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CONSTITUTIONAL LAW I
2021 COURSE SYLLABUS AND LIST OF CASES
(Atty. Mary Ellen S. Cabuhat)

MODULE 1: THE CONCEPT OF STATE

1.1. Definition of State

Collector of Internal Revenue vs. Campos Rueda (G.R. No. L-13250, October 29, 1971)

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
ANTONIO CAMPOS RUEDA, respondent..

The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the Court of Tax
Appeals as to whether or not the requisites of statehood, or at least so much thereof as may be necessary for the
acquisition of an international personality, must be satisfied for a "foreign country" to fall within the exemption of
Section 122 of the National Internal Revenue Code1 is now ripe for adjudication. The Court of Tax Appeals answered the
question in the negative, and thus reversed the action taken by petitioner Collector, who would hold respondent
Antonio Campos Rueda, as administrator of the estate of the late Estrella Soriano Vda. de Cerdeira, liable for the sum of
P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal properties in the
Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from 1931 up to the time of
her death in 1955. In an earlier resolution promulgated May 30, 1962, this Court on the assumption that the need for
resolving the principal question would be obviated, referred the matter back to the Court of Tax Appeals to determine
whether the alleged law of Tangier did grant the reciprocal tax exemption required by the aforesaid Section 122. Then
came an order from the Court of Tax Appeals submitting copies of legislation of Tangier that would manifest that the
element of reciprocity was not lacking. It was not until July 29, 1969 that the case was deemed submitted for decision.
When the petition for review was filed on January 2, 1958, the basic issue raised was impressed with an element of
novelty. Four days thereafter, however, on January 6, 1958, it was held by this Court that the aforesaid provision does
not require that the "foreign country" possess an international personality to come within its terms.2 Accordingly, we
have to affirm.

The decision of the Court of Tax Appeals, now under review, sets forth the background facts as follows: "This is an
appeal interposed by petitioner Antonio Campos Rueda as administrator of the estate of the deceased Doña Maria de la
Estrella Soriano Vda. de Cerdeira, from the decision of the respondent Collector of Internal Revenue, assessing against
and demanding from the former the sum P161,874.95 as deficiency estate and inheritance taxes, including interest and
penalties, on the transfer of intangible personal properties situated in the Philippines and belonging to said Maria de la
Estrella Soriano Vda. de Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish
national, by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her
death on January 2, 1955. At the time of her demise she left, among others, intangible personal properties in the
Philippines."3 Then came this portion: "On September 29, 1955, petitioner filed a provisional estate and inheritance tax
return on all the properties of the late Maria Cerdeira. On the same date, respondent, pending investigation, issued an
assessment for state and inheritance taxes in the respective amounts of P111,592.48 and P157,791.48, or a total of
P369,383.96 which tax liabilities were paid by petitioner ... . On November 17, 1955, an amended return was filed ...
wherein intangible personal properties with the value of P396,308.90 were claimed as exempted from taxes. On
November 23, 1955, respondent, pending investigation, issued another assessment for estate and inheritance taxes in
the amounts of P202,262.40 and P267,402.84, respectively, or a total of P469,665.24 ... . In a letter dated January 11,
1956, respondent denied the request for exemption on the ground that the law of Tangier is not reciprocal to Section
122 of the National Internal Revenue Code. Hence, respondent demanded the payment of the sums of P239,439.49
representing deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interests and
compromise penalties ... . In a letter dated February 8, 1956, and received by respondent on the following day,
petitioner requested for the reconsideration of the decision denying the claim for tax exemption of the intangible
personal properties and the imposition of the 25% and 5% ad valorem penalties ... . However, respondent denied
request, in his letter dated May 5, 1956 ... and received by petitioner on May 21, 1956. Respondent premised the denial
on the grounds that there was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign
country. Consequently, respondent demanded the payment of the sums of P73,851.21 and P88,023.74 respectively, or a
total of P161,874.95 as deficiency estate and inheritance taxes including surcharges, interests and compromise
penalties."4

The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties regarding the
values of the properties and the mathematical correctness of the deficiency assessments, the principal question as
noted dealt with the reciprocity aspect as well as the insisting by the Collector of Internal Revenue that Tangier was not
a foreign country within the meaning of Section 122. In ruling against the contention of the Collector of Internal
Revenue, the appealed decision states: "In fine, we believe, and so hold, that the expression "foreign country", used in
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the last proviso of Section 122 of the National Internal Revenue Code, refers to a government of that foreign power
which, although not an international person in the sense of international law, does not impose transfer or death upon
intangible person properties of our citizens not residing therein, or whose law allows a similar exemption from such
taxes. It is, therefore, not necessary that Tangier should have been recognized by our Government order to entitle the
petitioner to the exemption benefits of the proviso of Section 122 of our Tax. Code."5

Hence appeal to this court by petitioner. The respective briefs of the parties duly submitted, but as above indicated,
instead of ruling definitely on the question, this Court, on May 30, 1962, resolve to inquire further into the question of
reciprocity and sent back the case to the Court of Tax Appeals for the motion of evidence thereon. The dispositive
portion of such resolution reads as follows: "While section 122 of the Philippine Tax Code aforequoted speaks of
'intangible personal property' in both subdivisions (a) and (b); the alleged laws of Tangier refer to 'bienes muebles
situados en Tanger', 'bienes muebles radicantes en Tanger', 'movables' and 'movable property'. In order that this Court
may be able to determine whether the alleged laws of Tangier grant the reciprocal tax exemptions required by Section
122 of the Tax Code, and without, for the time being, going into the merits of the issues raised by the petitioner-
appellant, the case is [remanded] to the Court of Tax Appeals for the reception of evidence or proof on whether or not
the words `bienes muebles', 'movables' and 'movable properties as used in the Tangier laws, include or embrace
'intangible person property', as used in the Tax Code."6 In line with the above resolution, the Court of Tax Appeals
admitted evidence submitted by the administrator petitioner Antonio Campos Rueda, consisting of exhibits of laws of
Tangier to the effect that "the transfers by reason of death of movable properties, corporeal or incorporeal, including
furniture and personal effects as well as of securities, bonds, shares, ..., were not subject, on that date and in said zone,
to the payment of any death tax, whatever might have been the nationality of the deceased or his heirs and legatees." It
was further noted in an order of such Court referring the matter back to us that such were duly admitted in evidence
during the hearing of the case on September 9, 1963. Respondent presented no evidence."7

The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue Code. It reads thus:
"That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time
of his death was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax
of any character in respect of intangible person property of the Philippines not residing in that foreign country, or (b) if
the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption
from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the
Philippines not residing in that foreign country."8 The only obstacle therefore to a definitive ruling is whether or not as
vigorously insisted upon by petitioner the acquisition of internal personality is a condition sine qua non to Tangier being
considered a "foreign country". Deference to the De Lara ruling, as was made clear in the opening paragraph of this
opinion, calls for an affirmance of the decision of the Court of Tax Appeals.

It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with Pound's
formulation that it be a politically organized sovereign community independent of outside control bound by penalties of
nationhood, legally supreme within its territory, acting through a government functioning under a regime of law. 9 It is
thus a sovereign person with the people composing it viewed as an organized corporate society under a government
with the legal competence to exact obedience to its commands. 10 It has been referred to as a body-politic organized by
common consent for mutual defense and mutual safety and to promote the general welfare.11 Correctly has it been
described by Esmein as "the juridical personification of the nation." 12 This is to view it in the light of its historical
development. The stress is on its being a nation, its people occupying a definite territory, politically organized, exercising
by means of its government its sovereign will over the individuals within it and maintaining its separate international
personality. Laski could speak of it then as a territorial society divided into government and subjects, claiming within its
allotted area a supremacy over all other institutions.13 McIver similarly would point to the power entrusted to its
government to maintain within its territory the conditions of a legal order and to enter into international relations. 14
With the latter requisite satisfied, international law do not exact independence as a condition of statehood. So Hyde did
opine. 15

Even on the assumption then that Tangier is bereft of international personality, petitioner has not successfully made out
a case. It bears repeating that four days after the filing of this petition on January 6, 1958 in Collector of Internal
Revenue v. De Lara, 16 it was specifically held by us: "Considering the State of California as a foreign country in relation
to section 122 of our Tax Code we believe and hold, as did the Tax Court, that the Ancilliary Administrator is entitled the
exemption from the inheritance tax on the intangible personal property found in the Philippines." 17 There can be no
doubt that California as a state in the American Union was in the alleged requisite of international personality.
Nonetheless, it was held to be a foreign country within the meaning of Section 122 of the National Internal Revenue
Code. 18

What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine that even a tiny
principality, that of Liechtenstein, hardly an international personality in the sense, did fall under this exempt category.
So it appears in an opinion of the Court by the then Acting Chief Justicem Bengson who thereafter assumed that position
in a permanent capacity, in Kiene v. Collector of Internal Revenue. 19 As was therein noted: 'The Board found from the
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documents submitted to it — proof of the laws of Liechtenstein — that said country does not impose estate, inheritance
and gift taxes on intangible property of Filipino citizens not residing in that country. Wherefore, the Board declared that
pursuant to the exemption above established, no estate or inheritance taxes were collectible, Ludwig Kiene being a
resident of Liechtestein when he passed away." 20 Then came this definitive ruling: "The Collector — hereafter named
the respondent — cites decisions of the United States Supreme Court and of this Court, holding that intangible personal
property in the Philippines belonging to a non-resident foreigner, who died outside of this country is subject to the
estate tax, in disregard of the principle 'mobilia sequuntur personam'. Such property is admittedly taxable here. Without
the proviso above quoted, the shares of stock owned here by the Ludwig Kiene would be concededly subject to estate
and inheritance taxes. Nevertheless our Congress chose to make an exemption where conditions are such that demand
reciprocity — as in this case. And the exemption must be honored." 21

WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed. Without
pronouncement as to costs.

FACTS:
Respondent Antonio Campos Rueda is an administrator of the estate of the late Estrella Soriano Vda. De Cerdeira by
reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on
January 2, 1955. At the time of her demise she left, among others, intangible personal properties in the Philippines.
Respondent Campos Rueda file a provisional estate and inheritance tax return on all the properties of the late Maria
Cerdeira. On the same date, respondent, pending investigation, issued an assessment for estate and inheritance taxes in
the respective amounts of P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities were paid by
petitioner. Rueda filed an amended return stating that intangible personal properties worth P396,308.90 should be
exempted from taxes. The CIR denied the request on the ground that the law of Tangier is not reciprocal to Section 122
of the National Internal Revenue Code.
The matter was then elevated to the Court of Tax Appeals which ruled in favor of the respondent. The principal question
as noted dealt with the reciprocity aspect as well as the insistence by the Collector of Internal Revenue that Tangier was
not a foreign country within the meaning of Section 122.

ISSUE: 
Whether or not Tangier is a state.

HELD:
YES. A foreign country is to be identified with a state, it is required in line with Pound’s formulation that it be a politically
organized sovereign community independent of outside control bound by ties of nationhood, legally supreme within its
territory, acting through a government functioning under a regime of law. It is thus a sovereign person with the people
composing it viewed as an organized corporate society under a government with the legal competence to exact
obedience its commands. It has been referred to as a body-politic organized by common consent for mutual defense and
mutual safety and to promote the general welfare.
Further, the Supreme Court noted that there is already an existing jurisprudence (Collector vs De Lara) which provides
that even a tiny principality that of Liechtenstein, hardly an international personality in the sense, did fall under the
exempt category provided for in Section 22 of the Tax Code. Thus, recognition is not necessary. Hence, since it was
proven that Tangier provides such exemption to personal properties of Filipinos found therein so must the Philippines
honor the exemption as provided for by our tax law with respect to the doctrine of reciprocity.

The principle of reciprocity involves permitting the application of the legal effects of specific relationships
in law when these same effects are accepted equally by foreign countries. In international law, reciprocity
means the right to equality and mutual respect between states.

1.2. Elements of a State

1.2.1. Territory (Refer to Module 6)

1.2.2. People
Sanidad vs. COMELEC (G.R. No. L-44640, October 12, 1976)

PABLO C. SANIDAD and PABLITO V. SANIDAD, petitioner,

vs.
HONORABLE COMMISSION ON ELECTIONS and HONORABLE NATIONAL TREASURER, respondents.

G.R. No. L-44684. October 12,1976

VICENTE M. GUZMAN, petitioner,

vs.
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COMMISSION ELECTIONS, respondent.

G.R. No. L-44714. October 12,1976

RAUL M. GONZALES, RAUL T. GONZALES, JR., and ALFREDO SALAPANTAN, petitioners,

vs.
HONORABLE COMMISSION ON SELECTIONS and HONORABLE NATIONAL TREASURER, respondents.

The capital question raised in these prohibition suits with preliminary injunction relates to the power of the incumbent
President of the Philippines to propose amendments to the present Constitution in the absence of the interim National
Assembly which has not been convened.

On September 2, 1976, President Ferdinand E. Marcos issued Presidential Decree No. 991 calling for a national
referendum on October 16, 1976 for the Citizens Assemblies ("barangays") to resolve, among other things, the issues of
martial law, the I . assembly, its replacement, the powers of such replacement, the period of its existence, the length of
the period for tile exercise by the President of his present powers.1

Twenty days after or on September 22, 1976, the President issued another related decree, Presidential Decree No. 1031,
amending the previous Presidential Decree No. 991, by declaring the provisions of presidential Decree No. 229 providing
for the manner of voting and canvass of votes in "barangays" (Citizens Assemblies) applicable to the national
referendum-plebiscite of October 16, 1976. Quite relevantly, Presidential Decree No. 1031 repealed Section 4, of
Presidential Decree No. 991, the full text of which (Section 4) is quoted in the footnote below.2

On the same date of September 22, 1976, the President issued Presidential Decree No. 1033, stating the questions to be
submitted to the people in the referendum-plebiscite on October 16, 1976. The Decree recites in its "whereas" clauses
that the people's continued opposition to the convening of the National Assembly evinces their desire to have such body
abolished and replaced thru a constitutional amendment, providing for a legislative body, which will be submitted
directly to the people in the referendum-plebiscite of October 16.

The questions ask, to wit:

(1) Do you want martial law to be continued?

(2) Whether or not you want martial law to be continued, do you approve the following amendments to the
Constitution? For the purpose of the second question, the referendum shall have the effect of a plebiscite within the
contemplation of Section 2 of Article XVI of the Constitution.

PROPOSED AMENDMENTS:

1. There shall be, in lieu of the interim National Assembly, an interim Batasang Pambansa. Members of the interim
Batasang Pambansa which shall not be more than 120, unless otherwise provided by law, shall include the incumbent
President of the Philippines, representatives elected from the different regions of the nation, those who shall not be less
than eighteen years of age elected by their respective sectors, and those chosen by the incumbent President from the
members of the Cabinet. Regional representatives shall be apportioned among the regions in accordance with the
number of their respective inhabitants and on the basis of a uniform and progressive ratio while the sectors shall be
determined by law. The number of representatives from each region or sector and the, manner of their election shall be
prescribed and regulated by law.

2. The interim Batasang Pambansa shall have the same powers and its members shall have the same functions,
responsibilities, rights, privileges, and disqualifications as the interim National Assembly and the regular National
Assembly and the members thereof. However, it shall not exercise the power provided in Article VIII, Section 14(l) of the
Constitution.

3. The incumbent President of the Philippines shall, within 30 days from the election and selection of the members,
convene the interim Batasang Pambansa and preside over its sessions until the Speaker shall have been elected. The
incumbent President of the Philippines shall be the Prime Minister and he shall continue to exercise all his powers even
after the interim Batasang Pambansa is organized and ready to discharge its functions and likewise he shall continue to
exercise his powers and prerogatives under the nineteen hundred and thirty five. Constitution and the powers vested in
the President and the Prime Minister under this Constitution.

4. The President (Prime Minister) and his Cabinet shall exercise all the powers and functions, and discharge the
responsibilities of the regular President (Prime Minister) and his Cabinet, and shall be subject only to such
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disqualifications as the President (Prime Minister) may prescribe. The President (Prime Minister) if he so desires may
appoint a Deputy Prime Minister or as many Deputy Prime Ministers as he may deem necessary.

5. The incumbent President shall continue to exercise legislative powers until martial law shall have been lifted.

6. Whenever in the judgment of the President (Prime Minister), there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act
adequately on any matter for any reason that in his judgment requires immediate action, he may, in order to meet the
exigency, issue the necessary decrees, orders or letters of instructions, which shall form part of the law of the land.

7. The barangays and sanggunians shall continue as presently constituted but their functions, powers, and composition
may be altered by law.

Referenda conducted thru the barangays and under the Supervision of the Commission on Elections may be called at
any time the government deems it necessary to ascertain the will of the people regarding any important matter whether
of national or local interest.

8. All provisions of this Constitution not inconsistent with any of these amendments shall continue in full force and
effect.

9. These amendments shall take effect after the incumbent President shall have proclaimed that they have been ratified
by I majority of the votes cast in the referendum-plebiscite."

The Commission on Elections was vested with the exclusive supervision and control of the October 1976 National
Referendum-Plebiscite.

On September 27, 1976, PABLO C. SANIDAD and PABLITO V. SANIDAD, father and son, commenced L-44640 for
Prohibition with Preliminary Injunction seeking to enjoin the Commission on Elections from holding and conducting the
Referendum Plebiscite on October 16; to declare without force and effect Presidential Decree Nos. 991 and 1033, insofar
as they propose amendments to the Constitution, as well as Presidential Decree No. 1031, insofar as it directs the
Commission on Elections to supervise, control, hold, and conduct the Referendum-Plebiscite scheduled on October 16,
1976.

Petitioners contend that under the 1935 and 1973 Constitutions there is no grant to the incumbent President to exercise
the constituent power to propose amendments to the new Constitution. As a consequence, the Referendum-Plebiscite
on October 16 has no constitutional or legal basis.

On October 5, 1976, the Solicitor General filed the comment for respondent Commission on Elections, The Solicitor
General principally maintains that petitioners have no standing to sue; the issue raised is political in nature, beyond
judicial cognizance of this Court; at this state of the transition period, only the incumbent President has the authority to
exercise constituent power; the referendum-plebiscite is a step towards normalization.

On September 30, 1976, another action for Prohibition with Preliminary Injunction, docketed as L-44684, was instituted
by VICENTE M. GUZMAN, a delegate to the 1971 Constitutional Convention, asserting that the power to propose
amendments to, or revision of the Constitution during the transition period is expressly conferred on the interim
National Assembly under Section 16, Article XVII of the Constitution.3

Still another petition for Prohibition with Preliminary Injunction was filed on October 5, 1976 by RAUL M. GONZALES, his
son RAUL, JR., and ALFREDO SALAPANTAN, docketed as L- 44714, to restrain the implementation of Presidential Decrees
relative to the forthcoming Referendum-Plebiscite of October 16.

These last petitioners argue that even granting him legislative powers under Martial Law, the incumbent President
cannot act as a constituent assembly to propose amendments to the Constitution; a referendum-plebiscite is untenable
under the Constitutions of 1935 and 1973; the submission of the proposed amendments in such a short period of time
for deliberation renders the plebiscite a nullity; to lift Martial Law, the President need not consult the people via
referendum; and allowing 15-.year olds to vote would amount to an amendment of the Constitution, which confines the
right of suffrage to those citizens of the Philippines 18 years of age and above.

We find the petitions in the three entitled cases to be devoid of merit.

I
Justiciability of question raised.
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1. As a preliminary resolution, We rule that the petitioners in L-44640 (Pablo C. Sanidad and Pablito V. Sanidad) possess
locus standi to challenge the constitutional premise of Presidential Decree Nos. 991, 1031, and 1033. It is now an ancient
rule that the valid source of a stature Presidential Decrees are of such nature-may be contested by one who will sustain
a direct injuries as a in result of its enforcement. At the instance of taxpayers, laws providing for the disbursement of
public funds may be enjoined, upon the theory that the expenditure of public funds by an officer of the State for the
purpose of executing an unconstitutional act constitutes a misapplication of such funds. 4 The breadth of Presidential
Decree No. 991 carries all appropriation of Five Million Pesos for the effective implementation of its purposes. 5
Presidential Decree No. 1031 appropriates the sum of Eight Million Pesos to carry out its provisions. 6 The interest of the
aforenamed petitioners as taxpayers in the lawful expenditure of these amounts of public money sufficiently clothes
them with that personality to litigate the validity of the Decrees appropriating said funds. Moreover, as regards
taxpayer's suits, this Court enjoys that open discretion to entertain the same or not. 7 For the present case, We deem it
sound to exercise that discretion affirmatively so that the authority upon which the disputed Decrees are predicated
may be inquired into.

2. The Solicitor General would consider the question at bar as a pure political one, lying outside the domain of judicial
review. We disagree. The amending process both as to proposal and ratification, raises a judicial question. 8 This is
especially true in cases where the power of the Presidency to initiate the of normally exercised by the legislature, is
seriously doubted. Under the terms of the 1973 Constitution, the power to propose amendments o the constitution
resides in the interim National Assembly in the period of transition (See. 15, Transitory provisions). After that period,
and the regular National Assembly in its active session, the power to propose amendments becomes ipso facto the
prerogative of the regular National Assembly (Sec. 1, pars. 1 and 2 of Art. XVI, 1973 constitution). The normal course has
not been followed. Rather than calling the National Assembly to constitute itself into a constituent assembly the
incumbent President undertook the proposal of amendments and submitted the proposed amendments thru
Presidential Decree 1033 to the people in a Referendum-Plebiscite on October 16. Unavoidably, the regularity regularity
of the procedure for amendments, written in lambent words in the very Constitution sought to be amended, raises a
contestable issue. The implementing Presidential Decree Nos. 991, 1031, and 1033, which commonly purport to have
the force and effect of legislation are assailed as invalid, thus the issue of the validity of said Decrees is plainly a
justiciable one, within the competence of this Court to pass upon. Section 2 (2), Article X of the new Constitution
provides: "All cases involving the constitutionality of a treaty, executive agreement, or law may shall be heard and
decided by the Supreme Court en banc and no treaty, executive agreement, or law may be declared unconstitutional
without the concurrence of at least ten Members. ..." The Supreme Court has the last word in the construction not only
of treaties and statutes, but also of the Constitution itself The amending, like all other powers organized in the
Constitution, is in form a delegated and hence a limited power, so that the Supreme Court is vested with that authorities
to determine whether that power has been discharged within its limits.

Political questions are neatly associated with the wisdom, of the legality of a particular act. Where the vortex of the
controversy refers to the legality or validity of the contested act, that matter is definitely justiciable or non-political.
What is in the heels of the Court is not the wisdom of the act of the incumbent President in proposing amendments to
the Constitution, but his constitutional authority to perform such act or to assume the power of a constituent assembly.
Whether the amending process confers on the President that power to propose amendments is therefore a downright
justiciable question. Should the contrary be found, the actuation of the President would merely be a brutum fulmen. If
the Constitution provides how it may be amended, the judiciary as the interpreter of that Constitution, can declare
whether the procedure followed or the authority assumed was valid or not.10

We cannot accept the view of the Solicitor General, in pursuing his theory of non-justiciability, that the question of the
President's authority to propose amendments and the regularity of the procedure adopted for submission of the
proposal to the people ultimately lie in the judgment of the A clear Descartes fallacy of vicious circle. Is it not that the
people themselves, by their sovereign act, provided for the authority and procedure for the amending process when
they ratified the present Constitution in 1973? Whether, therefore, the constitutional provision has been followed or not
is the proper subject of inquiry, not by the people themselves of course who exercise no power of judicial but by the
Supreme Court in whom the people themselves vested that power, a power which includes the competence to
determine whether the constitutional norms for amendments have been observed or not. And, this inquiry must be
done a prior not a posterior i.e., before the submission to and ratification by the people.

Indeed, the precedents evolved by the Court or, prior constitutional cases underline the preference of the Court's
majority to treat such issue of Presidential role in the amending process as one of non-political impression. In the
Plebiscite Cases, 11 the contention of the Solicitor General that the issue on the legality of Presidential Decree No. 73
"submitting to the Pilipino people (on January 15, 1973) for ratification or rejection the Constitution of the Republic of
the Philippines proposed by the 1971 Constitutional Convention and appropriating fund s therefore "is a political one,
was rejected and the Court unanimously considered the issue as justiciable in nature. Subsequently in the Ratification
Cases12 involving the issue of whether or not the validity of Presidential Proclamation No. 1102. announcing the
Ratification by the Filipino people of the constitution proposed by the 1971 Constitutional Convention," partakes of the
nature of a political question, the affirmative stand of' the Solicitor General was dismissed, the Court ruled that the
7

question raised is justiciable. Chief Justice Concepcion, expressing the majority view, said, Thus, in the aforementioned
plebiscite cases, We rejected the theory of the respondents therein that the question whether Presidential Decree No.
73 calling a plebiscite to be held on January 15, 1973, for the ratification or rejection of the proposed new Constitution,
was valid or not, was not a proper subject of judicial inquiry because, they claimed, it partook of a political nature, and
We unanimously declared that the issue was a justiciable one. With Identical unanimity. We overruled the respondent's
contention in the 1971 habeas corpus cases, questioning Our authority to determine the constitutional sufficiency of the
factual bases of the Presidential proclamation suspending the privilege of the writ of habeas corpus on August 21, 1971,
despite the opposite view taken by this Court in Barcelon vs. Baker and Montenegro vs. Castaneda, insofar as it adhered
to the former case, which view We, accordingly, abandoned and refused to apply. For the same reason, We did not
apply and expressly modified, in Gonzales vs. Commission on Elections, the political-question theory adopted in
Mabanag vs. Lopez Vito." 13 The return to Barcelon vs. Baker and Mabanag vs. Lopez Vito, urged by the Solicitor
General, was decisively refused by the Court. Chief Justice Concepcion continued: "The reasons adduced in support
thereof are, however, substantially the same as those given in support on the political question theory advanced in said
habeas corpus and plebiscite cases, which were carefully considered by this Court and found by it to be legally unsound
and constitutionally untenable. As a consequence. Our decisions in the aforementioned habeas corpus cases partakes of
the nature and effect of a stare decisis which gained added weight by its virtual reiteration."

II
The amending process as laid out in the new Constitution.

1. Article XVI of the 1973 Constitution on Amendments ordains:

SECTION 1. (1) Any amendment to, or revision of, this Constitution may be proposed by the National Assembly upon a
vote of three-fourths of all its Members, or by a constitutional convention. (2) The National Assembly may, by a vote of
two-thirds of all its Members, call a constitutional convention or, by a majority vote of all its Members, submit the
question of calling such a convention to the electorate in an election.

SECTION 2. Any amendment to, or revision of, this Constitution shall be valid when ratified by a majority of the votes
cast in a plebiscite which shall be held not later than three months after the approval of such amendment or revision.

In the present period of transition, the interim National Assembly instituted in the Transitory Provisions is conferred
with that amending power. Section 15 of the Transitory Provisions reads:

SECTION 15. The interim National Assembly, upon special call by the interim Prime Minister, may, by a majority vote of
all its Members, propose amendments to this Constitution. Such amendments shall take effect when ratified in
accordance with Article Sixteen hereof.

There are, therefore, two periods contemplated in the constitutional life of the nation, i.e., period of normalcy and
period of transition. In times of normally, the amending process may be initiated by the proposals of the (1) regular
National Assembly upon a vote of three-fourths of all its members; or (2) by a Constitutional Convention called by a vote
of two-thirds of all the Members of the National Assembly. However the calling of a Constitutional Convention may be
submitted to the electorate in an election voted upon by a majority vote of all the members of the National Assembly. In
times of transition, amendments may be proposed by a majority vote of all the Members of the National Assembly upon
special call by the interim Prime Minister,.

2. This Court in Aquino v. COMELEC," had already settled that the incumbent President is vested with that prerogative of
discretion as to when he shall initially convene the interim National Assembly. Speaking for the majority opinion in that
case, Justice Makasiar said: "The Constitutional Convention intended to leave to the President the determination of the
time when he shall initially convene the interim National Assembly, consistent with the prevailing conditions of peace
and order in the country." Concurring, Justice Fernandez, himself a member of that Constitutional Convention, revealed:
"(W)hen the Delegates to the Constitutional Convention voted on the Transitory Provisions, they were aware of the fact
that under the same, the incumbent President was given the discretion as to when he could convene the interim
National Assembly; it was so stated plainly by the sponsor, Delegate Yaneza; as a matter of fact, the proposal that it be
convened 'immediately', made by Delegate Pimentel (V) was rejected. The President's decision to defer the convening of
the interim National Assembly soon found support from the people themselves. In the plebiscite of January 10-15, 1973,
at which the ratification of the 1973 Constitution was submitted, the people voted against the convening of the interim
National Assembly. In the referendum of July 24, 1973, the Citizens Assemblies ("bagangays") reiterated their sovereign
will to withhold the convening of the interim National Assembly. Again, in the referendum of February 27, 1975, the
proposed question of whether the interim National Assembly shall be initially convened was eliminated, because some
of the members of Congress and delegates of the Constitutional Convention, who were deemed automatically members
of the I interim National Assembly, were against its inclusion since in that referendum of January, 1973, the people had
already resolved against it.
8

3. In sensu strictiore, when the legislative arm of the state undertakes the proposals of amendment to a Constitution,
that body is not in the usual function of lawmaking. lt is not legislating when engaged in the amending process.16
Rather, it is exercising a peculiar power bestowed upon it by the fundamental charter itself. In the Philippines, that
power is provided for in Article XVI of the 1973 Constitution (for the regular National Assembly) or in Section 15 of the
Transitory Provisions (for the National Assembly). While ordinarily it is the business of the legislating body to legislate for
the nation by virtue of constitutional conferment amending of the Constitution is not legislative in character. In political
science a distinction is made between constitutional content of an organic character and that of a legislative character'.
The distinction, however, is one of policy, not of law.17 Such being the case, approval of the President of any proposed
amendment is a misnomer 18 The prerogative of the President to approve or disapprove applies only to the ordinary
cases of legislation. The President has nothing to do with proposition or adoption of amendments to the Constitution. 19

III
Concentration of Powers in the President during crisis government.

1. In general, the governmental powers in crisis government the Philippines is a crisis government today are more or less
concentrated in the President. 20 According to Rossiter, "(t)he concentration of government power in a democracy
faced by an emergency is a corrective to the crisis inefficiencies inherent in the doctrine of the separation of powers. In
most free states it has generally been regarded as imperative that the total power of the government be parceled out
among three mutually independent branches executive, legislature, and judiciary. It is believed to be destructive of
constitutionalism if any one branch should exercise any two or more types of power, and certainly a total disregard of
the separation of powers is, as Madison wrote in the Federalist, No. 47, 'the very definition of tyranny.' In normal times
the separation of powers forms a distinct obstruction to arbitrary governmental action. By this same token, in abnormal
times it may form an insurmountable barrier to a decisive emergency action in behalf of the state and its independent
existence. There are moments in the life of any government when all powers must work together in unanimity of
purpose and action, even if this means the temporary union of executive, legislative, and judicial power in the hands of
one man. The more complete the separation of powers in a constitutional system, the more difficult and yet the more
necessary will be their fusion in time of crisis. This is evident in a comparison of the crisis potentialities of the cabinet
and presidential systems of government. In the former the all-important harmony of legislature and executive is taken
for granted; in the latter it is neither guaranteed nor to be to confidently expected. As a result, cabinet is more easily
established and more trustworthy than presidential dictatorship. The power of the state in crisis must not only be
concentrated and expanded; it must also be freed from the normal system of constitutional and legal limitations. 21
John Locke, on the other hand, claims for the executive in its own right a broad discretion capable even of setting aside
the ordinary laws in the meeting of special exigencies for which the legislative power had not provided. 22 The rationale
behind such broad emergency powers of the Executive is the release of the government from "the paralysis of
constitutional restrains" so that the crisis may be ended and normal times restored.

2. The presidential exercise of legislative powers in time of martial law is now a conceded valid at. That sun clear
authority of the President is saddled on Section 3 (pars. 1 and 2) of the Transitory Provisions, thus:23

The incumbent President of the Philippines shall initially convene the interim National Assembly and shall preside over
its sessions until the interim Speaker shall have been elected. He shall continue to exercise his powers and prerogatives
under the nineteen hundred and thirty-five Constitution and the powers vested in the President and the Prime Minister
under this Constitution until the calls upon the interim National Assembly to elect the interim President and the interim
Prime Minister, who shall then exercise their respective powers vested by this Constitution.

All proclamations, orders, decrees, instructions, and acts promulgated, issued, or done by the incumbent President shall
be part of the law of the land, and shall remain valid, binding, and effective even after lifting of martial law or the
ratification of this Constitution, unless modified, revoked, or superseded by subsequent proclamations, orders, decrees,
instructions, or other acts of the incumbent President, or unless expressly and explicitly modified or repealed by the
regular National Assembly.

"It is unthinkable," said Justice Fernandez, a 1971 Constitutional Convention delegate, "that the Constitutional
Convention, while giving to the President the discretion when to call the interim National Assembly to session, and
knowing that it may not be convened soon, would create a vacuum in the exercise of legislative powers. Otherwise, with
no one to exercise the lawmaking powers, there would be paralyzation of the entire governmental machinery." 24
Paraphrasing Rossiter, this is an extremely important factor in any constitutional dictatorship which extends over a
period of time. The separation of executive and legislature ordained in the Constitution presents a distinct obstruction to
efficient crisis government. The steady increase in executive power is not too much a cause for as the steady increase in
the magnitude and complexity of the problems the President has been called upon by the Filipino people to solve in
their behalf, which involve rebellion, subversion, secession, recession, inflation, and economic crisis-a crisis greater than
war. In short, while conventional constitutional law just confines the President's power as Commander-in-Chief to the
direction of the operation of the national forces, yet the facts of our political, social, and economic disturbances had
9

convincingly shown that in meeting the same, indefinite power should be attributed to tile President to take emergency
measures 25

IV
Authority of the incumbent President t to propose amendments to the Constitution.

1. As earlier pointed out, the power to legislate is constitutionally consigned to the interim National Assembly during the
transition period. However, the initial convening of that Assembly is a matter fully addressed to the judgment of the
incumbent President. And, in the exercise of that judgment, the President opted to defer convening of that body in utter
recognition of the people's preference. Likewise, in the period of transition, the power to propose amendments to the
Constitution lies in the interim National Assembly upon special call by the President (See. 15 of the Transitory
Provisions). Again, harking to the dictates of the sovereign will, the President decided not to call the interim National
Assembly. Would it then be within the bounds of the Constitution and of law for the President to assume that
constituent power of the interim Assembly vis-a-vis his assumption of that body's legislative functions? The answer is
yes. If the President has been legitimately discharging the legislative functions of the interim Assembly, there is no
reason why he cannot validly discharge the function of that Assembly to propose amendments to the Constitution,
which is but adjunct, although peculiar, to its gross legislative power. This, of course, is not to say that the President has
converted his office into a constituent assembly of that nature normally constituted by the legislature. Rather, with the
interim National Assembly not convened and only the Presidency and the Supreme Court in operation, the urges of
absolute necessity render it imperative upon the President to act as agent for and in behalf of the people to propose
amendments to the Constitution. Parenthetically, by its very constitution, the Supreme Court possesses no capacity to
propose amendments without constitutional infractions. For the President to shy away from that actuality and decline to
undertake the amending process would leave the governmental machineries at a stalemate or create in the powers of
the State a destructive vacuum, thereby impeding the objective of a crisis government "to end the crisis and restore
normal times." In these parlous times, that Presidential initiative to reduce into concrete forms the constant voices of
the people reigns supreme. After all, constituent assemblies or constitutional conventions, like the President now, are
mere agents of the people .26

2. The President's action is not a unilateral move. As early as the referendums of January 1973 and February 1975, the
people had already rejected the calling of the interim National Assembly. The Lupong Tagapagpaganap of the Katipunan
ng mga Sanggunian, the Pambansang Katipunan ng mga Barangay, and the Pambansang Katipunan ng mga Barangay,
representing 42,000 barangays, about the same number of Kabataang Barangay organizations, Sanggunians in 1,458
municipalities, 72 provinces, 3 sub-provinces, and 60 cities had informed the President that the prevailing sentiment of
the people is for the abolition of the interim National Assembly. Other issues concerned the lifting of martial law and
amendments to the Constitution .27 The national organizations of Sangguniang Bayan presently proposed to settle the
issues of martial law, the interim Assembly, its replacement, the period of its existence, the length of the period for the
exercise by the President of its present powers in a referendum to be held on October 16 .28 The Batasang Bayan
(legislative council) created under Presidential Decree 995 of September 10, 1976, composed of 19 cabinet members, 9
officials with cabinet rank, 91 members of the Lupong Tagapagpaganap (executive committee) of the Katipunan ng mga
Sangguniang Bayan voted in session to submit directly to the people in a plebiscite on October 16, the previously quoted
proposed amendments to the Constitution, including the issue of martial law .29 Similarly, the "barangays" and the
"sanggunians" endorsed to the President the submission of the proposed amendments to the people on October 16. All
the foregoing led the President to initiate the proposal of amendments to the Constitution and the subsequent issuance
of Presidential Decree No, 1033 on September 22, 1976 submitting the questions (proposed amendments) to the people
in the National Referendum-Plebiscite on October 16.

V
The People is Sovereign

1. Unlike in a federal state, the location of sovereignty in a unitary state is easily seen. In the Philippines, a republican
and unitary state, sovereignty "resides in the people and all government authority emanates from them .30 In its fourth
meaning, Savigny would treat people as "that particular organized assembly of individuals in which, according to the
Constitution, the highest power exists." 31 This is the concept of popular sovereignty. It means that the constitutional
legislator, namely the people, is sovereign 32 In consequence, the people may thus write into the Constitution their
convictions on any subject they choose in the absence of express constitutional prohibition. 33 This is because, as
Holmes said, the Constitution "is an experiment, as all life is all experiment."34 "The necessities of orderly government,"
wrote Rottschaefer, "do not require that one generation should be permitted to permanently fetter all future
generations." A constitution is based, therefore, upon a self-limiting decision of the people when they adopt it. 35

2. The October 16 referendum-plebiscite is a resounding call to the people to exercise their sovereign power as
constitutional legislator. The proposed amendments, as earlier discussed, proceed not from the thinking of a single man.
Rather, they are the collated thoughts of the sovereign will reduced only into enabling forms by the authority who can
presently exercise the powers of the government. In equal vein, the submission of those proposed amendments and the
10

question of martial law in a referendum-plebiscite expresses but the option of the people themselves implemented only
by the authority of the President. Indeed, it may well be said that the amending process is a sovereign act, although the
authority to initiate the same and the procedure to be followed reside somehow in a particular body.

VI
Referendum-Plebiscite not rendered nugatory by the participation of the 15-year olds.

1. October 16 is in parts a referendum and a plebiscite. The question - (1) Do you want martial law to be continued? - is a
referendum question, wherein the 15-year olds may participate. This was prompted by the desire of the Government to
reach the larger mas of the people so that their true pulse may be felt to guide the President in pursuing his program for
a New Order. For the succeeding question on the proposed amendments, only those of voting age of 18 years may
participate. This is the plebiscite aspect, as contemplated in Section 2, Article XVI of the new Constitution. 36 On this
second question, it would only be the votes of those 18 years old and above which will have valid bearing on the results.
The fact that the voting populace are simultaneously asked to answer the referendum question and the plebiscite
question does not infirm the referendum-plebiscite. There is nothing objectionable in consulting the people on a given
issue, which is of current one and submitting to them for ratification of proposed constitutional amendments. The fear
of commingled votes (15-year olds and 18-year olds above) is readily dispelled by the provision of two ballot boxes for
every barangay center, one containing the ballots of voters fifteen years of age and under eighteen, and another
containing the ballots of voters eighteen years of age and above. 37 The ballots in the ballot box for voters fifteen years
of age and under eighteen shall be counted ahead of the ballots of voters eighteen years and above contained in
another ballot box. And, the results of the referendum-plebiscite shall be separately prepared for the age groupings, i.e.,
ballots contained in each of the two boxes.38

2. It is apt to distinguish here between a "referendum" and a "plebiscite." A "referendum" is merely consultative in
character. It is simply a means of assessing public reaction to the given issues submitted to the people foe their
consideration, the calling of which is derived from or within the totality of the executive power of the President.39 It is
participated in by all citizens from the age of fifteen, regardless of whether or not they are illiterates, feeble-minded, or
ex- convicts .40 A "plebiscite," on the other hand, involves the constituent act of those "citizens of the Philippines not
otherwise disqualified by law, who are eighteen years of age or over, and who shall have resided in the Philippines for at
least one year and in the place wherein they propose to vote for at least six months preceding the election Literacy,
property or any other substantive requirement is not imposed. It is generally associated with the amending process of
the Constitution, more particularly, the ratification aspect.

VII

1. There appeals to be no valid basis for the claim that the regime of martial law stultifies in main the freedom to
dissent. That speaks of a bygone fear. The martial law regime which, in the observation of Justice Fernando, 41 is
impressed with a mild character recorded no State imposition for a muffled voice. To be sure, there are restraints of the
individual liberty, but on certain grounds no total suppression of that liberty is aimed at. The for the referendum-
plebiscite on October 16 recognizes all the embracing freedoms of expression and assembly The President himself had
announced that he would not countenance any suppression of dissenting views on the issues, as he is not interested in
winning a "yes" or "no" vote, but on the genuine sentiment of the people on the issues at hand. 42 Thus, the dissenters
soon found their way to the public forums, voicing out loud and clear their adverse views on the proposed amendments
and even (in the valid ratification of the 1973 Constitution, which is already a settled matter.43 Even government
employees have been held by the Civil Service Commission free to participate in public discussion and even campaign for
their stand on the referendum-plebiscite issues.44

VIII
Time for deliberation is not short.

1. The period from September 21 to October 16 or a period of 3 weeks is not too short for free debates or discussions on
the referendum-plebiscite issues. The questions are not new. They are the issues of the day. The people have been living
with them since the proclamation of martial law four years ago. The referendums of 1973 and 1975 carried the same
issue of martial law. That notwithstanding, the contested brief period for discussion is not without counterparts in
previous plebiscites for constitutional amendments. Justice Makasiar, in the Referendum Case, recalls: "Under the old
Society, 15 days were allotted for the publication in three consecutive issues of the Official Gazette of the women's
suffrage amendment to the Constitution before the scheduled plebiscite on April 30, 1937 (Com. Act No. 34). The
constitutional amendment to append as ordinance the complicated Tydings-Kocialskowski was published in only three
consecutive issues of the Official Gazette for 10 days prior to the scheduled plebiscite (Com. Act 492). For the 1940
Constitutional amendments providing for the bicameral Congress, the reelection of the President and Vice President,
and the creation of the Commission on Elections, 20 days of publication in three consecutive issues of the Official
Gazette was fixed (Com Act No. 517). And the Parity Amendment, an involved constitutional amendment affecting the
11

economy as well as the independence of the Republic was publicized in three consecutive issues of the Official Gazette
for 20 days prior to the plebiscite (Rep. Act No. 73)."45

2. It is worthy to note that Article XVI of the Constitution makes no provision as to the specific date when the plebiscite
shall be held, but simply states that it "shall be held not later than three months after the approval of such amendment
or revision." In Coleman v. Miller, 46 the United States Supreme court held that this matter of submission involves "an
appraisal of a great variety of relevant conditions, political, social and economic," which "are essentially political and not
justiciable." The constituent body or in the instant cases, the President, may fix the time within which the people may
act. This is because proposal and ratification are not treated as unrelated acts, but as succeeding steps in a single
endeavor, the natural inference being that they are not to be widely separated in time; second, it is only when there is
deemed to be a necessity therefor that amendments are to be proposed, the reasonable implication being that when
proposed, they are to be considered and disposed of presently, and third, ratification is but the expression of the
approbation of the people, hence, it must be done contemporaneously. 47 In the words of Jameson, "(a)n alteration of
the Constitution proposed today has relation to the sentiment and the felt needs of today, and that, if not ratified early
while that sentiment may fairly be supposed to exist. it ought to be regarded as waived, and not again to be voted upon,
unless a second time proposed by proper body

IN RESUME

The three issues are

1. Is the question of the constitutionality of Presidential Decrees Nos. 991, 1031 and 1033 political or justiciable?

2. During the present stage of the transition period, and under, the environmental circumstances now obtaining, does
the President possess power to propose amendments to the Constitution as well as set up the required machinery and
prescribe the procedure for the ratification of his proposals by the people?

3. Is the submission to the people of the proposed amendments within the time frame allowed therefor a sufficient and
proper submission?

Upon the first issue, Chief Justice Fred Ruiz Castro and Associate Justices Enrique M. Fernando, Claudio Teehankee,
Antonio P. Barredo, Cecilia Munoz Palma, Hermogenes Concepcion Jr. and Ruperto G. Martin are of the view that the
question posed is justiciable, while Associate Justices Felix V. Makasiar, Felix Q. Antonio and Ramon C. Aquino hold the
view that the question is political.

Upon the second issue, Chief Justice Castro and Associate Justices Barredo, Makasiar, Antonio, Aquino, Concepcion Jr.
and Martin voted in the affirmative, while Associate Justices Teehankee and Munoz Palma voted in the negative.
Associate Justice Fernando, conformably to his concurring and dissenting opinion in Aquino vs. Enrile (59 SCRA 183),
specifically dissents from the proposition that there is concentration of powers in the Executive during periods of crisis,
thus raising serious doubts as to the power of the President to propose amendments.

Upon the third issue, Chief Justice Castro and Associate Justices Barredo, Makasiar, Aquino, Concepcion Jr. and Martin
are of the view that there is a sufficient and proper submission of the proposed amendments for ratification by the
people. Associate Justices Barredo and Makasiar expressed the hope, however that the period of time may be extended.
Associate Justices Fernando, Makasiar and Antonio are of the view that the question is political and therefore beyond
the competence and cognizance of this Court, Associate Justice Fernando adheres to his concurrence in the opinion of
Chief Justice Concepcion in Gonzales vs. COMELEC (21 SCRA 774).Associate Justices Teehankee and MUNOZ Palma hold
that prescinding from the President's lack of authority to exercise the constituent power to propose the amendments,
etc., as above stated, there is no fair and proper submission with sufficient information and time to assure intelligent
consent or rejection under the standards set by this Court in the controlling cases of Gonzales, supra, and Tolentino vs.
COMELEC (41 SCRA 702).

Chief Justice Castro and Associate Justices Barredo, Makasiar, Antonio, Aquino, Concepcion Jr. and Martin voted to
dismiss the three petitions at bar. For reasons as expressed in his separate opinion, Associate Justice Fernando concurs
in the result. Associate Justices Teehankee and Munoz Palma voted to grant the petitions.

ACCORDINGLY, the vote being 8 to 2 to dismiss, the said petitions are hereby dismissed. This decision is immediately
executory.

SO ORDERED.

Facts:
12

The petitioners sought to enjoin the Commission on Elections from holding and conducting the referendum-plebiscite;
to declare without force and effect Presidential Decree numbers 991 and 1033, insofar as they propose amendments to
the Constitution as well as PD 1031, insofar as it directs the COMELEC to supervise, control, hold, and conduct the
Referendum-Plebiscite.

Petitioners contend that the President has no power to propose amendments to the new constitution, a such, the
referendum has no legal basis.

Issues
Whether the President may call upon a referendum for the amendment of the Constitution.

Ruling
Yes.

In the transitory provision of the 1973 provisions, the National Assembly, although composed mainly by legislators,
amending the Constitution is not legislating.

The prerogative of the President to approve or disapproved applies only to the ordinary case of legislation. The
President has nothing to do with the proposition or adoption of amendments to the Constitution.

The petitions are dismissed.

1.2.3. Government

a. Definition
U.S. vs. Dorr (2 Phil 33) G.R. No. 1051 May 19, 1903

THE UNITED STATES, complainant-appellee,

vs.
FRED L. DORR, ET AL., defendants-appellants.

