the senior citizens.
Drug store owners assail the law with the contention that granting the
discount would result to loss of profit and capital especially that such law

Whether or not Section

4(a)of the Expanded Senior
Citizens Act is unconstitutional
or not violative of Article 3 Section
9 of the Constitution which provides
that private property shall not be
taken for public use without just
compensation and the equal
protection clause of Article 3
Section 1.

The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit.
This constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation. Just compensation
is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers gain but the
owners loss.
The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample. The law grants a twenty percent discount to senior citizens for medical and
dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert hall, circuses, carnivals, and other similar
places of culture, leisure and
amusement;Faresfor land, air and sea travel; utilization of services in hotels and similar lodgingestablishments, restaurants and recreation
centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens.
As a form of reimbursement, the law provides that business establishments extending the twenty percent discount to senior citizens may
claim the discount as a tax deduction. The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits.
Accordingly, it has been described as the most essential, insistent and the least limitable of powers, extending as it does to all the great
public needs. It 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, either with penalties or without, not repugnant to the constitution, as they shall judge to be
for the good and welfare of the commonwealth, and of the subjects of the same.

failed to provide a scheme to justly compensate the discount.