The defendants have been convicted upon a complaint charging them with the offense of writing, publishing, and
circulating a scurrilous libel against the Government of the United States and the Insular Government of the Philippine
Islands. The complaint is based upon section 8 of Act No. 292 of the Commission, which is as follows:
Every person who shall utter seditious words or speeches, write, publish, or circulate scurrilous libels against the
Government of the United States or the Insular Government of the Philippine Islands, or which tend to disturb or
obstruct any lawful officer in executing his office, or which tend to instigate others to cabal or meet together for
unlawful purposes, or which suggest or incite rebellious conspiracies or riots, or which tend to stir up the people against
the lawful authorities, or to disturb the peace of the community, the safety and order of the Government, or who shall
knowingly conceal such evil practices, shall be punished by a fine not exceeding two thousand dollars or by
imprisonment not exceeding two years, or both, in the discretion of the court.
The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April 6, 1902, under the caption of
"A few hard facts."
The Attorney-General in his brief indicates the following passages of the article as those upon which he relies to sustain
the conviction:
Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say of the action of the Civil Commission in
appointing rascally natives to important Government positions:
"It is a strong thing to say, but nevertheless true, that the Civil Commission, through its ex-insurgent office holders, and
by its continual disregard for the records of natives obtained during the military rule of the Islands, has, in its distribution
of offices, constituted a protectorate over a set of men who should be in jail or deported. . . . [Reference is then made to
the appointment of one Tecson as justice of the peace.] This is the kind of foolish work that the Commission is doing all
over the Islands, reinstating insurgents and rogues and turning down the men who have during the struggle, at the risk
of their lives, aided the Americans."
x x x           x x x          x x x
There is no doubt but that the Filipino office holders of the Islands are in a good many instances rascals.
x x x           x x x          x x x
The commission has exalted to the highest positions in the Islands Filipinos who are alleged to be notoriously corrupt
and rascally, and men of no personal character.
x x x           x x x          x x x
Editor Valdez, of "Miau," made serious charges against two of the native Commissioners — charges against Trinidad H.
Pardo de Tavera, which, if true, would brand the man as a coward and a rascal, and with what result? . . . [Reference is
then made to the prosecution and conviction of Valdez for libel "under a law which specifies that the greater the truth
the greater the libel."] Is it the desire of the people of the United States that the natives against whom these charges
13

have been made (which, if true, absolutely vilify their personal characters) be permitted to retain their seats on the Civil
Commission, the executive body of the Philippine Government, without an investigation?
x x x           x x x          x x x
It is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and corrupt.
The fiscal system, upon which life, liberty, and justice depends, is admitted by the Attorney-General himself to be most
unsatisfactory. It is a fact that the Philippine judiciary is far from being what it should. Neither fiscals nor judges can be
persuaded to convict insurgents when they wish to protect them.
x x x           x x x          x x x
Now we hear all sorts of reports as to rottenness existing in the province [of Tayabas], and especially the northern end
of it; it is said that it is impossible to secure the conviction of lawbreakers and outlaws by the native justices, or a
prosecution by the native fiscals.
x x x           x x x          x x x
The long and short of it is that Americans will not stand for an arbitrary government, especially when evidences of
carpetbagging and rumors of graft are too thick to be pleasant.
We do not understand that it is claimed that the defendants succeeded in establishing at the trial the truth of any of the
foregoing statements. The only question which we have considered is whether their publication constitutes an offense
under section 8 of Act No. 292, above cited.
Several allied offenses or modes of committing the same offense are defined in that section, viz: (1) The uttering of
seditious words or speeches; (2) the writing, publishing, or circulating of scurrilous libels against the Government of the
United States or the Insular Government of the Philippine Islands; (3) the writing, publishing, or circulating of libels
which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend to instigate others to cabal
or meet together for unlawful purposes; (5) or which suggest or incite rebellious conspiracies or riots; (6) or which tend
to stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the
Government; (7) knowingly concealing such evil practices.
The complaint appears to be framed upon the theory that a writing, in order to be punishable as a libel under this
section, must be of a scurrilous nature and directed against the Government of the United States or the Insular
Government of the Philippine Islands, and must, in addition, tend to some one of the results enumerated in the section.
The article in question is described in the complaint as "a scurrilous libel against the Government of the United States
and the Insular Government of the Philippine Islands, which tends to obstruct the lawful officers of the United States
and the Insular Government of the Philippine Islands in the execution of their offices, and which tends to instigate others
to cabal and meet together for unlawful purposes, and which suggests and incites rebellious conspiracies, and which
tends to stir up the people against the lawful authorities, and which disturbs the safety and order of the Government of
the United States and the Insular Government of the Philippine Islands." But it is "a well-settled rule in considering
indictments that where an offense may be committed in any of several different modes, and the offense, in any
particular instance, is alleged to have been committed in two or more modes specified, it is sufficient to prove the
offense committed in any one of them, provided that it be such as to constitute the substantive offense"
(Com. vs. Kneeland, 20 Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the
substantive charges into which the complaint may be separated has been made out.
We are all, however, agreed upon the proposition that the article in question has no appreciable tendency to "disturb or
obstruct any lawful officer in executing his office," or to "instigate" any person or class of persons "to cabal or meet
together for unlawful purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir up the people
against the lawful authorities or to disturb the peace of the community, the safety and order of the Government." All
these various tendencies, which are described in section 8 of Act No. 292, each one of which is made an element of a
certain form of libel, may be characterized in general terms as seditious tendencies. This is recognized in the description
of the offenses punished by this section, which is found in the title of the act, where they are defined as the crimes of
the "seditious utterances, whether written or spoken."
Excluding from consideration the offense of publishing "scurrilous libels against the Government of the United States or
the Insular Government of the Philippine Islands," which may conceivably stand on a somewhat different footing, the
offenses punished by this section all consist in inciting, orally or in writing, to acts of disloyalty or disobedience to the
lawfully constituted authorities in these Islands. And while the article in question, which is, in the main, a virulent attack
against the policy of the Civil Commission in appointing natives to office, may have had the effect of exciting among
certain classes dissatisfaction with the Commission and its measures, we are unable to discover anything in it which can
be regarded as having a tendency to produce anything like what may be called disaffection, or, in other words, a state of
feeling incompatible with a disposition to remain loyal to the Government and obedient to the laws. There can be no
conviction, therefore, for any of the offenses described in the section on which the complaint is based, unless it is for the
offense of publishing a scurrilous libel against the Government of the of the United States or the Insular Government of
the Philippine Islands.
Can the article be regarded as embraced within the description of "scurrilous libels against the Government of the
United States or the Insular Government of the Philippine Islands?" In the determination of this question we have
encountered great difficulty, by reason of the almost entire lack of American precedents which might serve as a guide in
the construction of the law. There are, indeed, numerous English decisions, most of them of the eighteenth century, on
the subject of libelous attacks upon the "Government, the constitution, or the law generally," attacks upon the Houses
of Parliament, the Cabinet, the Established Church, and other governmental organisms, but these decisions are not now
14

accessible to us, and, if they were, they were made under such different conditions from those which prevail at the
present day, and are founded upon theories of government so foreign to those which have inspired the legislation of
which the enactment in question forms a part, that they would probably afford but little light in the present inquiry. In
England, in the latter part of the eighteenth century, any "written censure upon public men for their conduct as such," as
well as any written censure "upon the laws or upon the institutions of the country," would probably have been regarded
as a libel upon the Government. (2 Stephen, History of the Criminal Law of England, 348.) This has ceased to be the law
in England, and it is doubtful whether it was ever the common law of any American State. "It is true that there are
ancient dicta to the effect that any publication tending to "possess the people with an ill opinion of the Government" is a
seditious libel ( per Holt, C. J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in R. vs. Cobbett, 1804, 29
How. St. Tr., 49), but no one would accept that doctrine now. Unless the words used directly tend to foment riot or
rebellion or otherwise to disturb the peace and tranquility of the Kingdom, the utmost latitude is allowed in the
discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley says (Const. Lim., 528): "The English
common law rule which made libels on the constitution or the government indictable, as it was administered by the
courts, seems to us unsuited to the condition and circumstances of the people of America, and therefore never to have
been adopted in the several States."
We find no decisions construing the Tennessee statute (Code, sec. 6663), which is apparently the only existing American
statute of a similar character to that in question, and from which much of the phraseology of then latter appears to have
been taken, though with some essential modifications.
The important question is to determine what is meant in section 8 of Act No. 292 by the expression "the Insular
Government of the Philippine Islands." Does it mean in a general and abstract sense the existing laws and institutions of
the Islands, or does it mean the aggregate of the individuals by whom the government of the Islands is, for the time
being, administered? Either sense would doubtless be admissible.
We understand, in modern political science, . . . by the term government, that institution or aggregate of institutions by
which an independent society makes and carries out those rules of action which are unnecessary to enable men to live
in a social state, or which are imposed upon the people forming that society by those who possess the power or
authority of prescribing them. Government is the aggregate of authorities which rule a society. By " dministration, again,
we understand in modern times, and especially in more or less free countries, the aggregate of those persons in whose
hands the reins of government are for the time being (the chief ministers or heads of departments)." (Bouvier, Law
Dictionary, 891.) But the writer adds that the terms "government" and "administration" are not always used in their
strictness, and that "government" is often used for "administration."
In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made an offense to "write, print,
utter, or published," or to "knowingly and willingly assist or aid in writing, printing, uttering, or publishing any false,
scandalous, and malicious writing or writings against the Government of the United States, or either House of the
Congress of the United States, or the President of the United States, with intent to defame the said Government, or
either House of the said Congress, or the said President, or to bring them, or either of them, into contempt or disrepute,
or to excite against them or either or any of them the hatred of the good people of the United States," etc. The term
"government" would appear to be used here in the abstract sense of the existing political system, as distinguished from
the concrete organisms of the Government — the Houses of Congress and the Executive — which are also specially
mentioned.
Upon the whole, we are of the opinion that this is the sense in which the term is used in the enactment under
consideration.
It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel, upon an abstraction like the
Government in the sense of the laws and institutions of a country, but we think an answer to this suggestion is that the
expression "scurrilous libel" is not used in section 8 of Act No. 292 in the sense in which it is used in the general libel law
(Act No. 277) — that is, in the sense of written defamation of individuals — but in the wider sense, in which it is applied
in the common law to blasphemous, obscene, or seditious publications in which there may be no element of defamation
whatever. "The word 'libel' as popularly used, seems to mean only defamatory words; but words written, if obscene,
blasphemous, or seditious, are technically called libels, and the publication of them is, by the law of England, an
indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per Bramwell L. J. See Com. vs. Kneeland, 20 Pick.,
206, 211.)
While libels upon forms of government, unconnected with defamation of individuals, must in the nature of things be of
uncommon occurrence, the offense is by no means an imaginary one. An instance of a prosecution for an offense
essentially of this nature is Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted "as a factious
and seditious person of a wicked mind and unquiet and turbulent disposition and conversation, seditiously, maliciously,
and willfully intending, as much as in him lay, to bring into contempt and hatred the independence of the United States,
the constitution of this Commonwealth and of the United States, to excite popular discontent and dissatisfaction against
the scheme of polity instituted, and upon trial in the said United States and in the said Commonwealth, to molest,
disturb, and destroy the peace and tranquility of the said United States and of the said Commonwealth, to condemn the
principles of the Revolution, and revile, depreciate, and scandalize the characters of the Revolutionary patriots and
statesmen, to endanger, subvert, and totally destroy the republican constitutions and free governments of the said
United States and this Commonwealth, to involve the said United States and this Commonwealth in civil war, desolation,
and anarchy, and to procure by art and force a radical change and alteration in the principles and forms of the said
constitutions and governments, without the free will, wish, and concurrence of the people of the said United States and
15

this Commonwealth, respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked, seditious, and
detestable intentions aforesaid he . . . falsely, maliciously, factiously, and seditiously did make, compose, write, and
publish the following libel, to wit; 'A democracy is scarcely tolerable at any period of national history. Its omens are
always sinister and its powers are unpropitious. With all the lights or experience blazing before our eyes, it is impossible
not to discover the futility of this form of government. It was weak and wicked at Athens, it was bad in Sparta, and
worse in Rome. It has been tried in France and terminated in despotism. it was tried in England and rejected with the
utmost loathing and abhorrence. It is on its trial here and its issue will be civil war, desolation, and anarchy. No wise man
but discerns its imperfections; no good man but shudders at its miseries; no honest man but proclaims its fraud, and no
brave man but draws his sword against its force. The institution of a scheme of polity so radically contemptible and
vicious is a memorable example of what the villainy of some men can devise, the folly of others receive, and both
establish, in despite of reason, reflection, and sensation.'"
An attack upon the lawfully established system of civil government in the Philippine Islands, like that which Dennie was
accused of making upon the republican form of government lawfully established in the United States and in the State of
Pennsylvania would, we think, if couched in scandalous language, constitute the precise offense described in section 8 of
Act No. 292 as a scurrilous libel against the Insular Government of the Philippine Islands.
Defamation of individuals, whether holding official positions or not, and whether directed to their public conduct or to
their private life, may always be adequately punished under the general libel law. Defamation of the Civil Commission as
an aggregation, it being "a body of persons definite and small enough for its individual members to be recognized as
such" (Stephen, Digest of the Criminal Law, art. 277), as well as defamation of any of the individual members of the
Commission or of the Civil Governor, either in his public capacity or as a private individual, may be so punished. The
general libel law enacted by the Commission was in force when Act No. 292, was passed. There was no occasion for any
further legislation on the subject of libels against the individuals by whom the Insular Government is administered —
against the Insular Government in the sense of the aggregate of such individuals. There was occasion for stringent
legislation against seditious words or libels, and that is the main if not the sole purpose of the section under
consideration. It is not unreasonable to suppose that the Commission, in enacting this section, may have conceived of
attacks of a malignant or scurrilous nature upon the existing political system of the United States, or the political system
established in these Islands by the authority of the United States, as necessarily of a seditious tendency, but it is not so
reasonable to suppose that they conceived of attacks upon the personnel of the government as necessarily tending to
sedition. Had this been their view it seems probable that they would, like the framers of the Sedition Act of 1798, have
expressly and specifically mentioned the various public officials and collegiate governmental bodies defamation of which
they meant to punish as sedition.
The article in question contains no attack upon the governmental system of the United States, and it is quite apparent
that, though grossly abusive as respects both the Commission as a body and some of its individual members, it contains
no attack upon the governmental system by which the authority of the United States is enforced in these Islands. The
form of government by a Civil Commission and a Civil Governor is not assailed. It is the character of the men who are
intrusted with the administration of the government that the writer is seeking to bring into disrepute by impugning the
purity of their motives, their public integrity, and their private morals, and the wisdom of their policy. The publication of
the article, therefore, no seditious tendency being apparent, constitutes no offense under Act No. 292, section 8.
The judgment of conviction is reversed and the defendants are acquitted, with costs de oficio.

FACTS:
1. Herein respondents were alleged to have committed an offense of writing, publishing and circulating scurrilous
libel against the Government of the U.S. and the Insular Government of the Philippine Islands in violation of
Section 8, Act 292 of the Commission.
2. The alleged libel was published in “Manila Freedom” issue dated 06 April 1902 as an editorial issue.
3. The editorial is about the appointment of rascal natives (Filipinos) to important Government positions by the
Civil Commission (CC for brevity).
The following are part of the article:
 
“…the Civil Commission has, in its distribution of offices, constituted a protectorate over a set of men who should be in
jail or deported…xxx…this kind of foolish work that the Commission is doing all over the Island, reinstating insurgents and
rogues and turning down the men who have during struggle, at the risk of their lives, aided the Americans.”
 
“The commission has exalted to the highest position in the Islands Filipinos who are alleged to be notoriously corrupt and
rascally, and men of no personal character”.
 
“it is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and corrupt…
xxx”.
 
4. Article 292, section 8 has provided modes for committing an offense against it. However, albeit the article has a
virulent attack against the policy of the CC, the complaint in question cannot be regarded as having a tendency
to produce anything like what may be called disaffection or a state of feeling incompatible with a disposition to
remain loyal to the Government and obedient to the laws.
16

5. There is a question as how the term “the Insular Government of the Phil. Islands”,  is used in Section 8, Art. 292.
Is it defined as “the existing law and institutions of the Islands” or “the aggregate of the individuals by whom the
government of the Islands is administered”?
 
ISSUE: 
Whether the Article published by the respondents is in violation of the Art. 292 for it directly attacks the U.S.
government and the Insular Government of the Phil. Island?
 
RULING:
1. In modern political science, the term government is defined as “the institution or aggregate of institutions by
which an independent society makes and carries out those rules…xxx…the government is the aggregation of
authorities which rule a society (administration)”.[1]
2. On the other hand, the Sedition Act of 1798, the term ‘government’ is used in an abstract sense (e.q. President,
Congress), meaning the existing political system, its laws and institutions. The Court opines that it is in this sense
that the term is used in the enactment (Art. 292) under consideration.
3. Hence, in Art. 292, the meaning of “Insular of the Government of the Phil. Islands” is the government as a
system, however, the article in questions attacks the ‘government’ as the aggregate of public officials who run it.
4. The Court ruled that the article in question contains no attack upon the governmental system of the U.S., by
which the authority of the U.S. is enforced in these Islands per se. In this case, it is the character of men who are
entrusted with the administration of the government which the writer wants to bring disrepute due to their
motives, public integrity, and private morals and wisdoms of their policy. The publication does not constitute
any seditious tendency being apparent to be in violation of Art. 292.
Respondents are acquitted.
ADMINISTRATION – the aggregate of persons in whose hands the reins of government are for the time being.

b. Distinguished from Administration

c. Doctrine of Parens Patriae

1. Gov. of the Philippine Islands vs. Monte de Piedad (G.R. No. 9959, December 13, 1916)
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, represented by the Treasurer of the Philippine Islands, plaintiff-
appellee,
vs.
EL MONTE DE PIEDAD Y CAJA DE AHORRAS DE MANILA, defendant-appellant.

About $400,000, were subscribed and paid into the treasury of the Philippine Islands by the inhabitants of the Spanish
Dominions of the relief of those damaged by the earthquake which took place in the Philippine Islands on June 3, 1863.
Subsequent thereto and on October 6 of that year, a central relief board was appointed, by authority of the King of
Spain, to distribute the moneys thus voluntarily contributed. After a thorough investigation and consideration, the relief
board allotted $365,703.50 to the various sufferers named in its resolution, dated September 22, 1866, and, by order of
the Governor-General of the Philippine Islands, a list of these allotments, together with the names of those entitled
thereto, was published in the Official Gazette of Manila dated April 7, 1870. There was later distributed, inaccordance
with the above-mentioned allotments, the sum of $30,299.65, leaving a balance of S365,403.85 for distribution. Upon
the petition of the governing body of the Monte de Piedad, dated February 1, 1833, the Philippine Government, by
order dated the 1st of that month, directed its treasurer to turn over to the Monte de Piedad the sum of $80,000 of the
relief fund in installments of $20,000 each. These amounts were received on the following dates: February 15, March 12,
April 14, and June 2, 1883, and are still in the possession of the Monte de Piedad. On account of various petitions of the
persons, and heirs of others to whom the above-mentioned allotments were made by the central relief board for the
payment of those amounts, the Philippine Islands to bring suit against the Monte de Piedad a recover, "through the
Attorney-General and in representation of the Government of the Philippine Islands," the $80.000, together with
interest, for the benefit of those persons or their heirs appearing in the list of names published in the Official Gazette
instituted on May 3, 1912, by the Government of the Philippine Islands, represented by the Insular Treasurer, and after
due trial, judgment was entered in favor of the plaintiff for the sum of $80,000 gold or its equivalent in Philippine
currency, together with legal interest from February 28, 1912, and the costs of the cause. The defendant appealed and
makes the following assignment of errors:

1. The court erred in not finding that the eighty thousand dollars ($80,000), give to the Monte de Piedad y Caja de
Ahorros, were so given as a donation subject to one condition, to wit: the return of such sum of money to the Spanish
Government of these Islands, within eight days following the day when claimed, in case the Supreme Government of
Spain should not approve the action taken by the former government.

2. The court erred in not having decreed that this donation had been cleared; said eighty thousand dollars ($80,000)
being at present the exclusive property of the appellant the Monte de Piedad y Caja de Ahorros.
17

3. That the court erred in stating that the Government of the Philippine Islands has subrogated the Spanish Government
in its rights, as regards an important sum of money resulting from a national subscription opened by reason of the
earthquake of June 3, 1863, in these Island.

4. That the court erred in not declaring that Act Numbered 2109, passed by the Philippine Legislature on January 30,
1912, is unconstitutional.

5. That the court erred in holding in its decision that there is no title for the prescription of this suit brought by the
Insular Government against the Monte de Piedad y Caja de Ahorros for the reimbursement of the eighty thousand
dollars ($80,000) given to it by the late Spanish Government of these Islands.

6. That the court erred in sentencing the Monte de Piedad y Caja de Ahorros to reimburse the Philippine Government in
the sum of eighty thousand dollars ($80,000) gold coin, or the equivalent thereof in the present legal tender currency in
circulation, with legal interest thereon from February 28th, 1912, and the costs of this suit.

In the royal order of June 29, 1879, the Governor-General of the Philippine Islands was directed to inform the home
Government in what manner the indemnity might be paid to which, by virtue of the resolutions of the relief board, the
persons who suffered damage by the earthquake might be entitled, in order to perform the sacred obligation which the
Government of Spain had assumed toward the donors.

The next pertinent document in order is the defendant's petition, dated February 1, 1883, addressed to the Governor-
General of the Philippine Islands, which reads:

Board of Directors of the Monte de Piedad of Manila Presidencia.

Excellency: The Board of Directors of the Monte de Piedad y Caja de Ahorros of Manila informs your Excellency, First:
That the funds which it has up to the present been able to dispose of have been exhausted in loans on jewelry, and
there only remains the sum of one thousand and odd pesos, which will be expended between to-day and day after
tomorrow. Second: That, to maintain the credit of the establishment, which would be greatly injured were its operations
suspended, it is necessary to procure money. Third: That your Excellency has proposed to His Majesty's Government to
apply to the funds of the Monte de Piedad a part of the funds held in the treasury derived form the national subscription
for the relief of the distress caused by the earthquake of 1863. Fourth: That in the public treasury there is held at the
disposal of the central earthquake relief board over $1090,000 which was deposited in the said treasury by order of your
general Government, it having been transferred thereto from the Spanish-Filipino Bank where it had been held. fifth:
That in the straightened circumstances of the moment, your Excellency can, to avert impending disaster to the Monte de
Piedad, order that, out of that sum of one hundred thousand pesos held in the Treasury at the disposal of the central
relief board, there be transferred to the Monte de Piedad the sum of $80,000, there to be held under the same
conditions as at present in the Treasury, to wit, at the disposal of the Relief Board. Sixth: That should this transfer not be
approved for any reason, either because of the failure of His Majesty's Government to approve the proposal made by
your Excellency relative to the application to the needs of the Monte de Piedad of a pat of the subscription intended to
believe the distress caused by the earthquake of 1863, or for any other reason, the board of directors of the Monte de
Piedad obligates itself to return any sums which it may have received on account of the eighty thousand pesos, or the
whole thereof, should it have received the same, by securing a loan from whichever bank or banks may lend it the
money at the cheapest rate upon the security of pawned jewelry. — This is an urgent measure to save the Monte de
Piedad in the present crisis and the board of directors trusts to secure your Excellency's entire cooperation and that of
the other officials who have take part in the transaction.

The Governor-General's resolution on the foregoing petition is as follows:

GENERAL GOVERNMENT OF THE PHILIPPINES.

MANILA, February 1, 1883.

In view of the foregoing petition addressed to me by the board of directors of the Monte de Piedad of this city, in which
it is stated that the funds which the said institution counted upon are nearly all invested in loans on jewelry and that the
small account remaining will scarcely suffice to cover the transactions of the next two days, for which reason it entreats
the general Government that, in pursuance of its telegraphic advice to H. M. Government, the latter direct that there be
turned over to said Monte de Piedad $80,000 out of the funds in the public treasury obtained from the national
subscription for the relief of the distress caused by the earthquake of 1863, said board obligating itself to return this sum
should H. M. Government, for any reason, not approve the said proposal, and for this purpose it will procure funds by
means of loans raised on pawned jewelry; it stated further that if the aid so solicited is not furnished, it will be
compelled to suspend operations, which would seriously injure the credit of so beneficient an institution; and in view of
the report upon the matter made by the Intendencia General de Hacienda; and considering the fact that the public
18

treasury has on hand a much greater sum from the source mentioned than that solicited; and considering that this
general Government has submitted for the determination of H. M. Government that the balance which, after strictly
applying the proceeds obtained from the subscription referred to, may remain as a surplus should be delivered to the
Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution, believing that in so
doing the wishes of the donors would be faithfully interpreted inasmuch as those wishes were no other than to relieve
distress, an act of charity which is exercised in the highest degree by the Monte de Piedad, for it liberates needy person
from the pernicious effects of usury; and

Considering that the lofty purposes that brought about the creation of the pious institution referred to would be
frustrated, and that the great and laudable work of its establishment, and that the great and laudable and valuable if the
aid it urgently seeks is not granted, since the suspension of its operations would seriously and regrettably damage the
ever-growing credit of the Monte de Piedad; and

Considering that if such a thing would at any time cause deep distress in the public mind, it might be said that at the
present juncture it would assume the nature of a disturbance of public order because of the extreme poverty of the
poorer classes resulting from the late calamities, and because it is the only institution which can mitigate the effects of
such poverty; and

Considering that no reasonable objection can be made to granting the request herein contained, for the funds in
question are sufficiently secured in the unlikely event that H> M. Government does not approve the recommendation
mentioned, this general Government, in the exercise of the extraordinary powers conferred upon it and in conformity
with the report of the Intendencia de Hacienda, resolves as follows:

First. Authority is hereby given to deliver to the Monte de Piedad, out of the sum held in the public treasury of these
Islands obtained from the national subscription opened by reason of the earthquakes of 1863, amounts up to the sum
$80,000, as its needs may require, in installments of $20,000.

Second. The board of directors of the Monte de Piedad is solemnly bound to return, within eight days after demand, the
sums it may have so received, if H. M. Government does not approve this resolution.

Third. The Intendencia General de Hacienda shall forthwith, and in preference to all other work, proceed to prepare the
necessary papers so that with the least possible delay the payment referred to may be made and the danger that
menaces the Monte de Piedad of having to suspend its operations may be averted.

H. M. Government shall be advised hereof.lawphi1.net

(Signed) P. DE RIVERA.

By the royal order of December 3, 1892, the Governor-General of the Philippine Islands was ordered to "inform this
ministerio what is the total sum available at the present time, taking into consideration the sums delivered to the Monte
de Piedad pursuant to the decree issued by your general Government on February 1, 1883," and after the rights of the
claimants, whose names were published in the Official Gazette of Manila on April 7, 1870, and their heirs had been
established, as therein provided, as such persons "have an unquestionable right to be paid the donations assigned to
them therein, your general Government shall convoke them all within a reasonable period and shall pay their shares to
such as shall identify themselves, without regard to their financial status," and finally "that when all the proceedings and
operations herein mentioned have been concluded and the Government can consider itself free from all kinds of claims
on the part of those interested in the distribution of the funds deposited in the vaults of the Treasury, such action may
be taken as the circumstances shall require, after first consulting the relief board and your general Government and
taking account of what sums have been delivered to the Monte de Piedad and those that were expended in 1888 to
relieve public calamities," and "in order that all the points in connection with the proceedings had as a result of the
earthquake be clearly understood, it is indispensable that the offices hereinbefore mentioned comply with the
provisions contained in paragraphs 2 and 3 of the royal order of June 25, 1879." On receipt of this Finance order by the
Governor-General, the Department of Finance was called upon for a report in reference to the $80,000 turned over to
the defendant, and that Department's report to the Governor-General dated June 28, 1893, reads:

Intendencia General de Hacienda de Filipinas (General Treasury of the Philippines) — Excellency. — By Royal Order No.
1044 of December 3, last, it is provided that the persons who sustained losses by the earthquakes that occurred in your
capital in the year 1863 shall be paid the amounts allotted to them out of the sums sent from Spain for this purpose,
with observance of the rules specified in the said royal order, one of them being that before making the payment to the
interested parties the assets shall be reduced to money. These assets, during the long period of time that has elapsed
since they were turned over to the Treasury of the Philippine Islands, were used to cover the general needs of the
appropriation, a part besides being invested in the relief of charitable institutions and another part to meet pressing
needs occasioned by public calamities. On January 30, last, your Excellency was please to order the fulfillment of that
sovereign mandate and referred the same to this Intendencia for its information and the purposes desired (that is, for
19

compliance with its directions and, as aforesaid, one of these being the liquidation, recovery, and deposit with the
Treasury of the sums paid out of that fund and which were expended in a different way from that intended by the
donors) and this Intendencia believed the moment had arrived to claim from the board of directors of the Monte de
Piedad y Caja de Ahorros the sum of 80,000 pesos which, by decree of your general Government of the date of February
1, 1883, was loaned to it out of the said funds, the (Monte de Piedad) obligating itself to return the same within the
period of eight days if H. M. Government did not approve the delivery. On this Intendencia's demanding from the Monte
de Piedad the eighty thousand pesos, thus complying with the provisions of the Royal Order, it was to be supposed that
no objection to its return would be made by the Monte de Piedad for, when it received the loan, it formally engaged
itself to return it; and, besides, it was indisputable that the moment to do so had arrived, inasmuch as H. M.
Government, in ordering that the assets of the earthquake relief fund should he collected, makes express mention of the
80,000 pesos loaned to the Monte de Piedad, without doubt considering as sufficient the period of ten years during
which it has been using this large sum which lawfully belongs to their persons. This Intendencia also supposed that the
Monte de Piedad no longer needed the amount of that loan, inasmuch as, far from investing it in beneficient
transactions, it had turned the whole amount into the voluntary deposit funds bearing 5 per cent interests, the result of
this operation being that the debtor loaned to the creditor on interest what the former had gratuitously received. But
the Monte de Piedad, instead of fulfilling the promise it made on receiving the sum, after repeated demands refused to
return the money on the ground that only your Excellency, and not the Intendencia (Treasury), is entitled to order the
reimbursement, taking no account of the fact that this Intendencia was acting in the discharge of a sovereign command,
the fulfillment of which your Excellency was pleased to order; and on the further ground that the sum of 80,000 pesos
which it received from the fund intended for the earthquake victims was not received as a loan, but as a donation, this in
the opinion of this Intendencia, erroneously interpreting both the last royal order which directed the apportionment of
the amount of the subscription raised in the year 1863 and the superior decree which granted the loan, inasmuch as in
this letter no donation is made to the Monte de Piedad of the 80,000 pesos, but simply a loan; besides, no donation
whatever could be made of funds derived from a private subscription raised for a specific purpose, which funds are
already distributed and the names of the beneficiaries have been published in the Gaceta, there being lacking only the
mere material act of the delivery, which has been unduly delayed. In view of the unexpected reply made by the Monte
de Piedad, and believing it useless to insist further in the matter of the claim for the aforementioned loan, or to argue in
support thereof, this Intendencia believes the intervention of your Excellency necessary in this matter, if the royal Order
No. 1044 of December 3, last, is to be complied with, and for this purpose I beg your Excellency kindly to order the
Monte de Piedad to reimburse within the period of eight days the 80,000 which it owes, and that you give this
Intendencia power to carry out the provisions of the said royal order. I must call to the attention of your Excellency that
the said pious establishment, during the last few days and after demand was made upon it, has endorsed to the Spanish-
Filipino Bank nearly the whole of the sum which it had on deposit in the general deposit funds.

The record in the case under consideration fails to disclose any further definite action taken by either the Philippine
Government or the Spanish Government in regard to the $80,000 turned over to the Monte de Piedad.

In the defendant's general ledger the following entries appear: "Public Treasury: February 15, 1883, $20,000; March 12,
1883, $20,000; April 14, 1883, $20,000; June 2, 1883, $20,000, total $80,000." The book entry for this total is as follows:
"To the public Treasury derived from the subscription for the earthquake of 1863, $80,000 received from general
Treasury as a returnable loan, and without interest." The account was carried in this manner until January 1, 1899, when
it was closed by transferring the amount to an account called "Sagrada Mitra," which latter account was a loan of
$15,000 made to the defendant by the Archbishop of Manila, without interest, thereby placing the "Sagrada Mitra"
account at $95,000 instead of $15,000. The above-mentioned journal entry for January 1, 1899, reads: "Sagrada Mitra
and subscription, balance of these two account which on this date are united in accordance with an order of the Exmo.
Sr. Presidente of the Council transmitted verbally to the Presidente Gerente of these institutions, $95,000."

On March 16, 1902, the Philippine government called upon the defendant for information concerning the status of the
$80,000 and received the following reply:

MANILA, March 31, 1902.

To the Attorney-General of the Department of Justice of the Philippine Islands.

SIR: In reply to your courteous letter of the 16th inst., in which you request information from this office as to when and
for what purpose the Spanish Government delivered to the Monte de Piedad eighty thousand pesos obtained from the
subscription opened in connection with the earthquake of 1863, as well as any other information that might be useful
for the report which your office is called upon to furnish, I must state to your department that the books kept in these
Pious Institutions, and which have been consulted for the purpose, show that on the 15th of February, 1883, they
received as a reimbursable loan and without interest, twenty thousand pesos, which they deposited with their own
funds. On the same account and on each of the dates of March 12, April 14 and June 2 of the said year, 1883, they also
received and turned into their funds a like sum of twenty thousand pesos, making a total of eighty thousand pesos. —
(Signed) Emilio Moreta.
20

I hereby certify that the foregoing is a literal copy of that found in the letter book No. 2 of those Pious Institutions.

Manila, November 19, 1913

(Sgd.) EMILIO LAZCANOTEGUI,
Secretary

(Sgd.) O. K. EMILIO MORETA,

Managing Director.

The foregoing documentary evidence shows the nature of the transactions which took place between the Government
of Spain and the Philippine Government on the one side and the Monte de Piedad on the other, concerning the $80,000.
The Monte de Piedad, after setting forth in its petition to the Governor-General its financial condition and its absolute
necessity for more working capital, asked that out of the sum of $100,000 held in the Treasury of the Philippine Islands,
at the disposal of the central relief board, there be transferred to it the sum of $80,000 to be held under the same
conditions, to wit, "at the disposal of the relief board." The Monte de Piedad agreed that if the transfer of these funds
should not be approved by the Government of Spain, the same would be returned forthwith. It did not ask that the
$80,000 be given to it as a donation. The Governor-General, after reciting the substance of the petition, stated that "this
general Government has submitted for the determination of H. M. Government that the balance which, after strictly
applying the proceeds obtained from the subscription referred to, may remain as a surplus, should be delivered to the
Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution," and "considering
that no reasonable objection can be made to granting the request herein contained," directed the transfer of the
$80,000 to be made with the understanding that "the Board of Directors of the Monte de Piedad is solemnly bound to
return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this
resolution." It will be noted that the first and only time the word "donation" was used in connection with the $80,000
appears in this resolution of the Governor-General. It may be inferred from the royal orders that the Madrid
Government did tacitly approve of the transfer of the $80,000 to the Monte de Piedad as a loan without interest, but
that Government certainly did not approve such transfer as a donation for the reason that the Governor-General was
directed by the royal order of December 3, 1892, to inform the Madrid Government of the total available sum of the
earthquake fund, "taking into consideration the sums delivered to the Monte de Piedad pursuant to the decree issued
by your general Government on February 1, 1883." This language, nothing else appearing, might admit of the
interpretation that the Madrid Government did not intend that the Governor-General of the Philippine Islands should
include the $80,000 in the total available sum, but when considered in connection with the report of the Department of
Finance there can be no doubt that it was so intended. That report refers expressly to the royal order of December 3d,
and sets forth in detail the action taken in order to secure the return of the $80,000. The Department of Finance, acting
under the orders of the Governor-General, understood that the $80,000 was transferred to the Monte de Piedad well
knew that it received this sum as a loan interest." The amount was thus carried in its books until January, 1899, when it
was transferred to the account of the "Sagrada Mitra" and was thereafter known as the "Sagrada Mitra and subscription
account." Furthermore, the Monte de Piedad recognized and considered as late as March 31, 1902, that it received the
$80,000 "as a returnable loan, and without interest." Therefore, there cannot be the slightest doubt the fact that the
Monte de Piedad received the $80,000 as a mere loan or deposit and not as a donation. Consequently, the first alleged
error is entirely without foundation.

Counsel for the defendant, in support of their third assignment of error, say in their principal brief that:

The Spanish nation was professedly Roman Catholic and its King enjoyed the distinction of being deputy ex officio of the
Holy See and Apostolic Vicar-General of the Indies, and as such it was his duty to protect all pious works and charitable
institutions in his kingdoms, especially those of the Indies; among the latter was the Monte de Piedad of the Philippines,
of which said King and his deputy the Governor-General of the Philippines, as royal vice-patron, were, in a special and
peculiar manner, the protectors; the latter, as a result of the cession of the Philippine Islands, Implicitly renounced this
high office and tacitly returned it to the Holy See, now represented by the Archbishop of Manila; the national
subscription in question was a kind of foundation or pious work, for a charitable purpose in these Islands; and the entire
subscription not being needed for its original purpose, the royal vice-patron, with the consent of the King, gave the
surplus thereof to an analogous purpose; the fulfillment of all these things involved, in the majority, if not in all cases,
faithful compliance with the duty imposed upon him by the Holy See, when it conferred upon him the royal patronage of
the Indies, a thing that touched him very closely in his conscience and religion; the cessionary Government though
Christian, was not Roman Catholic and prided itself on its policy of non-interference in religious matters, and
inveterately maintained a complete separation between the ecclesiastical and civil powers.

In view of these circumstances it must be quite clear that, even without the express provisions of the Treaty of Paris,
which apparently expressly exclude such an idea, it did not befit the honor of either of the contracting parties to
subrogate to the American Government in lieu of the Spanish Government anything respecting the disposition of the
funds delivered by the latter to the Monte de Piedad. The same reasons that induced the Spanish Government to take
21

over such things would result in great inconvenience to the American Government in attempting to do so. The question
was such a delicate one, for the reason that it affected the conscience, deeply religious, of the King of Spain, that it
cannot be believed that it was ever his intention to confide the exercise thereof to a Government like the American. (U.
S. vs. Arredondo, 6 Pet. [U. S.], 711.)

It is thus seen that the American Government did not subrogate the Spanish Government or rather, the King of Spain, in
this regard; and as the condition annexed to the donation was lawful and possible of fulfillment at the time the contract
was made, but became impossible of fulfillment by the cession made by the Spanish Government in these Islands,
compliance therewith is excused and the contract has been cleared thereof.

The contention of counsel, as thus stated, in untenable for two reason, (1) because such contention is based upon the
erroneous theory that the sum in question was a donation to the Monte de Piedad and not a loan, and (2) because the
charity founded by the donations for the earthquake sufferers is not and never was intended to be an ecclesiastical
pious work. The first proposition has already been decided adversely to the defendant's contention. As to the second,
the record shows clearly that the fund was given by the donors for a specific and definite purpose — the relief of the
earthquake sufferers — and for no other purpose. The money was turned over to the Spanish Government to be
devoted to that purpose. The Spanish Government remitted the money to the Philippine Government to be distributed
among the suffers. All officials, including the King of Spain and the Governor-General of the Philippine Islands, who took
part in the disposal of the fund, acted in their purely civil, official capacity, and the fact that they might have belonged to
a certain church had nothing to do with their acts in this matter. The church, as such, had nothing to do with the fund in
any way whatever until the $80,000 reached the coffers of the Monte de Piedad (an institution under the control of the
church) as a loan or deposit. If the charity in question had been founded as an ecclesiastical pious work, the King of
Spain and the Governor-General, in their capacities as vicar-general of the Indies and as royal vice-patron, respectively,
would have disposed of the fund as such and not in their civil capacities, and such functions could not have been
transferred to the present Philippine Government, because the right to so act would have arisen out of the special
agreement between the Government of Spain and the Holy See, based on the union of the church and state which was
completely separated with the change of sovereignty.

And in their supplemental brief counsel say:

By the conceded facts the money in question is part of a charitable subscription. The donors were persons in Spain, the
trustee was the Spanish Government, the donees, the cestuis que trustent, were certain persons in the Philippine
Islands. The whole matter is one of trusteeship. This is undisputed and indisputable. It follows that the Spanish
Government at no time was the owner of the fund. Not being the owner of the fund it could not transfer the ownership.
Whether or not it could transfer its trusteeship it certainly never has expressly done so and the general terms of
property transfer in the Treaty of Paris are wholly insufficient for such a purpose even could Spain have transferred its
trusteeship without the consent of the donors and even could the United States, as a Government, have accepted such a
trust under any power granted to it by the thirteen original States in the Constitution, which is more than doubtful. It
follows further that this Government is not a proper party to the action. The only persons who could claim to be
damaged by this payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this
Government is neither.

If "the whole matter is one of trusteeship," and it being true that the Spanish Government could not, as counsel say,
transfer the ownership of the fund to the Monte de Piedad, the question arises, who may sue to recover this loan? It
needs no argument to show that the Spanish or Philippine Government, as trustee, could maintain an action for this
purpose had there been no change of sovereignty and if the right of action has not prescribed. But those governments
were something more than mere common law trustees of the fund. In order to determine their exact status with
reference to this fund, it is necessary to examine the law in force at the time there transactions took place, which are
the law of June 20, 1894, the royal decree of April 27. 1875, and the instructions promulgated on the latter date. These
legal provisions were applicable to the Philippine Islands (Benedicto vs. De la Rama, 3 Phil. Rep., 34)

The funds collected as a result of the national subscription opened in Spain by royal order of the Spanish Government
and which were remitted to the Philippine Government to be distributed among the earthquake sufferers by the Central
Relief Board constituted, under article 1 of the law of June 20, 1894, and article 2 of the instructions of April 27, 1875, a
special charity of a temporary nature as distinguished from a permanent public charitable institution. As the Spanish
Government initiated the creation of the fund and as the donors turned their contributions over to that Government, it
became the duty of the latter, under article 7 of the instructions, to exercise supervision and control over the moneys
thus collected to the end that the will of the donors should be carried out. The relief board had no power whatever to
dispose of the funds confided to its charge for other purposes than to distribute them among the sufferers, because
paragraph 3 of article 11 of the instructions conferred the power upon the secretary of the interior of Spain, and no
other, to dispose of the surplus funds, should there be any, by assigning them to some other charitable purpose or
institution. The secretary could not dispose of any of the funds in this manner so long as they were necessary for the
specific purpose for which they were contributed. The secretary had the power, under the law above mentioned to
22

appoint and totally or partially change the personnel of the relief board and to authorize the board to defend the rights
of the charity in the courts. The authority of the board consisted only in carrying out the will of the donors as directed by
the Government whose duty it was to watch over the acts of the board and to see that the funds were applied to the
purposes for which they were contributed .The secretary of the interior, as the representative of His Majesty's
Government, exercised these powers and duties through the Governor-General of the Philippine Islands. The
Governments of Spain and of the Philippine Islands in complying with their duties conferred upon them by law, acted in
their governmental capacities in attempting to carry out the intention of the contributors. It will this be seen that those
governments were something more, as we have said, than mere trustees of the fund.

It is further contended that the obligation on the part of the Monte de Piedad to return the $80,000 to the Government,
even considering it a loan, was wiped out on the change of sovereignty, or inn other words, the present Philippine
Government cannot maintain this action for that reason. This contention, if true, "must result from settled principles of
rigid law," as it cannot rest upon any title to the fund in the Monte de Piedad acquired prior to such change. While the
obligation to return the $80,000 to the Spanish Government was still pending, war between the United States and Spain
ensued. Under the Treaty of Paris of December 10, 1898, the Archipelago, known as the Philippine Islands, was ceded to
the United States, the latter agreeing to pay Spain the sum of $20,000,000. Under the first paragraph of the eighth
article, Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, public highways, and
other immovable property which, in conformity with law, belonged to the public domain, and as such belonged to the
crown of Spain." As the $80,000 were not included therein, it is said that the right to recover this amount did not,
therefore, pass to the present sovereign. This, in our opinion, does not follow as a necessary consequence, as the right
to recover does not rest upon the proposition that the $80,000 must be "other immovable property" mentioned in
article 8 of the treaty, but upon contractual obligations incurred before the Philippine Islands were ceded to the United
States. We will not inquire what effect his cession had upon the law of June 20, 1849, the royal decree of April 27, 1875,
and the instructions promulgated on the latter date. In Vilas vs. Manila (220 U. S., 345), the court said:

That there is a total abrogation of the former political relations of the inhabitants of the ceded region is obvious. That all
laws theretofore in force which are in conflict with the political character, constitution, or institutions of the substituted
sovereign, lose their force, is also plain. (Alvarez y Sanchez vs. United States, 216 U. S., 167.) But it is equally settled in
the same public law that the great body of municipal law which regulates private and domestic rights continues in force
until abrogated or changed by the new ruler.

If the above-mentioned legal provisions are in conflict with the political character, constitution or institutions of the new
sovereign, they became inoperative or lost their force upon the cession of the Philippine Islands to the United States,
but if they are among "that great body of municipal law which regulates private and domestic rights," they continued in
force and are still in force unless they have been repealed by the present Government. That they fall within the latter
class is clear from their very nature and character. They are laws which are not political in any sense of the word. They
conferred upon the Spanish Government the right and duty to supervise, regulate, and to some extent control charities
and charitable institutions. The present sovereign, in exempting "provident institutions, savings banks, etc.," all of which
are in the nature of charitable institutions, from taxation, placed such institutions, in so far as the investment in
securities are concerned, under the general supervision of the Insular Treasurer (paragraph 4 of section 111 of Act No.
1189; see also Act No. 701).

Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of Spain devolved upon he United
States. In Magill vs. Brown (16 Fed. Cas., 408), quoted with approval in Mormon Charch vs. United States (136 U. S.,1,
57), the court said:

The Revolution devolved on the State all the transcendent power of Parliament, and the prerogative of the crown, and
gave their Acts the same force and effect.

In Fontain vs. Ravenel (17 Hw., 369, 384), Mr. Justice McLean, delivering the opinion of the court in a charity case, said:

When this country achieved its independence, the prerogatives of the crown devolved upon the people of the States.
And this power still remains with them except so fact as they have delegated a portion of it to the Federal Government.
The sovereign will is made known to us by legislative enactment. The State as a sovereign, is the parens patriae.

Chancelor Kent says:

In this country, the legislature or government of the State, as parens patriae, has the right to enforce all charities of
public nature, by virtue of its general superintending authority over the public interests, where no other person is
entrusted with it. (4 Kent Com., 508, note.)

The Supreme Court of the United States in Mormon Church vs. United States, supra, after approving also the last
quotations, said:
23

This prerogative of parens patriae is inherent in the supreme power of every State, whether that power is lodged in a
royal person or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by
irresponsible monarchs to the great detriment of the people and the destruction of their liberties. On the contrary, it is a
most beneficient functions, and often necessary to be exercised in the interest of humanity, and for the prevention of
injury to those who cannot protect themselves.

The court in the same case, after quoting from Sohier vs. Mass. General Hospital (3 Cush., 483, 497), wherein the latter
court held that it is deemed indispensible that there should be a power in the legislature to authorize the same of the
estates of in facts, idiots, insane persons, and persons not known, or not in being, who cannot act for themselves, said:

These remarks in reference to in facts, insane persons and person not known, or not in being, apply to the beneficiaries
of charities, who are often in capable of vindicating their rights, and justly look for protection to the sovereign authority,
acting as parens patriae. They show that this beneficient functions has not ceased t exist under the change of
government from a monarchy to a republic; but that it now resides in the legislative department, ready to be called into
exercise whenever required for the purposes of justice and right, and is a clearly capable of being exercised in cases of
charities as in any other cases whatever.

In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was not the real party in interest; that the
Attorney-General had no power to institute the action; and that there must be an allegation and proof of a distinct right
of the people as a whole, as distinguished from the rights of individuals, before an action could be brought by the
Attorney-General in the name of the people. The court, in overruling these contentions, held that it was not only the
right but the duty of the Attorney-General to prosecute the action, which related to charities, and approved the
following quotation from Attorney-General vs. Compton (1 Younge & C. C., 417):

Where property affected by a trust for public purposes is in the hands of those who hold it devoted to that trust, it is the
privilege of the public that the crown should be entitled to intervene by its officers for the purpose of asserting, on
behalf on the public generally, the public interest and the public right, which, probably, no individual could be found
effectually to assert, even if the interest were such as to allow it. (2 Knet's Commentaries, 10th ed., 359; Lewin on Trusts,
sec. 732.)

It is further urged, as above indicated, that "the only persons who could claim to be damaged by this payment to the
Monte, if it was unlawful, are the donors or the cestuis que trustent, and this Government is neither. Consequently, the
plaintiff is not the proper party to bring the action." The earthquake fund was the result or the accumulation of a great
number of small contributions. The names of the contributors do not appear in the record. Their whereabouts are
unknown. They parted with the title to their respective contributions. The beneficiaries, consisting of the original
sufferers and their heirs, could have been ascertained. They are quite numerous also. And no doubt a large number of
the original sufferers have died, leaving various heirs. It would be impracticable for them to institute an action or actions
either individually or collectively to recover the $80,000. The only course that can be satisfactorily pursued is for the
Government to again assume control of the fund and devote it to the object for which it was originally destined.

The impracticability of pursuing a different course, however, is not the true ground upon which the right of the
Government to maintain the action rests. The true ground is that the money being given to a charity became, in a
measure, public property, only applicable, it is true, to the specific purposes to which it was intended to be devoted, but
within those limits consecrated to the public use, and became part of the public resources for promoting the happiness
and welfare of the Philippine Government. (Mormon Church vs. U. S., supra.) To deny the Government's right to
maintain this action would be contrary to sound public policy, as tending to discourage the prompt exercise of similar
acts of humanity and Christian benevolence in like instances in the future.

As to the question raised in the fourth assignment of error relating to the constitutionality of Act No. 2109, little need be
said for the reason that we have just held that the present Philippine Government is the proper party to the action. The
Act is only a manifestation on the part of the Philippine Government to exercise the power or right which it undoubtedly
had. The Act is not, as contended by counsel, in conflict with the fifth section of the Act of Congress of July 1, 1902,
because it does not take property without due process of law. In fact, the defendant is not the owner of the $80,000,
but holds it as a loan subject to the disposal of the central relief board. Therefor, there can be nothing in the Act which
transcends the power of the Philippine Legislature.

In Vilas vs. Manila, supra, the plaintiff was a creditor of the city of Manila as it existed before the cession of the
Philippine Islands to the United States by the Treaty of Paris of December 10, 1898. The action was brought upon the
theory that the city, under its present charter from the Government of the Philippine Islands, was the same juristic
person, and liable upon the obligations of the old city. This court held that the present municipality is a totally different
corporate entity and in no way liable for the debts of the Spanish municipality. The Supreme Court of the United States,
in reversing this judgment and in holding the city liable for the old debt, said:
24

The juristic identity of the corporation has been in no wise affected, and, in law, the present city is, in every legal sense,
the successor of the old. As such it is entitled to the property and property rights of the predecessor corporation, and is,
in law, subject to all of its liabilities.

In support of the fifth assignment of error counsel for the defendant argue that as the Monte de Piedad declined to
return the $80,000 when ordered to do so by the Department of Finance in June, 1893, the plaintiff's right of action had
prescribed at the time this suit was instituted on May 3, 1912, citing and relying upon article 1961, 1964 and 1969 of the
Civil Code. While on the other hand, the Attorney-General contends that the right of action had not prescribed (a)
because the defense of prescription cannot be set up against the Philippine Government, (b) because the right of action
to recover a deposit or trust funds does not prescribe, and (c) even if the defense of prescription could be interposed
against the Government and if the action had, in fact, prescribed, the same was revived by Act No. 2109.

The material facts relating to this question are these: The Monte de Piedad received the $80,000 in 1883 "to be held
under the same conditions as at present in the treasury, to wit, at the disposal of the relief board." In compliance with
the provisions of the royal order of December 3, 1892, the Department of Finance called upon the Monte de Piedad in
June, 1893, to return the $80,000. The Monte declined to comply with this order upon the ground that only the
Governor-General of the Philippine Islands and not the Department of Finance had the right to order the
reimbursement. The amount was carried on the books of the Monte as a returnable loan until January 1, 1899, when it
was transferred to the account of the "Sagrada Mitra." On March 31, 1902, the Monte, through its legal representative,
stated in writing that the amount in question was received as a reimbursable loan, without interest. Act No. 2109
became effective January 30, 1912, and the action was instituted on May 3rd of that year.

Counsel for the defendant treat the question of prescription as if the action was one between individuals or corporations
wherein the plaintiff is seeking to recover an ordinary loan. Upon this theory June, 1893, cannot be taken as the date
when the statute of limitations began to run, for the reason that the defendant acknowledged in writing on March 31,
1902, that the $80,000 were received as a loan, thereby in effect admitting that it still owed the amount. (Section 50,
Code of Civil Procedure.) But if counsels' theory is the correct one the action may have prescribed on May 3, 1912,
because more than ten full years had elapsed after March 31, 1902. (Sections 38 and 43, Code of Civil Procedure.)

Is the Philippine Government bound by the statute of limitations? The Supreme Court of the United States in U. S. vs.
Nashville, Chattanooga & St. Louis Railway Co. (118 U. S., 120, 125), said:

It is settled beyond doubt or controversy — upon the foundation of the great principle of public policy, applicable to all
governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or
agents to whose care they are confided — that the United States, asserting rights vested in it as a sovereign
government, is not bound by any statute of limitations, unless Congress has clearly manifested its intention that it
should be so bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs. Knight, 14 Pet., 301; Gibson vs. Chouteau, 13 Wall., 92; U. S.
vs. Thompson, 98 U. S., 486; Fink vs. O'Neil, 106 U. S., 272, 281.)

In Gibson vs. Choteau, supra, the court said:

It is a matter of common knowledge that statutes of limitation do not run against the State. That no laches can be
imputed to the King, and that no time can bar his rights, was the maxim of the common laws, and was founded on the
principle of public policy, that as he was occupied with the cares of government he ought not to suffer from the
negligence of his officer and servants. The principle is applicable to all governments, which must necessarily act through
numerous agents, and is essential to a preservation of the interests and property of the public. It is upon this principle
that in this country the statutes of a State prescribing periods within which rights must be prosecuted are not held to
embrace the State itself, unless it is expressly designated or the mischiefs to be remedied are of such a nature that it
must necessarily be included. As legislation of a State can only apply to persons and thing over which the State has
jurisdiction, the United States are also necessarily excluded from the operation of such statutes.

In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as follows:

In the absence of express statutory provision to the contrary, statute of limitations do not as a general rule run against
the sovereign or government, whether state or federal. But the rule is otherwise where the mischiefs to be remedied
are of such a nature that the state must necessarily be included, where the state goes into business in concert or in
competition with her citizens, or where a party seeks to enforces his private rights by suit in the name of the state or
government, so that the latter is only a nominal party.

In the instant case the Philippine Government is not a mere nominal party because it, in bringing and prosecuting this
action, is exercising its sovereign functions or powers and is seeking to carry out a trust developed upon it when the
Philippine Islands were ceded to the United States. The United States having in 1852, purchased as trustee for the
25

Chickasaw Indians under treaty with that tribe, certain bonds of the State of Tennessee, the right of action of the
Government on the coupons of such bonds could not be barred by the statute of limitations of Tennessee, either while it
held them in trust for the Indians, or since it became the owner of such coupons. (U. S. vs. Nashville, etc., R. Co., supra.)
So where lands are held in trust by the state and the beneficiaries have no right to sue, a statute does not run against
the State's right of action for trespass on the trust lands. (Greene Tp. vs. Campbell, 16 Ohio St., 11; see also Atty.-Gen. vs.
Midland R. Co., 3 Ont., 511 [following Reg. vs. Williams, 39 U. C. Q. B., 397].)

These principles being based "upon the foundation of the great principle of public policy" are, in the very nature of
things, applicable to the Philippine Government.

Counsel in their argument in support of the sixth and last assignments of error do not question the amount of the
judgment nor do they question the correctness of the judgment in so far as it allows interest, and directs its payment in
gold coin or in the equivalent in Philippine currency.

For the foregoing reasons the judgment appealed from is affirmed, with costs against the appellant. So ordered.

Facts:
On June 3, 1863, an Earthquake took place in the Philippine Islands, which was then under the Spanish Crown, that
devastated lot of civilians. Therefore n Oct. 6 of that year, a central relief board was appointed, by authority of the King
of Spain, to distribute the money voluntarily contributed by donors. After a thorough investigation and consideration,
the relief board allotted $365703.50 to the various sufferers name in its resolution.
These were later distributed in accordance with the above mentioned allotments, the sum of $30,299.65, leaving a
balance of $365.403.85 for distribution. Upon the petition of the governing body of the Monte de Piedad, dated
February 1, 1833, the Philippine Government, by order dated the first month, directed its treasured to turn over Monte
de Piedad the sum of $80,000 of relief fund in its installment of 20,000 each. These amounts received on the following
dates: February 15, March 12, April 14, and June 2, 1883, and are still in the possession of Monte de Piedad.
The Attorney General in representation of the Philippine Islands, a file of claim for the $80000 together with interest, for
the benefit of those persons or their heirs appearing in the list of names published in the Official Gazette instituted on
May, 3, 1912 by the Government of the Philippine Islands, represented by the Insular Treasurer, and after due trial in the
lower court, judgment was entered in honor of the plaintiff currency, together with legal interest from February 28,
1912, and cost of cause. The Monte de Piedad then contended that the present Philippine Government cannot file suit
on the ground that the obligation of the former was wiped out when their was a change of sovereignty.

Issue:
Whether or not the government of the Philippine Islands has capacity to file a suit against the Monte de Piedad for the
recovery of the said amount.

Ruling:
Under the Principle of Parens Patriae, the Philippine Government being the guardian of the “rights of the people” can
represent the legitimate claimants of the beneficiary and therefore has the capacity to file a suit against the appellant.
The Philippine Government is not merely a nominal party that’s why it can bring and prosecute this action by exercising
its sovereign powers. The supreme court then held the right of the government to file the case.

2. Cabanas vs. Pilapil (58 SCRA 94)

MELCHORA CABANAS, plaintiff-appellee,

vs.
FRANCISCO PILAPIL, defendant-appellant.

The appealed decision made clear: "There is no controversy as to the facts. " 1 The insured, Florentino Pilapil had a child,
Millian Pilapil, with a married woman, the plaintiff, Melchora Cabanas. She was ten years old at the time the complaint
was filed on October 10, 1964. The defendant, Francisco Pilapil, is the brother of the deceased. The deceased insured
himself and instituted as beneficiary, his child, with his brother to act as trustee during her minority. Upon his death, the
proceeds were paid to him. Hence this complaint by the mother, with whom the child is living, seeking the delivery of
such sum. She filed the bond required by the Civil Code. Defendant would justify his claim to the retention of the
amount in question by invoking the terms of the insurance policy. 2
After trial duly had, the lower court in a decision of May 10, 1965, rendered judgment ordering the defendant to deliver
the proceeds of the policy in question to plaintiff. Its main reliance was on Articles 320 and 321 of the Civil Code. The
former provides: "The father, or in his absence the mother, is the legal administrator of the property pertaining to the
child under parental authority. If the property is worth more than two thousand pesos, the father or mother shall give a
bond subject to the approval of the Court of First Instance." 3 The latter states: "The property which the unemancipated
child has acquired or may acquire with his work or industry, or by any lucrative title, belongs to the child in ownership,
and in usufruct to the father or mother under whom he is under parental authority and whose company he lives; ... 4
26

Conformity to such explicit codal norm is apparent in this portion of the appealed decision: "The insurance proceeds
belong to the beneficiary. The beneficiary is a minor under the custody and parental authority of the plaintiff, her
mother. The said minor lives with plaintiff or lives in the company of the plaintiff. The said minor acquired this property
by lucrative title. Said property, therefore, belongs to the minor child in ownership, and in usufruct to the plaintiff, her
mother. Since under our law the usufructuary is entitled to possession, the plaintiff is entitled to possession of the
insurance proceeds. The trust, insofar as it is in conflict with the above quoted provision of law, is pro tanto  null and
void. In order, however, to protect the rights of the minor, Millian Pilapil, the plaintiff should file an additional bond in
the guardianship proceedings, Sp. Proc. No. 2418-R of this Court to raise her bond therein to the total amount of
P5,000.00."5
It is very clear, therefore, considering the above, that unless the applicability of the two cited Civil Code provisions can
be disputed, the decision must stand. There is no ambiguity in the language employed. The words are rather clear. Their
meaning is unequivocal. Time and time again, this Court has left no doubt that where codal or statutory norms are cast
in categorical language, the task before it is not one of interpretation but of application. 6 So it must be in this case. So it
was in the appealed decision.
1. It would take more than just two paragraphs as found in the brief for the defendant-appellant 7 to blunt the force of
legal commands that speak so plainly and so unqualifiedly. Even if it were a question of policy, the conclusion will remain
unaltered. What is paramount, as mentioned at the outset, is the welfare of the child. It is in consonance with such
primordial end that Articles 320 and 321 have been worded. There is recognition in the law of the deep ties that bind
parent and child. In the event that there is less than full measure of concern for the offspring, the protection is supplied
by the bond required. With the added circumstance that the child stays with the mother, not the uncle, without any
evidence of lack of maternal care, the decision arrived at can stand the test of the strictest scrutiny. It is further fortified
by the assumption, both logical and natural, that infidelity to the trust imposed by the deceased is much less in the case
of a mother than in the case of an uncle. Manresa, commenting on Article 159 of the Civil Code of Spain, the source of
Article 320 of the Civil Code, was of that view: Thus "El derecho y la obligacion de administrar el Patrimonio de los hijos
es una consecuencia natural y lógica de la patria potestad y de la presunción de que nadie cuidará de los bienes de
acquéllos con mas cariño y solicitude que los padres. En nuestro Derecho antiguo puede decirse que se hallaba
reconocida de una manera indirecta aquelia doctrina, y asi se desprende de la sentencia del Tribunal Supremeo de 30 de
diciembre de 1864, que se refiere a la ley 24, tit. XIII de la Partida 5. De la propia suerte aceptan en general dicho
principio los Codigos extranjeros, con las limitaciones y requisitos de que trataremos mis adelante." 8
2. The appealed decision is supported by another cogent consideration. It is buttressed by its adherence to the concept
that the judiciary, as an agency of the State acting as parens patriae, is called upon whenever a pending suit of litigation
affects one who is a minor to accord priority to his best interest. It may happen, as it did occur here, that family relations
may press their respective claims. It would be more in consonance not only with the natural order of things but the
tradition of the country for a parent to be preferred. it could have been different if the conflict were between father and
mother. Such is not the case at all. It is a mother asserting priority. Certainly the judiciary as the instrumentality of the
State in its role of parens patriae, cannot remain insensible to the validity of her plea. In a recent case, 9 there is this
quotation from an opinion of the United States Supreme Court: "This prerogative of parens patriae  is inherent in the
supreme power of every State, whether that power is lodged in a royal person or in the legislature, and has no affinity to
those arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detriment of the people
and the destruction of their liberties." What is more, there is this constitutional provision vitalizing this concept. It reads:
"The State shall strengthen the family as a basic social institution." 10 If, as the Constitution so wisely dictates, it is the
family as a unit that has to be strengthened, it does not admit of doubt that even if a stronger case were presented for
the uncle, still deference to a constitutional mandate would have led the lower court to decide as it did.
WHEREFORE, the decision of May 10, 1965 is affirmed. Costs against defendant-appellant.

FACTS:
Florentino Pilapil, the insured, had a child, Millian Pilapil, with a married woman, Melchora Cabanas. The complaint was
filed on October 10, 1964. The defendant Francisco Pilapil, the brother of the deceased is the one designated by the
latter to act as his daughter’s trustee during her minority. Thus, upon Florentino’s death, the proceeds were paid to his
brother hence the complaint of the mother whom the child lives with. Petitioner contends that she should be entitled to
act as the trustee of the insurance policy of her child.
ISSUE:
Does the State have the authority to interfere with the terms of the insurance policy by virtue of parens patriae?
HELD:
The appealed decision adheres to the concept that the judiciary, as an agent of the State, acts as parens patriae. As such,
the judiciary cannot remain insensible to the validity of the petitioner’s plea. “The State shall strengthen the family as a
basic social institution”. The Constitution, moreover, dictates that it is the family as a unit that has to be strengthened.
As such, the decision of the lower courts, entitling the mother as the trustee, is affirmed.

d. Functions of the Government

i. Constituent
ii. Ministrant
27

Cases:
1. Boy Scouts of the Philippines vs. Commission on Audit [651 SCRA 146 (2011)]

BOY SCOUTS OF THE PHILIPPINES, Petitioner,

vs.
COMMISSION ON AUDIT, Respondent.

The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the Philippines (BSP) is the subject matter of
this controversy that reached us via petition for prohibition1 filed by the BSP under Rule 65 of the 1997 Rules of Court.
In this petition, the BSP seeks that the COA be prohibited from implementing its June 18, 2002 Decision,2 its February
21, 2007 Resolution,3 as well as all other issuances arising therefrom, and that all of the foregoing be rendered null and
void. 4

Antecedent Facts and Background of the Case

This case arose when the COA issued Resolution No. 99-0115 on August 19, 1999 ("the COA Resolution"), with the
subject "Defining the Commission’s policy with respect to the audit of the Boy Scouts of the Philippines." In its whereas
clauses, the COA Resolution stated that the BSP was created as a public corporation under Commonwealth Act No. 111,
as amended by Presidential Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National
Labor Relations Commission,6 the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is
appropriately regarded as a government instrumentality under the 1987 Administrative Code."7 The COA Resolution
also cited its constitutional mandate under Section 2(1), Article IX (D). Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS RESOLVED, AS IT DOES
HEREBY RESOLVE, to conduct an annual financial audit of the Boy Scouts of the Philippines in accordance with generally
accepted auditing standards, and express an opinion on whether the financial statements which include the Balance
Sheet, the Income Statement and the Statement of Cash Flows present fairly its financial position and results of
operations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision, the Boy Scouts of the Philippines shall be
classified among the government corporations belonging to the Educational, Social, Scientific, Civic and Research Sector
under the Corporate Audit Office I, to be audited, similar to the subsidiary corporations, by employing the team audit
approach.8 (Emphases supplied.)

The BSP sought reconsideration of the COA Resolution in a letter9 dated November 26, 1999 signed by the BSP National
President Jejomar C. Binay, who is now the Vice President of the Republic, wherein he wrote:

It is the position of the BSP, with all due respect, that it is not subject to the Commission’s jurisdiction on the following
grounds:

1. We reckon that the ruling in the case of Boy Scouts of the Philippines vs. National Labor Relations Commission, et al.
(G.R. No. 80767) classifying the BSP as a government-controlled corporation is anchored on the "substantial Government
participation" in the National Executive Board of the BSP. It is to be noted that the case was decided when the BSP
Charter is defined by Commonwealth Act No. 111 as amended by Presidential Decree 460.

However, may we humbly refer you to Republic Act No. 7278 which amended the BSP’s charter after the cited case was
decided. The most salient of all amendments in RA No. 7278 is the alteration of the composition of the National
Executive Board of the BSP.

The said RA virtually eliminated the "substantial government participation" in the National Executive Board by removing:
(i) the President of the Philippines and executive secretaries, with the exception of the Secretary of Education, as
members thereof; and (ii) the appointment and confirmation power of the President of the Philippines, as Chief Scout,
over the members of the said Board.

The BSP believes that the cited case has been superseded by RA 7278. Thereby weakening the case’s conclusion that the
BSP is a government-controlled corporation (sic). The 1987 Administrative Code itself, of which the BSP vs. NLRC relied
on for some terms, defines government-owned and controlled corporations as agencies organized as stock or non-stock
corporations which the BSP, under its present charter, is not.
28

Also, the Government, like in other GOCCs, does not have funds invested in the BSP. What RA 7278 only provides is that
the Government or any of its subdivisions, branches, offices, agencies and instrumentalities can from time to time
donate and contribute funds to the BSP.

xxxx

Also the BSP respectfully believes that the BSP is not "appropriately regarded as a government instrumentality under the
1987 Administrative Code" as stated in the COA resolution. As defined by Section 2(10) of the said code, instrumentality
refers to "any agency of the National Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter."

The BSP is not an entity administering special funds. It is not even included in the DECS National Budget. x x x

It may be argued also that the BSP is not an "agency" of the Government. The 1987 Administrative Code, merely
referred the BSP as an "attached agency" of the DECS as distinguished from an actual line agency of departments that
are included in the National Budget. The BSP believes that an "attached agency" is different from an "agency." Agency,
as defined in Section 2(4) of the Administrative Code, is defined as any of the various units of the Government including
a department, bureau, office, instrumentality, government-owned or controlled corporation or local government or
distinct unit therein.

Under the above definition, the BSP is neither a unit of the Government; a department which refers to an executive
department as created by law (Section 2[7] of the Administrative Code); nor a bureau which refers to any principal
subdivision or unit of any department (Section 2[8], Administrative Code).10

Subsequently, requests for reconsideration of the COA Resolution were also made separately by Robert P. Valdellon,
Regional Scout Director, Western Visayas Region, Iloilo City and Eugenio F. Capreso, Council Scout Executive of Calbayog
City.11

In a letter12 dated July 3, 2000, Director Crescencio S. Sunico, Corporate Audit Officer (CAO) I of the COA, furnished the
BSP with a copy of the Memorandum13 dated June 20, 2000 of Atty. Santos M. Alquizalas, the COA General Counsel. In
said Memorandum, the COA General Counsel opined that Republic Act No. 7278 did not supersede the Court’s ruling in
Boy Scouts of the Philippines v. National Labor Relations Commission, even though said law eliminated the substantial
government participation in the selection of members of the National Executive Board of the BSP. The Memorandum
further provides:

Analysis of the said case disclosed that the substantial government participation is only one (1) of the three (3) grounds
relied upon by the Court in the resolution of the case. Other considerations include the character of the BSP’s purposes
and functions which has a public aspect and the statutory designation of the BSP as a "public corporation". These
grounds have not been deleted by R.A. No. 7278. On the contrary, these were strengthened as evidenced by the
amendment made relative to BSP’s purposes stated in Section 3 of R.A. No. 7278.

On the argument that BSP is not appropriately regarded as "a government instrumentality" and "agency" of the
government, such has already been answered and clarified. The Supreme Court has elucidated this matter in the BSP
case when it declared that BSP is regarded as, both a "government-controlled corporation with an original charter" and
as an "instrumentality" of the Government. Likewise, it is not disputed that the Administrative Code of 1987 designated
the BSP as one of the attached agencies of DECS. Being an attached agency, however, it does not change its nature as a
government-controlled corporation with original charter and, necessarily, subject to COA audit jurisdiction. Besides,
Section 2(1), Article IX-D of the Constitution provides that COA 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.14

Based on the Memorandum of the COA General Counsel, Director Sunico wrote:

In view of the points clarified by said Memorandum upholding COA Resolution No. 99-011, we have to comply with the
provisions of the latter, among which is to conduct an annual financial audit of the Boy Scouts of the Philippines.15

In a letter dated November 20, 2000 signed by Director Amorsonia B. Escarda, CAO I, the COA informed the BSP that a
preliminary survey of its organizational structure, operations and accounting system/records shall be conducted on
November 21 to 22, 2000.16
29

Upon the BSP’s request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for Review with Prayer
for Preliminary Injunction and/or Temporary Restraining Order before the COA. This was denied by the COA in its
questioned Decision, which held that the BSP is under its audit jurisdiction. The BSP moved for reconsideration but this
was likewise denied under its questioned Resolution.17

This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary restraining
order against the COA.

The Issue

As stated earlier, the sole issue to be resolved in this case is whether the BSP falls under the COA’s audit jurisdiction.

The Parties’ Respective Arguments

The BSP contends that Boy Scouts of the Philippines v. National Labor Relations Commission is inapplicable for purposes
of determining the audit jurisdiction of the COA as the issue therein was the jurisdiction of the National Labor Relations
Commission over a case for illegal dismissal and unfair labor practice filed by certain BSP employees.18

While the BSP concedes that its functions do relate to those that the government might otherwise completely assume
on its own, it avers that this alone was not determinative of the COA’s audit jurisdiction over it. The BSP further avers
that the Court in Boy Scouts of the Philippines v. National Labor Relations Commission "simply stated x x x that in respect
of functions, the BSP is akin to a public corporation" but this was not synonymous to holding that the BSP is a
government corporation or entity subject to audit by the COA. 19

The BSP contends that Republic Act No. 7278 introduced crucial amendments to its charter; hence, the findings of the
Court in Boy Scouts of the Philippines v. National Labor Relations Commission are no longer valid as the government has
ceased to play a controlling influence in it. The BSP claims that the pronouncements of the Court therein must be taken
only within the context of that case; that the Court had categorically found that its assets were acquired from the Boy
Scouts of America and not from the Philippine government, and that its operations are financed chiefly from
membership dues of the Boy Scouts themselves as well as from property rentals; and that "the BSP may correctly be
characterized as non-governmental, and hence, beyond the audit jurisdiction of the COA." It further claims that the
designation by the Court of the BSP as a government agency or instrumentality is mere obiter dictum.20

The BSP maintains that the provisions of Republic Act No. 7278 suggest that "governance of BSP has come to be
overwhelmingly a private affair or nature, with government participation restricted to the seat of the Secretary of
Education, Culture and Sports."21 It cites Philippine Airlines Inc. v. Commission on Audit22 wherein the Court declared
that, "PAL, having ceased to be a government-owned or controlled corporation is no longer under the audit jurisdiction
of the COA."23 Claiming that the amendments introduced by Republic Act No. 7278 constituted a supervening event
that changed the BSP’s corporate identity in the same way that the government’s privatization program changed PAL’s,
the BSP makes the case that the government no longer has control over it; thus, the COA cannot use the Boy Scouts of
the Philippines v. National Labor Relations Commission as its basis for the exercise of its jurisdiction and the issuance of
COA Resolution No. 99-011.24 The BSP further claims as follows:

It is not far-fetched, in fact, to concede that BSP’s funds and assets are private in character. Unlike ordinary public
corporations, such as provinces, cities, and municipalities, or government-owned and controlled corporations, such as
Land Bank of the Philippines and the Development Bank of the Philippines, the assets and funds of BSP are not derived
from any government grant. For its operations, BSP is not dependent in any way on any government appropriation; as a
matter of fact, it has not even been included in any appropriations for the government. To be sure, COA has not alleged,
in its Resolution No. 99-011 or in the Memorandum of its General Counsel, that BSP received, receives or continues to
receive assets and funds from any agency of the government. The foregoing simply point to the private nature of the
funds and assets of petitioner BSP.

xxxx

As stated in petitioner’s third argument, BSP’s assets and funds were never acquired from the government. Its
operations are not in any way financed by the government, as BSP has never been included in any appropriations act for
the government. Neither has the government invested funds with BSP. BSP, has not been, at any time, a user of
government property or funds; nor have properties of the government been held in trust by BSP. This is precisely the
reason why, until this time, the COA has not attempted to subject BSP to its audit jurisdiction. x x x.25

To summarize its other arguments, the BSP contends that it is not a government-owned or controlled corporation;
neither is it an instrumentality, agency, or subdivision of the government.
30

In its Comment,26 the COA argues as follows:

1. The BSP is a public corporation created under Commonwealth Act No. 111 dated October 31, 1936, and whose
functions relate to the fostering of public virtues of citizenship and patriotism and the general improvement of the moral
spirit and fiber of the youth. The manner of creation and the purpose for which the BSP was created indubitably prove
that it is a government agency.

2. Being a government agency, the funds and property owned or held in trust by the BSP are subject to the audit
authority of respondent Commission on Audit pursuant to Section 2 (1), Article IX-D of the 1987 Constitution.

3. Republic Act No. 7278 did not change the character of the BSP as a government-owned or controlled corporation and
government instrumentality.27

The COA maintains that the functions of the BSP that include, among others, the teaching to the youth of patriotism,
courage, self-reliance, and kindred virtues, are undeniably sovereign functions enshrined under the Constitution and
discussed by the Court in Boy Scouts of the Philippines v. National Labor Relations Commission. The COA contends that
any attempt to classify the BSP as a private corporation would be incomprehensible since no less than the law which
created it had designated it as a public corporation and its statutory mandate embraces performance of sovereign
functions.28

The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service Commission even
before the 1987 Constitution was the fact that it was a government-owned or controlled corporation; that as an
attached agency of the Department of Education, Culture and Sports (DECS), the BSP is an agency of the government;
and that the BSP is a chartered institution under Section 1(12) of the Revised Administrative Code of 1987, embraced
under the term government instrumentality.29

The COA concludes that being a government agency, the funds and property owned or held by the BSP are subject to the
audit authority of the COA pursuant to Section 2(1), Article IX (D) of the 1987 Constitution.

In support of its arguments, the COA cites The Veterans Federation of the Philippines (VFP) v. Reyes,30 wherein the
Court held that among the reasons why the VFP is a public corporation is that its charter, Republic Act No. 2640,
designates it as one. Furthermore, the COA quotes the Court as saying in that case:

In several cases, we have dealt with the issue of whether certain specific activities can be classified as sovereign
functions. These cases, which deal with activities not immediately apparent to be sovereign functions, upheld the public
sovereign nature of operations needed either to promote social justice or to stimulate patriotic sentiments and love of
country.

xxxx

Petitioner claims that its funds are not public funds because no budgetary appropriations or government funds have
been released to the VFP directly or indirectly from the DBM, and because VFP funds come from membership dues and
lease rentals earned from administering government lands reserved for the VFP.

The fact that no budgetary appropriations have been released to the VFP does not prove that it is a private corporation.
The DBM indeed did not see it fit to propose budgetary appropriations to the VFP, having itself believed that the VFP is a
private corporation. If the DBM, however, is mistaken as to its conclusion regarding the nature of VFP's incorporation, its
previous assertions will not prevent future budgetary appropriations to the VFP. The erroneous application of the law by
public officers does not bar a subsequent correct application of the law.31 (Citations omitted.)

The COA points out that the government is not precluded by law from extending financial support to the BSP and adding
to its funds, and that "as a government instrumentality which continues to perform a vital function imbued with public
interest and reflective of the government’s policy to stimulate patriotic sentiments and love of country, the BSP’s funds
from whatever source are public funds, and can be used solely for public purpose in pursuance of the provisions of
Republic Act No. [7278]."32

The COA claims that the fact that it has not yet audited the BSP’s funds may not bar the subsequent exercise of its audit
jurisdiction.

The BSP filed its Reply33 on August 29, 2007 maintaining that its statutory designation as a "public corporation" and the
public character of its purpose and functions are not determinative of the COA’s audit jurisdiction; reiterating its stand
that Boy Scouts of the Philippines v. National Labor Relations Commission is not applicable anymore because the aspect
31

of government ownership and control has been removed by Republic Act No. 7278; and concluding that the funds and
property that it either owned or held in trust are not public funds and are not subject to the COA’s audit jurisdiction.

Thereafter, considering the BSP’s claim that it is a private corporation, this Court, in a Resolution34 dated July 20, 2010,
required the parties to file, within a period of twenty (20) days from receipt of said Resolution, their respective
comments on the issue of whether Commonwealth Act No. 111, as amended by Republic Act No. 7278, is constitutional.

In compliance with the Court’s resolution, the parties filed their respective Comments.

In its Comment35 dated October 22, 2010, the COA argues that the constitutionality of Commonwealth Act No. 111, as
amended, is not determinative of the resolution of the present controversy on the COA’s audit jurisdiction over
petitioner, and in fact, the controversy may be resolved on other grounds; thus, the requisites before a judicial inquiry
may be made, as set forth in Commissioner of Internal Revenue v. Court of Tax Appeals,36 have not been fully met.37
Moreover, the COA maintains that behind every law lies the presumption of constitutionality.38 The COA likewise
argues that contrary to the BSP’s position, repeal of a law by implication is not favored.39 Lastly, the COA claims that
there was no violation of Section 16, Article XII of the 1987 Constitution with the creation or declaration of the BSP as a
government corporation. Citing Philippine Society for the Prevention of Cruelty to Animals v. Commission on Audit,40
the COA further alleges:

The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the
relation of the corporation to the State. If the corporation is created by the State as the latter’s own agency or
instrumentality to help it in carrying out its governmental functions, then that corporation is considered public;
otherwise, it is private. x x x.41

For its part, in its Comment42 filed on December 3, 2010, the BSP submits that its charter, Commonwealth Act No. 111,
as amended by Republic Act No. 7278, is constitutional as it does not violate Section 16, Article XII of the Constitution.
The BSP alleges that "while [it] is not a public corporation within the purview of COA’s audit jurisdiction, neither is it a
private corporation created by special law falling within the ambit of the constitutional prohibition x x x."43 The BSP
further alleges:

Petitioner’s purpose is embodied in Section 3 of C.A. No. 111, as amended by Section 1 of R.A. No. 7278, thus:

xxxx

A reading of the foregoing provision shows that petitioner was created to advance the interest of the youth, specifically
of young boys, and to mold them into becoming good citizens. Ultimately, the creation of petitioner redounds to the
benefit, not only of those boys, but of the public good or welfare. Hence, it can be said that petitioner’s purpose and
functions are more of a public rather than a private character. Petitioner caters to all boys who wish to join the
organization without any distinction. It does not limit its membership to a particular class of boys. Petitioner’s members
are trained in scoutcraft and taught patriotism, civic consciousness and responsibility, courage, self-reliance, discipline
and kindred virtues, and moral values, preparing them to become model citizens and outstanding leaders of the
country.44

The BSP reiterates its stand that the public character of its purpose and functions do not place it within the ambit of the
audit jurisdiction of the COA as it lacks the government ownership or control that the Constitution requires before an
entity may be subject of said jurisdiction.45 It avers that it merely stated in its Reply that the withdrawal of government
control is akin to privatization, but it does not necessarily mean that petitioner is a private corporation.46 The BSP claims
that it has a unique characteristic which "neither classifies it as a purely public nor a purely private corporation";47 that
it is not a quasi-public corporation; and that it may belong to a different class altogether.48

The BSP claims that assuming arguendo that it is a private corporation, its creation is not contrary to the purpose of
Section 16, Article XII of the Constitution; and that the evil sought to be avoided by said provision is inexistent in the
enactment of the BSP’s charter,49 as, (i) it was not created for any pecuniary purpose; (ii) those who will primarily
benefit from its creation are not its officers but its entire membership consisting of boys being trained in scoutcraft all
over the country; (iii) it caters to all boys who wish to join the organization without any distinction; and (iv) it does not
limit its membership to a particular class or group of boys. Thus, the enactment of its charter confers no special privilege
to particular individuals, families, or groups; nor does it bring about the danger of granting undue favors to certain
groups to the prejudice of others or of the interest of the country, which are the evils sought to be prevented by the
constitutional provision involved.50

Finally, the BSP states that the presumption of constitutionality of a legislative enactment prevails absent any clear
showing of its repugnancy to the Constitution.51
32

The Ruling of the Court

After looking at the legislative history of its amended charter and carefully studying the applicable laws and the
arguments of both parties, we find that the BSP is a public corporation and its funds are subject to the COA’s audit
jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled "An Act to Create a Public
Corporation to be Known as the Boy Scouts of the Philippines, and to Define its Powers and Purposes" created the BSP
as a "public corporation" to serve the following public interest or purpose:

Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with other agencies,
the ability of boys to do useful things for themselves and others, to train them in scoutcraft, and to inculcate in them
patriotism, civic consciousness and responsibility, courage, self-reliance, discipline and kindred virtues, and moral values,
using the method which are in common use by boy scouts.

Presidential Decree No. 460, approved on May 17, 1974, amended Commonwealth Act No. 111 and provided substantial
changes in the BSP organizational structure. Pertinent provisions are quoted below:

Section II. Section 5 of the said Act is also amended to read as follows:

The governing body of the said corporation shall consist of a National Executive Board composed of (a) the President of
the Philippines or his representative; (b) the charter and life members of the Boy Scouts of the Philippines; (c) the
Chairman of the Board of Trustees of the Philippine Scouting Foundation; (d) the Regional Chairman of the Scout
Regions of the Philippines; (e) the Secretary of Education and Culture, the Secretary of Social Welfare, the Secretary of
National Defense, the Secretary of Labor, the Secretary of Finance, the Secretary of Youth and Sports, and the Secretary
of Local Government and Community Development; (f) an equal number of individuals from the private sector; (g) the
National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age from each Scout Region to represent
the boy membership; and (i) three representatives of the cultural minorities. Except for the Regional Chairman who shall
be elected by the Regional Scout Councils during their annual meetings, and the Scouts of their respective regions, all
members of the National Executive Board shall be either by appointment or cooption, subject to ratification and
confirmation by the Chief Scout, who shall be the Head of State. Vacancies in the Executive Board shall be filled by a
majority vote of the remaining members, subject to ratification and confirmation by the Chief Scout. The by-laws may
prescribe the number of members of the National Executive Board necessary to constitute a quorum of the board, which
number may be less than a majority of the whole number of the board. The National Executive Board shall have power
to make and to amend the by-laws, and, by a two-thirds vote of the whole board at a meeting called for this purpose,
may authorize and cause to be executed mortgages and liens upon the property of the corporation.

Subsequently, on March 24, 1992, Republic Act No. 7278 further amended Commonwealth Act No. 111 "by
strengthening the volunteer and democratic character" of the BSP and reducing government representation in its
governing body, as follows:

Section 1. Sections 2 and 3 of Commonwealth Act. No. 111, as amended, is hereby amended to read as follows:

"Sec. 2. The said corporation shall have the powers of perpetual succession, to sue and be sued; to enter into contracts;
to acquire, own, lease, convey and dispose of such real and personal estate, land grants, rights and choses in action as
shall be necessary for corporate purposes, and to accept and receive funds, real and personal property by gift, devise,
bequest or other means, to conduct fund-raising activities; to adopt and use a seal, and the same to alter and destroy; to
have offices and conduct its business and affairs in Metropolitan Manila and in the regions, provinces, cities,
municipalities, and barangays of the Philippines, to make and adopt by-laws, rules and regulations not inconsistent with
this Act and the laws of the Philippines, and generally to do all such acts and things, including the establishment of
regulations for the election of associates and successors, as may be necessary to carry into effect the provisions of this
Act and promote the purposes of said corporation: Provided, That said corporation shall have no power to issue
certificates of stock or to declare or pay dividends, its objectives and purposes being solely of benevolent character and
not for pecuniary profit of its members.

"Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with other agencies,
the ability of boys to do useful things for themselves and others, to train them in scoutcraft, and to inculcate in them
patriotism, civic consciousness and responsibility, courage, self-reliance, discipline and kindred virtues, and moral values,
using the method which are in common use by boy scouts."

Sec. 2. Section 4 of Commonwealth Act No. 111, as amended, is hereby repealed and in lieu thereof, Section 4 shall read
as follows:
33

"Sec. 4. The President of the Philippines shall be the Chief Scout of the Boy Scouts of the Philippines."

Sec. 3. Sections 5, 6, 7 and 8 of Commonwealth Act No. 111, as amended, are hereby amended to read as follows:

"Sec. 5. The governing body of the said corporation shall consist of a National Executive Board, the members of which
shall be Filipino citizens of good moral character. The Board shall be composed of the following:

"(a) One (1) charter member of the Boy Scouts of the Philippines who shall be elected by the members of the National
Council at its meeting called for this purpose;

"(b) The regional chairmen of the scout regions who shall be elected by the representatives of all the local scout councils
of the region during its meeting called for this purpose: Provided, That a candidate for regional chairman need not be
the chairman of a local scout council;

"(c) The Secretary of Education, Culture and Sports;

"(d) The National President of the Girl Scouts of the Philippines;

"(e) One (1) senior scout, each from Luzon, Visayas and Mindanao areas, to be elected by the senior scout delegates of
the local scout councils to the scout youth forums in their respective areas, in its meeting called for this purpose, to
represent the boy scout membership;

"(f) Twelve (12) regular members to be elected by the members of the National Council in its meeting called for this
purpose;

"(g) At least ten (10) but not more than fifteen (15) additional members from the private sector who shall be elected by
the members of the National Executive Board referred to in the immediately preceding paragraphs (a), (b), (c), (d), (e)
and (f) at the organizational meeting of the newly reconstituted National Executive Board which shall be held
immediately after the meeting of the National Council wherein the twelve (12) regular members and the one (1) charter
member were elected.

xxxx

"Sec. 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the Philippines by the
Government or any of its subdivisions, branches, offices, agencies or instrumentalities or by a foreign government or by
private, entities and individuals shall be expended by the National Executive Board in pursuance of this Act.

The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under
Republic Act No. 7278, falls under the second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose created by law; their personality begins as
soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member. (Emphases supplied.)

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under Article 45
of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or
recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning
partnerships. (Emphasis and underscoring supplied.)
34

The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a State policy
declared in Article II, Section 13 of the Constitution, which reads:

ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES

Section 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. It shall inculcate in the youth patriotism and nationalism,
and encourage their involvement in public and civic affairs.

Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a constitutional mandate,
comes within the class of "public corporations" defined by paragraph 2, Article 44 of the Civil Code and governed by the
law which creates it, pursuant to Article 45 of the same Code.

The BSP’s Classification Under the Administrative Code of 1987

The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl Scouts of the
Philippines, it is classified as an attached agency of the DECS under Executive Order No. 292, or the Administrative Code
of 1987, which states:

TITLE VI – EDUCATION, CULTURE AND SPORTS

Chapter 8 – Attached Agencies

SEC. 20. Attached Agencies. – The following agencies are hereby attached to the Department:

xxxx

(12) Boy Scouts of the Philippines;

(13) Girl Scouts of the Philippines.

The administrative relationship of an attached agency to the department is defined in the Administrative Code of 1987
as follows:

BOOK IV
THE EXECUTIVE BRANCH

Chapter 7 – ADMINISTRATIVE RELATIONSHIP

SEC. 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or in other laws
defining the special relationships of particular agencies, administrative relationships shall be categorized and defined as
follows:

xxxx

(3) Attachment. – (a) This refers to the lateral relationship between the department or its equivalent and the attached
agency or corporation for purposes of policy and program coordination. The coordination may be accomplished by
having the department represented in the governing board of the attached agency or corporation, either as chairman or
as a member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency
comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the
department or its equivalent provide general policies through its representative in the board, which shall serve as the
framework for the internal policies of the attached corporation or agency. (Emphasis ours.)

As an attached agency, the BSP enjoys operational autonomy, as long as policy and program coordination is achieved by
having at least one representative of government in its governing board, which in the case of the BSP is the DECS
Secretary. In this sense, the BSP is not under government control or "supervision and control." Still this characteristic
does not make the attached chartered agency a private corporation covered by the constitutional proscription in
question.

Art. XII, Sec. 16 of the Constitution refers to "private corporations" created by government for proprietary or
economic/business purposes
35

At the outset, it should be noted that the provision of Section 16 in issue is found in Article XII of the Constitution,
entitled "National Economy and Patrimony." Section 1 of Article XII is quoted as follows:

SECTION 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are competitive in
both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum
opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations,
shall be encouraged to broaden the base of their ownership.

The scope and coverage of Section 16, Article XII of the Constitution can be seen from the aforementioned declaration of
state policies and goals which pertains to national economy and patrimony and the interests of the people in economic
development.

Section 16, Article XII deals with "the formation, organization, or regulation of private corporations,"52 which should be
done through a general law enacted by Congress, provides for an exception, that is: if the corporation is government
owned or controlled; its creation is in the interest of the common good; and it meets the test of economic viability. The
rationale behind Article XII, Section 16 of the 1987 Constitution was explained in Feliciano v. Commission on Audit,53 in
the following manner:

The Constitution emphatically prohibits the creation of private corporations except by a general law applicable to all
citizens. The purpose of this constitutional provision is to ban private corporations created by special charters, which
historically gave certain individuals, families or groups special privileges denied to other citizens.54 (Emphasis added.)

It may be gleaned from the above discussion that Article XII, Section 16 bans the creation of "private corporations" by
special law. The said constitutional provision should not be construed so as to prohibit the creation of public
corporations or a corporate agency or instrumentality of the government intended to serve a public interest or purpose,
which should not be measured on the basis of economic viability, but according to the public interest or purpose it
serves as envisioned by paragraph (2), of Article 44 of the Civil Code and the pertinent provisions of the Administrative
Code of 1987.

The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and Economic Viability

The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall
within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all
corporations, which are not government owned or controlled, are ipso facto to be considered private corporations as
there exists another distinct class of corporations or chartered institutions which are otherwise known as "public
corporations." These corporations are treated by law as agencies or instrumentalities of the government which are not
subject to the tests of ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship to the government or
any of its Departments or Offices.

Classification of Corporations Under Section 16, Article XII of the Constitution on National Economy and Patrimony

The dissenting opinion of Associate Justice Antonio T. Carpio, citing a line of cases, insists that the Constitution
recognizes only two classes of corporations: private corporations under a general law, and government-owned or
controlled corporations created by special charters.

We strongly disagree. Section 16, Article XII should not be construed so as to prohibit Congress from creating public
corporations. In fact, Congress has enacted numerous laws creating public corporations or government agencies or
instrumentalities vested with corporate powers. Moreover, Section 16, Article XII, which relates to National Economy
and Patrimony, could not have tied the hands of Congress in creating public corporations to serve any of the
constitutional policies or objectives.

In his dissent, Justice Carpio contends that this ponente introduces "a totally different species of corporation, which is
neither a private corporation nor a government owned or controlled corporation" and, in so doing, is missing the fact
36

that the BSP, "which was created as a non-stock, non-profit corporation, can only be either a private corporation or a
government owned or controlled corporation."

Note that in Boy Scouts of the Philippines v. National Labor Relations Commission, the BSP, under its former charter, was
regarded as both a government owned or controlled corporation with original charter and a "public corporation." The
said case pertinently stated:

While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private entities, we
believe that considering the character of its purposes and its functions, the statutory designation of the BSP as "a public
corporation" and the substantial participation of the Government in the selection of members of the National Executive
Board of the BSP, the BSP, as presently constituted under its charter, is a government-controlled corporation within the
meaning of Article IX (B) (2) (1) of the Constitution.

We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the BSP as one of the
attached agencies of the Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is
defined as referring to any of the various units of the Government including a department, bureau, office,
instrumentality, government-owned or -controlled corporation, or local government or distinct unit therein.
"Government instrumentality" is in turn defined in the 1987 Administrative Code in the following manner:

Instrumentality - refers to any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy usually through a charter. This term includes regulatory agencies,
chartered institutions and government-owned or controlled corporations.

The same Code describes a "chartered institution" in the following terms:

Chartered institution - refers to any agency organized or operating under a special charter, and vested by law with
functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges,
and the monetary authority of the State.

We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative
Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation with an original charter"
and as an "instrumentality" of the Government within the meaning of Article IX (B) (2) (1) of the Constitution. x x x.55
(Emphases supplied.)

The existence of public or government corporate or juridical entities or chartered institutions by legislative fiat distinct
from private corporations and government owned or controlled corporation is best exemplified by the 1987
Administrative Code cited above, which we quote in part:

Sec. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole, or a particular statute,
shall require a different meaning:

xxxx

(10) "Instrumentality" refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or controlled corporations.

xxxx

(12) "Chartered institution" refers to any agency organized or operating under a special charter, and vested by law with
functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges
and the monetary authority of the State.

(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-owned or
controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and
37

the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and
responsibilities with respect to such corporations.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government because of
reduction of the number of representatives of the government in the BSP Board, it does not follow that it also ceases to
be a government instrumentality as it still retains all the characteristics of the latter as an attached agency of the DECS
under the Administrative Code. Vesting corporate powers to an attached agency or instrumentality of the government is
not constitutionally prohibited and is allowed by the above-mentioned provisions of the Civil Code and the 1987
Administrative Code.

Economic Viability and Ownership and Control Tests Inapplicable to Public Corporations

As presently constituted, the BSP still remains an instrumentality of the national government. It is a public corporation
created by law for a public purpose, attached to the DECS pursuant to its Charter and the Administrative Code of 1987. It
is not a private corporation which is required to be owned or controlled by the government and be economically viable
to justify its existence under a special law.

The dissent of Justice Carpio also submits that by recognizing "a new class of public corporation(s)" created by special
charter that will not be subject to the test of economic viability, the constitutional provision will be circumvented.

However, a review of the Record of the 1986 Constitutional Convention reveals the intent of the framers of the highest
law of our land to distinguish between government corporations performing governmental functions and corporations
involved in business or proprietary functions:

THE PRESIDENT. Commissioner Foz is recognized.

MR. FOZ. Madam President, I support the proposal to insert "ECONOMIC VIABILITY" as one of the grounds for organizing
government corporations. x x x.

MR. OPLE. Madam President, the reason for this concern is really that when the government creates a corporation,
there is a sense in which this corporation becomes exempt from the test of economic performance. We know what
happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers’ money through
new equity infusions from the government and what is always invoked is the common good. x x x

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a
restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market
test so that they become viable. x x x.

xxxx

THE PRESIDENT. Commissioner Quesada is recognized.

MS. QUESADA. Madam President, may we be clarified by the committee on what is meant by economic viability?

THE PRESIDENT. Please proceed.

MR. MONSOD. Economic viability normally is determined by cost-benefit ratio that takes into consideration all benefits,
including economic external as well as internal benefits. These are what they call externalities in economics, so that
these are not strictly financial criteria. Economic viability involves what we call economic returns or benefits of the
country that are not quantifiable in financial terms. x x x.

xxxx

MS. QUESADA. So, would this particular formulation now really limit the entry of government corporations into activities
engaged in by corporations?

MR. MONSOD. Yes, because it is also consistent with the economic philosophy that this Commission approved – that
there should be minimum government participation and intervention in the economy.

MS. QUESDA. Sometimes this Commission would just refer to Congress to provide the particular requirements when the
government would get into corporations. But this time around, we specifically mentioned economic viability. x x x.

MR. VILLEGAS. Commissioner Ople will restate the reason for his introducing that amendment.
38

MR. OPLE. I am obliged to repeat what I said earlier in moving for this particular amendment jointly with Commissioner
Foz. During the past three decades, there had been a proliferation of government corporations, very few of which have
succeeded, and many of which are now earmarked by the Presidential Reorganization Commission for liquidation
because they failed the economic test. x x x.

xxxx

MS. QUESADA. But would not the Commissioner say that the reason why many of the government-owned or controlled
corporations failed to come up with the economic test is due to the management of these corporations, and not the
idea itself of government corporations? It is a problem of efficiency and effectiveness of management of these
corporations which could be remedied, not by eliminating government corporations or the idea of getting into state-
owned corporations, but improving management which our technocrats should be able to do, given the training and the
experience.

MR. OPLE. That is part of the economic viability, Madam President.

MS. QUESADA. So, is the Commissioner saying then that the Filipinos will benefit more if these government-controlled
corporations were given to private hands, and that there will be more goods and services that will be affordable and
within the reach of the ordinary citizens?

MR. OPLE. Yes. There is nothing here, Madam President, that will prevent the formation of a government corporation in
accordance with a special charter given by Congress. However, we are raising the standard a little bit so that, in the
future, corporations established by the government will meet the test of the common good but within that framework
we should also build a certain standard of economic viability.

xxxx

THE PRESIDENT. Commissioner Padilla is recognized.

MR. PADILLA. This is an inquiry to the committee. With regard to corporations created by a special charter for
government-owned or controlled corporations, will these be in the pioneer fields or in places where the private
enterprise does not or cannot enter? Or is this so general that these government corporations can compete with private
corporations organized under a general law?

MR. MONSOD. Madam President, x x x. There are two types of government corporations – those that are involved in
performing governmental functions, like garbage disposal, Manila waterworks, and so on; and those government
corporations that are involved in business functions. As we said earlier, there are two criteria that should be followed for
corporations that want to go into business. First is for government corporations to first prove that they can be efficient
in the areas of their proper functions. This is one of the problems now because they go into all kinds of activities but are
not even efficient in their proper functions. Secondly, they should not go into activities that the private sector can do
better.

MR. PADILLA. There is no question about corporations performing governmental functions or functions that are
impressed with public interest. But the question is with regard to matters that are covered, perhaps not exhaustively, by
private enterprise. It seems that under this provision the only qualification is economic viability and common good, but
shall government, through government-controlled corporations, compete with private enterprise?

MR. MONSOD. No, Madam President. As we said, the government should not engage in activities that private enterprise
is engaged in and can do better. x x x.56 (Emphases supplied.)

Thus, the test of economic viability clearly does not apply to public corporations dealing with governmental functions, to
which category the BSP belongs. The discussion above conveys the constitutional intent not to apply this constitutional
ban on the creation of public corporations where the economic viability test would be irrelevant. The said test would
only apply if the corporation is engaged in some economic activity or business function for the government.

It is undisputed that the BSP performs functions that are impressed with public interest. In fact, during the consideration
of the Senate Bill that eventually became Republic Act No. 7278, which amended the BSP Charter, one of the bill’s
sponsors, Senator Joey Lina, described the BSP as follows:

Senator Lina. Yes, I can only think of two organizations involving the masses of our youth, Mr. President, that should be
given this kind of a privilege – the Boy Scouts of the Philippines and the Girl Scouts of the Philippines. Outside of these
two groups, I do not think there are other groups similarly situated.
39

The Boy Scouts of the Philippines has a long history of providing value formation to our young, and considering how
huge the population of the young people is, at this point in time, and also considering the importance of having an
organization such as this that will inculcate moral uprightness among the young people, and further considering that the
development of these young people at that tender age of seven to sixteen is vital in the development of the country
producing good citizens, I believe that we can make an exception of the Boy Scouting movement of the Philippines from
this general prohibition against providing tax exemption and privileges.57

Furthermore, this Court cannot agree with the dissenting opinion which equates the changes introduced by Republic Act
No. 7278 to the BSP Charter as clear manifestation of the intent of Congress "to return the BSP to the private sector." It
was not the intent of Congress in enacting Republic Act No. 7278 to give up all interests in this basic youth organization,
which has been its partner in forming responsible citizens for decades.

In fact, as may be seen in the deliberation of the House Bills that eventually resulted to Republic Act No. 7278, Congress
worked closely with the BSP to rejuvenate the organization, to bring it back to its former glory reached under its original
charter, Commonwealth Act No. 111, and to correct the perceived ills introduced by the amendments to its Charter
under Presidential Decree No. 460. The BSP suffered from low morale and decrease in number because the Secretaries
of the different departments in government who were too busy to attend the meetings of the BSP’s National Executive
Board ("the Board") sent representatives who, as it turned out, changed from meeting to meeting. Thus, the Scouting
Councils established in the provinces and cities were not in touch with what was happening on the national level, but
they were left to implement what was decided by the Board.58

A portion of the legislators’ discussion is quoted below to clearly show their intent:

HON. DEL MAR. x x x I need not mention to you the value and the tremendous good that the Boy Scout Movement has
done not only for the youth in particular but for the country in general. And that is why, if we look around, our past and
present national leaders, prominent men in the various fields of endeavor, public servants in government offices, and
civic leaders in the communities all over the land, and not only in our country but all over the world many if not most of
them have at one time or another been beneficiaries of the Scouting Movement. And so, it is along this line, Mr.
Chairman, that we would like to have the early approval of this measure if only to pay back what we owe much to the
Scouting Movement. Now, going to the meat of the matter, Mr. Chairman, if I may just – the Scouting Movement was
enacted into law in October 31, 1936 under Commonwealth Act No. 111. x x x [W]e were acknowledged as the third
biggest scouting organization in the world x x x. And to our mind, Mr. Chairman, this erratic growth and this decrease in
membership [number] is because of the bad policy measures that were enunciated with the enactment or promulgation
by the President before of Presidential Decree No. 460 which we feel is the culprit of the ills that is flagging the Boy
Scout Movement today. And so, this is specifically what we are attacking, Mr. Chairman, the disenfranchisement of the
National Council in the election of the national board. x x x. And so, this is what we would like to be appraised of by the
officers of the Boy [Scouts] of the Philippines whom we are also confident, have the best interest of the Boy Scout
Movement at heart and it is in this spirit, Mr. Chairman, that we see no impediment towards working together, the Boy
Scout of the Philippines officers working together with the House of Representatives in coming out with a measure that
will put back the vigor and enthusiasm of the Boy Scout Movement. x x x.59 (Emphasis ours.)

The following is another excerpt from the discussion on the House version of the bill, in the Committee on Government
Enterprises:

HON. AQUINO: x x x Well, obviously, the two bills as well as the previous laws that have created the Boy Scouts of the
Philippines did not provide for any direct government support by way of appropriation from the national budget to
support the activities of this organization. The point here is, and at the same time they have been subjected to a
governmental intervention, which to their mind has been inimical to the objectives and to the institution per se, that is
why they are seeking legislative fiat to restore back the original mandate that they had under Commonwealth Act 111.
Such having been the experience in the hands of government, meaning, there has been negative interference on their
part and inasmuch as their mandate is coming from a legislative fiat, then shouldn’t it be, this rhetorical question,
shouldn’t it be better for this organization to seek a mandate from, let’s say, the government the Corporation Code of
the Philippines and register with the SEC as non-profit non-stock corporation so that government intervention could be
very very minimal. Maybe that’s a rhetorical question, they may or they may not answer, ano. I don’t know what would
be the benefit of a charter or a mandate being provided for by way of legislation versus a registration with the SEC under
the Corporation Code of the Philippines inasmuch as they don’t get anything from the government anyway insofar as
direct funding. In fact, the only thing that they got from government was intervention in their affairs. Maybe we can
solicit some commentary comments from the resource persons. Incidentally, don’t take that as an objection, I’m not
objecting. I’m all for the objectives of these two bills. It just occurred to me that since you have had very bad experience
in the hands of government and you will always be open to such possible intervention even in the future as long as you
have a legislative mandate or your mandate or your charter coming from legislative action.
40

xxxx

MR. ESCUDERO: Mr. Chairman, there may be a disadvantage if the Boy Scouts of the Philippines will be required to
register with the SEC. If we are registered with the SEC, there could be a danger of proliferation of scout organization.
Anybody can organize and then register with the SEC. If there will be a proliferation of this, then the organization will
lose control of the entire organization. Another disadvantage, Mr. Chairman, anybody can file a complaint in the SEC
against the Boy Scouts of the Philippines and the SEC may suspend the operation or freeze the assets of the organization
and hamper the operation of the organization. I don’t know, Mr. Chairman, how you look at it but there could be a
danger for anybody filing a complaint against the organization in the SEC and the SEC might suspend the registration
permit of the organization and we will not be able to operate.

HON. AQUINO: Well, that I think would be a problem that will not be exclusive to corporations registered with the SEC
because even if you are government corporation, court action may be taken against you in other judicial bodies because
the SEC is simply another quasi-judicial body. But, I think, the first point would be very interesting, the first point that
you raised. In effect, what you are saying is that with the legislative mandate creating your charter, in effect, you have
been given some sort of a franchise with this movement.

MR. ESCUDERO: Yes.

HON. AQUINO: Exclusive franchise of that movement?

MR. ESCUDERO: Yes.

HON. AQUINO: Well, that’s very well taken so I will proceed with other issues, Mr. Chairman. x x x.60 (Emphases added.)

Therefore, even though the amended BSP charter did away with most of the governmental presence in the BSP Board,
this was done to more strongly promote the BSP’s objectives, which were not supported under Presidential Decree No.
460. The BSP objectives, as pointed out earlier, are consistent with the public purpose of the promotion of the well-
being of the youth, the future leaders of the country. The amendments were not done with the view of changing the
character of the BSP into a privatized corporation. The BSP remains an agency attached to a department of the
government, the DECS, and it was not at all stripped of its public character.

The ownership and control test is likewise irrelevant for a public corporation like the BSP. To reiterate, the relationship
of the BSP, an attached agency, to the government, through the DECS, is defined in the Revised Administrative Code of
1987. The BSP meets the minimum statutory requirement of an attached government agency as the DECS Secretary sits
at the BSP Board ex officio, thus facilitating the policy and program coordination between the BSP and the DECS.

Requisites for Declaration of Unconstitutionality Not Met in this Case

The dissenting opinion of Justice Carpio improperly raised the issue of unconstitutionality of certain provisions of the
BSP Charter. Even if the parties were asked to Comment on the validity of the BSP charter by the Court, this alone does
not comply with the requisites for judicial review, which were clearly set forth in a recent case:

When questions of constitutional significance are raised, the Court can exercise its power of judicial review only if the
following requisites are present: (1) the existence of an actual and appropriate case; (2) the existence of personal and
substantial interest on the part of the party raising the constitutional question; (3) recourse to judicial review is made at
the earliest opportunity; and (4) the constitutional question is the lis mota of the case.61 (Emphasis added.)

Thus, when it comes to the exercise of the power of judicial review, the constitutional issue should be the very lis mota,
or threshold issue, of the case, and that it should be raised by either of the parties. These requirements would be
ignored under the dissent’s rather overreaching view of how this case should have been decided. True, it was the Court
that asked the parties to comment, but the Court cannot be the one to raise a constitutional issue. Thus, the Court
chooses to once more exhibit restraint in the exercise of its power to pass upon the validity of a law.

Re: the COA’s Jurisdiction

Regarding the COA’s jurisdiction over the BSP, Section 8 of its amended charter allows the BSP to receive contributions
or donations from the government. Section 8 reads:

Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the Philippines by
the Government or any of its subdivisions, branches, offices, agencies or instrumentalities shall be expended by the
Executive Board in pursuance of this Act.lawph!1
41

The sources of funds to maintain the BSP were identified before the House Committee on Government Enterprises while
the bill was being deliberated, and the pertinent portion of the discussion is quoted below:

MR. ESCUDERO. Yes, Mr. Chairman. The question is the sources of funds of the organization. First, Mr. Chairman, the
Boy Scouts of the Philippines do not receive annual allotment from the government. The organization has to raise its
own funds through fund drives and fund campaigns or fund raising activities. Aside from this, we have some revenue
producing projects in the organization that gives us funds to support the operation. x x x From time to time, Mr.
Chairman, when we have special activities we request for assistance or financial assistance from government agencies,
from private business and corporations, but this is only during special activities that the Boy Scouts of the Philippines
would conduct during the year. Otherwise, we have to raise our own funds to support the organization.62

The nature of the funds of the BSP and the COA’s audit jurisdiction were likewise brought up in said congressional
deliberations, to wit:

HON. AQUINO: x x x Insofar as this organization being a government created organization, in fact, a government
corporation classified as such, are your funds or your finances subjected to the COA audit?

MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not subjected. We don’t fall under the jurisdiction of the COA.

HON. AQUINO: All right, but before were you?

MR. ESCUDERO: No, Mr. Chairman.

MR. JESUS: May I? As historical backgrounder, Commonwealth Act 111 was written by then Secretary Jorge Vargas and
before and up to the middle of the Martial Law years, the BSP was receiving a subsidy in the form of an annual… a one
draw from the Sweepstakes. And, this was the case also with the Girl Scouts at the Anti-TB, but then this was… and the
Boy Scouts then because of this funding partly from government was being subjected to audit in the contributions being
made in the part of the Sweepstakes. But this was removed later during the Martial Law years with the creation of the
Human Settlements Commission. So the situation right now is that the Boy Scouts does not receive any funding from
government, but then in the case of the local councils and this legislative charter, so to speak, enables the local councils
even the national headquarters in view of the provisions in the existing law to receive donations from the government
or any of its instrumentalities, which would be difficult if the Boy Scouts is registered as a private corporation with the
Securities and Exchange Commission. Government bodies would be estopped from making donations to the Boy Scouts,
which at present is not the case because there is the Boy Scouts charter, this Commonwealth Act 111 as amended by PD
463.

xxxx

HON. AMATONG: Mr. Chairman, in connection with that.

THE CHAIRMAN: Yeah, Gentleman from Zamboanga.

HON. AMATONG: There is no auditing being made because there’s no money put in the organization, but how about
donated funds to this organization? What are the remedies of the donors of how will they know how their money are
being spent?

MR. ESCUDERO: May I answer, Mr. Chairman?

THE CHAIRMAN: Yes, gentleman.

MR. ESCUDERO: The Boy Scouts of the Philippines has an external auditor and by the charter we are required to submit
a financial report at the end of each year to the National Executive Board. So all the funds donated or otherwise is
accounted for at the end of the year by our external auditor. In this case the SGV.63

Historically, therefore, the BSP had been subjected to government audit in so far as public funds had been infused
thereto. However, this practice should not preclude the exercise of the audit jurisdiction of COA, clearly set forth under
the Constitution, which pertinently provides:

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 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
42

colleges and universities; (c) other government-owned or controlled corporations with original charters 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 of the granting institution to submit to such audit as a condition of subsidy
or equity. x x x. 64

Since the BSP, under its amended charter, continues to be a public corporation or a government instrumentality, we
come to the inevitable conclusion that it is subject to the exercise by the COA of its audit jurisdiction in the manner
consistent with the provisions of the BSP Charter.

WHEREFORE, premises considered, the instant petition for prohibition is DISMISSED.

SO ORDERED.

FACTS:
This case arose when the COA issued Resolution No. 99-011on August 19, 1999 ("the COA Resolution"), with the subject
"Defining the Commissions policy with respect to the audit of the Boy Scouts of the Philippines." In its whereas clauses,
the COA Resolution stated that the BSP was created as a public corporation under Commonwealth Act No. 111, as
amended by Presidential Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National
Labor Relations Commission, the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is
appropriately regarded as a government instrumentality under the 1987 Administrative Code." The COA Resolution also
cited its constitutional mandate under Section 2(1), Article IX (D).Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS RESOLVED, AS IT DOES
HEREBY RESOLVE,to conduct an annual financial audit of the Boy Scouts of the Philippines in accordance with generally
accepted auditing standards, and express an opinion on whether the financial statements which include the Balance
Sheet, the Income Statement and the Statement of Cash Flows present fairly its financial position and results of
operations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision, the Boy Scouts of the Philippines shall be
classified among the government corporations belonging to the Educational, Social, Scientific, Civic and Research
Sectorunder the Corporate Audit Office I, to be audited, similar to the subsidiary corporations, by employing the team
audit approach

ISSUE:
Does COA have jurisdiction over BSP?

HELD:
After looking at the legislative history of its amended charter and carefully studying the applicable laws and the
arguments of both parties, [the Supreme Court found] that the BSP is a public corporation and its funds are subject to
the COA's audit jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled "An Act to Create a Public
Corporation to be known as the Boy Scouts of the Philippines, and to Define its Powers and Purposes" created the BSP as
a "public corporation"

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under
Republic Act No. 7278, falls under the second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2)Other corporations, institutions and entities for public interest or purpose created by law; their personality begins as
soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member.

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under Article 45
of the Civil Code, which provides:
43

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or
recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning
partnerships.

The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a State policy
declared in Article II, Section 13 of the Constitution, which reads:

Section 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. It shall inculcate in the youth patriotism and nationalism,
and encourage their involvement in public and civic affairs.

Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a constitutional mandate,
comes within the class of "public corporations" defined by paragraph 2, Article 44 of the Civil Code and governed by the
law which creates it, pursuant to Article 45 of the same Code. DENIED.

2. Liban vs. Gordon [639 SCRA 709 (2011)]

DANTE V. LIBAN, REYNALDO M. BERNARDO and SALVADOR M. VIARI, Petitioners,

vs.
RICHARD J. GORDON, Respondent.
PHILIPPINE NATIONAL RED CROSS, Intervenor.

This resolves the Motion for Clarification and/or for Reconsideration1 filed on August 10, 2009 by respondent Richard J.
Gordon (respondent) of the Decision promulgated by this Court on July 15, 2009 (the Decision), the Motion for Partial
Reconsideration2 filed on August 27, 2009 by movant-intervenor Philippine National Red Cross (PNRC), and the latter’s
Manifestation and Motion to Admit Attached Position Paper3 filed on December 23, 2009.

In the Decision,4 the Court held that respondent did not forfeit his seat in the Senate when he accepted the
chairmanship of the PNRC Board of Governors, as "the office of the PNRC Chairman is not a government office or an
office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the
1987 Constitution."5 The Decision, however, further declared void the PNRC Charter "insofar as it creates the PNRC as a
private corporation" and consequently ruled that "the PNRC should incorporate under the Corporation Code and
register with the Securities and Exchange Commission if it wants to be a private corporation."6 The dispositive portion of
the Decision reads as follows:

WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross is not a government office
or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of
the 1987 Constitution. We also declare that Sections 1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the
Philippine National Red Cross, or Republic Act No. 95, as amended by Presidential Decree Nos. 1264 and 1643, are VOID
because they create the PNRC as a private corporation or grant it corporate powers.7

In his Motion for Clarification and/or for Reconsideration, respondent raises the following grounds: (1) as the issue of
constitutionality of Republic Act (R.A.) No. 95 was not raised by the parties, the Court went beyond the case in deciding
such issue; and (2) as the Court decided that Petitioners did not have standing to file the instant Petition, the
pronouncement of the Court on the validity of R.A. No. 95 should be considered obiter.8

Respondent argues that the validity of R.A. No. 95 was a non-issue; therefore, it was unnecessary for the Court to decide
on that question. Respondent cites Laurel v. Garcia,9 wherein the Court said that it "will not pass upon a constitutional
question although properly presented by the record if the case can be disposed of on some other ground" and goes on
to claim that since this Court, in the Decision, disposed of the petition on some other ground, i.e., lack of standing of
petitioners, there was no need for it to delve into the validity of R.A. No. 95, and the rest of the judgment should be
deemed obiter.

In its Motion for Partial Reconsideration, PNRC prays that the Court sustain the constitutionality of its Charter on the
following grounds:

A. THE ASSAILED DECISION DECLARING UNCONSTITUTIONAL REPUBLIC ACT NO. 95 AS AMENDED DEPRIVED
INTERVENOR PNRC OF ITS CONSTITUTIONAL RIGHT TO DUE PROCESS.
44

1. INTERVENOR PNRC WAS NEVER A PARTY TO THE INSTANT CONTROVERSY.

2. THE CONSTITUTIONALITY OF REPUBLIC ACT NO. 95, AS AMENDED WAS NEVER AN ISSUE IN THIS CASE.

B. THE CURRENT CHARTER OF PNRC IS PRESIDENTIAL DECREE NO. 1264 AND NOT REPUBLIC ACT NO. 95. PRESIDENTIAL
DECREE NO. 1264 WAS NOT A CREATION OF CONGRESS.

C. PNRC’S STRUCTURE IS SUI GENERIS; IT IS A CLASS OF ITS OWN. WHILE IT IS PERFORMING HUMANITARIAN FUNCTIONS
AS AN AUXILIARY TO GOVERNMENT, IT IS A NEUTRAL ENTITY SEPARATE AND INDEPENDENT OF GOVERNMENT
CONTROL, YET IT DOES NOT QUALIFY AS STRICTLY PRIVATE IN CHARACTER.

In his Comment and Manifestation10 filed on November 9, 2009, respondent manifests: (1) that he agrees with the
position taken by the PNRC in its Motion for Partial Reconsideration dated August 27, 2009; and (2) as of the writing of
said Comment and Manifestation, there was pending before the Congress of the Philippines a proposed bill entitled "An
Act Recognizing the PNRC as an Independent, Autonomous, Non-Governmental Organization Auxiliary to the Authorities
of the Republic of the Philippines in the Humanitarian Field, to be Known as The Philippine Red Cross."11

After a thorough study of the arguments and points raised by the respondent as well as those of movant-intervenor in
their respective motions, we have reconsidered our pronouncements in our Decision dated July 15, 2009 with regard to
the nature of the PNRC and the constitutionality of some provisions of the PNRC Charter, R.A. No. 95, as amended.

As correctly pointed out in respondent’s Motion, the issue of constitutionality of R.A. No. 95 was not raised by the
parties, and was not among the issues defined in the body of the Decision; thus, it was not the very lis mota of the case.
We have reiterated the rule as to when the Court will consider the issue of constitutionality in Alvarez v. PICOP
Resources, Inc.,12 thus:

This Court will not touch the issue of unconstitutionality unless it is the very lis mota. It is a well-established rule that a
court should not pass upon a constitutional question and decide a law to be unconstitutional or invalid, unless such
question is raised by the parties and that when it is raised, if the record also presents some other ground upon which the
court may [rest] its judgment, that course will be adopted and the constitutional question will be left for consideration
until such question will be unavoidable.13

Under the rule quoted above, therefore, this Court should not have declared void certain sections of R.A. No. 95, as
amended by Presidential Decree (P.D.) Nos. 1264 and 1643, the PNRC Charter. Instead, the Court should have exercised
judicial restraint on this matter, especially since there was some other ground upon which the Court could have based
its judgment. Furthermore, the PNRC, the entity most adversely affected by this declaration of unconstitutionality, which
was not even originally a party to this case, was being compelled, as a consequence of the Decision, to suddenly
reorganize and incorporate under the Corporation Code, after more than sixty (60) years of existence in this country.

Its existence as a chartered corporation remained unchallenged on ground of unconstitutionality notwithstanding that
R.A. No. 95 was enacted on March 22, 1947 during the effectivity of the 1935 Constitution, which provided for a
proscription against the creation of private corporations by special law, to wit:

SEC. 7. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private
corporations, unless such corporations are owned and controlled by the Government or any subdivision or
instrumentality thereof. (Art. XIV, 1935 Constitution.)

Similar provisions are found in Article XIV, Section 4 of the 1973 Constitution and Article XII, Section 16 of the 1987
Constitution. The latter reads:

SECTION 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of
private corporations. Government-owned or controlled corporations may be created or established by special charters
in the interest of the common good and subject to the test of economic viability.

Since its enactment, the PNRC Charter was amended several times, particularly on June 11, 1953, August 16, 1971,
December 15, 1977, and October 1, 1979, by virtue of R.A. No. 855, R.A. No. 6373, P.D. No. 1264, and P.D. No. 1643,
respectively. The passage of several laws relating to the PNRC’s corporate existence notwithstanding the effectivity of
the constitutional proscription on the creation of private corporations by law, is a recognition that the PNRC is not
strictly in the nature of a private corporation contemplated by the aforesaid constitutional ban.

A closer look at the nature of the PNRC would show that there is none like it not just in terms of structure, but also in
terms of history, public service and official status accorded to it by the State and the international community. There is
merit in PNRC’s contention that its structure is sui generis.
45

The PNRC succeeded the chapter of the American Red Cross which was in existence in the Philippines since 1917. It was
created by an Act of Congress after the Republic of the Philippines became an independent nation on July 6, 1946 and
proclaimed on February 14, 1947 its adherence to the Convention of Geneva of July 29, 1929 for the Amelioration of the
Condition of the Wounded and Sick of Armies in the Field (the "Geneva Red Cross Convention"). By that action the
Philippines indicated its desire to participate with the nations of the world in mitigating the suffering caused by war and
to establish in the Philippines a voluntary organization for that purpose and like other volunteer organizations
established in other countries which have ratified the Geneva Conventions, to promote the health and welfare of the
people in peace and in war.14

The provisions of R.A. No. 95, as amended by R.A. Nos. 855 and 6373, and further amended by P.D. Nos. 1264 and 1643,
show the historical background and legal basis of the creation of the PNRC by legislative fiat, as a voluntary organization
impressed with public interest. Pertinently R.A. No. 95, as amended by P.D. 1264, provides:

WHEREAS, during the meeting in Geneva, Switzerland, on 22 August 1894, the nations of the world unanimously agreed
to diminish within their power the evils inherent in war;

WHEREAS, more than one hundred forty nations of the world have ratified or adhered to the Geneva Conventions of
August 12, 1949 for the Amelioration of the Condition of the Wounded and Sick of Armed Forces in the Field and at Sea,
The Prisoners of War, and The Civilian Population in Time of War referred to in this Charter as the Geneva Conventions;

WHEREAS, the Republic of the Philippines became an independent nation on July 4, 1946, and proclaimed on February
14, 1947 its adherence to the Geneva Conventions of 1929, and by the action, indicated its desire to participate with the
nations of the world in mitigating the suffering caused by war and to establish in the Philippines a voluntary organization
for that purpose as contemplated by the Geneva Conventions;

WHEREAS, there existed in the Philippines since 1917 a chapter of the American National Red Cross which was
terminated in view of the independence of the Philippines; and

WHEREAS, the volunteer organizations established in other countries which have ratified or adhered to the Geneva
Conventions assist in promoting the health and welfare of their people in peace and in war, and through their mutual
assistance and cooperation directly and through their international organizations promote better understanding and
sympathy among the people of the world;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the
Constitution as Commander-in-Chief of all the Armed Forces of the Philippines and pursuant to Proclamation No. 1081
dated September 21, 1972, and General Order No. 1 dated September 22, 1972, do hereby decree and order that
Republic Act No. 95, Charter of the Philippine National Red Cross (PNRC) as amended by Republic Acts No. 855 and 6373,
be further amended as follows:

Section 1. There is hereby created in the Republic of the Philippines a body corporate and politic to be the voluntary
organization officially designated to assist the Republic of the Philippines in discharging the obligations set forth in the
Geneva Conventions and to perform such other duties as are inherent upon a national Red Cross Society. The national
headquarters of this Corporation shall be located in Metropolitan Manila. (Emphasis supplied.)

The significant public service rendered by the PNRC can be gleaned from Section 3 of its Charter, which provides:

Section 3. That the purposes of this Corporation shall be as follows:

(a) To provide volunteer aid to the sick and wounded of armed forces in time of war, in accordance with the spirit of and
under the conditions prescribed by the Geneva Conventions to which the Republic of the Philippines proclaimed its
adherence;

(b) For the purposes mentioned in the preceding sub-section, to perform all duties devolving upon the Corporation as a
result of the adherence of the Republic of the Philippines to the said Convention;

(c) To act in matters of voluntary relief and in accordance with the authorities of the armed forces as a medium of
communication between people of the Republic of the Philippines and their Armed Forces, in time of peace and in time
of war, and to act in such matters between similar national societies of other governments and the Governments and
people and the Armed Forces of the Republic of the Philippines;
46

(d) To establish and maintain a system of national and international relief in time of peace and in time of war and apply
the same in meeting and emergency needs caused by typhoons, flood, fires, earthquakes, and other natural disasters
and to devise and carry on measures for minimizing the suffering caused by such disasters;

(e) To devise and promote such other services in time of peace and in time of war as may be found desirable in
improving the health, safety and welfare of the Filipino people;

(f) To devise such means as to make every citizen and/or resident of the Philippines a member of the Red Cross.

The PNRC is one of the National Red Cross and Red Crescent Societies, which, together with the International Committee
of the Red Cross (ICRC) and the IFRC and RCS, make up the International Red Cross and Red Crescent Movement (the
Movement). They constitute a worldwide humanitarian movement, whose mission is:

[T]o prevent and alleviate human suffering wherever it may be found, to protect life and health and ensure respect for
the human being, in particular in times of armed conflict and other emergencies, to work for the prevention of disease
and for the promotion of health and social welfare, to encourage voluntary service and a constant readiness to give help
by the members of the Movement, and a universal sense of solidarity towards all those in need of its protection and
assistance.15

The PNRC works closely with the ICRC and has been involved in humanitarian activities in the Philippines since 1982.
Among others, these activities in the country include:

1. Giving protection and assistance to civilians displaced or otherwise affected by armed clashes between the
government and armed opposition groups, primarily in Mindanao;

2. Working to minimize the effects of armed hostilities and violence on the population;

3. Visiting detainees; and

4. Promoting awareness of international humanitarian law in the public and private sectors.16

National Societies such as the PNRC act as auxiliaries to the public authorities of their own countries in the humanitarian
field and provide a range of services including disaster relief and health and social programmes.

The International Federation of Red Cross (IFRC) and Red Crescent Societies (RCS) Position Paper,17 submitted by the
PNRC, is instructive with regard to the elements of the specific nature of the National Societies such as the PNRC, to wit:

National Societies, such as the Philippine National Red Cross and its sister Red Cross and Red Crescent Societies, have
certain specificities deriving from the 1949 Geneva Convention and the Statutes of the International Red Cross and Red
Crescent Movement (the Movement). They are also guided by the seven Fundamental Principles of the Red Cross and
Red Crescent Movement: Humanity, Impartiality, Neutrality, Independence, Voluntary Service, Unity and Universality.

A National Society partakes of a sui generis character. It is a protected component of the Red Cross movement under
Articles 24 and 26 of the First Geneva Convention, especially in times of armed conflict. These provisions require that the
staff of a National Society shall be respected and protected in all circumstances. Such protection is not ordinarily
afforded by an international treaty to ordinary private entities or even non-governmental organisations (NGOs). This sui
generis character is also emphasized by the Fourth Geneva Convention which holds that an Occupying Power cannot
require any change in the personnel or structure of a National Society. National societies are therefore organizations
that are directly regulated by international humanitarian law, in contrast to other ordinary private entities, including
NGOs.

xxxx

In addition, National Societies are not only officially recognized by their public authorities as voluntary aid societies,
auxiliary to the public authorities in the humanitarian field, but also benefit from recognition at the International level.
This is considered to be an element distinguishing National Societies from other organisations (mainly NGOs) and other
forms of humanitarian response.

x x x. No other organisation belongs to a world-wide Movement in which all Societies have equal status and share equal
responsibilities and duties in helping each other. This is considered to be the essence of the Fundamental Principle of
Universality.
47

Furthermore, the National Societies are considered to be auxiliaries to the public authorities in the humanitarian field. x
x x.

The auxiliary status of [a] Red Cross Society means that it is at one and the same time a private institution and a public
service organization because the very nature of its work implies cooperation with the authorities, a link with the State. In
carrying out their major functions, Red Cross Societies give their humanitarian support to official bodies, in general
having larger resources than the Societies, working towards comparable ends in a given sector.

x x x No other organization has a duty to be its government’s humanitarian partner while remaining independent.18
(Emphases ours.)

It is in recognition of this sui generis character of the PNRC that R.A. No. 95 has remained valid and effective from the
time of its enactment in March 22, 1947 under the 1935 Constitution and during the effectivity of the 1973 Constitution
and the 1987 Constitution.

The PNRC Charter and its amendatory laws have not been questioned or challenged on constitutional grounds, not even
in this case before the Court now.

In the Decision, the Court, citing Feliciano v. Commission on Audit,19 explained that the purpose of the constitutional
provision prohibiting Congress from creating private corporations was to prevent the granting of special privileges to
certain individuals, families, or groups, which were denied to other groups. Based on the above discussion, it can be
seen that the PNRC Charter does not come within the spirit of this constitutional provision, as it does not grant special
privileges to a particular individual, family, or group, but creates an entity that strives to serve the common good.

Furthermore, a strict and mechanical interpretation of Article XII, Section 16 of the 1987 Constitution will hinder the
State in adopting measures that will serve the public good or national interest. It should be noted that a special law, R.A.
No. 9520, the Philippine Cooperative Code of 2008, and not the general corporation code, vests corporate power and
capacities upon cooperatives which are private corporations, in order to implement the State’s avowed policy.

In the Decision of July 15, 2009, the Court recognized the public service rendered by the PNRC as the government’s
partner in the observance of its international commitments, to wit:

The PNRC is a non-profit, donor-funded, voluntary, humanitarian organization, whose mission is to bring timely,
effective, and compassionate humanitarian assistance for the most vulnerable without consideration of nationality, race,
religion, gender, social status, or political affiliation. The PNRC provides six major services: Blood Services, Disaster
Management, Safety Services, Community Health and Nursing, Social Services and Voluntary Service.

The Republic of the Philippines, adhering to the Geneva Conventions, established the PNRC as a voluntary organization
for the purpose contemplated in the Geneva Convention of 27 July 1929. x x x.20 (Citations omitted.)

So must this Court recognize too the country’s adherence to the Geneva Convention and respect the unique status of
the PNRC in consonance with its treaty obligations. The Geneva Convention has the force and effect of law.21 Under the
Constitution, the Philippines adopts the generally accepted principles of international law as part of the law of the
land.22 This constitutional provision must be reconciled and harmonized with Article XII, Section 16 of the Constitution,
instead of using the latter to negate the former.

By requiring the PNRC to organize under the Corporation Code just like any other private corporation, the Decision of
July 15, 2009 lost sight of the PNRC’s special status under international humanitarian law and as an auxiliary of the State,
designated to assist it in discharging its obligations under the Geneva Conventions. Although the PNRC is called to be
independent under its Fundamental Principles, it interprets such independence as inclusive of its duty to be the
government’s humanitarian partner. To be recognized in the International Committee, the PNRC must have an
autonomous status, and carry out its humanitarian mission in a neutral and impartial manner.

However, in accordance with the Fundamental Principle of Voluntary Service of National Societies of the Movement, the
PNRC must be distinguished from private and profit-making entities. It is the main characteristic of National Societies
that they "are not inspired by the desire for financial gain but by individual commitment and devotion to a humanitarian
purpose freely chosen or accepted as part of the service that National Societies through its volunteers and/or members
render to the Community."23

The PNRC, as a National Society of the International Red Cross and Red Crescent Movement, can neither "be classified as
an instrumentality of the State, so as not to lose its character of neutrality" as well as its independence, nor strictly as a
private corporation since it is regulated by international humanitarian law and is treated as an auxiliary of the State.24
48

Based on the above, the sui generis status of the PNRC is now sufficiently established.1âwphi1 Although it is neither a
subdivision, agency, or instrumentality of the government, nor a government-owned or -controlled corporation or a
subsidiary thereof, as succinctly explained in the Decision of July 15, 2009, so much so that respondent, under the
Decision, was correctly allowed to hold his position as Chairman thereof concurrently while he served as a Senator, such
a conclusion does not ipso facto imply that the PNRC is a "private corporation" within the contemplation of the provision
of the Constitution, that must be organized under the Corporation Code. As correctly mentioned by Justice Roberto A.
Abad, the sui generis character of PNRC requires us to approach controversies involving the PNRC on a case-to-case
basis.

In sum, the PNRC enjoys a special status as an important ally and auxiliary of the government in the humanitarian field in
accordance with its commitments under international law. This Court cannot all of a sudden refuse to recognize its
existence, especially since the issue of the constitutionality of the PNRC Charter was never raised by the parties. It bears
emphasizing that the PNRC has responded to almost all national disasters since 1947, and is widely known to provide a
substantial portion of the country’s blood requirements. Its humanitarian work is unparalleled. The Court should not
shake its existence to the core in an untimely and drastic manner that would not only have negative consequences to
those who depend on it in times of disaster and armed hostilities but also have adverse effects on the image of the
Philippines in the international community. The sections of the PNRC Charter that were declared void must therefore
stay.

WHEREFORE, premises considered, respondent Richard J. Gordon’s Motion for Clarification and/or for Reconsideration
and movant-intervenor PNRC’s Motion for Partial Reconsideration of the Decision in G.R. No. 175352 dated July 15, 2009
are GRANTED. The constitutionality of R.A. No. 95, as amended, the charter of the Philippine National Red Cross, was not
raised by the parties as an issue and should not have been passed upon by this Court. The structure of the PNRC is sui
generis¸ being neither strictly private nor public in nature. R.A. No. 95 remains valid and constitutional in its entirety. The
dispositive portion of the Decision should therefore be MODIFIED by deleting the second sentence, to now read as
follows:

WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross is not a government office
or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of
the 1987 Constitution.

SO ORDERED.

FACTS:
Respondent filed a motion for partial reconsideration on a Supreme Court decision which ruled that being chairman of
the Philippine National Red Cross (PNRC) did not disqualify him from being a Senator, and that the charter creating PNRC
is unconstitutional as the PNRC is a private corporation and the Congress is precluded by the Constitution to create such.

The Court then ordered the PNRC to incorporate itself with the SEC as a private corporation. Respondent takes
exception to the second part of the ruling, which addressed the constitutionality of the statute creating the PNRC as a
private corporation. Respondent avers that the issue of constitutionality was only touched upon in the issue of locus
standi. It is a rule that the constitutionality will not be touched upon if it is not the lis mota of the case.

ISSUE:
Was it proper for the Court to have ruled on the constitutionality of the PNRC statute?

HELD:
In the case at bar, the constitutionality of the PNRC statute was raised in the issue of standing. As such, the Court should
not have declared certain provisions of such as unconstitutional. On the substantive issue, the PNRC is sui generis. It is
unlike the private corporations that the Constitution wants to prevent Congress from creating. First, the PNRC is not
organized for profit. It is an organization dedicated to assist victims of war and administer relief to those who have been
devastated by calamities, among others. It is entirely devoted to public service. It is not covered by the prohibition since
the Constitution aims to eliminate abuse by the Congress, which tend to favor personal gain. Secondly, the PNRC was
created in order to participate in the mitigation of the effects of war, as embodied in the Geneva Convention. The
creation of the PNRC is compliance with international treaty obligations. Lastly, the PNRC is a National Society, an
auxiliary of the government. It is not like government instrumentalities and GOCC.

The PNRC is regulated directly by international humanitarian law, as opposed to local law regulating the other
mentioned entities. As such, it was improper for the Court to have declared certain portions of the PNRC statute as
unconstitutional. However, it is the stand of Justice Carpio that there is no mandate for the Government to create a
National Society to this effect. He also raises the fact that the PNRC is not sui generis in being a private corporation
organized for public needs. Justice Abad is of the opinion that the PNRC is neither private or governmental, hence it was
within the power of Congress to create.
49

It has been consistently held in Jurisprudence that the Court should exercise judicial restraint when it comes to issues of
constitutionality where it is not the lis mota of the case.

3. Shipside, Inc. vs. Court of Appeals (G.R. No. 143377, February 20, 2001)

SHIPSIDE INCORPORATED, petitioner,

vs.
THE HON. COURT OF APPEALS [Special Former Twelfth Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San
Fernando City, La Union) & The REPUBLIC OF THE PHILIPPINES, respondents.

Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the 1997 Rules on Civil
Procedure against the resolutions of the Court of Appeals promulgated on November 4, 1999 and May 23, 2000, which
respectively, dismissed a petition for certiorari and prohibition and thereafter denied a motion for reconsideration.

The antecedent facts are, undisputed:

On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four parcels of land
- Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with 1,583 square meters; and Lot 4, with 508
square meters.

On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra Llana, Regina
Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115 OCT No.0-381 on August 10, 1960.
Consequently, Transfer Certificate No. T-4304 was issued in favor of the buyers covering Lots No. 1 and 4.

Lot No. 1 is described as:

A parcel of land (Lot 1, Plan PSU-159621, L.R. Case No. N-361; L.R.C. Record No. N-14012, situated in the Barrio of Poro,
Municipality of San Fernando, Province of La Union, bounded on the NE, by the Foreshore; on the SE, by Public Land and
property of the Benguet Consolidated Mining Company; on the SW, by properties of Rafael Galvez (US Military
Reservation Camp Wallace) and Policarpio Munar; and on the NW, by an old Barrio Road. Beginning at a point marked
"1" on plan, being S. 74 deg. 11'W., 2670.36 from B.L.L.M. 1, San Fernando, thence

S. 66 deg. 19'E., 134.95 m. to point 2; S.14 deg. 57'W., 11.79 m. to point 3;

S. 12 deg. 45'W., 27.00 m. to point 4; S. 12 deg. 45'W, 6.90 m. to point 5;

N. 69 deg., 32'W., 106.00 m. to point 6; N. 52 deg., 21'W., 36.85 m. to point 7;

N. 21 deg. 31'E., 42.01 m. to the point of beginning; containing an area of SIX THOUSAND FIVE HUNDRED AND SEVENTY -
ONE (6,571) SQUARE METERS, more or less. All points referred to are indicated on the plan; and marked on the ground;
bearings true, date of survey, February 4-21, 1957.

Lot No. 4 has the following technical description:

A parcel of land (Lot 4, Plan PSU-159621, L.R. Case No. N-361 L.R.C. Record No. N-14012), situated in the Barrio of Poro,
Municipality of San Fernando, La Union. Bounded on the SE by the property of the Benguet Consolidated Mining
Company; on the S. by property of Pelagia Carino; and on the NW by the property of Rafael Galvez (US Military
Reservation, Camp Wallace). Beginning at a point marked "1" on plan, being S. deg. 24'W. 2591.69 m. from B.L.L.M. 1,
San Fernando, thence S. 12 deg. 45'W., 73.03 m. to point 2; N. 79 deg. 59'W., 13.92 m. to point 3; N. 23 deg. 26'E., 75.00
m. to the point of beginning; containing an area of FIVE HUNDED AND EIGHT (508) SQUARE METERS, more or less. All
points referred to are indicated in the plan and marked on the ground; bearings true, date of survey, February 4-21,
1957.

On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining Company. The deed of sale
covering the aforesaid property was inscribed as Entry No. 9173 on TCT No. T-4304. Subsequently, Transfer Certificate
No. T-4314 was issued in the name of Lepanto Consolidated Mining Company as owner of Lots No. 1 and 4.

On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First Instance of La Union,
Second Judicial District, issued an Order in Land Registration Case No. N- 361 (LRC Record No. N-14012) entitled "Rafael
Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest; Republic of the Philippines, Movant" declaring OCT No. 0-381 of
the Registry of Deeds for the Province of La Union issued in the name of Rafael Galvez, null and void, and ordered the
cancellation thereof.
50

The Order pertinently provided: Accordingly, with the foregoing, and without prejudice on the rights of incidental parties
concerned herein to institute their respective appropriate actions compatible with whatever cause they may have, it is
hereby declared and this court so holds that both proceedings in Land Registration Case No. N-361 and Original
Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in virtue thereof and registered in the
name of Rafael Galvez, are null and void; the Register of Deeds for the Province of La Union is hereby ordered to cancel
the said original certificate and/or such other certificates of title issued subsequent thereto having reference to the
same parcels of land; without pronouncement as to costs.

On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1 and 4, with the deed
being entered in TCT No. 4314 as entry No. 12381. Transfer Certificate of Title No. T-5710 was thus issued in favor of the
petitioner which starting since then exercised proprietary rights over Lots No. 1 and 4.

In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by the trial court declaring
OCT No. 0-381 null and void. The motion was denied on January 25, 1965. On appeal, the Court of Appeals ruled in favor
of the Republic of the Philippines in a Resolution promulgated on August 14, 1973 in CA-G.R. No. 36061-R. 1âwphi1.nêt

Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated August 14, 1973 became
final and executory on October 23, 1973.

On April 22, 1974, the trial court in L.R.C. Case No. N-361 issued a writ of execution of the judgment which was served
on the Register of Deeds, San Fernando, La Union on April 29, 1974.

Twenty four long years, thereafter, on January 14, 1999, the Office of the Solicitor General received a letter dated
January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development Corporation, stating
that the aforementioned orders and decision of the trial court in L.R.C. No. N-361 have not been executed by the
Register of Deeds, San Fernando, La Union despite receipt of the writ of execution.

On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and cancellation of titles
before the Regional Trial Court of the First Judicial Region (Branch 26, San Fernando, La Union) docketed therein as Civil
Case No. 6346 entitled, "Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, represented by Teresita Tan,
Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat, Regina Bustos, Shipside Incorporated and the Register of Deeds of La
Union, Defendants."

The evidence shows that the impleaded defendants (except the Register of Deeds of the province of La Union) are the
successors-in- interest of Rafael Galvez (not Reynaldo Galvez as alleged by the Solicitor General) over the property
covered by OCT No. 0-381, namely: (a) Shipside Inc. which is presently the registered owner in fee simple of Lots No. 1
and 4 covered by TCT No. T -5710, with a total area of 7,079 square meters; (b) Elisa Bustos, Jesusito Galvez, and
Teresita Tan who are the registered owners of Lot No. 2 of OCT No. 0-381; and (c) Elisa Bustos, Filipina Mamaril, Regina
Bustos and Erlinda Balatbat who are the registered owners of Lot No. 3 of OCT No. 0-381, now covered by TCT No. T-
4916, with an area of 1,583 square meters.

In its complaint in Civil Case No.6346, the Solicitor General argued that since the trial court in LRC Case No. 361 had
ruled and declared OCT No. 0-381 to be null and void, which ruling was subsequently affirmed by the Court of Appeals,
the defendants-successors-in-interest of Rafael Galvez have no valid title over the property covered by OCT No. 0-381,
and the subsequent Torrens titles issued in their names should be consequently cancelled.

On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following grounds: (1) the complaint
stated no cause of action because only final and executory judgments may be subject of an action for revival of
judgment; (2) .the plaintiff is not the real party-in-interest because the real property covered by the Torrens titles sought
to be cancelled, allegedly part of Camp Wallace (Wallace Air Station), were under the ownership and administration of
the Bases Conversion Development Authority (BCDA) under Republic Act No. 7227; (3) plaintiff's cause of action is
barred by prescription; {4) twenty-five years having lapsed since the issuance of the writ of execution, no action for
revival of judgment may be instituted because under Paragraph 3 of Article 1144 of the Civil Code, such action may be
brought only within ten (10) years from the time the judgment had been rendered.

An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999, alleging among others,
that: (1) the real party-in-interest is the Republic of the Philippines; and (2) prescription does not run against the State.

On August 31, 1999, the trial court denied petitioner's motion to dismiss and on October 14, 1999, its motion for
reconsideration was likewise turned down.
51

On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of Appeals, docketed
therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court denying its motion to dismiss and its
subsequent motion for reconsideration were issued in excess of jurisdiction.

On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on the ground that the
verification and certification in the petition, tinder the signature of Lorenzo Balbin, Jr., was made without authority,
there being no proof therein that Balbin was authorized to institute the petition for and in behalf and of petitioner.

On May 23, 2000, the Court of Appeals denied petitioner's, motion for reconsideration on the grounds that: (1) a
complaint filed on behalf of a corporation can be made only if authorized by its Board of Directors, and in the absence
thereof, the petition cannot prosper and be granted due course; and (2) petitioner was unable to show that it had
substantially complied with the rule requiring proof of authority to institute an action or proceeding.

Hence, the instant petition.

In support of its petition, Shipside, Inc. asseverates that:

1. The Honorable Court of Appeals gravely abused its discretion in dismissing the petition when it made a conclusive
legal presumption that Mr. Balbin had no authority to sign the petition despite the clarity of laws, jurisprudence and
Secretary's certificate to the contrary;

2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in effect affirming the grave
abuse of discretion committed by the lower court when it refused to dismiss the 1999 Complaint for Revival of a 1973
judgment, in violation of clear laws and jurisprudence.

Petitioner likewise adopted the arguments it raised in the petition' and comment/reply it filed with the Court of Appeals,
attached to its petition as Exhibit "L" and "N", respectively.

In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the following
considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the verification and certification of non-
forum shopping portion of the petition, failed to show proof of his authorization to institute the petition for certiorari
and prohibition with the Court of Appeals, thus the latter court acted correctly in dismissing the same; (2) the real party-
in-interest in the case at bar being the Republic of the Philippines, its claims are imprescriptible.

In order to preserve the rights of herein parties, the Court issued a temporary restraining order on June 26, 2000
enjoining the trial court from conducting further proceedings in Civil Case No. 6346.

The issues posited in this case are: (1) whether or not an authorization from petitioner's Board of Directors is still
required in order for its resident manager to institute or commence a legal action for and in behalf of the corporation;
and (2) whether or not the Republic of the Philippines can maintain the action for revival of judgment herein.

We find for petitioner.

Anent the first issue:

The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the resident manager for
petitioner, who was the signatory in the verification and certification on non-forum shopping, failed to show proof that
he was authorized by petitioner's board of directors to file such a petition.

A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation Code and
those that are implied or incidental to its existence. In turn, a corporation exercises said powers through its board of
directors and/or its duly authorized officers and agents. Thus, it has been observed that the power of a corporation to
sue and be sued in any court is lodged with the board of directors that exercises its corporate powers (Premium Marble
Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board
of directors.

It is undisputed that on October 21, 1999, the time petitioner's Resident Manager Balbin filed the petition, there was no
proof attached thereto that Balbin was authorized to sign the verification and non-forum shopping certification therein,
as a consequence of which the petition was dismissed by the Court of Appeals. However, subsequent to such dismissal,
petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its "board secretary stating
that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been authorized by petitioner's board
of directors to file said petition.
52

The Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional (Uy
v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a condition affecting the form of the pleading,
non-compliance with which does not necessarily render the pleading fatally defective. Verification is simply intended to
secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a
matter of speculation, and that the pleading is filed in good faith. The court may order the correction of the pleading if
verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with in order that the ends of justice may thereby be served.

On the other hand, the lack of certification, against forum shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of civil Procedure provides that the failure of the
petitioner to submit the required documents that should accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against forum
shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.

In certain exceptional circumstances, however, the Court has allowed the belated filing of the certification. In Loyola v.
Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the filing of the certification one day after the filing
of an election protest as substantial compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et.
al. (264 SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the dismissal of the petition. In
"Uy v. LandBank, supra, the Court had dismissed Uy's petition for lack of verification and certification against non-forum
shopping. However, it subsequently reinstated the petition after Uy submitted a motion to admit certification and non-
forum shopping certification. In all these cases, there were special circumstances or compelling "reasons that justified
the relaxation of the rule requiring verification and certification on non-forum shopping.

In the instant case, the merits of petitioner' case should be considered special circumstances or compelling reasons that
justify tempering the requirement in regard to the certificate of non-forum shopping. Moreover, in Loyola, Roadway,
and Uy, the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. With more
reason should we allow the instant petition since petitioner herein did submit a certification on non-forum shopping,
failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a
secretary's certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise, mitigates this
oversight.

It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory,
nonetheless the requirements must not be interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum-shopping (Bernardo v. NLRC, .255 SCRA 108 [1996]). Lastly, technical rules of procedure
should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable objective, the
granting of substantial justice is an even more urgent ideal.

Now to the second issue:

The action instituted by the Solicitor General in the trial court is one for revival of judgment which is governed by Article
1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil Procedure. Article 1144(3) provides that an
action upon a judgment "must be brought within 10 years from the time the right of action accrues." On the other hand,
Section 6, Rule 39 provides that a final and executory judgment or order may be executed on motion within five (5)
years from the date of its entry, but that after the lapse of such time, and before it is barred by the statute of limitations,
a judgment may be enforced by action. Taking these two provisions into consideration, it is plain that an action for
revival of judgment must be brought within ten years from the time said judgment becomes final.

From the records of this, case, it is clear that the judgment sought to be revived became final on October 23, 1973. On
the other hand, the action for revival of judgment was instituted only in 1999, or more than twenty-five (25) years after
the judgment had become final. Hence, the action is barred by extinctive prescription considering that 'such an action
can be instituted only within ten (10) years from the time the cause of action accrues.

The Solicitor General, nonetheless, argues that the State's cause , of action in the cancellation of the land title issued to
petitioner's predecessor-in-interest is imprescriptible because it is included in Camp Wallace, which belongs to the
government.

The argument is misleading.

While it is true that prescription does not run against the State, the same may not be invoked by the government in this
case since it is no longer interested in the subject matter. While Camp Wallace may have belonged to the government at
53

the time Rafael Galvez's title was ordered cancelled in Land Registration Case No. N-361, the same no longer holds true
today.

Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, created the Bases
Conversion and Development Authority Section 4 pertinently provides:

Section 4. Purposes of the Conversion Authority. - The Conversion Authority shall have the following purposes:

(a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air Station, O'Donnell
Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and those
portions of Metro Manila military camps which may be transferred to it by the President;

Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:

Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development Authority. - All areas covered
by the Wallace Air Station as embraced and defined by the 1947 Military Bases Agreement between the Philippines and
the United States of America, as amended, excluding those covered by Presidential Proclamations and some 25-hectare
area for the radar and communication station of the Philippine Air Force, are hereby transferred to the Bases Conversion
Development Authority ...

With the transfer of Camp Wallace to the BCDA, the government no longer has a right or interest to protect.
Consequently, the Republic is not a real party in interest and it may not institute the instant action. Nor may it raise the
defense of imprescriptibility, the same being applicable only in cases where the government is a party in interest. Under
Section 2 of Rule 3 of the 1997 Rules of Civil Procedure, "every action must be prosecuted or defended in the name of
the real party in interest." To qualify a person to be a real party in interest in whose name an action must be prosecuted,
he must appear to be the present real owner of the right sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668
[1989]). A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. And by real interest is meant a present substantial interest, as distinguished from
a mere expectancy, or a future, contingent, subordinate or consequential interest (Ibonilla v. Province of Cebu, 210 SCRA
526 [1992]). Being the owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development
Authority, not the Government, which stands to be benefited if the land covered by TCT No. T-5710 issued in the name
of petitioner is cancelled.

Nonetheless, it has been posited that the transfer of military reservations and their extensions to the BCDA is basically
for the purpose of accelerating the sound and balanced conversion of these military reservations into alternative
productive uses and to enhance the benefits to be derived from such property as a measure of promoting the economic
and social development, particularly of Central Luzon and, in general, the country's goal for enhancement (Section 2,
Republic Act No. 7227). It is contended that the transfer of these military reservations to the Conversion Authority does
not amount to an abdication on the part of the Republic of its interests, but simply a recognition of the need to create a
body corporate which will act as its agent for the realization of its program. It is consequently asserted that the Republic
remains to be the real party in interest and the Conversion Authority merely its agent.

We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality separate and distinct
from the government. Section 3 of Republic Act No. 7227 reads:

Section 3. Creation of the Bases Conversion and Development Authority. - There is hereby created a body corporate to
be known as the Conversion Authority which shall have the attribute of perpetual succession and shall be vested with
the powers of a corporation.

It may not be amiss to state at this point that the functions of government have been classified into governmental or
constituent and proprietary or ministrant. While public benefit and public welfare, particularly, the promotion of the
economic and social development of Central Luzon, may be attributable to the operation of the BCDA, yet it is certain
that the functions performed by the BCDA are basically proprietary in nature. The promotion of economic and social
development of Central Luzon, in particular, and the country's goal for enhancement, in general, do not make the BCDA
equivalent to the Government. Other corporations have been created by government to act as its agents for the
realization of its programs, the SSS, GSIS, NAWASA arid the NIA, to count a few, and yet, the Court has ruled that these
entities, although performing functions aimed at promoting public interest and public welfare, are not government-
function corporations invested with governmental attributes. It may thus be said that the BCDA is not a mere agency of
the Government but a corporate body performing proprietary functions.

Moreover, Section 5 of Republic Act No. 7227 provides:

54

Section 5. Powers of the Conversion Authority. - To carry out its objectives under this Act, the Conversion Authority is
hereby vested with the following powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate name and to adopt, alter and use a corporate
seal which shall be judicially noticed;

Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to cancel petitioner's title, not
the Republic, the former being the real party in interest. One having no right or interest to protect cannot invoke the
jurisdiction of the court as a party plaintiff in an action (Ralla v. Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if
the plaintiff or the defendant is not a real party in interest. If the suit is not brought in the name of the real party in
interest, a motion to dismiss may be filed, as was done by petitioner in this case, on the ground that the complaint states
no cause of action (Tanpingco v. IAC, 207 SCRA 652 [1992]).

However, E.B. Marcha Transport Co., Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority that the Republic is the
proper party to sue for the recovery of possession of property which at the time of the institution of the suit was no
longer held by the national government but by the Philippine Ports Authority .In E.B. Marcha, the Court ruled:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as principal of the
Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. We may
presume that, by doing so, the Republic of the Philippines did not intend .to retain the said rentals for its own use,
considering that by its voluntary act it had transferred the land in question to the Philippine Ports Authority effective July
11, 1974. The Republic of the Philippines had simply sought to assist, not supplant, the Philippine Ports Authority, whose
title to the disputed property it continues to recognize, We may expect then that the said rentals, once collected by the
Republic of the Philippines, shall be turned over by it to the Philippine Ports Authority conformably to the purposes of
P.D. No. 857.

E.B. Marcha is, however, not on all fours with the case at bar. In the former, the Court considered the Republic a proper
party to sue since the claims of the Republic and the Philippine Ports Authority against the petitioner therein were the
same. To dismiss the complaint in E.B. Marcha would have brought needless delay in the settlement of the matter since
the PPA would have to refile the case on the same claim already litigated upon. Such is not the case here since to allow
the government to sue herein enables it to raise the issue of imprescriptibility, a claim which is not available to the
BCDA. The rule that prescription does not run against the State does not apply to corporations or artificial bodies
created by the State for special purposes, it being said that when the title of the Republic has been divested, its
grantees, although artificial bodies of its own creation, are in the same category as ordinary persons (Kingston v. LeHigh
Valley Coal Co., 241 Pa 469). By raising the claim of imprescriptibility, a claim which cannot be raised by the BCDA, the
Government not only assists the BCDA, as it did in E.B. Marcha, it even supplants the latter, a course of action proscribed
by said case.

Moreover, to recognize the Government as a proper party to sue in this case would set a bad precedent as it would
allow the Republic to prosecute, on behalf of government-owned or controlled corporations, causes of action which
have already prescribed, on the pretext that the Government is the real party in interest against whom prescription does
not run, said corporations having been created merely as agents for the realization of government programs.

Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced by the Republic
twenty-seven years for which it is now being made to answer, nay, being made to suffer financial losses.

It should also be noted that petitioner is unquestionably a buyer in good faith and for value, having acquired the
property in 1963, or 5 years after the issuance of the original certificate of title, as a third transferee. If only not to do
violence and to give some measure of respect to the Torrens System, petitioner must be afforded some measure of
protection.

One more point.

Since the portion in dispute now forms part of the property owned and administered by the Bases Conversion and
Development Authority, it is alienable and registerable real property.

We find it unnecessary to rule on the other matters raised by the herein parties.

WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October 4, 1999 of the Regional
Trial, Court of the First National Judicial Region (Branch 26, San Fernando, La Union) in Civil Case No. 6346 entitled
"Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et. al., Defendants" as well as the resolutions
promulgated on November 4, 1999 and May 23, 2000 by the Court of Appeals (Twelfth Division) in
55

CA-G.R. SP No. 55535 entitled "Shipside, Inc., Petitioner versus Ron. Alfredo Cajigal, as Judge, RTC, San Fernando, La
Union, Branch 26, and the Republic of the Philippines, Respondents" are hereby reversed and set aside. The complaint in
Civil Case No. 6346, Regional Trial Court, Branch 26, San Fernando City, La Union entitled "Republic of the Philippines,
Plaintiff, versus Heirs of Rafael Galvez, et al." is ordered dismissed, without prejudice to the filing of an appropriate
action by the Bases Development and Conversion Authority.

SO ORDERED.

FACTS:
Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four parcels of land — Lot 1 , 2, 3 and 4
where lots 1 and 4 conveyed by him in favor of Filipina Mamaril, Cleopatra Llana, Regina Bustos, and Erlinda Balatbat in
a deed of sale. On August 16, 1960, Mamaril, et al. sold the same lots to Lepanto Consolidated Mining Company and the
latter in turn conveyed the property to Petitioner Shipside Incorporated.

Unknown to Lepanto Consolidated Mining Company, the CFI of La Union, Second Judicial District, issued an Order in
Land Registration Case No. N-361 (LRC Record No. N-14012) entitled “Rafael Galvez, Applicant, Eliza Bustos, et al.,
Parties-In-Interest; Republic of the Philippines, Movant” OCT No. 0-381 was already declared null and void and was
ordered cancelled.

Rafael Galvez filed his motion for reconsideration against the order issued by the trial court declaring OCT No. 0-381 null
and void. The motion was denied. On appeal, the Court of Appeals ruled in favor of the Republic certifying that its
decision became final and executory on October 23, 1973.

24 years after, the Office of the Solicitor General received a letter from Mr. Victor G. Floresca, Vice-President, John Hay
Poro Point Development Corporation, stating that the aforementioned orders and decision of the trial court in L.R.C. No.
N-361 have not been executed. The OSG filed for complaint for revival of judgment and cancellation of titles. Petitioner
Shipside, Inc. moved to dismiss the complaint, alleging that the respondent Republic was not the real party-in-interest
and that the cause of action was already barred by prescription. The trial court denied petitioner’s motion to dismiss and
its motion for reconsideration was likewise turned down.

ISSUE:
Whether or not the Republic may still for revival of judgment.

HELD:
NO. While it is true that prescription does not run against the State, the same may not be invoked by the government in
this case since it is no longer interested in the subject matter. While Camp Wallance may have belonged to the
government at the time Galvez’ title was ordered cancelled, the same no longer holds true today.

RA 7277 created Bases Conversion and Development Authority (BSDA). With the transfer of Camp Wallance to the
BCDA, the government has no longer a right or protect. The rule that prescription does not run against the State does
not apply to corporations or artificial bodies created by the State for special purposes, it being said that when the title of
the Republic has been divested, its grantees, although artificial bodies of its own creation, are in the same category as
ordinary persons.

The Bases Conversion Development Authority (BCDA), created under R.A. 7227, performs functions which are basically
proprietary in nature. The promotion of economic and social development of Central Luzon, in particular, and the
country’s goal for enhancement, in general, do not make BCDA equivalent to Government. Other corporations, such as
SSS, GSIS, NIA, although performing functions aimed at promoting public interest and public welfare, are not invested
with government attributes.

Consequently, the Republic was not a real party in interest and it may not institute the instant action. Nor may it raise
the defense of imprescriptibility, the same being applicable only in cases where the government is a party in interest.
Being the owner of the areas covered by Camp Wallace, it was the BCDA, not the Government, which stood to be
benefited if the land covered by TCT No. T-5710 issued in the name of petitioner was cancelled.

4. Association of Philippine Coconut Dessicators vs. Philippine Coconut Authority (G.R. No. 110526, February 10,
1998)

ASSOCIATION OF PHILIPPINE COCONUT DESICCATORS, petitioner,

vs.
PHILIPPINE COCONUT AUTHORITY, respondent.
56

At issue in this case is the validity of a resolution, dated March 24, 1993, of the Philippine Coconut Authority in which it
declares that it will no longer require those wishing to engage in coconut processing to apply to it for a license or permit
as a condition for engaging in such business.

Petitioner Association of Philippine Coconut Desiccators (hereafter referred to as APCD) brought this suit for certiorari
and mandamus against respondent Philippine Coconut Authority (PCA) to invalidate the latter's Board Resolution No.
018-93 and the certificates of registration issued under it on the ground that the resolution in question is beyond the
power of the PCA to adopt, and to compel said administrative agency to comply instead with the mandatory provisions
of statutes regulating the desiccated coconut industry, in particular, and the coconut industry, in general.

As disclosed by the parties' pleadings, the facts are as follows:

On November 5, 1992, seven desiccated coconut processing companies belonging to the APCD brought suit in the
Regional Trial Court, National Capital Judicial Region in Makati, Metro Manila, to enjoin the PCA from issuing permits to
certain applicants for the establishment of new desiccated coconut processing plants. Petitioner alleged that the
issuance of licenses to the applicants would violate PCA's Administrative Order No. 02, series of 1991, as the applicants
were seeking permits to operate in areas considered "congested" under the administrative order.1

On November 6, 1992, the trial court issued a temporary restraining order and, on November 25, 1992, a writ of
preliminary injunction, enjoining the PCA from processing and issuing licenses to Primex Products, Inc., Coco Manila,
Superstar (Candelaria) and Superstar (Davao) upon the posting of a bond in the amount of P100,000.00.2

Subsequently and while the case was pending in the Regional Trial Court, the Governing Board of the PCA issued on
March 24, 1993 Resolution No. 018-93, providing for the withdrawal of the Philippine Coconut Authority from all
regulation of the coconut product processing industry. While it continues the registration of coconut product processors,
the registration would be limited to the "monitoring" of their volumes of production and administration of quality
standards. The full text of the resolution reads:

RESOLUTION NO. 018-93

POLICY DECLARATION DEREGULATING
THE ESTABLISHMENT OF NEW COCONUT
PROCESSING PLANTS

WHEREAS, it is the policy of the State to promote free enterprise unhampered by protective regulations and
unnecessary bureaucratic red tapes;

WHEREAS, the deregulation of certain sectors of the coconut industry, such as marketing of coconut oils pursuant to
Presidential Decree No. 1960, the lifting of export and commodity clearances under Executive Order No. 1016, and
relaxation of regulated capacity for the desiccated coconut sector pursuant to Presidential Memorandum of February
11, 1988, has become a centerpiece of the present dispensation;

WHEREAS, the issuance of permits or licenses prior to business operation is a form of regulation which is not provided in
the charter of nor included among the powers of the PCA;

WHEREAS, the Governing Board of PCA has determined to follow and further support the deregulation policy and effort
of the government to promote free enterprise;

NOW THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any coconut
oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any similar
coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as condition
prior to establishment or operation of such mills or plants;

RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product
processors for the purpose of monitoring their volumes of production, administration of quality standards with the
corresponding service fees/charges.

ADOPTED this 24th day of March 1993, at Quezon City.3

The PCA then proceeded to issue "certificates of registration" to those wishing to operate desiccated coconut processing
plants, prompting petitioner to appeal to the Office of the President of the Philippines on April 26, 1993 not to approve
the resolution in question. Despite follow-up letters sent on May 25 and June 2, 1993, petitioner received no reply from
the Office of the President. The "certificates of registration" issued in the meantime by the PCA has enabled a number of
new coconut mills to operate. Hence this petition.
57

Petitioner alleges:

RESPONDENT PCA'S BOARD RESOLUTION NO. 018-93 IS NULL AND VOID FOR BEING AN UNDUE EXERCISE OF
LEGISLATIVE POWER BY AN ADMINISTRATIVE BODY.

II

ASIDE FROM BEING ULTRA-VIRES, BOARD RESOLUTION NO. 018-93 IS WITHOUT ANY BASIS, ARBITRARY, UNREASONABLE
AND THEREFORE IN VIOLATION OF SUBSTANTIVE DUE PROCESS OF LAW.

III

IN PASSING BOARD RESOLUTION NO. 018-93, RESPONDENT PCA VIOLATED THE PROCEDURAL DUE PROCESS
REQUIREMENT OF CONSULTATION PROVIDED IN PRESIDENTIAL DECREE NO. 1644, EXECUTIVE ORDER NO. 826 AND PCA
ADMINISTRATIVE ORDER NO. 002, SERIES OF 1991.

On the other hand, in addition to answering petitioner's arguments, respondent PCA alleges that this petition should be
denied on the ground that petitioner has a pending appeal before the Office of the President. Respondent accuses
petitioner of forum-shopping in filing this petition and of failing to exhaust available administrative remedies before
coming to this Court. Respondent anchors its argument on the general rule that one who brings an action under Rule 65
must show that one has no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.

I.

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously
urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question
was issued by the PCA in the exercise of its rule-making or legislative power. However, only judicial review of decisions
of administrative agencies made in the exercise of their quasi-judicial function is subject to the exhaustion doctrine. The
exhaustion doctrine stands as a bar to an action which is not yet complete4 and it is clear, in the case at bar, that after
its promulgation the resolution of the PCA abandoning regulation of the desiccated coconut industry became effective.
To be sure, the PCA is under the direct supervision of the President of the Philippines but there is nothing in P.D. No.
232, P.D. No. 961, P.D. No. 1468 and P.D. No. 1644 defining the powers and functions of the PCA which requires rules
and regulations issued by it to be approved by the President before they become effective.

In any event, although the APCD has appealed the resolution in question to the Office of the President, considering the
fact that two months after they had sent their first letter on April 26, 1993 they still had to hear from the President's
office, meanwhile respondent PCA was issuing certificates of registration indiscriminately to new coconut millers, we
hold that petitioner was justified in filing this case on June 25, 1993.5 Indeed, after writing the Office of the President on
April 26, 19936 petitioner sent inquiries to that office not once, but twice, on May 26, 19937 and on June 2, 1993,8 but
petitioner did not receive any reply.

II.

We now turn to the merit of the present petition. The Philippine Coconut Authority was originally created by P.D. 232 on
June 30, 1973, to take over the powers and functions of the Coconut Coordinating Council, the Philippine Coconut
Administration and the Philippine Coconut Research Institute. On June 11, 1978, by P.D. No. 1468, it was made "an
independent public corporation . . . directly reporting to, and supervised by, the President of the Philippines,"9 and
charged with carrying out the State's policy "to promote the rapid integrated development and growth of the coconut
and other palm oil industry in all its aspects and to ensure that the coconut farmers become direct participants in, and
beneficiaries of, such development and growth."10 through a regulatory scheme set up by law.11

Through this scheme, the government, on August 28, 1982, temporarily prohibited the opening of new coconut
processing plants and, four months later, phased out some of the existing ones in view of overproduction in the coconut
industry which resulted in cut-throat competition, underselling and smuggling of poor quality products and ultimately in
the decline of the export performance of coconut-based commodities. The establishment of new plants could be
authorized only upon determination by the PCA of the existence of certain economic conditions and the approval of the
President of the Philippines. Thus, Executive Order No. 826, dated August 28, 1982, provided:

Sec. 1. Prohibition. — Except as herein provided, no government agency or instrumentality shall hereafter authorize,
approve or grant any permit or license for the establishment or operation of new desiccated coconut processing plants,
58

including the importation of machinery or equipment for the purpose. In the event of a need to establish a new plant, or
expand the capacity, relocate or upgrade the efficiencies of any existing desiccated plant, the Philippine Coconut
Authority may, upon proper determination of such need and evaluation of the condition relating to:

a. the existing market demand;

b. the production capacity prevailing in the country or locality;

c. the level and flow of raw materials; and

d. other circumstances which may affect the growth or viability of the industry concerned,

authorize or grant the application for, the establishment or expansion of capacity, relocation or upgrading of efficiencies
of such desiccated coconut processing plant, subject to the approval of the President.

On December 6, 1982, a phase-out of some of the existing plants was ordered by the government after finding that "a
mere freeze in the present capacity of existing plants will not afford a viable solution to the problem considering that the
total available limited market is not adequate to support all the existing processing plants, making it imperative to
reduce the number of existing processing plants."12 Accordingly, it was ordered:13

Sec. 1. The Philippine Coconut Authority is hereby ordered to take such action as may be necessary to reduce the
number of existing desiccated coconut processing plants to a level which will insure the survival of the remaining plants.
The Authority is hereby directed to determine which of the existing processing plants should be phased out and to enter
into appropriate contracts with such plants for the above purpose.

It was only on October 23, 1987 when the PCA adopted Resolution No. 058-87, authorizing the establishment and
operation of additional DCN plants, in view of the increased demand for desiccated coconut products in the world's
markets, particularly in Germany, the Netherlands and Australia. Even then, the opening of new plants was made
subject to "such implementing guidelines to be set forth by the Authority" and "subject to the final approval of the
President."

The guidelines promulgated by the PCA, as embodied in Administrative Order No. 002, series of 1991, inter alia
authorized the opening of new plants in "non-congested areas only as declared by the PCA" and subject to compliance
by applicants with "all procedures and requirements for registration under Administrative Order No. 003, series of 1981
and this Order." In addition, as the opening of new plants was premised on the increased global demand for desiccated
coconut products, the new entrants were required to submit sworn statements of the names and addresses of
prospective foreign buyers.

This form of "deregulation" was approved by President Aquino in her memorandum, dated February 11, 1988, to the
PCA. Affirming the regulatory scheme, the President stated in her memorandum:

It appears that pursuant to Executive Order No. 826 providing measures for the protection of the Desiccated Coconut
Industry, the Philippine Coconut Authority evaluated the conditions relating to: (a) the existing market demands; (b) the
production capacity prevailing in the country or locality; (c) the level and flow of raw materials; and (d) other
circumstances which may affect the growth or viability of the industry concerned and that the result of such evaluation
favored the expansion of production and market of desiccated coconut products.

In view hereof and the favorable recommendation of the Secretary of Agriculture, the deregulation of the Desiccated
Coconut Industry as recommended in Resolution No. 058-87 adopted by the PCA Governing Board on October 28, 1987
(sic) is hereby approved.14

These measures — the restriction in 1982 on entry into the field, the reduction the same year of the number of the
existing coconut mills and then the lifting of the restrictions in 1987 — were adopted within the framework of regulation
as established by law "to promote the rapid integrated development and growth of the coconut and other palm oil
industry in all its aspects and to ensure that the coconut farmers become direct participants in, and beneficiaries of, such
development and growth." 15 Contrary to the assertion in the dissent, the power given to the Philippine Coconut
Authority — and before it to the Philippine Coconut Administration — "to formulate and adopt a general program of
development for the coconut and other palm oils industry"16 is not a roving commission to adopt any program deemed
necessary to promote the development of the coconut and other palm oils industry, but one to be exercised in the
context of this regulatory structure.

In plain disregard of this legislative purpose, the PCA adopted on March 24, 1993 the questioned resolution which allows
not only the indiscriminate opening of new coconut processing plants but the virtual dismantling of the regulatory
59

infrastructure whereby, forsaking controls theretofore placed in its keeping, the PCA limits its function to the innocuous
one of "monitoring" compliance by coconut millers with quality standards and volumes of production. In effect, the PCA
would simply be compiling statistical data on these matters, but in case of violations of standards there would be
nothing much it would do. The field would be left without an umpire who would retire to the bleachers to become a
mere spectator. As the PCA provided in its Resolution No. 018-93:

NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any
coconut oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any
similar coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as
condition prior to establishment or operation of such mills or plants;

RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product
processors for the purpose of monitoring their volumes of production, administration of quality standards with the
corresponding service fees/charges.

The issue is not whether the PCA has the power to adopt this resolution to carry out its mandate under the law "to
promote the accelerated growth and development of the coconut and other palm oil industry."17 The issue rather is
whether it can renounce the power to regulate implicit in the law creating it for that is what the resolution in question
actually is.

Under Art. II, § 3(a) of the Revised Coconut Code (P.D. No. 1468), the role of the PCA is "To formulate and adopt a
general program of development for the coconut and other palm oil industry in all its aspects." By limiting the purpose
of registration to merely "monitoring volumes of production [and] administration of quality standards" of coconut
processing plants, the PCA in effect abdicates its role and leaves it almost completely to market forces how the coconut
industry will develop.

Art. II, § 3 of P.D. No. 1468 further requires the PCA:

(h) To regulate the marketing and the exportation of copra and its by-products by establishing standards for domestic
trade and export and, thereafter, to conduct an inspection of all copra and its by-products proposed for export to
determine if they conform to the standards established;

Instead of determining the qualifications of market players and preventing the entry into the field of those who are
unfit, the PCA now relies entirely on competition — with all its wastefulness and inefficiency — to do the weeding out, in
its naive belief in survival of the fittest. The result can very well be a repeat of 1982 when free enterprise degenerated
into a "free-for-all," resulting in cut-throat competition, underselling, the production of inferior products and the like,
which badly affected the foreign trade performance of the coconut industry.

Indeed, by repudiating its role in the regulatory scheme, the PCA has put at risk other statutory provisions, particularly
those of P.D. No. 1644, to wit:

Sec. 1. The Philippine Coconut Authority shall have full power and authority to regulate the marketing and export of
copra, coconut oil and their by-products, in furtherance of the steps being taken to rationalize the coconut oil milling
industry.

Sec. 2. In the exercise of its powers under Section 1 hereof, the Philippine Coconut Authority may initiate and implement
such measures as may be necessary to attain the rationalization of the coconut oil milling industry, including, but not
limited to, the following measures:

(a) Imposition of floor and/or ceiling prices for all exports of copra, coconut oil and their by-products;

(b) Prescription of quality standards;

(c) Establishment of maximum quantities for particular periods and particular markets;

(d) Inspection and survey of export shipments through an independent international superintendent or surveyor.

In the exercise of its powers hereunder, the Philippine Coconut Authority shall consult with, and be guided by, the
recommendation of the coconut farmers, through corporations owned or controlled by them through the Coconut
Industry Investment Fund and the private corporation authorized to be organized under Letter of Instructions No. 926.

and the Revised Coconut Code (P.D. No. 1468), Art. II, § 3, to wit:
60

(m) Except in respect of entities owned or controlled by the Government or by the coconut farmers under Sections 9 and
10, Article III hereof, the Authority shall have full power and authority to regulate the production, distribution and
utilization of all subsidized coconut-based products, and to require the submission of such reports or documents as may
be deemed necessary by the Authority to ascertain whether the levy payments and/or subsidy claims are due and
correct and whether the subsidized products are distributed among, and utilized by, the consumers authorized by the
Authority.

The dissent seems to be saying that in the same way that restrictions on entry into the field were imposed in 1982 and
then relaxed in 1987, they can be totally lifted now without prejudice to reimposing them in the future should it become
necessary to do so. There is really no renunciation of the power to regulate, it is claimed. Trimming down of PCA's
function to registration is not an abdication of the power to regulate but is regulation itself. But how can this be done
when, under Resolution No. 018-93, the PCA no longer requires a license as condition for the establishment or operation
of a plant? If a number of processing firms go to areas which are already congested, the PCA cannot stop them from
doing so. If there is overproduction, the PCA cannot order a cut back in their production. This is because the licensing
system is the mechanism for regulation. Without it the PCA will not be able to regulate coconut plants or mills.

In the first "whereas" clause of the questioned resolution as set out above, the PCA invokes a policy of free enterprise
that is "unhampered by protective regulations and unnecessary bureaucratic red tape" as justification for abolishing the
licensing system. There can be no quarrel with the elimination of "unnecessary red tape." That is within the power of the
PCA to do and indeed it should eliminate red tape. Its success in doing so will be applauded. But free enterprise does not
call for removal of "protective regulations."

Our Constitutions, beginning with the 1935 document, have repudiated laissez-faire as an economic principle.18
Although the present Constitution enshrines free enterprise as a policy,19 it nonetheless reserves to the government the
power to intervene whenever necessary to promote the general welfare. This is clear from the following provisions of
Art. XII of the Constitution which, so far as pertinent, state:

Sec. 6. . . . Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall
have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote
distributive justice and to intervene when the common good so demands.

Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in
restraint of trade or unfair competition shall be allowed. (Emphasis added).

At all events, any change in policy must be made by the legislative department of the government. The regulatory
system has been set up by law. It is beyond the power of an administrative agency to dismantle it. Indeed, petitioner
charges the PCA of seeking to render moot a case filed by some of its members questioning the grant of licenses to
certain parties by adopting the resolution in question. It is alleged that members of petitioner complained to the court
that the PCA had authorized the establishment and operation of new plants in areas which were already crowded, in
violation of its Administrative Order No. 002, series of 1991. In response, the Regional Trial Court issued a writ of
preliminary injunction, enjoining the PCA from issuing licenses to the private respondent in that case.

These allegations of petitioner have not been denied here. It would thus seem that instead of defending its decision to
allow new entrants into the field against petitioner's claim that the PCA decision violated the guidelines in
Administrative Order No. 002, series of 1991, the PCA adopted the resolution in question to render the case moot. In so
doing, the PCA abdicated its function of regulation and left the field to untrammeled competition that is likely to
resurrect the evils of cut-throat competition, underselling and overproduction which in 1982 required the temporary
closing of the field to new players in order to save the industry.

The PCA cannot rely on the memorandum of then President Aquino for authority to adopt the resolution in question. As
already stated, what President Aquino approved in 1988 was the establishment and operation of new DCN plants
subject to the guidelines to be drawn by the PCA.20 In the first place, she could not have intended to amend the several
laws already mentioned, which set up the regulatory system, by a mere memoranda to the PCA. In the second place,
even if that had been her intention, her act would be without effect considering that, when she issued the
memorandum in question on February 11, 1988, she was no longer vested with legislative authority.21

WHEREFORE, the petition is GRANTED. PCA Resolution No. 018-93 and all certificates of registration issued under it are
hereby declared NULL and VOID for having been issued in excess of the power of the Philippine Coconut Authority to
adopt or issue.

SO ORDERED.

Facts:
61

PCA was created by PD 232 as independent public corporation to promote the rapid integrated development and
growth of the coconut and other palm oil industry in all its aspects and to ensure that coconut farmers become direct
participants in, and beneficiaries of, such development and growth through a regulatory scheme set up by law. PCA is
also in charge of the issuing of licenses to would-be coconut plant operators. On 24 March 1993, however, PCA issued
Board Resolution No. 018-93 which no longer require those wishing to engage in coconut processing to apply for
licenses as a condition for engaging in such business. The purpose of which is to promote free enterprise unhampered by
protective regulations and unnecessary bureaucratic red tapes. But this caused cut-throat competition among operators
specifically in congested areas, underselling, smuggling, and the decline of coconut-based commodities. The APCD then
filed a petition for mandamus to compel PCA to revoke BR No. 018-93.

Issue:
whether or not PCA ran in conflict against the very nature of its creation

Held:
Yes. Our Constitutions, beginning with the 1935 document, have repudiated laissez-faire as an economic principle.
Although the present Constitution enshrines free enterprise as a policy, it nonetheless reserves to the government the
power to intervene whenever necessary to promote the general welfare. As such, free enterprise does not call for the
removal of “protective regulations” for the benefit of the general public. This is so because under Art 12, Sec 6 and 9, it
is very clear that the government reserves the power to intervene whenever necessary to promote the general welfare
and when the public interest so requires.

5. Philippine Virginia Tobacco Adm. vs. CIR (G.R. No. L-32052, July 25, 1975)

PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, REUEL ABRAHAM, MILAGROS ABUEG, AVELINO ACOSTA, CAROLINA ACOSTA,
MARTIN AGSALUD, JOSEFINA AGUINALDO, GLORIA ALBANO, ANTONIO ALUNING, COSME ALVAREZ, ISABEL ALZATE,
AURORA APUSEN, TOMAS ARCANGEL, LOURDES ARJONELLO, MANUEL AROMIN, DIONISIO ASISTIN, JOSE AURE,
NICASIO AZNAR, EUGENIO AZURIN, CLARITA BACUGAN, PIO BALAGOT, HEREDIO BALMACEDA, ESTHER BANAAG,
JOVENCIO BARBERO, MONICO BARBADILLO, HERNANDO BARROZO, FILIPINA BARROZO, REMEDIO BARTOLOME,
ANGELINA BASCOS, JOSE BATALLA, ALMARIO BAUTISTA, EUGENIO BAUTISTA, JR., HERMALO BAUTISTA, JUANITO
BAUTISTA, SEVERINO BARBANO, CAPPIA BARGONIA, ESMERALDA BERNARDEZ, RUBEN BERNARDEZ, ALFREDO
BONGER, TOMAS BOQUIREN, ANGELINA BRAVO, VIRGINIA BRINGA, ALBERTO BUNEO, SIMEON CABANAYAN,
LUCRECIA CACATIAN, LEONIDES CADAY, ANGELINA CADOTTE, IGNACIO CALAYCAY, PACIFICO CALUB, RUFINO CALUZA,
CALVIN CAMBA, ALFREDO CAMPOSENO, BAGUILITA CANTO, ALFREDO CARRERA, PEDRO CASES, CRESCENTE CASIS,
ERNESTO CASTANEDA, HERMINIO CASTILLO, JOSE CASTRO, LEONOR CASTRO, MADEO CASTRO, MARIA PINZON
CASTRO, PABLO CATURA, RESTITUTO CESPADES, FLORA CHACON, EDMUNDO CORPUZ, ESTHER CRUZ, CELIA
CUARESMA, AQUILINO DACAYO, DIONISIA DASALLA, SOCORRO DELFIN, ABELARDO DIAZ, ARTHUR DIAZ, CYNTHIA
DIZON, MARCIA DIZON, ISABELO DOMINGO, HONORATA DOZA, CAROLINA DUAD, JUSTINIANO EPISTOLA, ROMEO
ENCARNACION, PRIMITIVO ESCANO, ELSA ESPEJO, JUAN ESPEJO, RIZALINA ESQUILLO, YSMAEL FARINAS, LORNA
FAVIS, DAN FERNANDEZ, JAIME FERNANDEZ, ALFREDO FERRER, MODESTO FERRER, JR., EUGENIO FLANDEZ,
GUILLERMO FLORENDO, ALFREDO FLORES, DOMINGA FLORES, ROMEO FLORES, LIGAYA FONTANILLA, MELCHOR
GASMEN, LEILA GASMENA, CONSUELO GAROLAGA, ALFONSO GOROSPE, CESAR GOROSPE, RICARDO GOROSPE, JR.,
CARLITO GUZMAN, ERNESTO DE GUZMAN, THELMA DE GUZMAN, FELIX HERNANDEZ, SOLIVEN HERNANDO,
FRANCISCO HIDALGO, LEONILO INES, SIXTO JAQUIES, TRINIDAD JAVIER, FERMIN LAGUA, GUALBERTO LAMBINO,
ROMAN LANTING, OSCAR LAZO, ROSARIO LAZO, JOSEFINA DE LARA, AMBROSIO LAZOL, NALIE LIBATIQUE, LAMBERTO
LLAMAS, ANTONIO LLANES, ROMULA LOPEZ, ADRIANO LORENZANA, ANTONIO MACARAEG, ILDEFONSO MAGAT,
CECILIO MAGHANOY, ALFONSO MAGSANOC, AVELINA MALLARE, AUGUSTO MANALO, DOMINADOR MANASAN,
BENITO MANECLANG, JR., TIRSO MANGUMAY, EVELIA MANZANO, HONORANTE MARIANO, DOMINGO MEDINA,
MARTIN MENDOZA, PERFECTO MILANA, EMILIO MILLAN, GREGORIO MONEGAS, CONSOLACION NAVALTA, NOLI
OCAMPO, VICENTE CLEGARIO, ELPIDIO PALMONES, ARACELI PANGALANGAN, ISIDORO PANLASIGUI, JR., ARTEMIO
PARIS, JR., FEDERICO PAYUMO, JR., NELIA PAYUMO, BITUEN PAZ, FRANCISCO PENGSON, OSCAR PERALTA, PROCORRO
PERALTA, RAMON PERALTA, MINDA PICHAY, MAURO PIMENTEL, PRUDENCIO PIMENTEL, LEOPOLDO PUNO,
REYNALDO RABE, ROLANDO REA, CONSTANTINO REA, CECILIA RICO, CECILIO RILLORAZA, AURORA ROMAN,
MERCEDES RUBIO, URSULA RUPISAN, OLIVIA SABADO, BERNARDO SACRAMENTO, LUZ SALVADOR, JOSE SAMSON, JR.,
ROMULA DE LOS SANTOS, ANTONIO SAYSON, JR., FLORANTE SERIL, MARIO SISON, RUDY SISON, PROCEDIO TABIN,
LUCENA TABISULA, HANNIBAL TAJANO, ENRIQUE TIANGCO, JR., JUSTINIANO TOBIAS, NYMIA TOLENTINO,
CONSTANTE TOLENTINO, TEODORO TOREBIO, FEDERICO TRINIDAD, JOVENCINTO TRINIDAD, LAZARO VALDEZ,
LUDRALINA VALDEZ, MAXIMINA VALDEZ, FRANCISCO VELASCO, JR., ROSITA VELASCO, SEVERO VANTANILLA,
VENANCIO VENTIGAN, FELICITAS VENUS, NIEVES DE VERA, ELISEO VERSOZA, SILVESTRE VILA, GLORIA VILLAMOR,
ALEJANDRO VELLANUEVA, DAVID VILLANUEVA, CAROLINA VILLASENOR ORLANDO VILLASTIQUE, MAJELLA VILORIN,
ROSARIO VILORIA, MAY VIRATA, FEDERICO VIRAY, MELBA YAMBAO, MARIO ZAMORA, AUTENOR ABUEG, SOTERO
ACEDO, HONRADO ALBERTO, FELIPE ALIDO, VICENTE ANCHUELO, LIBERTAD APEROCHO, MARIANO BALBAGO, MARIO
62

BALMACEDA, DAISY BICENIO, SYLVIA BUSTAMANTE, RAYMUNDO GEMERINO, LAZARO CAPURAS, ROGELIO
CARUNGCONG, ZACARIAS CAYETANO, JR., LILY CHUA, ANDRES CRUZ, ARTURO CRUZ, BIENVENIDO ESTEBAN, PABLO
JARETA, MANUEL JOSE, NESTORIA KINTANAR, CLEOPATRIA LAZEM. MELCHOR LAZO, JESUS LUNA, GASPAR MARINAS,
CESAR MAULSON, MANUEL MEDINA, JESUS PLURAD, LAKAMBINI RAZON, GLORIA IBANEZ, JOSE SANTOS, ELEAZAR
SQUI, JOSE TAMAYO, FELIPE TENORIO, SILVINO UMALI, VICENTE ZARA, SATURNINO GARCIA, WILLIAM GARCIA,
NORMA GARINGARAO, ROSARIO ANTONIO, RUBEN BAUTISTA, QUIRINO PUESTO, NELIA M. GOMERI, OSCAR R.
LANUZA, AURORA M. LINDAYA, GREGORIO MOGSINO, JACRM B. PAPA, GREGORIO R. RIEGO, TERESITA N. ROZUL,
MAGTANGOL SAMALA, PORFIRIO AGOCOLIS, LEONARDO MONTE, HERMELINO PATI, ALFREDO PAYOYO,
PURIFICACION ROJAS, ODANO TEANO, RICARDO SANTIAGO, and MARCELO MANGAHAS, respondents.

The principal issue that calls for resolution in this appeal by certiorari from an order of respondent Court of Industrial
Relations is one of constitutional significance. It is concerned with the expanded role of government necessitated by the
increased responsibility to provide for the general welfare. More specifically, it deals with the question of whether
petitioner, the Philippine Virginia Tobacco Administration, discharges governmental and not proprietary functions. The
landmark opinion of the then Justice, row Chief Justice, Makalintal in Agricultural Credit and Cooperative Financing
Administration v. Confederation of Unions in Government Corporations and offices, points the way to the right answer.1
It interpreted the then fundamental law as hostile to the view of a limited or negative state. It is antithetical to the
laissez faire concept. For as noted in an earlier decision, the welfare state concept "is not alien to the philosophy of [the
1935] Constitution."2 It is much more so under the present Charter, which is impressed with an even more explicit
recognition of social and economic rights.3 There is manifest, to recall Laski, "a definite increase in the profundity of the
social conscience," resulting in "a state which seeks to realize more fully the common good of its members."4 It does not
necessarily follow, however, just because petitioner is engaged in governmental rather than proprietary functions, that
the labor controversy was beyond the jurisdiction of the now defunct respondent Court. Nor is the objection raised that
petitioner does not come within the coverage of the Eight-Hour Labor Law persuasive.5 We cannot then grant the
reversal sought. We affirm.

The facts are undisputed. On December 20, 1966, claimants, now private respondents, filed with respondent Court a
petition wherein they alleged their employment relationship, the overtime services in excess of the regular eight hours a
day rendered by them, and the failure to pay them overtime compensation in accordance with Commonwealth Act No.
444. Their prayer was for the differential between the amount actually paid to them and the amount allegedly due
them.6 There was an answer filed by petitioner Philippine Virginia Tobacco Administration denying the allegations and
raising the special defenses of lack of a cause of action and lack of jurisdiction.7 The issues were thereafter joined, and
the case set for trial, with both parties presenting their evidence.8 After the parties submitted the case for decision, the
then Presiding Judge Arsenio T. Martinez of respondent Court issued an order sustaining the claims of private
respondents for overtime services from December 23, 1963 up to the date the decision was rendered on March 21,
1970, and directing petitioner to pay the same, minus what it had already paid. 9 There was a motion for
reconsideration, but respondent Court en banc denied the same. 10 Hence this petition for certiorari.

Petitioner Philippine Virginia Tobacco Administration, as had been noted, would predicate its plea for the reversal of the
order complained of on the basic proposition that it is beyond the jurisdiction of respondent Court as it is exercising
governmental functions and that it is exempt from the operation of Commonwealth Act No. 444. 11 While, to repeat, its
submission as to the governmental character of its operation is to be given credence, it is not a necessary consequence
that respondent Court is devoid of jurisdiction. Nor could the challenged order be set aside on the additional argument
that the Eight-Hour Labor Law is not applicable to it. So it was, at the outset, made clear.

1. A reference to the enactments creating petitioner corporation suffices to demonstrate the merit of petitioner's plea
that it performs governmental and not proprietary functions. As originally established by Republic Act No. 2265, 12 its
purposes and objectives were set forth thus: "(a) To promote the effective merchandising of Virginia tobacco in the
domestic and foreign markets so that those engaged in the industry will be placed on a basis of economic security; (b) To
establish and maintain balanced production and consumption of Virginia tobacco and its manufactured products, and
such marketing conditions as will insure and stabilize the price of a level sufficient to cover the cost of production plus
reasonable profit both in the local as well as in the foreign market; (c) To create, establish, maintain, and operate
processing, warehousing and marketing facilities in suitable centers and supervise the selling and buying of Virginia
tobacco so that the farmers will enjoy reasonable prices that secure a fair return of their investments; (d) To prescribe
rules and regulations governing the grading, classifying, and inspecting of Virginia tobacco; and (e) To improve the living
and economic conditions of the people engaged in the tobacco industry." 13 The amendatory statute, Republic Act No.
4155, 14 renders even more evident its nature as a governmental agency. Its first section on the declaration of policy
reads: "It is declared to be the national policy, with respect to the local Virginia tobacco industry, to encourage the
production of local Virginia tobacco of the qualities needed and in quantities marketable in both domestic and foreign
markets, to establish this industry on an efficient and economic basis, and, to create a climate conducive to local
cigarette manufacture of the qualities desired by the consuming public, blending imported and native Virginia leaf
tobacco to improve the quality of locally manufactured cigarettes." 15 The objectives are set forth thus: "To attain this
national policy the following objectives are hereby adopted: 1. Financing; 2. Marketing; 3. The disposal of stocks of the
63

Agricultural Credit Administration (ACA) and the Philippine Virginia Tobacco Administration (PVTA) at the best
obtainable prices and conditions in order that a reinvigorated Virginia tobacco industry may be established on a sound
basis; and 4. Improving the quality of locally manufactured cigarettes through blending of imported and native Virginia
leaf tobacco; such importation with corresponding exportation at a ratio of one kilo of imported to four kilos of exported
Virginia tobacco, purchased by the importer-exporter from the Philippine Virginia Tobacco Administration." 16

It is thus readily apparent from a cursory perusal of such statutory provisions why petitioner can rightfully invoke the
doctrine announced in the leading Agricultural Credit and Cooperative Financing Administration decision 17 and why the
objection of private respondents with its overtones of the distinction between constituent and ministrant functions of
governments as set forth in Bacani v. National Coconut Corporation 18 if futile. The irrelevance of such a distinction
considering the needs of the times was clearly pointed out by the present Chief Justice, who took note, speaking of the
reconstituted Agricultural Credit Administration, that functions of that sort "may not be strictly what President Wilson
described as "constituent" (as distinguished from "ministrant"),such as those relating to the maintenance of peace and
the prevention of crime, those regulating property and property rights, those relating to the administration of justice
and the determination of political duties of citizens, and those relating to national defense and foreign relations. Under
this traditional classification, such constituent functions are exercised by the State as attributes of sovereignty, and not
merely to promote the welfare, progress and prosperity of the people — these latter functions being ministrant, the
exercise of which is optional on the part of the government." 19 Nonetheless, as he explained so persuasively: "The
growing complexities of modern society, however, have rendered this traditional classification of the functions of
government quite unrealistic, not to say obsolete. The areas which used to be left to private enterprise and initiative and
which the government was called upon to enter optionally, and only "because it was better equipped to administer for
the public welfare than is any private individual or group of individuals", continue to lose their well-defined boundaries
and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy,
by the Constitution itself in its declaration of principle concerning the promotion of social justice." 20 Thus was laid to
rest the doctrine in Bacani v. National Coconut Corporation, 21 based on the Wilsonian classification of the tasks
incumbent on government into constituent and ministrant in accordance with the laissez faire principle. That concept,
then dominant in economics, was carried into the governmental sphere, as noted in a textbook on political science, 22
the first edition of which was published in 1898, its author being the then Professor, later American President, Woodrow
Wilson. He took pains to emphasize that what was categorized by him as constituent functions had its basis in a
recognition of what was demanded by the "strictest [concept of] laissez faire, [as they] are indeed the very bonds of
society." 23 The other functions he would minimize as ministrant or optional.

It is a matter of law that in the Philippines, the laissez faire principle hardly commanded the authoritative position which
at one time it held in the United States. As early as 1919, Justice Malcolm in Rubi v. Provincial Board 24 could affirm:
"The doctrines of laissez faire and of unrestricted freedom of the individual, as axioms of economic and political theory,
are of the past. The modern period has shown a widespread belief in the amplest possible demonstration of government
activity." 25 The 1935 Constitution, as was indicated earlier, continued that approach. As noted in Edu v. Ericta:26 "What
is more, to erase any doubts, the Constitutional Convention saw to it that the concept of laissez-faire was rejected. It
entrusted to our government the responsibility of coping with social and economic problems with the commensurate
power of control over economic affairs. Thereby it could live up to its commitment to promote the general welfare
through state action." 27 Nor did the opinion in Edu stop there: "To repeat, our Constitution which took effect in 1935
erased whatever doubts there might be on that score. Its philosophy is a repudiation of laissez-faire. One of the leading
members of the Constitutional Convention, Manuel A. Roxas, later the first President of the Republic, made it clear when
he disposed of the objection of Delegate Jose Reyes of Sorsogon, who noted the "vast extensions in the sphere of
governmental functions" and the "almost unlimited power to interfere in the affairs of industry and agriculture as well as
to compete with existing business" as "reflections of the fascination exerted by [the then] current tendencies' in other
jurisdictions. He spoke thus: "My answer is that this constitution has a definite and well defined philosophy, not only
political but social and economic.... If in this Constitution the gentlemen will find declarations of economic policy they
are there because they are necessary to safeguard the interest and welfare of the Filipino people because we believe
that the days have come when in self-defense, a nation may provide in its constitution those safeguards, the patrimony,
the freedom to grow, the freedom to develop national aspirations and national interests, not to be hampered by the
artificial boundaries which a constitutional provision automatically imposes." 28

It would be then to reject what was so emphatically stressed in the Agricultural Credit Administration decision about
which the observation was earlier made that it reflected the philosophy of the 1935 Constitution and is even more in
consonance with the expanded role of government accorded recognition in the present Charter if the plea of petitioner
that it discharges governmental function were not heeded. That path this Court is not prepared to take. That would be
to go backward, to retreat rather than to advance. Nothing can thus be clearer than that there is no constitutional
obstacle to a government pursuing lines of endeavor, formerly reserved for private enterprise. This is one way, in the
language of Laski, by which through such activities, "the harsh contract which [does] obtain between the levels of the
rich and the poor" may be minimized. 29 It is a response to a trend noted by Justice Laurel in Calalang v. Williams 30 for
64

the humanization of laws and the promotion of the interest of all component elements of society so that man's innate
aspirations, in what was so felicitously termed by the First Lady as "a compassionate society" be attained. 31

2. The success that attended the efforts of petitioner to be adjudged as performing governmental rather than
proprietary functions cannot militate against respondent Court assuming jurisdiction over this labor dispute. So it was
mentioned earlier. As far back as Tabora v. Montelibano, 32 this Court, speaking through Justice Padilla, declared: The
NARIC was established by the Government to protect the people against excessive or unreasonable rise in the price of
cereals by unscrupulous dealers. With that main objective there is no reason why its function should not be deemed
governmental. The Government owes its very existence to that aim and purpose — to protect the people." 33 In a
subsequent case, Naric Worker's Union v. Hon. Alvendia, 34 decided four years later, this Court, relying on Philippine
Association of Free Labor Unions v. Tan, 35 which specified the cases within the exclusive jurisdiction of the Court of
Industrial Relations, included among which is one that involves hours of employment under the Eight-Hour Labor Law,
ruled that it is precisely respondent Court and not ordinary courts that should pass upon that particular labor
controversy. For Justice J. B. L. Reyes, the ponente, the fact that there were judicial as well as administrative and
executive pronouncements to the effect that the Naric was performing governmental functions did not suffice to confer
competence on the then respondent Judge to issue a preliminary injunction and to entertain a complaint for damages,
which as pointed out by the labor union, was connected with an unfair labor practice. This is emphasized by the
dispositive portion of the decision: "Wherefore, the restraining orders complained of, dated May 19, 1958 and May 27,
1958, are set aside, and the complaint is ordered dismissed, without prejudice to the National Rice and Corn
Corporation's seeking whatever remedy it is entitled to in the Court of Industrial Relations." 36 Then, too, in a case
involving petitioner itself, Philippine Virginia Tobacco Administration, 37 where the point in dispute was whether it was
respondent Court or a court of first instance that is possessed of competence in a declaratory relief petition for the
interpretation of a collective bargaining agreement, one that could readily be thought of as pertaining to the judiciary,
the answer was that "unless the law speaks clearly and unequivocally, the choice should fall on the Court of Industrial
Relations." 38 Reference to a number of decisions which recognized in the then respondent Court the jurisdiction to
determine labor controversies by government-owned or controlled corporations lends to support to such an approach.
39 Nor could it be explained only on the assumption that proprietary rather than governmental functions did call for
such a conclusion. It is to be admitted that such a view was not previously bereft of plausibility. With the aforecited
Agricultural Credit and Cooperative Financing Administration decision rendering obsolete the Bacani doctrine, it has, to
use a Wilsonian phrase, now lapsed into "innocuous desuetude." 40 Respondent Court clearly was vested with
jurisdiction.

3. The contention of petitioner that the Eight-Hour Labor Law 41 does not apply to it hardly deserves any extended
consideration. There is an air of casualness in the way such an argument was advanced in its petition for review as well
as in its brief. In both pleadings, it devoted less than a full page to its discussion. There is much to be said for brevity, but
not in this case. Such a terse and summary treatment appears to be a reflection more of the inherent weakness of the
plea rather than the possession of an advocate's enviable talent for concision. It did cite Section 2 of the Act, but its very
language leaves no doubt that "it shall apply to all persons employed in any industry or occupation, whether public or
private ... ." 42 Nor are private respondents included among the employees who are thereby barred from enjoying the
statutory benefits. It cited Marcelo v. Philippine National Red Cross 43 and Boy Scouts of the Philippines v. Araos.44
Certainly, the activities to which the two above public corporations devote themselves can easily be distinguished from
that engaged in by petitioner. A reference to the pertinent sections of both Republic Acts 2265 and 2155 on which it
relies to obtain a ruling as to its governmental character should render clear the differentiation that exists. If as a result
of the appealed order, financial burden would have to be borne by petitioner, it has only itself to blame. It need not
have required private respondents to render overtime service. It can hardly be surmised that one of its chief problems is
paucity of personnel. That would indeed be a cause for astonishment. It would appear, therefore, that such an objection
based on this ground certainly cannot suffice for a reversal. To repeat, respondent Court must be sustained.

WHEREFORE, the appealed Order of March 21, 1970 and the Resolution of respondent Court en banc of May 8, 1970
denying a motion for reconsideration are hereby affirmed. The last sentence of the Order of March 21, 1970 reads as
follows: "To find how much each of them [private respondents] is entitled under this judgment, the Chief of the
Examining Division, or any of his authorized representative, is hereby directed to make a reexamination of records,
papers and documents in the possession of respondent PVTA pertinent and proper under the premises and to submit his
report of his findings to the Court for further disposition thereof." Accordingly, as provided by the New Labor Code, this
case is referred to the National Labor Relations Commission for further proceedings conformably to law. No costs.

Facts:
This case involves the expanded role of the government necessitated by the increased responsibility to provide for the
general welfare.
In 1966 private respondents filed a petition seeking relief for their alleged overtime services and the petitioner’s failure
to pay for said compensation in accordance with CA No. 444.
65

Petitioner denied the allegations for lack of a cause of cause of action and lack of jurisdiction. Judge Martinez issued an
order, directing petitioner to pay. Hence, this petition for certiorari on grounds that the corporation is exercising
governmental functions and is therefore exempt from Commonwealth Act No. 444.
PVTA contended it is beyond the jurisdiction of respondent Court as it is exercising governmental functions and that it is
exempt from the operation of Commonwealth Act No. 444.

Issue:
Whether or not PVTA discharges governmental and not proprietary functions.

Held:
YES. But the distinction between the constituent and ministrant functions of the government has become obsolete. The
government has to provide for the welfare of its people. RA No. 2265 providing for a distinction between constituent
and the ministrant functions is irrelevant considering the needs of the present time: “The growing complexities of
modern society have rendered this traditional classification of the functions of government obsolete.”

The contention of petitioner that the Labor Code does not apply to them deserve scant consideration.
There is no question based on RA 4155, that petitioner is a governmental agency. As such, the petitioner can rightfully
invoke the doctrine announced in the leading ACCFA case. The objection of private respondents with its overtones of
the distinction between constituent and ministrant functions of governments as set forth in Bacani v. Nacoco, is futile. It
does not necessarily follow, that just because petitioner is engaged in governmental rather than proprietary functions,
that the labor controversy was beyond the jurisdiction of the now defunct respondent Court. Nor is the objection raised
that petitioner does not come within the coverage of the Eight-Hour Labor Law persuasive.

A reference to the pertinent sections of both Republic Acts 2265 and 2155 renders clear the differentiation that exists. If
as a result of the appealed order, financial burden would have to be borne by petitioner, it has only itself to blame. It
need not have required private respondents to render overtime service. It can hardly be surmised that one of its chief
problems is paucity of personnel. That would indeed be a cause for astonishment. It would appear, therefore, that such
an objection based on this ground certainly cannot suffice for a reversal. To repeat, respondent Court must be sustained.

6. Bacani vs. NACOCO (G.R. No. L-9657, November 29, 1956)

LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT CORPORATION, ET AL.,
Defendants, NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS, Defendants-Appellants.

Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the
pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant
Corporate Counsel Federico Alikpala, counsel for Defendant, requested said stenographers for copies of the transcript of
the stenographic notes taken by them during the hearing. Plaintiffs complied with the request by delivering to Counsel
Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their
fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto
for said transcript at the rate of P1 per page.

Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and sought the
recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to reimburse said
amounts on the strength of a circular of the Department of Justice wherein the opinion was expressed that the National
Coconut Corporation, being a government entity, was exempt from the payment of the fees in question. On February 6,
1954, the Auditor General issued an order directing the Cashier of the Department of Justice to deduct from the salary
of Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every
payday beginning March 30, 1954. To prevent deduction of these fees from their salaries and secure a judicial ruling that
the National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of
Court, this action was instituted in the Court of First Instance of Manila.

Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview of
section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the stenographers’ fees under
Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring (1) “that Defendant National
Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court; chan
roblesvirtualawlibrary(2) that the payments already made by said Defendant to Plaintiffs herein and received by the
latter from the former in the total amount of P714, for copies of the stenographic transcripts in question, are valid, just
and legal; chan roblesvirtualawlibraryand (3) that Plaintiffs are under no obligation whatsoever to make a refund of
these payments already received by them.” This is an appeal from said decision.

Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the legal fees
provided for therein, and among these fees are those which stenographers may charge for the transcript of notes taken
66

by them that may be requested by any interested person (section 8). The fees in question are for the transcript of notes
taken during the hearing of a case in which the National Coconut Corporation is interested, and the transcript was
requested by its assistant corporate counsel for the use of said corporation.

On the other hand, section 2 of the Revised Administrative Code defines the scope of the term “Government of the
Republic of the Philippines” as follows:chanroblesvirtuallawlibrary

“‘The Government of the Philippine Islands’ is a term which refers to the corporate governmental entity through which
the functions of government are exercised throughout the Philippine Islands, including, save as the contrary appears
from the context, the various arms through which political authority is made effective in said Islands, whether pertaining
to the central Government or to the provincial or municipal branches or other form of local government.”

The question now to be determined is whether the National Coconut Corporation may be considered as included in the
term “Government of the Republic of the Philippines” for the purposes of the exemption of the legal fees provided for in
Rule 130 of the Rules of Court.

As may be noted, the term “Government of the Republic of the Philippines” refers to a government entity through which
the functions of government are exercised, including the various arms through which political authority is made effective
in the Philippines, whether pertaining to the central government or to the provincial or municipal branches or other
form of local government. This requires a little digression on the nature and functions of our government as instituted in
our Constitution.

To begin with, we state that the term “Government” may be defined as “that institution or aggregate of institutions by
which an independent society makes and carries out those rules of action which are necessary to enable men to live in a
social state, or which are imposed upon the people forming that society by those who possess the power or authority of
prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the national government, has reference
to what our Constitution has established composed of three great departments, the legislative, executive, and the
judicial, through which the powers and functions of government are exercised. These functions are
twofold:chanroblesvirtuallawlibrary constitute and ministrant. The former are those which constitute the very bonds of
society and are compulsory in nature; chan roblesvirtualawlibrarythe latter are those that are undertaken only by way of
advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent
functions as:

“‘(1) The keeping of order and providing for the protection of persons and property from violence and robbery.

‘(2) The fixing of the legal relations between man and wife and between parents and children.

‘(3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for
debt or for crime.

‘(4) The determination of contract rights between individuals.

‘(5) The definition and punishment of crime.

‘(6) The administration of justice in civil cases.

‘(7) The determination of the political duties, privileges, and relations of citizens.

‘(8) Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the preservation of the state from external
danger or encroachment and the advancement of its international interests.’“ (Malcolm, The Government of the
Philippine Islands, p. 19.)

The most important of the ministrant functions are:chanroblesvirtuallawlibrary public works, public education, public
charity, health and safety regulations, and regulations of trade and industry. The principles deter mining whether or not
a government shall exercise certain of these optional functions are:chanroblesvirtuallawlibrary (1) that a government
should do for the public welfare those things which private capital would not naturally undertake and (2) that a
government should do these things which by its very nature it is better equipped to administer for the public welfare
than is any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.)

From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to
promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and
those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class
belongs the organization of those corporations owned or controlled by the government to promote certain aspects of
67

the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or
controlled corporations which may take on the form of a private enterprise or one organized with powers and formal
characteristics of a private corporations under the Corporation Law.

The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these corporation perform certain
functions of government make them a part of the Government of the Philippines?

The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the simple reason that they do not
come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation.
While it was organized with the purpose of “adjusting the coconut industry to a position independent of trade
preferences in the United States” and of providing “Facilities for the better curing of copra products and the proper
utilization of coconut by-products”, a function which our government has chosen to exercise to promote the coconut
industry, however, it was given a corporate power separate and distinct from our government, for it was made subject
to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are
concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other
private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, “The
mere fact that the Government happens to be a majority stockholder does not make it a public corporation” (National
Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). “By becoming a stockholder in the National Coal Company,
the Government divested itself of its sovereign character so far as respects the transactions of the corporation cralaw .
Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National
Coal Company remains an agency or instrumentality of government.” (Government of the Philippine Islands vs. Springer,
50 Phil., 288.)

To recapitulate, we may mention that the term “Government of the Republic of the Philippines” used in section 2 of the
Revised Administrative Code refers only to that government entity through which the functions of the government are
exercised as an attribute of sovereignty, and in this are included those arms through which political authority is made
effective whether they be provincial, municipal or other form of local government. These are what we call municipal
corporations. They do not include government entities which are given a corporate personality separate and distinct
from the government and which are governed by the Corporation Law. Their powers, duties and liabilities have to be
determined in the light of that law and of their corporate charters. They do not therefore come within the exemption
clause prescribed in section 16, Rule 130 of our Rules of Court.

“Public corporations are those formed or organized for the government of a portion of the State.” (Section 3, Republic
Act No. 1459, Corporation Law).

“‘The generally accepted definition of a municipal corporation would only include organized cities and towns, and like
organizations, with political and legislative powers for the local, civil government and police regulations of the
inhabitants of the particular district included in the boundaries of the corporation.’ Heller vs. Stremmel, 52 Mo. 309,
312.”

“In its more general sense the phrase ‘municipal corporation’ may include both towns and counties, and other public
corporations created by government for political purposes. In its more common and limited signification, it embraces
only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661.” (McQuillin,
Municipal Corporations, 2nd ed., Vol. 1, p. 385.)

“We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by the
authority of the government, of the inhabitants of a particular place or district, and authorizing them in their corporate
capacity to exercise subordinate specified powers of legislation and regulation with respect to their local and internal
concerns. This power of local government is the distinctive purpose and the distinguishing feature of a municipal
corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)

It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not
less than 200 words before the appeal is taken and P0.15 for each page after the filing of the appeal, but in this case the
National Coconut Corporation has agreed and in fact has paid P1.00 per page for the services rendered by the Plaintiffs
and has not raised any objection to the amount paid until its propriety was disputed by the Auditor General. The
payment of the fees in question became therefore contractual and as such is valid even if it goes beyond the limit
prescribed in section 8, Rule 130 of the Rules of Court.

As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial, considering
that this case refers not to a money claim disapproved by the Auditor General but to an action of prohibition the
purpose of which is to restrain the officials concerned from deducting from Plaintiffs’ salaries the amount paid to them
as stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of Court relative to appeals from a
decision of the Auditor General.
68

Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

FACTS:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the
pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant
Corporate Counsel Federico Alikpala, counsel for Defendant, requested said stenographers for copies of the transcript of
the stenographic notes taken by them during the hearing. Plaintiffs complied with the request by delivering to Counsel
Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their
fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto
for said transcript at the rate of P1 per page. However, the Auditor General disallowed the payment of these fees and
ordered that it shall be reimbursed for the reason that NACOCO, being a public corporation, is exempted from the fees.
For reimbursement to take place, it was further ordered that the amount of P25 per payday be deducted from the salary
of Bacani and P10 from the salary of Matoto. Hence, this petition.

ISSUE:
WON NACOCO is exempt from legal fees being an alleged government corporation.

HELD:
NO. There are functions which our government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty (constitute), and those which it may exercise to
promote merely the welfare, progress and prosperity of the people (ministrant). To this latter class belongs the
organization of those corporations owned or controlled by the government to promote certain aspects of the economic
life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled
corporations which may take on the form of a private enterprise or one organized with powers and formal
characteristics of a private corporations under the Corporation Law. They do not acquire the status of a government
entity for the simple reason that they do not come under the classification of municipal or public corporation. NACOCO
is a GOCC. Thus, not part of the government.

7. People vs. Sandiganbayan (G.R. No. 145951, August 12, 2003)

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
SANDIGANBAYAN (2ND DIV.), and JOSE S. RAMISCAL, JR., JULIAN ALZAGA, ATTY. MANUEL SATUITO, ELIZABETH LIANG
and JESUS GARCIA, respondents.

Respondents Jose S. Ramiscal, Jr., Julian Alzaga, Manuel Satuito, Elizabeth Liang and Jesus Garcia were all charged with
Malversation through Falsification of Public Documents before the Sandiganbayan in Criminal Case No. 25741. The
Information alleged that respondents misappropriated and converted for their personal use the amount of
P250,318,200.00 from the funds of the Armed Forces of the Philippines Retirement and Separation Benefits System
(AFP-RSBS).1

On November 12, 1999, respondent Ramiscal filed with the Sandiganbayan an "Urgent Motion to Declare Nullity of
Information and to Defer Issuance of Warrant of Arrest."2 He argued, inter alia, that the Sandiganbayan had no
jurisdiction over the case because the AFP-RSBS is a private entity. The said Urgent Motion was later adopted by
respondents Alzaga and Satuito.

The Urgent Motion was denied by the Sandiganbayan in a Resolution promulgated on January 6, 2000.3 Respondents
filed a Motion for Reconsideration. In a Resolution issued on May 12, 2000, the Sandiganbayan sustained respondents'
contention that the AFP-RSBS is a private entity. Hence, it reconsidered its earlier Resolution and ordered the dismissal
of Criminal Case No. 25741. Upon denial of its Motion for Reconsideration, the prosecution filed the instant special civil
action for certiorari anchored on the following grounds:

RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION
IN ISSUING THE RESOLUTION DATED MAY 9, 2000 INSOFAR AS IT DISMISSED THE CASE FOR LACK OF JURISDICTION.

II

RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF EXCESS OF JURISDICTION IN
DENYING PROSECUTION'S MOTION FOR RECONSIDERATION DATED JUNE 1, 2000, SUPPLEMENTAL MOTION FOR
69

RECONSIDERATION DATED JULY 10, 2000 AND SECOND SUPPLEMENTAL MOTION FOR RECONSIDERATION DATED MAY
12, 2000.4

Considering that the Resolution of the Sandiganbayan which dismissed Criminal Case No. 25741 was a final order which
finally disposed of the case, the proper remedy therefrom is a petition for review under Rule 45 of the 1997 Rules of Civil
Procedure.5 Section 1 of said Rule 45 explicitly provides:

Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a judgment or final order or
resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of
law which must be distinctly set forth.

Moreover, Section 7 of Presidential Decree No. 1606, as amended by Section 3 of Republic Act No. 7975, states:

Form, Finality and Enforcement of Decisions. –

xxx xxx xxx.

Decisions and final orders of the Sandiganbayan shall be appealable to the Supreme Court by petition for review on
certiorari raising pure questions of law in accordance with Rule 45 of the Rules of Court.

Basic is the rule that a special civil action for certiorari under Rule 65 of the Rules may be availed of only where there is
no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law.6 Certiorari cannot be availed of as a
substitute for the lost remedy of an ordinary appeal.7

The foregoing rule, however, may be relaxed where the issue raised is one purely of law, where public interest is
involved, and in case of urgency. In such cases, certiorari is allowed notwithstanding the existence and availability of the
remedy of appeal. Certiorari may also be availed of where an appeal would be slow, inadequate and insufficient.8 If the
strict application of the Rules will tend to frustrate rather than promote justice, it is always within our power to suspend
the rules, or except a particular case from its operation.9

We now come to the substantive issue of whether the AFP-RSBS is a government-owned or controlled corporation or a
private corporation and, corollarily, whether its funds are public or private. The Sandiganbayan based its ruling that the
AFP-RSBS is a private entity on its findings that the Government does not provide counterpart contribution to the
System; that the employees of the AFP-RSBS do not receive any salary from the Government and are not covered by the
salary standardization law; that their remittances and contributions were made to the Social Security System and not to
the Government Service Insurance System; and that the contribution to the System of the sum of P200,000,000.00
under Presidential Decree 361 can not be deemed as equity of the government in the System but rather, a donation or
"seed money" which was never increased thereafter.10

Generally, factual findings of the Sandiganbayan are conclusive on us. This rule, however, admits of exceptions, such as
where: (1) the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (2) the inference made
is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; and
(5) the findings of fact of the Sandiganbayan are premised on a want of evidence and are contradicted by evidence on
record.11

The AFP-RSBS was created by Presidential Decree No. 361. Its purpose and functions are akin to those of the GSIS and
the SSS, as in fact it is the system that manages the retirement and pension funds of those in the military service.
Members of the Armed Forces of the Philippines and the Philippine National Police are expressly excluded from the
coverage of The GSIS Act of 1997.12 Therefore, soldiers and military personnel, who are incidentally employees of the
Government, rely on the administration of the AFP-RSBS for their retirement, pension and separation benefits. For this
purpose, the law provides that the contribution by military officers and enlisted personnel to the System shall be
compulsory, thus:

Officers and enlisted personnel in the active service shall contribute to the System an amount equivalent to four per
cent (4%) of their monthly base and longevity pay, which contribution shall be deducted from their pay from the Armed
Forces of the Philippines and paid to the System: Provided, however, That any officer or enlisted person who is due for
compulsory retirement or is optionally retirable and actually elects to retire within one year from the approval of this
Act, shall no longer be required to contribute to the System: Provided, further, That any officer or enlisted person who is
separated through no fault of his own and is not eligible for either retirement or separation benefits shall upon his
separation, be refunded in one lump sum all his actual contributions to the System plus interest at the rate of four per
cent (4%).13
70

Its enabling law further mandates that the System shall be administered by the Chief of Staff of the Armed Forces of the
Philippines through an agency, group, committee or board, which may be created and organized by him and subject to
such rules and regulations governing the same as he may, subject to the approval of the Secretary of National Defense,
promulgate from time to time. Moreover, the investment of funds of the System shall be decided by the Chief of Staff of
the Armed Forces of the Philippines with the approval of the Secretary of National Defense.14

In connection with the Sandiganbayan's finding that the funds of the AFP-RSBS, except for the initial seed money, come
entirely from contributions and that no part thereof come from appropriations, Section 2 of P.D. 361 states:

SECTION 2. The System shall be funded as follows:

(a) Appropriations and contributions;

(b) Donations, gift, legacies, bequest and others to the System;

(c) All earnings of the System which shall not be subject to any tax whatsoever.

Indeed, the clear import of the above-quoted provision is that, while it may be true that there have been no
appropriations for the contribution of funds to the AFP-RSBS, the Government is not precluded from later on adding to
the funds in order to provide additional benefits to the men in uniform.

The above considerations indicate that the character and operations of the AFP-RSBS are imbued with public interest. As
such, we hold that the same is a government entity and its funds are in the nature of public funds.

WHEREFORE, in view of the foregoing, the instant petition for certiorari is GRANTED. The assailed Resolution of the
Sandiganbayan dated May 12, 2000 is ANNULLED and SET ASIDE. Criminal Case No. 25741 is ordered REINSTATED, and
the Sandiganbayan is DIRECTED to resume proceedings thereon with dispatch.

SO ORDERED.

8. MIAA vs. Court of Appeals (G.R. No. 155650, July 20, 2006)

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG
PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents.

The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA)
Complex in Parañaque City under Executive Order No. 903, otherwise known as the  Revised Charter of the Manila
International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President
Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909 1 and 2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA
Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land, 3 including the runways and
buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation. 4 The MIAA Charter further
provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless
specifically approved by the President of the Philippines. 5
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined
that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section
21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax imposed by
the City. MIAA then paid some of the real estate tax already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable
years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:
TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTAL
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
71

E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00

*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.006
On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the
Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands
and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion
No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that
Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption.
The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer
for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from
imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition
was docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary
period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental
motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review. 7
Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the Barangay Halls of Barangays
Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public market of Barangay La Huerta; and in the main lobby of the
Parañaque City Hall. The City of Parañaque published the notices in the 3 and 10 January 2003 issues of the Philippine
Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of
the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall
Building of Parañaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent  Ex-
Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain
respondents — the City of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer
of Parañaque, and the City Assessor of Parañaque ("respondents") — from auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered
respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the
TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours
after the conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the
hearing, MIAA, respondent City of Parañaque, and the Solicitor General subsequently submitted their respective
Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA.
However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport
Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands
and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and
public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax.
MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the
Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation
would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges
of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents
also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all
others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code.
Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local
Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents
further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from
claiming that the Airport Lands and Buildings are exempt from real estate tax.
The Issue
72

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate
tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Parañaque, and all
proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become
moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government
and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines
and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax.
Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in
Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or
controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating
the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However,
MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the
Administrative Code of 1987 defines a government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. – x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not
organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided
into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter 9 provides:
SECTION 10. Capital. — The capital of the Authority to be contributed by the National Government shall be increased
from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and
immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the
valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on
Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions
taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other
properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the
unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for
in Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the
Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General
Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is divided into shares and x
x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into
shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-
stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers."
A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member
of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating
income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like
trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is
organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions.
MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers.
Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as
follows:
SEC. 2. General Terms Defined. –– x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
73

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, 12 police authority13 and the levying of fees and charges. 14 At the same time,
MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent
with the provisions of this Executive Order." 15
Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains
part of the National Government machinery although not integrated with the department framework. The MIAA Charter
expressly states that transforming MIAA into a "separate and autonomous body" 16 will make its operation more
"financially viable."17
Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock
corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or
controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the
University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate
powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government
corporate entities. However, they are not government-owned or controlled corporations in the strict sense as
understood under the Administrative Code, which is the governing law defining the legal relationship and status of
government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities  and local
government units.(Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which
historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation
as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines
and limitations as the Congress may provide."18
When local governments invoke the power to tax on national government instrumentalities, such power is construed
strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government instrumentality from local taxation, such exemption is
construed liberally in favor of the national government instrumentality. As this Court declared in  Maceda v. Macaraig,
Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its
agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be
handled by government in the course of its operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non tax-liability of such agencies. 19
There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy
requires such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national government instrumentalities for rendering essential public
services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for sound and compelling policy
considerations. There must be express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local
governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements
and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC
Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the
States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US
51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them ."
(Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
74

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may
perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340
US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot
be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial
property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part
of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals,
rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes
seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article
420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the
State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are  used by the public for international and
domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public
does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the
government of a tollway does not change the character of the road as one for public use. Someone must pay for the
maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among
the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a
more efficient and equitable manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of public dominion or
not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the
government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms
and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road,
the speed restrictions and other conditions for the use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk
of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA
as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who
actually use a public facility instead of taxing all the public including those who never use the particular public facility. A
user's tax is more equitable — a principle of taxation mandated in the 1987 Constitution. 21
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both
international and domestic air traffic," 22 are properties of public dominion because they are intended for public use.  As
properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion.  As
properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled
repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already
ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial
and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service
supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or
exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In
leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its
authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it
empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a
contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its
decision of February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature
outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc."
(Emphasis supplied) 23
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Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce
of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in
general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private
parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as
was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary
occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open
to the public and free from encumbrances or illegal private constructions. 24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of
an auction sale.25
Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public
or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being
contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the
600-hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public use the
Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains
to this day the existing general law governing the classification and disposition of lands of the public domain other than
timber and mineral lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may
designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of
the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this
purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways,
rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public
parks, public quarries, public fishponds, working men's village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-
alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable
under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these
properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are
inalienable in their present status as properties of public dominion, they are not subject to levy on execution or
foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the
State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is
reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. — (1) The President shall have the
power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific
public purpose indicated until otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential
proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce
of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I
of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic,
thus:
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law
to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of
any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head
cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air
Transportation of the Department of Transportation and Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. — x x x x
The land where the Airport is presently located as well as the surrounding land area of approximately six hundred
hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority,
subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an
76

actual survey of the area transferred within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities, runways, lands,
buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests
and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the
Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory
Provisions. — The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of
Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory
notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to
MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic
air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in
the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current
and future air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high standards of
accommodation and service within the context of a financially viable operation, will best be achieved by a separate
and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the
Philippines is given continuing authority to reorganize the National Government, which authority includes the creation
of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to  reorganize a division in the
Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over
MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines." This only means that the
Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil
Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and
Buildings, MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic
paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize
the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong
to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic
of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from
imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The
real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or
instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to
be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by
the Republic and continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even as the
Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption.
Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption
only if the "beneficial use thereof has been granted, for consideration or otherwise, to a  taxable person." MIAA, as a
government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if
we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does
not make these real properties subject to real estate tax.
77

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real
estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real
estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a  taxable
person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the
Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased
to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property
taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government
Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code.
Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or
controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and
non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government
Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the
minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty
tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the
withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory
or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical
persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC,
but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status — whether
MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from
Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax
exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local
Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of
tax on national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local
government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its
agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its
agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133.
The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned
by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by
local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three
classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under
Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring
the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This
theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to
tax by local governments since the national government is not included in the enumeration of exempt entities in Section
193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national
government.
Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject
to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law
with juridical personalities are: Bangko Sentral ng Pilipinas, 30 Philippine Rice Research Institute,31 Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority, 34 Philippine
Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine
National Railways.39
78

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments
from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between
national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts
should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without
juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government
Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the
national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code." This
means that unless the Local Government Code grants an express authorization, local governments have no power to tax
the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax
the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the
national government, its agencies and instrumentalities only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the
national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity.
Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this
exemption is when the government gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and
instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to
real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property,
although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a
taxable person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later
provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in
case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real
property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government
Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and
234 on the other. No one has urged that there is such a conflict, much less has any one presenteda persuasive argument
that there is such a conflict. The minority's assumption of an irreconcilable conflict in the statutory provisions is an
egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code." By its
own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise
of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain
matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply
cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section 133
limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax.
Section 133 states that the taxing powers of local governments "shall not extend to the levy" of any kind of tax on the
national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133 logically
prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the
"common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of
local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local
governments can impose any kind of tax on the national government, its agencies and instrumentalities — a gross
absurdity.
Local governments have no power to tax the national government, its agencies and instrumentalities, except as
otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless
otherwise provided in this Code." This exception — which is an exception to the exemption of the Republic from real
estate tax imposed by local governments — refers to Section 234(a) of the Code. The exception to the exemption in
Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its
agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase "government-owned or controlled
corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of the
Administrative Code admits that its definitions are not controlling when it provides:
79

SEC. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular statute,
shall require a different meaning:
xxxx
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may
require a different meaning than that defined in the Administrative Code. However, this does not automatically mean
that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the
Administrative Code clearly states that "unless the specific words x x x of a particular statute shall require a different
meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the
Local Government Code defining the phrase "government-owned or controlled corporation" differently from the
definition in the Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase "government-owned or
controlled corporation" differently from the definition in the Administrative Code. Indeed, there is none. The Local
Government Code is silent on the definition of the phrase "government-owned or controlled corporation." The
Administrative Code, however, expressly defines the phrase "government-owned or controlled corporation." The
inescapable conclusion is that the Administrative Code definition of the phrase "government-owned or controlled
corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the major
structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is the governing
law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the
provisions of the Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation" should apply only to
corporations organized under the Corporation Code, the general incorporation law, and not to corporations created by
special charters. The minority sees no reason why government corporations with special charters should have a capital
stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations" under the Administrative Code refer to
those corporations owned by the government or its instrumentalities which are created not by legislative enactment,
but formed and organized under the Corporation Code through registration with the Securities and Exchange
Commission. In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full
ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or
alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will
also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not
distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not
distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned corporations organized as stock
corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The
special charter40 of the Land Bank of the Philippines provides:
SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred
and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the
Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be
issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank shall be Five Billion Pesos to be divided
into Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the
National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five
Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the
Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in
Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special charters are the Philippine
Crop Insurance Corporation,42 Philippine International Trading Corporation, 43 and the Philippine National Bank 44 before it
was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real estate tax on real properties owned by them.
To rule that they are not government-owned or controlled corporations because they are not registered with the
Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code,
thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those that meet the two
conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or
controlled corporation must be established for the common good. The second condition is that the government-owned
80

or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution
provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through
special charters only if these entities are required to meet the twin conditions of common good and economic viability.
In other words, Congress has no power to create government-owned or controlled corporations with special charters
unless they are made to comply with the two conditions of common good and economic viability. The test of economic
viability applies only to government-owned or controlled corporations that perform economic or commercial activities
and need to compete in the market place. Being essentially economic vehicles of the State for the common good —
meaning for economic development purposes — these government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing governmental or public
functions need not meet the test of economic viability. These instrumentalities perform essential public services for the
common good, services that every modern State must provide its citizens. These instrumentalities need not be
economically viable since the government may even subsidize their entire operations. These instrumentalities are not
the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with
corporate powers but performing essential governmental or public functions. Congress has plenary authority to create
government instrumentalities vested with corporate powers provided these instrumentalities perform essential
government functions or public services. However, when the legislature creates through special charters corporations
that perform economic or commercial activities, such entities — known as "government-owned or controlled
corporations" — must meet the test of economic viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar
government-owned or controlled corporations, which derive their income to meet operating expenses solely from
commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation
of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely
drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the
purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation,
there is a sense in which this corporation becomes exempt from the test of economic performance. We know what
happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through
new equity infusions from the government and what is always invoked is the common good. That is the reason why this
year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all taxpayers' money which could have been relocated to
agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a
restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market
test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad
that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE
ECONOMIC TEST," together with the common good. 45
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987
Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase
"in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that
they must show capacity to function efficiently in business and that they should not go into activities which the private
sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make
profit and generate benefits not quantifiable in financial terms. 46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate powers and
performing essential public services. The State is obligated to render essential public services regardless of the economic
viability of providing such service. The non-economic viability of rendering such essential public service does not excuse
the State from withholding such essential services from the public.
However, government-owned or controlled corporations with special charters, organized essentially for economic or
commercial objectives, must meet the test of economic viability. These are the government-owned or controlled
corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the
Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations,
along with government-owned or controlled corporations organized under the Corporation Code, that fall under the
definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the
market place. MIAA does not compete in the market place because there is no competing international airport operated
81

by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the
Philippines. The operation of an international airport requires the presence of personnel from the following government
agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out
those without visas or travel documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious
diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of
criminals, as well as to secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave
Philippine airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises — such as runway and buildings — for the government personnel,
passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues
principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA
charges every passenger are regulatory or administrative fees 47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of
the Administrative Code, which provides:
SEC. 2. General Terms Defined. – x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled
corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10)
of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public
services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase
"government-owned or controlled corporations" under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled
corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions for
the creation of "government-owned or controlled corporations." The Administrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory
Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a
government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code.
As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of
the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is
not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property
owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA
are intended for public use, and at the very least intended for public service. Whether intended for public use or public
service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport
Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local
Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation
and status of government units, agencies and offices within the entire government machinery, MIAA is a government
instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government
Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges
of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as
provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes
82

subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private
parties are subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties
of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions
"ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and
owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the
Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government
Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure
sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001
and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila
International Airport Authority EXEMPT from the real estate tax imposed by the City of Parañaque. We declare  VOID all
the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of
Parañaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that
the Manila International Airport Authority has leased to private parties. We also declare VOID the assailed auction sale,
and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority.
No costs.
SO ORDERED.

FACTS:
MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to
2001. MIAA’s real estate tax delinquency was estimated at P624 million.

The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and
Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should
MIAA fail to pay the real estate tax delinquency.

MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary
injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real
estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings.

Paranaque’s Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of
“government-owned and-controlled corporations” upon the effectivity of the Local Government Code. Respondents also
argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all
others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code.
Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

MIAA’s contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The
reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a
case the tax debtor is also the tax creditor.

ISSUE:
Whether Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws?

RULING:
Yes. Ergo, the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant to such
assessments, are void.

1. MIAA is Not a Government-Owned or Controlled Corporation

MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus
exempt from local taxation.

MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting
shares.

MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have members.

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions.
MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers.

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
83

government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA
exercises “all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with
the provisions of this Executive Order.”

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like “roads, canals,
rivers, torrents, ports and bridges constructed by the State,” are owned by the State. The term “ports” includes seaports
and airports. The MIAA Airport Lands and Buildings constitute a “port” constructed by the State. Under Article 420 of the
Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the
Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and
domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does
not remove the character of the Airport Lands and Buildings as properties for public use.

The charging of fees to the public does not determine the character of the property whether it is of public dominion or
not. Article 420 of the Civil Code defines property of public dominion as one “intended for public use.” The terminal fees
MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that
maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for
public use. Such fees are often termed user’s tax. This means taxing those among the public who actually use a public
facility instead of taxing all the public including those who never use the particular public facility.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of
an auction sale.

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public
or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being
contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the
600-hectare runway of the MIAA for non-payment of real estate tax.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of
the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. n
MIAA’s case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head
cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.

d. Transfer to MIAA was Meant to Implement a Reorganization

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the
Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over
MIAA’s assets adverse to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Sec 234 of the LGC provides that real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person following are exempted from payment of the real property tax.
84

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real
estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real
estate tax.

e. Classifications of Government (legitimacy)

i. De Jure
ii. De Facto

Cases:
1. Republic vs. Sandiganbayan [407 SCRA 10 (2003)]

G.R. No. 104768 July 21, 2003

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
SANDIGANBAYAN, MAJOR GENERAL JOSEPHUS Q. RAMAS and ELIZABETH DIMAANO, Respondents.

The Case
Before this Court is a petition for review on certiorari seeking to set aside the Resolutions of the Sandiganbayan (First
Division)1 dated 18 November 1991 and 25 March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioner’s
Amended Complaint and ordered the return of the confiscated items to respondent Elizabeth Dimaano, while the
second Resolution denied petitioner’s Motion for Reconsideration. Petitioner prays for the grant of the reliefs sought in
its Amended Complaint, or in the alternative, for the remand of this case to the Sandiganbayan (First Division) for
further proceedings allowing petitioner to complete the presentation of its evidence.
Antecedent Facts
Immediately upon her assumption to office following the successful EDSA Revolution, then President Corazon C. Aquino
issued Executive Order No. 1 ("EO No. 1") creating the Presidential Commission on Good Government ("PCGG"). EO No.
1 primarily tasked the PCGG to recover all ill-gotten wealth of former President Ferdinand E. Marcos, his immediate
family, relatives, subordinates and close associates. EO No. 1 vested the PCGG with the power "(a) to conduct
investigation as may be necessary in order to accomplish and carry out the purposes of this order" and the power "(h) to
promulgate such rules and regulations as may be necessary to carry out the purpose of this order." Accordingly, the
PCGG, through its then Chairman Jovito R. Salonga, created an AFP Anti-Graft Board ("AFP Board") tasked to investigate
reports of unexplained wealth and corrupt practices by AFP personnel, whether in the active service or retired. 2
Based on its mandate, the AFP Board investigated various reports of alleged unexplained wealth of respondent Major
General Josephus Q. Ramas ("Ramas"). On 27 July 1987, the AFP Board issued a Resolution on its findings and
recommendation on the reported unexplained wealth of Ramas. The relevant part of the Resolution reads:
III. FINDINGS and EVALUATION:
Evidence in the record showed that respondent is the owner of a house and lot located at 15-Yakan St., La Vista, Quezon
City. He is also the owner of a house and lot located in Cebu City. The lot has an area of 3,327 square meters.
The value of the property located in Quezon City may be estimated modestly at ₱700,000.00.
The equipment/items and communication facilities which were found in the premises of Elizabeth Dimaano and were
confiscated by elements of the PC Command of Batangas were all covered by invoice receipt in the name of CAPT.
EFREN SALIDO, RSO Command Coy, MSC, PA. These items could not have been in the possession of Elizabeth Dimaano if
not given for her use by respondent Commanding General of the Philippine Army.
Aside from the military equipment/items and communications equipment, the raiding team was also able to confiscate
money in the amount of ₱2,870,000.00 and $50,000 US Dollars in the house of Elizabeth Dimaano on 3 March 1986.
Affidavits of members of the Military Security Unit, Military Security Command, Philippine Army, stationed at Camp
Eldridge, Los Baños, Laguna, disclosed that Elizabeth Dimaano is the mistress of respondent. That respondent usually
goes and stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga, Itaas, Batangas City and when
he arrives, Elizabeth Dimaano embraces and kisses respondent. That on February 25, 1986, a person who rode in a car
went to the residence of Elizabeth Dimaano with four (4) attache cases filled with money and owned by MGen Ramas.
Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible means of income and is supported
by respondent for she was formerly a mere secretary.
Taking in toto the evidence, Elizabeth Dimaano could not have used the military equipment/items seized in her house on
March 3, 1986 without the consent of respondent, he being the Commanding General of the Philippine Army. It is also
impossible for Elizabeth Dimaano to claim that she owns the ₱2,870,000.00 and $50,000 US Dollars for she had no
visible source of income.
This money was never declared in the Statement of Assets and Liabilities of respondent. There was an intention to cover
the existence of these money because these are all ill-gotten and unexplained wealth. Were it not for the affidavits of
the members of the Military Security Unit assigned at Camp Eldridge, Los Baños, Laguna, the existence and ownership of
these money would have never been known.
85

The Statement of Assets and Liabilities of respondent were also submitted for scrutiny and analysis by the Board’s
consultant. Although the amount of ₱2,870,000.00 and $50,000 US Dollars were not included, still it was disclosed that
respondent has an unexplained wealth of ₱104,134. 60.
IV. CONCLUSION:
In view of the foregoing, the Board finds that a prima facie case exists against respondent for ill-gotten and unexplained
wealth in the amount of ₱2,974,134.00 and $50,000 US Dollars.
V. RECOMMENDATION:
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted and tried for violation of RA 3019,
as amended, otherwise known as "Anti-Graft and Corrupt Practices Act" and RA 1379, as amended, otherwise known as
"The Act for the Forfeiture of Unlawfully Acquired Property." 3
Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under Republic Act No. 1379 ("RA No. 1379") 4 against
Ramas.
Before Ramas could answer the petition, then Solicitor General Francisco I. Chavez filed an Amended Complaint naming
the Republic of the Philippines ("petitioner"), represented by the PCGG, as plaintiff and Ramas as defendant. The
Amended Complaint also impleaded Elizabeth Dimaano ("Dimaano") as co-defendant.
The Amended Complaint alleged that Ramas was the Commanding General of the Philippine Army until 1986. On the
other hand, Dimaano was a confidential agent of the Military Security Unit, Philippine Army, assigned as a clerk-typist at
the office of Ramas from 1 January 1978 to February 1979. The Amended Complaint further alleged that Ramas
"acquired funds, assets and properties manifestly out of proportion to his salary as an army officer and his other income
from legitimately acquired property by taking undue advantage of his public office and/or using his power, authority and
influence as such officer of the Armed Forces of the Philippines and as a subordinate and close associate of the deposed
President Ferdinand Marcos."5
The Amended Complaint also alleged that the AFP Board, after a previous inquiry, found reasonable ground to believe
that respondents have violated RA No. 1379. 6 The Amended Complaint prayed for, among others, the forfeiture of
respondents’ properties, funds and equipment in favor of the State.
Ramas filed an Answer with Special and/or Affirmative Defenses and Compulsory Counterclaim to the Amended
Complaint. In his Answer, Ramas contended that his property consisted only of a residential house at La Vista
Subdivision, Quezon City, valued at ₱700,000, which was not out of proportion to his salary and other legitimate income.
He denied ownership of any mansion in Cebu City and the cash, communications equipment and other items confiscated
from the house of Dimaano.
Dimaano filed her own Answer to the Amended Complaint. Admitting her employment as a clerk-typist in the office of
Ramas from January-November 1978 only, Dimaano claimed ownership of the monies, communications equipment,
jewelry and land titles taken from her house by the Philippine Constabulary raiding team.
After termination of the pre-trial,7 the court set the case for trial on the merits on 9-11 November 1988.
On 9 November 1988, petitioner asked for a deferment of the hearing due to its lack of preparation for trial and the
absence of witnesses and vital documents to support its case. The court reset the hearing to 17 and 18 April 1989.
On 13 April 1989, petitioner filed a motion for leave to amend the complaint in order "to charge the delinquent
properties with being subject to forfeiture as having been unlawfully acquired by defendant Dimaano alone x x x." 8
Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded with petitioner’s presentation of evidence
on the ground that the motion for leave to amend complaint did not state when petitioner would file the amended
complaint. The Sandiganbayan further stated that the subject matter of the amended complaint was on its face vague
and not related to the existing complaint. The Sandiganbayan also held that due to the time that the case had been
pending in court, petitioner should proceed to present its evidence.
After presenting only three witnesses, petitioner asked for a postponement of the trial.
On 28 September 1989, during the continuation of the trial, petitioner manifested its inability to proceed to trial because
of the absence of other witnesses or lack of further evidence to present. Instead, petitioner reiterated its motion to
amend the complaint to conform to the evidence already presented or to change the averments to show that Dimaano
alone unlawfully acquired the monies or properties subject of the forfeiture.
The Sandiganbayan noted that petitioner had already delayed the case for over a year mainly because of its many
postponements. Moreover, petitioner would want the case to revert to its preliminary stage when in fact the case had
long been ready for trial. The Sandiganbayan ordered petitioner to prepare for presentation of its additional evidence, if
any.
During the trial on 23 March 1990, petitioner again admitted its inability to present further evidence. Giving petitioner
one more chance to present further evidence or to amend the complaint to conform to its evidence, the Sandiganbayan
reset the trial to 18 May 1990. The Sandiganbayan, however, hinted that the re-setting was without prejudice to any
action that private respondents might take under the circumstances.
However, on 18 May 1990, petitioner again expressed its inability to proceed to trial because it had no further evidence
to present. Again, in the interest of justice, the Sandiganbayan granted petitioner 60 days within which to file an
appropriate pleading. The Sandiganbayan, however, warned petitioner that failure to act would constrain the court to
take drastic action.
Private respondents then filed their motions to dismiss based on Republic v. Migrino. 9 The Court held in Migrino that the
PCGG does not have jurisdiction to investigate and prosecute military officers by reason of mere position held without a
showing that they are "subordinates" of former President Marcos.
86

On 18 November 1991, the Sandiganbayan rendered a resolution, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint, without pronouncement as to costs. The
counterclaims are likewise dismissed for lack of merit, but the confiscated sum of money, communications equipment,
jewelry and land titles are ordered returned to Elizabeth Dimaano.
The records of this case are hereby remanded and referred to the Hon. Ombudsman, who has primary jurisdiction over
the forfeiture cases under R.A. No. 1379, for such appropriate action as the evidence warrants. This case is also referred
to the Commissioner of the Bureau of Internal Revenue for a determination of any tax liability of respondent Elizabeth
Dimaano in connection herewith.
SO ORDERED.
On 4 December 1991, petitioner filed its Motion for Reconsideration.
In answer to the Motion for Reconsideration, private respondents filed a Joint Comment/Opposition to which petitioner
filed its Reply on 10 January 1992.
On 25 March 1992, the Sandiganbayan rendered a Resolution denying the Motion for Reconsideration.
Ruling of the Sandiganbayan
The Sandiganbayan dismissed the Amended Complaint on the following grounds:
(1.) The actions taken by the PCGG are not in accordance with the rulings of the Supreme Court in Cruz, Jr. v.
Sandiganbayan10 and Republic v. Migrino11 which involve the same issues.
(2.) No previous inquiry similar to preliminary investigations in criminal cases was conducted against Ramas and
Dimaano.
(3.) The evidence adduced against Ramas does not constitute a prima facie case against him.
(4.) There was an illegal search and seizure of the items confiscated.
The Issues
Petitioner raises the following issues:
A. RESPONDENT COURT SERIOUSLY ERRED IN CONCLUDING THAT PETITIONER’S EVIDENCE CANNOT MAKE A CASE FOR
FORFEITURE AND THAT THERE WAS NO SHOWING OF CONSPIRACY, COLLUSION OR RELATIONSHIP BY CONSANGUINITY
OR AFFINITY BY AND BETWEEN RESPONDENT RAMAS AND RESPONDENT DIMAANO NOTWITHSTANDING THE FACT THAT
SUCH CONCLUSIONS WERE CLEARLY UNFOUNDED AND PREMATURE, HAVING BEEN RENDERED PRIOR TO THE
COMPLETION OF THE PRESENTATION OF THE EVIDENCE OF THE PETITIONER.
B. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ACTIONS TAKEN BY THE PETITIONER, INCLUDING THE
FILING OF THE ORIGINAL COMPLAINT AND THE AMENDED COMPLAINT, SHOULD BE STRUCK OUT IN LINE WITH THE
RULINGS OF THE SUPREME COURT IN CRUZ, JR. v. SANDIGANBAYAN, 194 SCRA 474 AND REPUBLIC v. MIGRINO, 189
SCRA 289, NOTWITHSTANDING THE FACT THAT:
1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and Republic v. Migrino, supra, are clearly not applicable to this case;
2. Any procedural defect in the institution of the complaint in Civil Case No. 0037 was cured and/or waived by
respondents with the filing of their respective answers with counterclaim; and
3. The separate motions to dismiss were evidently improper considering that they were filed after commencement of
the presentation of the evidence of the petitioner and even before the latter was allowed to formally offer its evidence
and rest its case;
C. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ARTICLES AND THINGS SUCH AS SUMS OF MONEY,
COMMUNICATIONS EQUIPMENT, JEWELRY AND LAND TITLES CONFISCATED FROM THE HOUSE OF RESPONDENT
DIMAANO WERE ILLEGALLY SEIZED AND THEREFORE EXCLUDED AS EVIDENCE. 12
The Court’s Ruling
First Issue: PCGG’s Jurisdiction to Investigate Private Respondents
This case involves a revisiting of an old issue already decided by this Court in Cruz, Jr. v. Sandiganbayan 13 and Republic v.
Migrino.14
The primary issue for resolution is whether the PCGG has the jurisdiction to investigate and cause the filing of a
forfeiture petition against Ramas and Dimaano for unexplained wealth under RA No. 1379.
We hold that PCGG has no such jurisdiction.
The PCGG created the AFP Board to investigate the unexplained wealth and corrupt practices of AFP personnel, whether
in the active service or retired. 15 The PCGG tasked the AFP Board to make the necessary recommendations to
appropriate government agencies on the action to be taken based on its findings. 16 The PCGG gave this task to the AFP
Board pursuant to the PCGG’s power under Section 3 of EO No. 1 "to conduct investigation as may be necessary in order
to accomplish and to carry out the purposes of this order." EO No. 1 gave the PCGG specific responsibilities, to wit:
SEC. 2. The Commission shall be charged with the task of assisting the President in regard to the following matters:
(a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family,
relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover and
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.
(b) The investigation of such cases of graft and corruption as the President may assign to the Commission from time to
time.
x x x.
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The PCGG, through the AFP Board, can only investigate the unexplained wealth and corrupt practices of AFP personnel
who fall under either of the two categories mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who have
accumulated ill-gotten wealth during the administration of former President Marcos by being the latter’s immediate
family, relative, subordinate or close associate, taking undue advantage of their public office or using their powers,
influence x x x;17 or (2) AFP personnel involved in other cases of graft and corruption provided the President assigns their
cases to the PCGG.18
Petitioner, however, does not claim that the President assigned Ramas’ case to the PCGG. Therefore, Ramas’ case should
fall under the first category of AFP personnel before the PCGG could exercise its jurisdiction over him. Petitioner argues
that Ramas was undoubtedly a subordinate of former President Marcos because of his position as the Commanding
General of the Philippine Army. Petitioner claims that Ramas’ position enabled him to receive orders directly from his
commander-in-chief, undeniably making him a subordinate of former President Marcos.
We hold that Ramas was not a "subordinate" of former President Marcos in the sense contemplated under EO No. 1 and
its amendments.
Mere position held by a military officer does not automatically make him a "subordinate" as this term is used in EO Nos.
1, 2, 14 and 14-A absent a showing that he enjoyed close association with former President Marcos. Migrino discussed
this issue in this wise:
A close reading of EO No. 1 and related executive orders will readily show what is contemplated within the term
‘subordinate.’ The Whereas Clauses of EO No. 1 express the urgent need to recover the ill-gotten wealth amassed by
former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad.
EO No. 2 freezes ‘all assets and properties in the Philippines in which former President Marcos and/or his wife, Mrs.
Imelda Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees have any interest
or participation.’
Applying the rule in statutory construction known as ejusdem generis that is-
‘[W]here general words follow an enumeration of persons or things by words of a particular and specific meaning, such
general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of
the same kind or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of Deeds of Davao, 96 Phil. 53,
58, citing Black on Interpretation of Laws, 2nd Ed., 203].’
[T]he term "subordinate" as used in EO Nos. 1 & 2 refers to one who enjoys a close association with former President
Marcos and/or his wife, similar to the immediate family member, relative, and close associate in EO No. 1 and the close
relative, business associate, dummy, agent, or nominee in EO No. 2.
xxx
It does not suffice, as in this case, that the respondent is or was a government official or employee during the
administration of former President Marcos. There must be a prima facie showing that the respondent unlawfully
accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or his wife. (Emphasis
supplied)
Ramas’ position alone as Commanding General of the Philippine Army with the rank of Major General 19 does not suffice
to make him a "subordinate" of former President Marcos for purposes of EO No. 1 and its amendments. The PCGG has
to provide a prima facie showing that Ramas was a close associate of former President Marcos, in the same manner that
business associates, dummies, agents or nominees of former President Marcos were close to him. Such close association
is manifested either by Ramas’ complicity with former President Marcos in the accumulation of ill-gotten wealth by the
deposed President or by former President Marcos’ acquiescence in Ramas’ own accumulation of ill-gotten wealth if any.
This, the PCGG failed to do.
Petitioner’s attempt to differentiate the instant case from Migrino does not convince us. Petitioner argues that unlike in
Migrino, the AFP Board Resolution in the instant case states that the AFP Board conducted the investigation pursuant to
EO Nos. 1, 2, 14 and 14-A in relation to RA No. 1379. Petitioner asserts that there is a presumption that the PCGG was
acting within its jurisdiction of investigating crony-related cases of graft and corruption and that Ramas was truly a
subordinate of the former President. However, the same AFP Board Resolution belies this contention. Although the
Resolution begins with such statement, it ends with the following recommendation:
V. RECOMMENDATION:
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted and tried for violation of RA 3019,
as amended, otherwise known as "Anti-Graft and Corrupt Practices Act" and RA 1379, as amended, otherwise known as
"The Act for the Forfeiture of Unlawfully Acquired Property." 20
Thus, although the PCGG sought to investigate and prosecute private respondents under EO Nos. 1, 2, 14 and 14-A, the
result yielded a finding of violation of Republic Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-
A. This absence of relation to EO No. 1 and its amendments proves fatal to petitioner’s case. EO No. 1 created the PCGG
for a specific and limited purpose, and necessarily its powers must be construed to address such specific and limited
purpose.
Moreover, the resolution of the AFP Board and even the Amended Complaint do not show that the properties Ramas
allegedly owned were accumulated by him in his capacity as a "subordinate" of his commander-in-chief. Petitioner
merely enumerated the properties Ramas allegedly owned and suggested that these properties were disproportionate
to his salary and other legitimate income without showing that Ramas amassed them because of his close association
with former President Marcos. Petitioner, in fact, admits that the AFP Board resolution does not contain a finding that
Ramas accumulated his wealth because of his close association with former President Marcos, thus:
88

10. While it is true that the resolution of the Anti-Graft Board of the New Armed Forces of the Philippines did not
categorically find a prima facie evidence showing that respondent Ramas unlawfully accumulated wealth by virtue of
his close association or relation with former President Marcos and/or his wife, it is submitted that such omission was
not fatal. The resolution of the Anti-Graft Board should be read in the context of the law creating the same and the
objective of the investigation which was, as stated in the above, pursuant to Republic Act Nos. 3019 and 1379 in relation
to Executive Order Nos. 1, 2, 14 and 14-a;21 (Emphasis supplied)
Such omission is fatal. Petitioner forgets that it is precisely a prima facie showing that the ill-gotten wealth was
accumulated by a "subordinate" of former President Marcos that vests jurisdiction on PCGG. EO No. 1 22 clearly premises
the creation of the PCGG on the urgent need to recover all ill-gotten wealth amassed by former President Marcos, his
immediate family, relatives, subordinates and close associates. Therefore, to say that such omission was not fatal is
clearly contrary to the intent behind the creation of the PCGG.
In Cruz, Jr. v. Sandiganbayan,23 the Court outlined the cases that fall under the jurisdiction of the PCGG pursuant to EO
Nos. 1, 2,24 14,25 14-A:26
A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with Sections 1, 2 and 3 of Executive Order
No. 14, shows what the authority of the respondent PCGG to investigate and prosecute covers:
(a) the investigation and prosecution of the civil action for the recovery of ill-gotten wealth under Republic Act No. 1379,
accumulated by former President Marcos, his immediate family, relatives, subordinates and close associates, whether
located in the Philippines or abroad, including the take-over or sequestration of all business enterprises and entities
owned or controlled by them, during his administration, directly or through his nominees, by taking undue advantage of
their public office and/or using their powers, authority and influence, connections or relationships; and
(b) the investigation and prosecution of such offenses committed in the acquisition of said ill-gotten wealth as
contemplated under Section 2(a) of Executive Order No. 1.
However, other violations of the Anti-Graft and Corrupt Practices Act not otherwise falling under the foregoing
categories, require a previous authority of the President for the respondent PCGG to investigate and prosecute in
accordance with Section 2 (b) of Executive Order No. 1. Otherwise, jurisdiction over such cases is vested in the
Ombudsman and other duly authorized investigating agencies such as the provincial and city prosecutors, their
assistants, the Chief State Prosecutor and his assistants and the state prosecutors. (Emphasis supplied)
The proper government agencies, and not the PCGG, should investigate and prosecute forfeiture petitions not falling
under EO No. 1 and its amendments. The preliminary investigation of unexplained wealth amassed on or before 25
February 1986 falls under the jurisdiction of the Ombudsman, while the authority to file the corresponding forfeiture
petition rests with the Solicitor General. 27 The Ombudsman Act or Republic Act No. 6770 ("RA No. 6770") vests in the
Ombudsman the power to conduct preliminary investigation and to file forfeiture proceedings involving unexplained
wealth amassed after 25 February 1986.28
After the pronouncements of the Court in Cruz, the PCGG still pursued this case despite the absence of a prima facie
finding that Ramas was a "subordinate" of former President Marcos. The petition for forfeiture filed with the
Sandiganbayan should be dismissed for lack of authority by the PCGG to investigate respondents since there is no prima
facie showing that EO No. 1 and its amendments apply to respondents. The AFP Board Resolution and even the
Amended Complaint state that there are violations of RA Nos. 3019 and 1379. Thus, the PCGG should have
recommended Ramas’ case to the Ombudsman who has jurisdiction to conduct the preliminary investigation of ordinary
unexplained wealth and graft cases. As stated in Migrino:
[But] in view of the patent lack of authority of the PCGG to investigate and cause the prosecution of private respondent
for violation of Rep. Acts Nos. 3019 and 1379, the PCGG must also be enjoined from proceeding with the case, without
prejudice to any action that may be taken by the proper prosecutory agency. The rule of law mandates that an agency of
government be allowed to exercise only the powers granted to it.
Petitioner’s argument that private respondents have waived any defect in the filing of the forfeiture petition by
submitting their respective Answers with counterclaim deserves no merit as well.
Petitioner has no jurisdiction over private respondents. Thus, there is no jurisdiction to waive in the first place. The PCGG
cannot exercise investigative or prosecutorial powers never granted to it. PCGG’s powers are specific and limited. Unless
given additional assignment by the President, PCGG’s sole task is only to recover the ill-gotten wealth of the Marcoses,
their relatives and cronies.29 Without these elements, the PCGG cannot claim jurisdiction over a case.
Private respondents questioned the authority and jurisdiction of the PCGG to investigate and prosecute their cases by
filing their Motion to Dismiss as soon as they learned of the pronouncement of the Court in Migrino. This case was
decided on 30 August 1990, which explains why private respondents only filed their Motion to Dismiss on 8 October
1990. Nevertheless, we have held that the parties may raise lack of jurisdiction at any stage of the proceeding. 30 Thus, we
hold that there was no waiver of jurisdiction in this case. Jurisdiction is vested by law and not by the parties to an
action.31
Consequently, the petition should be dismissed for lack of jurisdiction by the PCGG to conduct the preliminary
investigation. The Ombudsman may still conduct the proper preliminary investigation for violation of RA No. 1379, and if
warranted, the Solicitor General may file the forfeiture petition with the Sandiganbayan. 32 The right of the State to forfeit
unexplained wealth under RA No. 1379 is not subject to prescription, laches or estoppel. 33
Second Issue: Propriety of Dismissal of Case
Before Completion of Presentation of Evidence
89

Petitioner also contends that the Sandiganbayan erred in dismissing the case before completion of the presentation of
petitioner’s evidence.
We disagree.
Based on the findings of the Sandiganbayan and the records of this case, we find that petitioner has only itself to blame
for non-completion of the presentation of its evidence. First, this case has been pending for four years before the
Sandiganbayan dismissed it. Petitioner filed its Amended Complaint on 11 August 1987, and only began to present its
evidence on 17 April 1989. Petitioner had almost two years to prepare its evidence. However, despite this sufficient
time, petitioner still delayed the presentation of the rest of its evidence by filing numerous motions for postponements
and extensions. Even before the date set for the presentation of its evidence, petitioner filed, on 13 April 1989, a Motion
for Leave to Amend the Complaint. 34 The motion sought "to charge the delinquent properties (which comprise most of
petitioner’s evidence) with being subject to forfeiture as having been unlawfully acquired by defendant Dimaano alone x
x x."
The Sandiganbayan, however, refused to defer the presentation of petitioner’s evidence since petitioner did not state
when it would file the amended complaint. On 18 April 1989, the Sandiganbayan set the continuation of the
presentation of evidence on 28-29 September and 9-11 October 1989, giving petitioner ample time to prepare its
evidence. Still, on 28 September 1989, petitioner manifested its inability to proceed with the presentation of its
evidence. The Sandiganbayan issued an Order expressing its view on the matter, to wit:
The Court has gone through extended inquiry and a narration of the above events because this case has been ready for
trial for over a year and much of the delay hereon has been due to the inability of the government to produce on
scheduled dates for pre-trial and for trial documents and witnesses, allegedly upon the failure of the military to supply
them for the preparation of the presentation of evidence thereon. Of equal interest is the fact that this Court has been
held to task in public about its alleged failure to move cases such as this one beyond the preliminary stage, when, in
view of the developments such as those of today, this Court is now faced with a situation where a case already in
progress will revert back to the preliminary stage, despite a five-month pause where appropriate action could have been
undertaken by the plaintiff Republic. 35
On 9 October 1989, the PCGG manifested in court that it was conducting a preliminary investigation on the unexplained
wealth of private respondents as mandated by RA No. 1379. 36 The PCGG prayed for an additional four months to conduct
the preliminary investigation. The Sandiganbayan granted this request and scheduled the presentation of evidence on
26-29 March 1990. However, on the scheduled date, petitioner failed to inform the court of the result of the preliminary
investigation the PCGG supposedly conducted. Again, the Sandiganbayan gave petitioner until 18 May 1990 to continue
with the presentation of its evidence and to inform the court of "what lies ahead insofar as the status of the case is
concerned x x x."37 Still on the date set, petitioner failed to present its evidence. Finally, on 11 July 1990, petitioner filed
its Re-Amended Complaint.38 The Sandiganbayan correctly observed that a case already pending for years would revert
to its preliminary stage if the court were to accept the Re-Amended Complaint.
Based on these circumstances, obviously petitioner has only itself to blame for failure to complete the presentation of
its evidence. The Sandiganbayan gave petitioner more than sufficient time to finish the presentation of its evidence. The
Sandiganbayan overlooked petitioner’s delays and yet petitioner ended the long-string of delays with the filing of a Re-
Amended Complaint, which would only prolong even more the disposition of the case.
Moreover, the pronouncements of the Court in Migrino and Cruz prompted the Sandiganbayan to dismiss the case since
the PCGG has no jurisdiction to investigate and prosecute the case against private respondents. This alone would have
been sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against private respondents.
Thus, we hold that the Sandiganbayan did not err in dismissing the case before completion of the presentation of
petitioner’s evidence.
Third Issue: Legality of the Search and Seizure
Petitioner claims that the Sandiganbayan erred in declaring the properties confiscated from Dimaano’s house as illegally
seized and therefore inadmissible in evidence. This issue bears a significant effect on petitioner’s case since these
properties comprise most of petitioner’s evidence against private respondents. Petitioner will not have much evidence
to support its case against private respondents if these properties are inadmissible in evidence.
On 3 March 1986, the Constabulary raiding team served at Dimaano’s residence a search warrant captioned "Illegal
Possession of Firearms and Ammunition." Dimaano was not present during the raid but Dimaano’s cousins witnessed
the raid. The raiding team seized the items detailed in the seizure receipt together with other items not included in the
search warrant. The raiding team seized these items: one baby armalite rifle with two magazines; 40 rounds of 5.56
ammunition; one pistol, caliber .45; communications equipment, cash consisting of ₱2,870,000 and US$50,000, jewelry,
and land titles.
Petitioner wants the Court to take judicial notice that the raiding team conducted the search and seizure "on March 3,
1986 or five days after the successful EDSA revolution." 39 Petitioner argues that a revolutionary government was
operative at that time by virtue of Proclamation No. 1 announcing that President Aquino and Vice President Laurel were
"taking power in the name and by the will of the Filipino people." 40 Petitioner asserts that the revolutionary government
effectively withheld the operation of the 1973 Constitution which guaranteed private respondents’ exclusionary right.
Moreover, petitioner argues that the exclusionary right arising from an illegal search applies only beginning 2 February
1987, the date of ratification of the 1987 Constitution. Petitioner contends that all rights under the Bill of Rights had
already reverted to its embryonic stage at the time of the search. Therefore, the government may confiscate the monies
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and items taken from Dimaano and use the same in evidence against her since at the time of their seizure, private
respondents did not enjoy any constitutional right.
Petitioner is partly right in its arguments.
The EDSA Revolution took place on 23-25 February 1986. As succinctly stated in President Aquino’s Proclamation No. 3
dated 25 March 1986, the EDSA Revolution was "done in defiance of the provisions of the 1973 Constitution."41 The
resulting government was indisputably a revolutionary government bound by no constitution or legal limitations except
treaty obligations that the revolutionary government, as the de jure government in the Philippines, assumed under
international law.
The correct issues are: (1) whether the revolutionary government was bound by the Bill of Rights of the 1973
Constitution during the interregnum, that is, after the actual and effective take-over of power by the revolutionary
government following the cessation of resistance by loyalist forces up to 24 March 1986 (immediately before the
adoption of the Provisional Constitution); and (2) whether the protection accorded to individuals under the International
Covenant on Civil and Political Rights ("Covenant") and the Universal Declaration of Human Rights ("Declaration")
remained in effect during the interregnum.
We hold that the Bill of Rights under the 1973 Constitution was not operative during the interregnum. However, we rule
that the protection accorded to individuals under the Covenant and the Declaration remained in effect during the
interregnum.
During the interregnum, the directives and orders of the revolutionary government were the supreme law because no
constitution limited the extent and scope of such directives and orders. With the abrogation of the 1973 Constitution by
the successful revolution, there was no municipal law higher than the directives and orders of the revolutionary
government. Thus, during the interregnum, a person could not invoke any exclusionary right under a Bill of Rights
because there was neither a constitution nor a Bill of Rights during the interregnum. As the Court explained in Letter of
Associate Justice Reynato S. Puno:42
A revolution has been defined as "the complete overthrow of the established government in any country or state by
those who were previously subject to it" or as "a sudden, radical and fundamental change in the government or political
system, usually effected with violence or at least some acts of violence." In Kelsen's book, General Theory of Law and
State, it is defined as that which "occurs whenever the legal order of a community is nullified and replaced by a new
order . . . a way not prescribed by the first order itself."
It was through the February 1986 revolution, a relatively peaceful one, and more popularly known as the "people power
revolution" that the Filipino people tore themselves away from an existing regime. This revolution also saw the
unprecedented rise to power of the Aquino government.
From the natural law point of view, the right of revolution has been defined as "an inherent right of a people to cast out
their rulers, change their policy or effect radical reforms in their system of government or institutions by force or a
general uprising when the legal and constitutional methods of making such change have proved inadequate or are so
obstructed as to be unavailable." It has been said that "the locus of positive law-making power lies with the people of
the state" and from there is derived "the right of the people to abolish, to reform and to alter any existing form of
government without regard to the existing constitution."
xxx
It is widely known that Mrs. Aquino’s rise to the presidency was not due to constitutional processes; in fact, it was
achieved in violation of the provisions of the 1973 Constitution as a Batasang Pambansa resolution had earlier
declared Mr. Marcos as the winner in the 1986 presidential election. Thus it can be said that the organization of Mrs.
Aquino’s Government which was met by little resistance and her control of the state evidenced by the appointment of
the Cabinet and other key officers of the administration, the departure of the Marcos Cabinet officials, revamp of the
Judiciary and the Military signaled the point  where the legal system then in effect, had ceased to be obeyed by the
Filipino. (Emphasis supplied)
To hold that the Bill of Rights under the 1973 Constitution remained operative during the interregnum would render
void all sequestration orders issued by the Philippine Commission on Good Government ("PCGG") before the adoption of
the Freedom Constitution. The sequestration orders, which direct the freezing and even the take-over of private
property by mere executive issuance without judicial action, would violate the due process and search and seizure
clauses of the Bill of Rights.
During the interregnum, the government in power was concededly a revolutionary government bound by no
constitution. No one could validly question the sequestration orders as violative of the Bill of Rights because there was
no Bill of Rights during the interregnum. However, upon the adoption of the Freedom Constitution, the sequestered
companies assailed the sequestration orders as contrary to the Bill of Rights of the Freedom Constitution.
In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on Good Government, 43 petitioner Baseco, while
conceding there was no Bill of Rights during the interregnum, questioned the continued validity of the sequestration
orders upon adoption of the Freedom Constitution in view of the due process clause in its Bill of Rights. The Court ruled
that the Freedom Constitution, and later the 1987 Constitution, expressly recognized the validity of sequestration
orders, thus:
If any doubt should still persist in the face of the foregoing considerations as to the validity and propriety of
sequestration, freeze and takeover orders, it should be dispelled by the fact that these particular remedies and the
authority of the PCGG to issue them have received constitutional approbation and sanction. As already mentioned, the
Provisional or "Freedom" Constitution recognizes the power and duty of the President to enact "measures to achieve
91

the mandate of the people to . . . (r)ecover ill-gotten properties amassed by the leaders and supporters of the previous
regime and protect the interest of the people through orders of sequestration or freezing of assets or accounts." And as
also already adverted to, Section 26, Article XVIII of the 1987 Constitution treats of, and ratifies the "authority to issue
sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986."
The framers of both the Freedom Constitution and the 1987 Constitution were fully aware that the sequestration orders
would clash with the Bill of Rights. Thus, the framers of both constitutions had to include specific language recognizing
the validity of the sequestration orders. The following discourse by Commissioner Joaquin G. Bernas during the
deliberations of the Constitutional Commission is instructive:
FR. BERNAS: Madam President, there is something schizophrenic about the arguments in defense of the present
amendment.
For instance, I have carefully studied Minister Salonga’s lecture in the Gregorio Araneta University Foundation, of which
all of us have been given a copy. On the one hand, he argues that everything the Commission is doing is traditionally
legal. This is repeated by Commissioner Romulo also. Minister Salonga spends a major portion of his lecture developing
that argument. On the other hand, almost as an afterthought, he says that in the end what matters are the results and
not the legal niceties, thus suggesting that the PCGG should be allowed to make some legal shortcuts, another word for
niceties or exceptions.
Now, if everything the PCGG is doing is legal, why is it asking the CONCOM for special protection? The answer is clear.
What they are doing will not stand the test of ordinary due process, hence they are asking for protection, for exceptions.
Grandes malos, grandes remedios, fine, as the saying stands, but let us not say grandes malos, grande y malos remedios.
That is not an allowable extrapolation. Hence, we should not give the exceptions asked for, and let me elaborate and
give three reasons:
First, the whole point of the February Revolution and of the work of the CONCOM is to hasten constitutional
normalization. Very much at the heart of the constitutional normalization is the full effectivity of the Bill of Rights. We
cannot, in one breath, ask for constitutional normalization and at the same time ask for a temporary halt to the full
functioning of what is at the heart of constitutionalism. That would be hypocritical; that would be a repetition of
Marcosian protestation of due process and rule of law. The New Society word for that is "backsliding." It is tragic when
we begin to backslide even before we get there.
Second, this is really a corollary of the first. Habits tend to become ingrained. The committee report asks for
extraordinary exceptions from the Bill of Rights for six months after the convening of Congress, and Congress may even
extend this longer.
Good deeds repeated ripen into virtue; bad deeds repeated become vice. What the committee report is asking for is that
we should allow the new government to acquire the vice of disregarding the Bill of Rights.
Vices, once they become ingrained, become difficult to shed. The practitioners of the vice begin to think that they have a
vested right to its practice, and they will fight tooth and nail to keep the franchise. That would be an unhealthy way of
consolidating the gains of a democratic revolution.
Third, the argument that what matters are the results and not the legal niceties is an argument that is very disturbing.
When it comes from a staunch Christian like Commissioner Salonga, a Minister, and repeated verbatim by another
staunch Christian like Commissioner Tingson, it becomes doubly disturbing and even discombobulating. The argument
makes the PCGG an auctioneer, placing the Bill of Rights on the auction block. If the price is right, the search and seizure
clause will be sold. "Open your Swiss bank account to us and we will award you the search and seizure clause. You can
keep it in your private safe."
Alternatively, the argument looks on the present government as hostage to the hoarders of hidden wealth. The hoarders
will release the hidden health if the ransom price is paid and the ransom price is the Bill of Rights, specifically the due
process in the search and seizure clauses. So, there is something positively revolving about either argument. The Bill of
Rights is not for sale to the highest bidder nor can it be used to ransom captive dollars. This nation will survive and grow
strong, only if it would become convinced of the values enshrined in the Constitution of a price that is beyond monetary
estimation.
For these reasons, the honorable course for the Constitutional Commission is to delete all of Section 8 of the committee
report and allow the new Constitution to take effect in full vigor. If Section 8 is deleted, the PCGG has two options. First,
it can pursue the Salonga and the Romulo argument — that what the PCGG has been doing has been completely within
the pale of the law. If sustained, the PCGG can go on and should be able to go on, even without the support of Section 8.
If not sustained, however, the PCGG has only one honorable option, it must bow to the majesty of the Bill of Rights.
The PCGG extrapolation of the law is defended by staunch Christians. Let me conclude with what another Christian
replied when asked to toy around with the law. From his prison cell, Thomas More said, "I'll give the devil benefit of law
for my nation’s safety sake." I ask the Commission to give the devil benefit of law for our nation’s sake. And we should
delete Section 8.
Thank you, Madam President. (Emphasis supplied)
Despite the impassioned plea by Commissioner Bernas against the amendment excepting sequestration orders from the
Bill of Rights, the Constitutional Commission still adopted the amendment as Section 26, 44 Article XVIII of the 1987
Constitution. The framers of the Constitution were fully aware that absent Section 26, sequestration orders would not
stand the test of due process under the Bill of Rights.
Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force during the interregnum, absent a
constitutional provision excepting sequestration orders from such Bill of Rights, would clearly render all sequestration
92

orders void during the interregnum. Nevertheless, even during the interregnum the Filipino people continued to enjoy,
under the Covenant and the Declaration, almost the same rights found in the Bill of Rights of the 1973 Constitution.
The revolutionary government, after installing itself as the de jure government, assumed responsibility for the State’s
good faith compliance with the Covenant to which the Philippines is a signatory. Article 2(1) of the Covenant requires
each signatory State "to respect and to ensure to all individuals within its territory and subject to its jurisdiction the
rights45 recognized in the present Covenant." Under Article 17(1) of the Covenant, the revolutionary government had the
duty to insure that "[n]o one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or
correspondence."
The Declaration, to which the Philippines is also a signatory, provides in its Article 17(2) that "[n]o one shall be arbitrarily
deprived of his property." Although the signatories to the Declaration did not intend it as a legally binding document,
being only a declaration, the Court has interpreted the Declaration as part of the generally accepted principles of
international law and binding on the State. 46 Thus, the revolutionary government was also obligated under international
law to observe the rights47 of individuals under the Declaration.
The revolutionary government did not repudiate the Covenant or the Declaration during the interregnum. Whether the
revolutionary government could have repudiated all its obligations under the Covenant or the Declaration is another
matter and is not the issue here. Suffice it to say that the Court considers the Declaration as part of customary
international law, and that Filipinos as human beings are proper subjects of the rules of international law laid down in
the Covenant. The fact is the revolutionary government did not repudiate the Covenant or the Declaration in the same
way it repudiated the 1973 Constitution. As the de jure government, the revolutionary government could not escape
responsibility for the State’s good faith compliance with its treaty obligations under international law.
It was only upon the adoption of the Provisional Constitution on 25 March 1986 that the directives and orders of the
revolutionary government became subject to a higher municipal law that, if contravened, rendered such directives and
orders void. The Provisional Constitution adopted verbatim the Bill of Rights of the 1973 Constitution. 48 The Provisional
Constitution served as a self-limitation by the revolutionary government to avoid abuses of the absolute powers
entrusted to it by the people.
During the interregnum when no constitution or Bill of Rights existed, directives and orders issued by government
officers were valid so long as these officers did not exceed the authority granted them by the revolutionary government.
The directives and orders should not have also violated the Covenant or the Declaration. In this case, the revolutionary
government presumptively sanctioned the warrant since the revolutionary government did not repudiate it. The
warrant, issued by a judge upon proper application, specified the items to be searched and seized. The warrant is thus
valid with respect to the items specifically described in the warrant.
However, the Constabulary raiding team seized items not included in the warrant. As admitted by petitioner’s witnesses,
the raiding team confiscated items not included in the warrant, thus:
Direct Examination of Capt. Rodolfo Sebastian
AJ AMORES
Q. According to the search warrant, you are supposed to seize only for weapons. What else, aside from the weapons,
were seized from the house of Miss Elizabeth Dimaano?
A. The communications equipment, money in Philippine currency and US dollars, some jewelries, land titles, sir.
Q. Now, the search warrant speaks only of weapons to be seized from the house of Elizabeth Dimaano. Do you know the
reason why your team also seized other properties not mentioned in said search warrant?
A. During the conversation right after the conduct of said raid, I was informed that the reason why they also brought the
other items not included in the search warrant was because the money and other jewelries were contained in attaché
cases and cartons with markings "Sony Trinitron", and I think three (3) vaults or steel safes. Believing that the attaché
cases and the steel safes were containing firearms, they forced open these containers only to find out that they
contained money.
xxx
Q. You said you found money instead of weapons, do you know the reason why your team seized this money instead of
weapons?
A. I think the overall team leader and the other two officers assisting him decided to bring along also the money because
at that time it was already dark and they felt most secured if they will bring that because they might be suspected also
of taking money out of those items, your Honor. 49
Cross-examination
Atty. Banaag
Q. Were you present when the search warrant in connection with this case was applied before the Municipal Trial Court
of Batangas, Branch 1?
A. Yes, sir.
Q. And the search warrant applied for by you was for the search and seizure of five (5) baby armalite rifles M-16 and five
(5) boxes of ammunition?
A. Yes, sir.
xxx
AJ AMORES
Q. Before you applied for a search warrant, did you conduct surveillance in the house of Miss Elizabeth Dimaano?
A. The Intelligence Operatives conducted surveillance together with the MSU elements, your Honor.
93

Q. And this party believed there were weapons deposited in the house of Miss Elizabeth Dimaano?
A. Yes, your Honor.
Q. And they so swore before the Municipal Trial Judge?
A. Yes, your Honor.
Q. But they did not mention to you, the applicant for the search warrant, any other properties or contraband which
could be found in the residence of Miss Elizabeth Dimaano?
A. They just gave us still unconfirmed report about some hidden items, for instance, the communications equipment and
money. However, I did not include that in the application for search warrant considering that we have not established
concrete evidence about that. So when…
Q. So that when you applied for search warrant, you had reason to believe that only weapons were in the house of Miss
Elizabeth Dimaano?
A. Yes, your Honor.50
xxx
Q. You stated that a .45 caliber pistol was seized along with one armalite rifle M-16 and how many ammunition?
A. Forty, sir.
Q. And this became the subject of your complaint with the issuing Court, with the fiscal’s office who charged Elizabeth
Dimaano for Illegal Possession of Firearms and Ammunition?
A. Yes, sir.
Q. Do you know what happened to that case?
A. I think it was dismissed, sir.
Q. In the fiscal’s office?
A. Yes, sir.
Q. Because the armalite rifle you seized, as well as the .45 caliber pistol had a Memorandum Receipt in the name of
Felino Melegrito, is that not correct?
A. I think that was the reason, sir.
Q. There were other articles seized which were not included in the search warrant, like for instance, jewelries. Why did
you seize the jewelries?
A. I think it was the decision of the overall team leader and his assistant to bring along also the jewelries and other
items, sir. I do not really know where it was taken but they brought along also these articles. I do not really know their
reason for bringing the same, but I just learned that these were taken because they might get lost if they will just leave
this behind.
xxx
Q. How about the money seized by your raiding team, they were not also included in the search warrant?
A. Yes sir, but I believe they were also taken considering that the money was discovered to be contained in attaché
cases.1âwphi1 These attaché cases were suspected to be containing pistols or other high powered firearms, but in the
course of the search the contents turned out to be money. So the team leader also decided to take this considering that
they believed that if they will just leave the money behind, it might get lost also.
Q. That holds true also with respect to the other articles that were seized by your raiding team, like Transfer Certificates
of Title of lands?
A. Yes, sir. I think they were contained in one of the vaults that were opened. 51
It is obvious from the testimony of Captain Sebastian that the warrant did not include the monies, communications
equipment, jewelry and land titles that the raiding team confiscated. The search warrant did not particularly describe
these items and the raiding team confiscated them on its own authority. The raiding team had no legal basis to seize
these items without showing that these items could be the subject of warrantless search and seizure. 52 Clearly, the
raiding team exceeded its authority when it seized these items.
The seizure of these items was therefore void, and unless these items are contraband per se, 53 and they are not, they
must be returned to the person from whom the raiding seized them. However, we do not declare that such person is the
lawful owner of these items, merely that the search and seizure warrant could not be used as basis to seize and withhold
these items from the possessor. We thus hold that these items should be returned immediately to Dimaano.
WHEREFORE, the petition for certiorari is DISMISSED. The questioned Resolutions of the Sandiganbayan dated 18
November 1991 and 25 March 1992 in Civil Case No. 0037, remanding the records of this case to the Ombudsman for
such appropriate action as the evidence may warrant, and referring this case to the Commissioner of the Bureau of
Internal Revenue for a determination of any tax liability of respondent Elizabeth Dimaano, are AFFIRMED.
SO ORDERED.

2. Co Kim Chan vs. Valdez Tan Keh (75 Phil. 113)

G.R. No. L-5 September 17, 1945

CO KIM CHAM (alias CO KIM CHAM), petitioner,

vs.
EUSEBIO VALDEZ TAN KEH and ARSENIO P. DIZON, Judge of First Instance of Manila, respondents.
94

This petition for mandamus in which petitioner prays that the respondent judge of the lower court be ordered to
continue the proceedings in civil case No. 3012 of said court, which were initiated under the regime of the so-called
Republic of the Philippines established during the Japanese military occupation of these Islands.
The respondent judge refused to take cognizance of and continue the proceedings in said case on the ground that the
proclamation issued on October 23, 1944, by General Douglas MacArthur had the effect of invalidating and nullifying all
judicial proceedings and judgements of the court of the Philippines under the Philippine Executive Commission and the
Republic of the Philippines established during the Japanese military occupation, and that, furthermore, the lower courts
have no jurisdiction to take cognizance of and continue judicial proceedings pending in the courts of the defunct
Republic of the Philippines in the absence of an enabling law granting such authority. And the same respondent, in his
answer and memorandum filed in this Court, contends that the government established in the Philippines during the
Japanese occupation were no de facto governments.
On January 2, 1942, the Imperial Japanese Forces occupied the City of Manila, and on the next day their Commander in
Chief proclaimed "the Military Administration under law over the districts occupied by the Army." In said proclamation,
it was also provided that "so far as the Military Administration permits, all the laws now in force in the Commonwealth,
as well as executive and judicial institutions, shall continue to be effective for the time being as in the past," and "all
public officials shall remain in their present posts and carry on faithfully their duties as before."
A civil government or central administration organization under the name of "Philippine Executive Commission was
organized by Order No. 1 issued on January 23, 1942, by the Commander in Chief of the Japanese Forces in the
Philippines, and Jorge B. Vargas, who was appointed Chairman thereof, was instructed to proceed to the immediate
coordination of the existing central administrative organs and judicial courts, based upon what had existed therefore,
with approval of the said Commander in Chief, who was to exercise jurisdiction over judicial courts.
The Chairman of the Executive Commission, as head of the central administrative organization, issued Executive Orders
Nos. 1 and 4, dated January 30 and February 5, 1942, respectively, in which the Supreme Court, Court of Appeals, Courts
of First Instance, and the justices of the peace and municipal courts under the Commonwealth were continued with the
same jurisdiction, in conformity with the instructions given to the said Chairman of the Executive Commission by the
Commander in Chief of Japanese Forces in the Philippines in the latter's Order No. 3 of February 20, 1942, concerning
basic principles to be observed by the Philippine Executive Commission in exercising legislative, executive and judicial
powers. Section 1 of said Order provided that "activities of the administration organs and judicial courts in the
Philippines shall be based upon the existing statutes, orders, ordinances and customs. . . ."
On October 14, 1943, the so-called Republic of the Philippines was inaugurated, but no substantial change was effected
thereby in the organization and jurisdiction of the different courts that functioned during the Philippine Executive
Commission, and in the laws they administered and enforced.
On October 23, 1944, a few days after the historic landing in Leyte, General Douglas MacArthur issued a proclamation to
the People of the Philippines which declared:
1. That the Government of the Commonwealth of the Philippines is, subject to the supreme authority of the
Government of the United States, the sole and only government having legal and valid jurisdiction over the people in
areas of the Philippines free of enemy occupation and control;
2. That the laws now existing on the statute books of the Commonwealth of the Philippines and the regulations
promulgated pursuant thereto are in full force and effect and legally binding upon the people in areas of the Philippines
free of enemy occupation and control; and
3. That all laws, regulations and processes of any other government in the Philippines than that of the said
Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy occupation and
control.
On February 3, 1945, the City of Manila was partially liberated and on February 27, 1945, General MacArthur, on behalf
of the Government of the United States, solemnly declared "the full powers and responsibilities under the Constitution
restored to the Commonwealth whose seat is here established as provided by law."
In the light of these facts and events of contemporary history, the principal questions to be resolved in the present case
may be reduced to the following:(1) Whether the judicial acts and proceedings of the court existing in the Philippines
under the Philippine Executive Commission and the Republic of the Philippines were good and valid and remained so
even after the liberation or reoccupation of the Philippines by the United States and Filipino forces; (2)Whether the
proclamation issued on October 23, 1944, by General Douglas MacArthur, Commander in Chief of the United States
Army, in which he declared "that all laws, regulations and processes of any of the government in the Philippines than
that of the said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy
occupation and control," has invalidated all judgements and judicial acts and proceedings of the said courts; and (3) If
the said judicial acts and proceedings have not been invalidated by said proclamation, whether the present courts of the
Commonwealth, which were the same court existing prior to, and continued during, the Japanese military occupation of
the Philippines, may continue those proceedings pending in said courts at the time the Philippines were reoccupied and
liberated by the United States and Filipino forces, and the Commonwealth of the Philippines were reestablished in the
Islands.
We shall now proceed to consider the first question, that is, whether or not under the rules of international law the
judicial acts and proceedings of the courts established in the Philippines under the Philippine Executive Commission and
the Republic of the Philippines were good and valid and remained good and valid even after the liberation or
reoccupation of the Philippines by the United States and Filipino forces.
95

1. It is a legal truism in political and international law that all acts and proceedings of the legislative, executive, and
judicial departments of a de facto government are good and valid. The question to be determined is whether or not the
governments established in these Islands under the names of the Philippine Executive Commission and Republic of the
Philippines during the Japanese military occupation or regime were de facto governments. If they were, the judicial acts
and proceedings of those governments remain good and valid even after the liberation or reoccupation of the
Philippines by the American and Filipino forces.
There are several kinds of de facto governments. The first, or government de facto  in a proper legal sense, is that
government that gets possession and control of, or usurps, by force or by the voice of the majority, the rightful legal
governments and maintains itself against the will of the latter, such as the government of England under the
Commonwealth, first by Parliament and later by Cromwell as Protector. The second is that which is established and
maintained by military forces who invade and occupy a territory of the enemy in the course of war, and which is
denominated a government of paramount force, as the cases of Castine, in Maine, which was reduced to British
possession in the war of 1812, and Tampico, Mexico, occupied during the war with Mexico, by the troops of the United
States. And the third is that established as an independent government by the inhabitants of a country who rise in
insurrection against the parent state of such as the government of the Southern Confederacy in revolt not concerned in
the present case with the first kind, but only with the second and third kinds of de facto governments.
Speaking of government "de facto" of the second kind, the Supreme Court of the United States, in the case of
Thorington vs. Smith (8 Wall., 1), said: "But there is another description of government, called also by publicists a
government de facto, but which might, perhaps, be more aptly denominated a government of paramount force. Its
distinguishing characteristics are (1), that its existence is maintained by active military power with the territories, and
against the rightful authority of an established and lawful government; and (2), that while it exists it necessarily be
obeyed in civil matters by private citizens who, by acts of obedience rendered in submission to such force, do not
become responsible, or wrongdoers, for those acts, though not warranted by the laws of the rightful government. Actual
governments of this sort are established over districts differing greatly in extent and conditions. They are usually
administered directly by military authority, but they may be administered, also, civil authority, supported more or less
directly by military force. . . . One example of this sort of government is found in the case of Castine, in Mine, reduced to
British possession in the war of 1812 . . . U. S. vs. Rice (4 Wheaton, 253). A like example is found in the case of Tampico,
occupied during the war with Mexico, by the troops of the United States . . . Fleming  vs. Page (9 Howard, 614). These
were cases of temporary possessions of territory by lawfull and regular governments at war with the country of which
the territory so possessed was part."
The powers and duties of de facto governments of this description are regulated in Section III of the Hague Conventions
of 1907, which is a revision of the provisions of the Hague Conventions of 1899 on the same subject of said Section III
provides "the authority of the legislative power having actually passed into the hands of the occupant, the latter shall
take steps in his power to reestablish and insure, as far as possible, public order and safety, while respecting, unless
absolutely prevented, the laws in force in the country."
According to the precepts of the Hague Conventions, as the belligerent occupant has the right and is burdened with the
duty to insure public order and safety during his military occupation, he possesses all the powers of a  de
facto government, and he can suspended the old laws and promulgate new ones and make such changes in the old as he
may see fit, but he is enjoined to respect, unless absolutely prevented by the circumstances prevailing in the occupied
territory, the municipal laws in force in the country, that is, those laws which enforce public order and regulate social
and commercial life of the country. On the other hand, laws of a political nature or affecting political relations, such as,
among others, the right of assembly, the right to bear arms, the freedom of the press, and the right to travel freely in
the territory occupied, are considered as suspended or in abeyance during the military occupation. Although the local
and civil administration of justice is suspended as a matter of course as soon as a country is militarily occupied, it is not
usual for the invader to take the whole administration into his own hands. In practice, the local ordinary tribunals are
authorized to continue administering justice; and judges and other judicial officers are kept in their posts if they accept
the authority of the belligerent occupant or are required to continue in their positions under the supervision of the
military or civil authorities appointed, by the Commander in Chief of the occupant. These principles and practice have
the sanction of all publicists who have considered the subject, and have been asserted by the Supreme Court and
applied by the President of the United States.
The doctrine upon this subject is thus summed up by Halleck, in his work on International Law (Vol. 2, p. 444): "The right
of one belligerent to occupy and govern the territory of the enemy while in its military possession, is one of the incidents
of war, and flows directly from the right to conquer. We, therefore, do not look to the Constitution or political
institutions of the conqueror, for authority to establish a government for the territory of the enemy in his possession,
during its military occupation, nor for the rules by which the powers of such government are regulated and limited. Such
authority and such rules are derived directly from the laws war, as established by the usage of the of the world, and
confirmed by the writings of publicists and decisions of courts — in fine, from the law of nations. . . . The municipal laws
of a conquered territory, or the laws which regulate private rights, continue in force during military occupation, excepts
so far as they are suspended or changed by the acts of conqueror. . . . He, nevertheless, has all the powers of a de
facto government, and can at his pleasure either change the existing laws or make new ones."
And applying the principles for the exercise of military authority in an occupied territory, which were later embodied in
the said Hague Conventions, President McKinley, in his executive order to the Secretary of War of May 19,1898, relating
to the occupation of the Philippines by United States forces, said in part: "Though the powers of the military occupant
96

are absolute and supreme, and immediately operate upon the political condition of the inhabitants, the municipal laws
of the conquered territory, such as affect private rights of person and property and provide for the punishment of crime,
are considered as continuing in force, so far as they are compatible with the new order of things, until they are
suspended or superseded by the occupying belligerent; and in practice they are not usually abrogated, but are allowed
to remain in force and to be administered by the ordinary tribunals, substantially as they were before the occupation.
This enlightened practice is, so far as possible, to be adhered to on the present occasion. The judges and the other
officials connected with the administration of justice may, if they accept the authority of the United States, continue to
administer the ordinary law of the land as between man and man under the supervision of the American Commander in
Chief." (Richardson's Messages and Papers of President, X, p. 209.)
As to "de facto" government of the third kind, the Supreme Court of the United States, in the same case of
Thorington vs. Smith, supra, recognized the government set up by the Confederate States as a de facto government. In
that case, it was held that "the central government established for the insurgent States differed from the temporary
governments at Castine and Tampico in the circumstance that its authority did no originate in lawful acts of regular war;
but it was not, on the account, less actual or less supreme. And we think that it must be classed among the governments
of which these are examples. . . .
In the case of William vs. Bruffy (96 U. S. 176, 192), the Supreme Court of the United States, discussing the validity of the
acts of the Confederate States, said: "The same general form of government, the same general laws for the
administration of justice and protection of private rights, which had existed in the States prior to the rebellion, remained
during its continuance and afterwards. As far as the Acts of the States do not impair or tend to impair the supremacy of
the national authority, or the just rights of citizens under the Constitution, they are, in general, to be treated as valid and
binding. As we said in Horn vs. Lockhart (17 Wall., 570; 21 Law. ed., 657): "The existence of a state of insurrection and
war did not loosen the bonds of society, or do away with civil government or the regular administration of the laws.
Order was to be preserved, police regulations maintained, crime prosecuted, property protected, contracts enforced,
marriages celebrated, estates settled, and the transfer and descent of property regulated, precisely as in the time of
peace. No one, that we are aware of, seriously questions the validity of judicial or legislative Acts  in the insurrectionary
States touching these and kindered subjects, where they were not hostile in their purpose or mode of enforcement to
the authority of the National Government, and did not impair the rights of citizens under the Constitution'. The same
doctrine has been asserted in numerous other cases."
And the same court, in the case of Baldy vs. Hunter (171 U. S., 388, 400), held: "That what occured or was done in
respect of such matters under the authority of the laws of these local de facto governments should not be disregarded
or held to be invalid merely  because those governments were organized in hostility to the Union established by the
national Constitution; this, because the existence of war between the United States and the Confederate States did not
relieve those who are within the insurrectionary lines from the necessity of civil obedience, nor destroy the bonds of
society nor do away with civil government or the regular administration of the laws, and because transactions in the
ordinary course of civil society as organized within the enemy's territory although they may have indirectly or remotely
promoted the ends of the de facto or unlawful government organized to effect a dissolution of the Union, were without
blame 'except when proved to have been entered into with actual  intent to further invasion or insurrection:'" and "That
judicial and legislative acts in the respective states composing the so-called Confederate States should be respected by
the courts if they were not hostile in their purpose or mode of enforcement to the authority of the National
Government, and did not impair the rights of citizens under the Constitution."
In view of the foregoing, it is evident that the Philippine Executive Commission, which was organized by Order No. 1,
issued on January 23, 1942, by the Commander of the Japanese forces, was a civil government established by the
military forces of occupation and therefore a de facto government of the second kind. It was not different from the
government established by the British in Castine, Maine, or by the United States in Tampico, Mexico. As Halleck says,
"The government established over an enemy's territory during the military occupation may exercise all the powers given
by the laws of war to the conqueror over the conquered, and is subject to all restrictions which that code imposes. It is
of little consequence whether such government be called a military or civil government. Its character is the same and
the source of its authority the same. In either case it is a government imposed by the laws of war, and so far it concerns
the inhabitants of such territory or the rest of the world, those laws alone determine the legality or illegality of its acts."
(Vol. 2, p. 466.) The fact that the Philippine Executive Commission was a civil and not a military government and was run
by Filipinos and not by Japanese nationals, is of no consequence. In 1806, when Napoleon occupied the greater part of
Prussia, he retained the existing administration under the general direction of a french official (Langfrey History of
Napoleon, 1, IV, 25); and, in the same way, the Duke of Willington, on invading France, authorized the local authorities
to continue the exercise of their functions, apparently without appointing an English superior. (Wellington Despatches,
XI, 307.). The Germans, on the other hand, when they invaded France in 1870, appointed their own officials, at least in
Alsace and Lorraine, in every department of administration and of every rank. (Calvo, pars. 2186-93; Hall, International
Law, 7th ed., p. 505, note 2.)
The so-called Republic of the Philippines, apparently established and organized as a sovereign state independent from
any other government by the Filipino people, was, in truth and reality, a government established by the belligerent
occupant or the Japanese forces of occupation. It was of the same character as the Philippine Executive Commission,
and the ultimate source of its authority was the same — the Japanese military authority and government. As General
MacArthur stated in his proclamation of October 23, 1944, a portion of which has been already quoted, "under enemy
duress, a so-called government styled as the 'Republic of the Philippines' was established on October 14, 1943, based
97

upon neither the free expression of the people's will nor the sanction of the Government of the United States." Japan
had no legal power to grant independence to the Philippines or transfer the sovereignty of the United States to, or
recognize the latent sovereignty of, the Filipino people, before its military occupation and possession of the Islands had
matured into an absolute and permanent dominion or sovereignty by a treaty of peace or other means recognized in the
law of nations. For it is a well-established doctrine in International Law, recognized in Article 45 of the Hauge
Conventions of 1907 (which prohibits compulsion of the population of the occupied territory to swear allegiance to the
hostile power), the belligerent occupation, being essentially provisional, does not serve to transfer sovereignty over the
territory controlled although the  de jure  government is during the period of occupancy deprived of the power to
exercise its rights as such. (Thirty Hogshead of Sugar vs. Boyle, 9 Cranch, 191; United States vs. Rice, 4 Wheat., 246;
Fleming vs. Page, 9 Howard, 603; Downes vs. Bidwell, 182 U. S., 345.) The formation of the Republic of the Philippines
was a scheme contrived by Japan to delude the Filipino people into believing in the apparent magnanimity of the
Japanese gesture of transferring or turning over the rights of government into the hands of Filipinos. It was established
under the mistaken belief that by doing so, Japan would secure the cooperation or at least the neutrality of the Filipino
people in her war against the United States and other allied nations.
Indeed, even if the Republic of the Philippines had been established by the free will of the Filipino who, taking advantage
of the withdrawal of the American forces from the Islands, and the occupation thereof by the Japanese forces of
invasion, had organized an independent government under the name with the support and backing of Japan, such
government would have been considered as one established by the Filipinos in insurrection or rebellion against the
parent state or the Unite States. And as such, it would have been a  de facto government similar to that organized by the
confederate states during the war of secession and recognized as such by the by the Supreme Court of the United States
in numerous cases, notably those of Thorington vs. Smith, Williams vs. Bruffy, and Badly vs. Hunter, above quoted; and
similar to the short-lived government established by the Filipino insurgents in the Island of Cebu during the Spanish-
American war, recognized as a de facto government by the Supreme Court of the United States in the case of
McCleod vs. United States (299 U. S., 416). According to the facts in the last-named case, the Spanish forces evacuated
the Island of Cebu on December 25, 1898, having first appointed a provisional government, and shortly afterwards, the
Filipinos, formerly in insurrection against Spain, took possession of the Islands and established a republic, governing the
Islands until possession thereof was surrendered to the United States on February 22, 1898. And the said Supreme Court
held in that case that "such government was of the class of de facto governments described in I Moore's International
Law Digest, S 20, . . . 'called also by publicists a government de facto, but which might, perhaps, be more aptly
denominated a government of paramount force . . '." That is to say, that the government of a country in possession of
belligerent forces in insurrection or rebellion against the parent state, rests upon the same principles as that of a
territory occupied by the hostile army of an enemy at regular war with the legitimate power.
The governments by the Philippine Executive Commission and the Republic of the Philippines during the Japanese
military occupation being de facto governments, it necessarily follows that the judicial acts and proceedings of the
courts of justice of those governments, which are not of a political complexion, were good and valid, and, by virtue of
the well-known principle of postliminy (postliminium) in international law, remained good and valid after the liberation
or reoccupation of the Philippines by the American and Filipino forces under the leadership of General Douglas
MacArthur. According to that well-known principle in international law, the fact that a territory which has been occupied
by an enemy comes again into the power of its legitimate government of sovereignty, "does not, except in a very few
cases, wipe out the effects of acts done by an invader, which for one reason or another it is within his competence to do.
Thus judicial acts done under his control, when they are not of a political complexion, administrative acts so done, to the
extent that they take effect during the continuance of his control, and the various acts done during the same time by
private persons under the sanction of municipal law, remain good. Were it otherwise, the whole social life of a
community would be paralyzed by an invasion; and as between the state and the individuals the evil would be scarcely
less, — it would be hard for example that payment of taxes made under duress should be ignored, and it would be
contrary to the general interest that the sentences passed upon criminals should be annulled by the disappearance of
the intrusive government ." (Hall, International Law, 7th ed., p. 518.) And when the occupation and the abandonment
have been each an incident of the same war as in the present case, postliminy applies, even though the occupant has
acted as conqueror and for the time substituted his own sovereignty as the Japanese intended to do apparently in
granting independence to the Philippines and establishing the so-called Republic of the Philippines. (Taylor, International
Law, p. 615.)
That not only judicial but also legislative acts of de facto governments, which are not of a political complexion, are and
remain valid after reoccupation of a territory occupied by a belligerent occupant, is confirmed by the Proclamation
issued by General Douglas MacArthur on October 23, 1944, which declares null and void all laws, regulations and
processes of the governments established in the Philippines during the Japanese occupation, for it would not have been
necessary for said proclamation to abrogate them if they were invalid ab initio.
2. The second question hinges upon the interpretation of the phrase "processes of any other government" as used in the
above-quoted proclamation of General Douglas MacArthur of October 23, 1944 — that is, whether it was the intention
of the Commander in Chief of the American Forces to annul and void thereby all judgments and judicial proceedings of
the courts established in the Philippines during the Japanese military occupation.
The phrase "processes of any other government" is broad and may refer not only to the judicial processes, but also to
administrative or legislative, as well as constitutional, processes of the Republic of the Philippines or other governmental
agencies established in the Islands during the Japanese occupation. Taking into consideration the fact that, as above
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indicated, according to the well-known principles of international law all judgements and judicial proceedings, which are
not of a political complexion, of the de facto governments during the Japanese military occupation were good and valid
before and remained so after the occupied territory had come again into the power of the titular sovereign, it should be
presumed that it was not, and could not have been, the intention of General Douglas MacArthur, in using the phrase
"processes of any other government" in said proclamation, to refer to judicial processes, in violation of said principles of
international law. The only reasonable construction of the said phrase is that it refers to governmental processes other
than judicial processes of court proceedings, for according to a well-known rule of statutory construction, set forth in 25
R. C. L., p. 1028, "a statute ought never to be construed to violate the law of nations if any other possible construction
remains."
It is true that the commanding general of a belligerent army of occupation, as an agent of his government, may not
unlawfully suspend existing laws and promulgate new ones in the occupied territory, if and when the exigencies of the
military occupation demand such action. But even assuming that, under the law of nations, the legislative power of a
commander in chief of military forces who liberates or reoccupies his own territory which has been occupied by an
enemy, during the military and before the restoration of the civil regime, is as broad as that of the commander in chief
of the military forces of invasion and occupation (although the exigencies of military reoccupation are evidently less than
those of occupation), it is to be presumed that General Douglas MacArthur, who was acting as an agent or a
representative of the Government and the President of the United States, constitutional commander in chief of the
United States Army, did not intend to act against the principles of the law of nations asserted by the Supreme Court of
the United States from the early period of its existence, applied by the Presidents of the United States, and later
embodied in the Hague Conventions of 1907, as above indicated. It is not to be presumed that General Douglas
MacArthur, who enjoined in the same proclamation of October 23, 1944, "upon the loyal citizens of the Philippines full
respect and obedience to the Constitution of the Commonwealth of the Philippines," should not only reverse the
international policy and practice of his own government, but also disregard in the same breath the provisions of section
3, Article II, of our Constitution, which provides that "The Philippines renounces war as an instrument of national policy,
and adopts the generally accepted principles of international law as part of the law of the Nation."
Moreover, from a contrary construction great inconvenience and public hardship would result, and great public interests
would be endangered and sacrificed, for disputes or suits already adjudged would have to be again settled accrued or
vested rights nullified, sentences passed on criminals set aside, and criminals might easily become immune for evidence
against them may have already disappeared or be no longer available, especially now that almost all court records in the
Philippines have been destroyed by fire as a consequence of the war. And it is another well-established rule of statutory
construction that where great inconvenience will result from a particular construction, or great public interests would be
endangered or sacrificed, or great mischief done, such construction is to be avoided, or the court ought to presume that
such construction was not intended by the makers of the law, unless required by clear and unequivocal words. (25 R. C.
L., pp. 1025, 1027.)
The mere conception or thought of possibility that the titular sovereign or his representatives who reoccupies a territory
occupied by an enemy, may set aside or annul all the judicial acts or proceedings of the tribunals which the belligerent
occupant had the right and duty to establish in order to insure public order and safety during military occupation, would
be sufficient to paralyze the social life of the country or occupied territory, for it would have to be expected that litigants
would not willingly submit their litigation to courts whose judgements or decisions may afterwards be annulled, and
criminals would not be deterred from committing crimes or offenses in the expectancy that they may escaped the
penalty if judgments rendered against them may be afterwards set aside.
That the proclamation has not invalidated all the judgements and proceedings of the courts of justice during the
Japanese regime, is impliedly confirmed by Executive Order No. 37, which has the force of law, issued by the President
of the Philippines on March 10, 1945, by virtue of the emergency legislative power vested in him by the Constitution and
the laws of the Commonwealth of the Philippines. Said Executive order abolished the Court of Appeals, and provided
"that all case which have heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme
Court final decision." This provision impliedly recognizes that the judgments and proceedings of the courts during the
Japanese military occupation have not been invalidated by the proclamation of General MacArthur of October 23,
because the said Order does not say or refer to cases which have been duly appealed to said court prior to the Japanese
occupation, but to cases which had therefore, that is, up to March 10, 1945, been duly appealed to the Court of Appeals;
and it is to be presumed that almost all, if not all, appealed cases pending in the Court of Appeals prior to the Japanese
military occupation of Manila on January 2, 1942, had been disposed of by the latter before the restoration of the
Commonwealth Government in 1945; while almost all, if not all, appealed cases pending on March 10, 1945, in the Court
of Appeals were  from judgments rendered by the Court of First Instance during the Japanese regime.
The respondent judge quotes a portion of Wheaton's International Law which say: "Moreover when it is said that an
occupier's acts are valid and under international law should not be abrogated by the subsequent conqueror, it must be
remembered that no crucial instances exist to show that if his acts should be reversed, any international wrong would
be committed. What does happen is that most matters are allowed to stand by the restored government, but the matter
can hardly be put further than this." (Wheaton, International Law, War, 7th English edition of 1944, p. 245.) And from
this quotion the respondent judge "draws the conclusion that whether the acts of the occupant should be considered
valid or not, is a question that is up to the restored government to decide; that there is no rule of international law that
denies to the restored government to decide; that there is no rule of international law that denies to the restored
99

government the right of exercise its discretion on the matter, imposing upon it in its stead the obligation of recognizing
and enforcing the acts of the overthrown government."
There is doubt that the subsequent conqueror has the right to abrogate most of the acts of the occupier, such as the
laws, regulations and processes other than judicial of the government established by the belligerent occupant. But in
view of the fact that the proclamation uses the words "processes of any other government" and not "judicial processes"
prisely, it is not necessary to determine whether or not General Douglas MacArthur had power to annul and set aside all
judgments and proceedings of the courts during the Japanese occupation. The question to be determined is whether or
not it was his intention, as representative of the President of the United States, to avoid or nullify them. If the
proclamation had, expressly or by necessary implication, declared null and void the judicial processes of any other
government, it would be necessary for this court to decide in the present case whether or not General Douglas
MacArthur had authority to declare them null and void. But the proclamation did not so provide, undoubtedly because
the author thereof was fully aware of the limitations of his powers as Commander in Chief of Military Forces of
liberation or subsequent conqueror.
Not only the Hague Regulations, but also the principles of international law, as they result from the usages established
between civilized nations, the laws of humanity and the requirements of the public of conscience, constitute or from the
law of nations. (Preamble of the Hague Conventions; Westlake, International Law, 2d ed., Part II, p. 61.) Article 43,
section III, of the Hague Regulations or Conventions which we have already quoted in discussing the first question,
imposes upon the occupant the obligation to establish courts; and Article 23 (h), section II, of the same Conventions,
which prohibits the belligerent occupant "to declare . . . suspended . . . in a Court of Law the rights and action of the
nationals of the hostile party," forbids him to make any declaration preventing the inhabitants from using their courts to
assert or enforce their civil rights. (Decision of the Court of Appeals of England in the case of Porter  vs. Fruedenburg, L.R.
[1915], 1 K.B., 857.) If a belligerent occupant is required to establish courts of justice in the territory occupied, and
forbidden to prevent the nationals thereof from asserting or enforcing therein their civil rights, by necessary implication,
the military commander of the forces of liberation or the restored government is restrained from nullifying or setting
aside the judgments rendered by said courts in their litigation during the period of occupation. Otherwise, the purpose
of these precepts of the Hague Conventions would be thwarted, for to declare them null and void would be tantamount
to suspending in said courts the right and action of the nationals of the territory during the military occupation thereof
by the enemy. It goes without saying that a law that enjoins a person to do something will not at the same time
empower another to undo the same. Although the question whether the President or commanding officer of the United
States Army has violated restraints imposed by the constitution and laws of his country is obviously of a domestic
nature, yet, in construing and applying limitations imposed on the executive authority, the Supreme Court of the United
States, in the case of Ochoa, vs. Hernandez (230 U.S., 139), has declared that they "arise from general rules of
international law and from fundamental principles known wherever the American flag flies."
In the case of Raymond vs. Thomas (91 U.S., 712), a special order issued by the officer in command of the forces of the
United States in South Carolina after the end of the Civil War, wholly annulling a decree rendered by a court of chancery
in that state in a case within its jurisdiction, was declared void, and not warranted by the acts approved respectively
March 2, 1867 (14 Stat., 428), and July 19 of the same year (15 id., 14), which defined the powers and duties of military
officers in command of the several states then lately in rebellion. In the course of its decision the court said; "We have
looked carefully through the acts of March 2, 1867 and July 19, 1867. They give very large governmental powers to the
military commanders designated, within the States committed respectively to their jurisdiction; but we have found
nothing to warrant the order here in question. . . . The clearest language would be necessary to satisfy us that Congress
intended that the power given by these acts should be so exercised. . . . It was an arbitrary stretch of authority, needful
to no good end that can be imagined. Whether Congress could have conferred the power to do such an act is a question
we are not called upon to consider. It is an unbending rule of law that the exercise of military power, where the rights of
the citizen are concerned, shall never be pushed beyond what the exigency requires. (Mithell vs. Harmony, 13 How.,
115; Warden vs. Bailey, 4 Taunt., 67; Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1 Smith's L.C., pt. 2, p. 934.) Viewing the
subject before us from the standpoint indicated, we hold that the order was void."
It is, therefore, evident that the proclamation of General MacArthur of October 23, 1944, which declared that "all laws,
regulations and processes of any other government in the Philippines than that of the said Commonwealth are null and
void without legal effect in areas of the Philippines free of enemy occupation and control," has not invalidated the
judicial acts and proceedings, which are not a political complexion, of the courts of justice in the Philippines that were
continued by the Philippine Executive Commission and the Republic of the Philippines during the Japanese military
occupation, and that said judicial acts and proceedings were good and valid before and now good and valid after the
reoccupation of liberation of the Philippines by the American and Filipino forces.
3. The third and last question is whether or not the courts of the Commonwealth, which are the same as those existing
prior to, and continued during, the Japanese military occupation by the Philippine Executive Commission and by the so-
called Republic of the Philippines, have jurisdiction to continue now the proceedings in actions pending in said courts at
the time the Philippine Islands were reoccupied or liberated by the American and Filipino forces, and the
Commonwealth Government was restored.
Although in theory the authority the authority of the local civil and judicial administration is suspended as a matter of
course as soon as military occupation takes place, in practice the invader does not usually take the administration of
justice into his own hands, but continues the ordinary courts or tribunals to administer the laws of the country which he
is enjoined, unless absolutely prevented, to respect. As stated in the above-quoted Executive Order of President
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McKinley to the Secretary of War on May 19, 1898, "in practice, they (the municipal laws) are not usually abrogated but
are allowed to remain in force and to be administered by the ordinary tribunals substantially as they were before the
occupation. This enlightened practice is, so far as possible, to be adhered to on the present occasion." And Taylor in this
connection says: "From a theoretical point of view it may be said that the conqueror is armed with the right to substitute
his arbitrary will for all preexisting forms of government, legislative, executive and judicial. From the stand-point of
actual practice such arbitrary will is restrained by the provision of the law of nations which compels the conqueror to
continue local laws and institution so far as military necessity will permit." (Taylor, International Public Law, p.596.)
Undoubtedly, this practice has been adopted in order that the ordinary pursuits and business of society may not be
unnecessarily deranged, inasmuch as belligerent occupation is essentially provisional, and the government established
by the occupant of transient character.
Following these practice and precepts of the law of nations, Commander in Chief of the Japanese Forces proclaimed on
January 3, 1942, when Manila was occupied, the military administration under martial law over the territory occupied by
the army, and ordered that "all the laws now in force in the Commonwealth, as well as executive and judicial
institutions, shall continue to be affective for the time being as in the past," and "all public officials shall remain in their
present post and carry on faithfully their duties as before." When the Philippine Executive Commission was organized by
Order No. 1 of the Japanese Commander in Chief, on January 23, 1942, the Chairman of the Executive Commission, by
Executive Orders Nos. 1 and 4 of January 30 and February 5, respectively, continued the Supreme Court, Court of
Appeals, Court of First Instance, and justices of the peace of courts, with the same jurisdiction in conformity with the
instructions given by the Commander in Chief of the Imperial Japanese Army in Order No. 3 of February 20, 1942. And
on October 14, 1943 when the so-called Republic of the Philippines was inaugurated, the same courts were continued
with no substantial change in organization and jurisdiction thereof.
If the proceedings pending in the different courts of the Islands prior to the Japanese military occupation had been
continued during the Japanese military administration, the Philippine Executive Commission, and the so-called Republic
of the Philippines, it stands to reason that the same courts, which had become reestablished and conceived of as
having in continued existence upon the reoccupation and liberation of the Philippines by virtue of the principle of
postliminy (Hall, International Law, 7th ed., p. 516), may continue the proceedings in cases then pending in said courts,
without necessity of enacting a law conferring jurisdiction upon them to continue said proceedings. As Taylor graphically
points out in speaking of said principles "a state or other governmental entity, upon the removal of a foreign military
force, resumes its old place with its right and duties substantially unimpaired. . . . Such political resurrection is the result
of a law analogous to that which enables elastic bodies to regain their original shape upon removal of the external force,
— and subject to the same exception in case of absolute crushing of the whole fibre and content." (Taylor, International
Public Law, p. 615.)
The argument advanced by the respondent judge in his resolution in support in his conclusion that the Court of First
Instance of Manila presided over by him "has no authority to take cognizance of, and continue said proceedings (of this
case) to final judgment until and unless the Government of the Commonwealth of the Philippines . . . shall have provided
for the transfer of the jurisdiction of the courts of the now defunct Republic of the Philippines, and the cases
commenced and the left pending therein," is "that said courts were a government alien to the Commonwealth
Government. The laws they enforced were, true enough, laws of the Commonwealth prior to Japanese occupation, but
they had become the laws — and the courts had become the institutions — of Japan by adoption (U.S.  vs. Reiter. 27 F.
Cases, No. 16146), as they became later on the laws and institutions of the Philippine Executive Commission and the
Republic of the Philippines."
The court in the said case of U.S. vs. Reiter did not and could not say that the laws and institutions of the country
occupied if continued by the conqueror or occupant, become the laws and the courts, by adoption, of the sovereign
nation that is militarily occupying the territory. Because, as already shown, belligerent or military occupation is
essentially provisional and does not serve to transfer the sovereignty over the occupied territory to the occupant. What
the court said was that, if such laws and institutions are continued in use by the occupant, they become his and derive
their force from him, in the sense that he may continue or set them aside. The laws and institution or courts so
continued remain the laws and institutions or courts of the occupied territory. The laws and the courts of the
Philippines, therefore, did not become, by being continued as required by the law of nations, laws and courts of Japan.
The provision of Article 45, section III, of the Hague Conventions of 1907 which prohibits any compulsion of the
population of occupied territory to swear allegiance to the hostile power, "extends to prohibit everything which would
assert or imply a change made by the invader in the legitimate sovereignty. This duty is neither to innovate in the
political life of the occupied districts, nor needlessly to break the continuity of their legal life. Hence, so far as the courts
of justice are allowed to continue administering the territorial laws, they must be allowed to give their sentences in the
name of the legitimate sovereign " (Westlake, Int. Law, Part II, second ed., p. 102). According to Wheaton, however, the
victor need not allow the use of that of the legitimate government. When in 1870, the Germans in France attempted to
violate that rule by ordering, after the fall of the Emperor Napoleon, the courts of Nancy to administer justice in the
name of the "High German Powers occupying Alsace and Lorraine," upon the ground that the exercise of their powers in
the name of French people and government was at least an implied recognition of the Republic, the courts refused to
obey and suspended their sitting. Germany originally ordered the use of the name of "High German Powers occupying
Alsace and Lorraine," but later offered to allow use of the name of the Emperor or a compromise. (Wheaton,
International Law, War, 7th English ed. 1944, p. 244.)
101

Furthermore, it is a legal maxim, that excepting that of a political nature, "Law once established continues until changed
by the some competent legislative power. It is not change merely by change of sovereignty." (Joseph H. Beale, Cases on
Conflict of Laws, III, Summary Section 9, citing Commonwealth vs. Chapman, 13 Met., 68.) As the same author says, in
his Treatise on the Conflict on Laws (Cambridge, 1916, Section 131): "There can no break or interregnum in law. From
the time the law comes into existence with the first-felt corporateness of a primitive people it must last until the final
disappearance of human society. Once created, it persists until a change take place, and when changed it continues in
such changed condition until the next change, and so forever. Conquest or colonization is impotent to bring law to an
end; in spite of change of constitution, the law continues unchanged until the new sovereign by legislative acts creates a
change."
As courts are creatures of statutes and their existence defends upon that of the laws which create and confer upon
them their jurisdiction, it is evident that such laws, not being a political nature, are not abrogated by a change of
sovereignty, and continue in force "ex proprio vigore" unless and until repealed by legislative acts. A proclamation that
said laws and courts are expressly continued is not necessary in order that they may continue in force. Such
proclamation, if made, is but a declaration of the intention of respecting and not repealing those laws. Therefore, even
assuming that Japan had legally acquired sovereignty over these Islands, which she had afterwards transferred to the so-
called Republic of the Philippines, and that the laws and the courts of these Islands had become the courts of Japan, as
the said courts of the laws creating and conferring jurisdiction upon them have continued in force until now, it
necessarily follows that the same courts may continue exercising the same jurisdiction over cases pending therein
before the restoration of the Commonwealth Government, unless and until they are abolished or the laws creating and
conferring jurisdiction upon them are repealed by the said government. As a consequence, enabling laws or acts
providing that proceedings pending in one court be continued by or transferred to another court, are not required by
the mere change of government or sovereignty. They are necessary only in case the former courts are abolished or their
jurisdiction so change that they can no longer continue taking cognizance of the cases and proceedings commenced
therein, in order that the new courts or the courts having jurisdiction over said cases may continue the proceedings.
When the Spanish sovereignty in the Philippine Islands ceased and the Islands came into the possession of the United
States, the "Audiencia" or Supreme Court was continued and did not cease to exist, and proceeded to take cognizance of
the actions pending therein upon the cessation of the Spanish sovereignty until the said "Audiencia" or Supreme Court
was abolished, and the Supreme Court created in Chapter II of Act No. 136 was substituted in lieu thereof. And the
Courts of First Instance of the Islands during the Spanish regime continued taking cognizance of cases pending therein
upon the change of sovereignty, until section 65 of the same Act No. 136 abolished them and created in its Chapter IV
the present Courts of First Instance in substitution of the former. Similarly, no enabling acts were enacted during the
Japanese occupation, but a mere proclamation or order that the courts in the Island were continued.
On the other hand, during the American regime, when section 78 of Act No. 136 was enacted abolishing the civil
jurisdiction of the provost courts created by the military government of occupation in the Philippines during the Spanish-
American War of 1898, the same section 78 provided for the transfer of all civil actions then pending in the provost
courts to the proper tribunals, that is, to the justices of the peace courts, Court of First Instance, or Supreme Court
having jurisdiction over them according to law. And later on, when the criminal jurisdiction of provost courts in the City
of Manila was abolished by section 3 of Act No. 186, the same section provided that criminal cases pending therein
within the jurisdiction of the municipal court created by Act No. 183 were transferred to the latter.
That the present courts as the same courts which had been functioning during the Japanese regime and, therefore, can
continue the proceedings in cases pending therein prior to the restoration of the Commonwealth of the Philippines, is
confirmed by Executive Order No. 37 which we have already quoted in support of our conclusion in connection with the
second question. Said Executive Order provides"(1) that the Court of Appeals created and established under
Commonwealth Act No. 3 as amended, be abolished, as it is hereby abolished," and "(2) that all cases which have
heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme Court for final decision. . . ."
In so providing, the said Order considers that the Court of Appeals abolished was the same that existed prior to, and
continued after, the restoration of the Commonwealth Government; for, as we have stated in discussing the previous
question, almost all, if not all, of the cases pending therein, or which had theretofore (that is, up to March 10, 1945)
been duly appealed to said court, must have been cases coming from the Courts of First Instance during the so-called
Republic of the Philippines. If the Court of Appeals abolished by the said Executive Order was not the same one which
had been functioning during the Republic, but that which had existed up to the time of the Japanese occupation, it
would have provided that all the cases which had, prior to and up to that occupation on January 2, 1942, been dully
appealed to the said Court of Appeals shall be transmitted to the Supreme Court for final decision.
It is, therefore, obvious that the present courts have jurisdiction to continue, to final judgment, the proceedings in cases,
not of political complexion, pending therein at the time of the restoration of the Commonwealth Government.
Having arrived at the above conclusions, it follows that the Court of First Instance of Manila has jurisdiction to continue
to final judgment the proceedings in civil case No. 3012, which involves civil rights of the parties under the laws of the
Commonwealth Government, pending in said court at the time of the restoration of the said Government; and that the
respondent judge of the court, having refused to act and continue him does a duty resulting from his office as presiding
judge of that court, mandamus is the speedy and adequate remedy in the ordinary course of law, especially taking into
consideration the fact that the question of jurisdiction herein involved does affect not only this particular case, but many
other cases now pending in all the courts of these Islands.
102

In view of all the foregoing it is adjudged and decreed that a writ of mandamus issue, directed to the respondent judge
of the Court of First Instance of Manila, ordering him to take cognizance of and continue to final judgment the
proceedings in civil case No. 3012 of said court. No pronouncement as to costs. So ordered.

FACTS:
The respondent judge refused to take cognizance of the case and to continue the proceedings in petitioner’s case on the
ground that the proclamation, issued on October 23, 1944, by General Douglas MacArthur had invalidated and nullified
all judicial proceedings and judgments of the court during the Japanese occupation. Respondent contends that the lower
courts have no jurisdiction to continue pending judicial proceedings and that the government established during the
Japanese occupation was no de facto government.

ISSUES:
1.    Do the judicial acts and proceedings of the court during the Japanese occupation remain good and valid?
2.    Did the proclamation of MacArthur invalidate all judgments and judicial acts and proceedings of said court?
3.    May the present courts continue those proceedings pending in said courts?

HELD:
It is evident that the Philippine Executive Commission was a civil government established by military forces and thus a de
facto government of the second kind. Legislative, as well as judicial, acts of de facto governments, which are not of
political complexion, remain valid after reoccupation. It is presumed that the proclamation of General MacArthur did not
specifically refer to judicial processes thus it has not invalidated all the judgments and proceedings of the courts during
the Japanese regime. The existence of the courts depends upon the laws which create and confer upon them their
jurisdiction. Such laws, not political in nature, are not abrogated by a change of sovereignty and continue in force until
repealed by legislative acts. It is thus obvious that the present courts have jurisdiction to continue proceedings in cases,
not of political complexion.

3. Lawyer's League vs. Aquino (G.R. no. 73748, May 22, 1986)

LAWYERS LEAGUE FOR A BETTER PHILIPPINES vs. AQUINO (G.R. No. 73748 - May 22, 1986)

Minute Resolutions

government.

In view of the foregoing, the petitions are hereby dismissed.

EN BANC

LAWYERS LEAGUE FOR A BETTER PHILIPPINES AND/OR OLIVER A. LOZANO VS. PRESIDENT CORAZON C. AQUINO, ET AL.

SIRS/MADAMS:

Quoted hereunder, for your information, is a resolution of this Court MAY 22, 1986.

In G.R. No. 73748, Lawyers League for a Better Philippines vs. President Corazon C. Aquino, et al.; G.R. No. 73972,
People's Crusade for Supremacy of the Constitution vs. Mrs. Cory Aquino, et al., and G.R. No. 73990, Councilor Clifton U.
Ganay vs.
Corazon C. Aquino, et al., the legitimacy of the government of President Aquino is questioned. It is claimed that her
government is illegal because it was not established pursuant to the 1973 Constitution.

As early as April 10, 1986, this Court* had already voted to dismiss the petitions for the reasons to be stated below. On
April 17, 1986, Atty. Lozano as counsel for the petitioners in G.R. Nos. 73748 and 73972 withdrew the petitions and
manifested that they would pursue the question by extra-judicial methods. The withdrawal is functus oficio.

The three petitions obviously are not impressed with merit. Petitioners have no personality to sue and their petitions
state no cause of action. For the legitimacy of the Aquino government is not a justiciable matter. It belongs to the realm
of politics where only the people of the Philippines are the judge. And the people have made the judgment; they have
accepted the government of President Corazon C. Aquino which is in effective control of the entire country so that it is
not merely a de factogovernment but is in fact and law a de jure government. Moreover, the community of nations has
recognized the legitimacy of the present government. All the eleven members of this Court, as reorganized, have sworn
to uphold the fundamental law of the Republic under her
103

Very truly yours,

(Sgd.) GLORIA C. PARAS

Clerk of Court

FACTS:
1. On February 25, 1986, President Corazon Aquino issued Proclamation No. 1 announcing that she and Vice President
Laurel were taking power.
2. On March 25, 1986, proclamation No.3 was issued providing the basis of the Aquino government assumption of
power by stating that the "new government was installed through a direct exercise of the power of the Filipino people
assisted by units of the New Armed Forces of the Philippines."

ISSUE:
Whether or not the government of Corazon Aquino is legitimate.

HELD:
Yes. The legitimacy of the Aquino government is not a justiciable matter but belongs to the realm of politics where only
the people are the judge. The Court further held that:
1. The people have accepted the Aquino government which is in effective control of the entire country;
2. It is not merely a de facto government but in fact and law a de jure government; and
3. The community of nations has recognized the legitimacy of the new government.

4. Aquino vs. COMELEC (62 SCRA 275)

G.R. No. L-40004 January 31, 1975

BENIGNO S. AQUINO, JR., TRINIDAD HERRERA, BISHOP FRANCISCO CLAVER, S.J., BISHOP ANTONIO NEPOMUCENO,
BISHOP JESUS VALERA, BISHOP FELIX ZAFRA, BISHOP TEOTIMO PACIS, EUGENIO LOPEZ, JR., SERGIO OSMEÑA, III,
ANTONIO ARANETA, ANTONIO MIRANDA, RAUL GONZALES, JOKER ARROYO, and EMILIO DE PERALTA, petitioners,
vs.
COMMISSION ON ELECTIONS, and NATIONAL TREASURER, respondents.

The respondents, through the Solicitor General, filed their comment on January 28, 1975. After the oral argument of
over 7 hours on January 30, 1975, the Court resolved to consider the comment as answer and the case submitted for
decision.

The first ground upon which the petition is predicated states that President Ferdinand E. Marcos does not hold any legal
office nor possess any lawful authority under either the 1935 Constitution or the 1973 Constitution and therefore has no
authority to issue the questioned proclamations, decrees and orders. This challenges the title of the incumbent
President to the office of the Presidency and therefore is in the nature of a quo warranto proceedings, the appropriate
action by which the title of a public officer can be questioned before the courts. Only the Solicitor General or the person
who asserts title to the same office can legally file such a quo warranto petition. The petitioners do not claim such right
to the office and not one of them is the incumbent Solicitor General. Hence, they have no personality to file the suit
(Castro vs. Del Rosario, Jan. 30, 1967, 19 SCRA 197; City of Manila & Antonio Villegas vs. Abelardo Subido, et. al., May 20,
1966, 17 SCRA 231-232, 235-236; Nacionalista Party vs. Bautista, 85 Phil. 101; and Nacionalista Party vs. Vera, 85 Phil.
127). It is established jurisprudence that the legality of the appointment or election of a public officer cannot be
questioned collaterally through a petition for prohibition which assails the validity of his official acts.

The foregoing governing legal principles on public officers are re-stated in order to avert any misapprehension that they
have been eroded by Our resolution in the instant petition.

Because of the far-reaching implications of the herein petition, the Court resolved to pass upon the issues raised.

II

This Court already ruled in the Ratification Cases "that there is no further judicial obstacle to the new Constitution being
considered in force and effect." As Chief Justice Makalintal stressed in the Habeas Corpus cases, the issue as to its
effectivity "has been laid to rest by Our decision in Javellana versus Executive Secretary (L-36142, March 31, 1973, 50
SCRA 30, 141), and of course by the existing political realities both in the conduct of national affairs and in our relation
with countries" (Aquino, Jr. vs. Enrile and 8 companion cases, L-35546, L-35538-40, L-35538-40, L-35547, L-35556, L-
35571 and
L-35573, Sept. 17, 1971, 59 SCRA 183, 241).
104

III

In the aforesaid Habeas Corpus cases, We affirmed the validity of Martial Law Proclamation No. 1081 issued on
September 22, 1972 by President Marcos because there was no arbitrariness in the issuance of said proclamation
pursuant to the 1935 Constitution that the factual bases had not disappeared but had even been exacerbated; that the
question is to the validity of the Martial Law proclamation has been foreclosed by Section 3(2) of Article XVII of the 1973
Constitution, which provides that "all proclamations, orders, decrees, instructions and acts promulgated, issued or done
by the incumbent President shall be part of the law of the land and shall remain valid, legal, binding and effective even
after the lifting of Martial Law or the ratification of this Constitution ..."; and that "any inquiry by this Court in the
present cases into the constitutional sufficiency of the factual bases for the proclamation of Martial Law, has become
moot and purposeless as a consequence of the general referendum of July 27-28, 1973. The question propounded to the
voters was: "Under the (1973) Constitution, the President, if he so desires, can continue in office beyond 1973. Do you
want President Marcos to continue beyond 1973 and finish the reforms be initiated under Martial Law?" The
overwhelming majority of those who cast their ballots, including citizens beyond 15 and 18 years, voted affirmatively on
the proposal. The question was thereby removed from the area of presidential power under the Constitution and
transferred to the seat of sovereignty itself. Whatever may be the nature of the exercise of that power by the President
in the beginning — whether or not purely political and therefore non-justiciable — this Court is precluded from applying
its judicial yardstick to the act of the sovereign." (Aquino, Jr. vs. Enrile, supra, 59 SCRA 183,
240-242).

Under the 1935 Constitution, President Ferdinand E. Marcos was duly reelected by the vote of the sovereign people in
the Presidential elections of 1969 by an overwhelming vote of over 5,000,000 electors as against 3,000,000 votes for his
rival, garnering a majority of from about 896,498 to 1,436,118 (Osmeña vs. Marcos, Presidential Election Contest No. 3,
Jan. 8, 1973). While his term of office under the 1935 Constitution should have terminated on December 30, 1973, by
the general referendum of July 27-28, 1973, the sovereign people expressly authorized him to continue in office even
beyond 1973 under the 1973 Constitution (which was validly ratified on January 17, 1973 by the sovereign people) in
order to finish the reforms he initiated under Martial Law; and as aforestated, as this was the decision of the people, in
whom "sovereignty resides ... and all government authority emanates ...," it is therefore beyond the scope of judicial
inquiry (Aquino, Jr. vs. Enrile, et. al., supra, p. 242).

The logical consequence therefore is that President Marcos is a de jure President of the Republic of the Philippines.

IV

The next issue is whether he is the incumbent President of the Philippines within the purview of Section 3 of Article XVII
on the transitory provisions of the new or 1973 Constitution. As heretofore stated, by virtue of his reelection in 1969,
the term of President Marcos tinder the 1935 Constitution was to terminate on December 30, 1973. The new
Constitution was approved by the Constitutional Convention on November 30, 1972, still during his incumbency. Being
the only incumbent President of the Philippines at the time of the approval of the new Constitution by the Constitutional
Convention, the Constitutional Convention had nobody in mind except President Ferdinand E. Marcos who shall initially
convene the interim Assembly. It was the incumbent President Marcos alone who issued Martial Law Proclamation No.
1081 on September 22, 1972 and issued orders and decrees as well as instructions and performed other acts as
President prior to the approval on November 30, 1972 of the new Constitution by the Constitutional Convention and
prior to its ratification on January 17, 1973 by the people. Consequently, since President Marcos was the only incumbent
President at the time, because his term under the 1935 Constitution has yet to expire on December 30, 1973, the
Constitutional Convention, in approving the new Constitution, had in mind only him when in Section 3(2) of Article XVII
of the new Constitution it provided "that all the proclamations, orders, decrees, instructions and acts promulgated,
issued or done by the incumbent President shall be part of the law of the land, and shall remain valid, legal, binding and
effective even after lifting of Martial Law or the ratification of this Constitution, unless modified, revoked or superseded
by subsequent proclamations, orders, decrees, instructions or other acts of the incumbent President, or unless expressly
and explicitly modified or repealed by the regular National Assembly."

The term incumbent President of the Philippines employed in Section 9 of the same Article XVII likewise could only refer
to President Ferdinand E. Marcos. .

This conclusion is further buttressed by Section 10 of the same Article XVII which provides that "the incumbent members
of the Judiciary may continue in office until they reach the age of 70 years unless sooner replaced in accordance with the
preceding section hereof." There can be no dispute that the phrase "incumbent members of the Judiciary" can only refer
to those members of the Judiciary who were already Justices and Judges of the various courts of the country at the time
the Constitutional Convention approved the new Constitution on November 30, 1972 and when it was ratified.

Because President Ferdinand E. Marcos is the incumbent President referred to in Article XVII of the transitory provisions
of the 1973 Constitution, he can "continue to exercise the powers and prerogatives under the nineteen hundred and
105

thirty five Constitution and the powers vested in the President and the Prime Minister under this Constitution until he
calls upon the interim National Assembly to elect the interim President and the interim Prime Minister, who shall then
exercise their legislative powers vested by this Constitution (Sec. 3[l], Art. XVII, 1973 Constitution).

Under the 1935 Constitution, the President is empowered to proclaim martial law. Under the 1973 Constitution, it is the
Prime Minister who is vested with such authority (Sec. 12, Art. IX, 1973 Constitution).

WE affirm the proposition that as Commander-in-Chief and enforcer or administrator of martial law, the incumbent
President of the Philippines can promulgate proclamations, orders and decrees during the period of Martial Law
essential to the security and preservation of the Republic, to the defense of the political and social liberties of the people
and to the institution of reforms to prevent the resurgence of rebellion or insurrection or secession or the threat thereof
as well as to meet the impact of a worldwide recession, inflation or economic crisis which presently threatens all nations
including highly developed countries (Rossiter, Constitutional Dictatorship, 1948 Ed., pp. 7, 303; see also Chief Justice
Stone's Concurring Opinion in Duncan vs. Kahanamoku, 327 US 304).

To dissipate all doubts as to the legality of such law-making authority by the President during the period of Martial Law,
Section 3(2) of Article XVII of the New Constitution expressly affirms that all the proclamations, orders, decrees,
instructions and acts he promulgated, issued or did prior to the approval by the Constitutional Convention on November
30, 1972 and prior to the ratification by the people on January 17, 1973 of the new Constitution, are "part of the law of
the land, and shall remain valid, legal, binding and effective even after the lifting of Martial Law or the ratification of this
Constitution, unless modified, revoked or superseded by subsequent proclamations, orders, decrees, instructions or
other acts of the incumbent President, or unless expressly and specifically modified or repealed by the regular National
Assembly."

The entire paragraph of Section 3(2) is not a grant of authority to legislate, but a recognition of such power as already
existing in favor of the incumbent President during the period of Martial Law.

Dr. Jose M. Aruego, noted authority in Constitutional Law as well as delegate to the 1935 and 1971 Constitutional
Conventions, shares this view, when he states thus:

108. ... — These Presidential Proclamations, order, decrees, instructions, etc. had been issued by the incumbent
President in the exercise of what he consider to be his powers under martial law, in the same manner that the
lawmaking body had enacted several thousand statutes in the exercise of what it consider to be its power under the
Organic Laws. Both these classes of rules of law — by the President and by the lawmaking body — were, under general
principles of constitutional law, presumed to be constitutional until declared unconstitutional by the agency charged
with the power and function to pass upon constitutional law question — the Judiciary, at the apex of which is the
Supreme Court. Hence, the inclusion of both group of rules — President rules and legislative rules — in the new
Constitution for the people to approve or disapprove in the scheduled plebiscite. (Aruego, The New Constitution, 1973
Ed., p. 230).

Delegate Arturo Pacificador, a Floor Leader of the 1971 Constitutional Convention, in explaining Section 3(2) of Article
XVII, underscores this recognition of the legislative power of the incumbent President as Commander-in-Chief during
martial Law, thus:

The second paragraph sets forth the understanding of the Convention of the nature, extent and scope of the powers of
the incumbent President of the Philippines, under martial law. It expressly recognizes that the commander-in-chief,
under martial law, can exercise all necessary powers to meet the perils of invasion, insurrection, rebellion or imminent
danger thereof. This provision complements Section 7, Article XVII of the Constitution that "all existing laws not
inconsistent with this Constitution shall remain operative until amended, modified, or repealed by the National
Assembly."

The second paragraph is an express recognition on the part of the framers of the new Constitution of the wisdom of the
proclamations, orders, decrees and instructions by the incumbent President in the light of the prevailing conditions
obtaining in the country. (Montejo, New Constitution, 1973 Ed., p. 314, emphasis supplied).

The power under the second clause of Section 3(2) is not limited merely to modifying, revoking or superseding all his
proclamations, orders, decrees, instructions or other acts promulgated, issued or done prior to the ratification of the
1973 Constitution. But even if the scope of his legislative authority thereunder is to be limited to the subject matter of
his previous proclamations, orders, decrees or instructions or acts, the challenged Proclamations Nos. 1366 and 1366-A,
as well as Presidential Decrees Nos. 629, 630, 637 and 637-A are analogous to the referenda of January, 1973 and July
27-28, 1973.
106

The actions of the incumbent President are not without historical precedents. It should be recalled that the American
Federal Constitution, unlike the 1935 or 1973 Constitution of the Philippines, does not confer expressly on the American
President the power to proclaim Martial Law or to suspend the writ of habeas corpus. And yet President Abraham
Lincoln during the Civil War, and President Roosevelt during the Second World War, without express constitutional or
statutory authority, created agencies and offices and appropriated public funds therefor in connection with the
prosecution of the war. Nobody raised a finger to oppose the same. In the case of President Roosevelt, the theater of
war was not in the United States. It was thousands of miles away, in the continents of Europe and Africa and in the Far
East. In the Philippines, military engagements between the government forces and the rebels and secessionists are going
on, emphasizing the immediacy of the peril to the safety of the Republic itself. There is therefore greater reason to
affirm this law-making authority in favor of the incumbent President during the period of Martial Law.

Petitioners further argue that the President should call the interim National Assembly as required of him by Section 3(1)
of Article XVII, which National Assembly alone can exercise legislative powers during the period of transition.

It should be stressed that there is a distinction between the existence of the interim Assembly and its organization as
well as its functioning. The interim Assembly already existed from the time the new Constitution was ratified; because
Section 1 of Article XVII states that "there shall be an interim National Assembly which shall exist immediately upon the
ratification of this Constitution and shall continue until the members of the regular National Assembly shall have been
elected and shall have assumed office ..." However, it cannot function until it is convened and thereafter duly organized
with the election of its interim speaker and other officials. This distinction was clearly delineated in the case of Mejia, et.
al. vs. Balolong, et. al. where We held that from the phrase "the City of Dagupan, which is hereby created, ...," Dagupan
City came into existence as a legal entity upon the approval of its Charter; but the date of the organization of the city
government was to be fixed by the President of the Philippines, and necessarily was subsequent to the approval of its
organic law (81 Phil. 486, 490-492).

Petitioners likewise urge that the President should have convened the interim Assembly before the expiration of his
term on December 30, 1973. The Constitutional Convention intended to leave to the President the determination of the
time when he shall initially convene the interim National Assembly, consistent with the prevailing conditions of peace
and order in the country. This was revealed by no less than Delegate Jose M. Aruego himself, who stated:

109. Convening the interim National Assembly. — The Constitutional Convention could have fixed the date when the
interim National Assembly should convene itself as it did with respect to the regular National Assembly. There would not
have been any need for any Presidential call as there is none, with respect to the regular National Assembly.

But considering that the country had been already placed under martial law rule the success of which was conditioned
upon the unity not only of planning but also in the execution of plans, many delegates felt that the incumbent President
should be given the discretion to decide when the interim National Assembly should be convened because he would
need its counsel and help in the administration of the affairs of the country.

And in the event that it should convene, why did the interim National Assembly not fix its tenure, and state expressly
when the election of the members of the regular National Assembly should be called? Many of the delegates felt that
they could not be sure even of the proximate date when the general conditions of peace and order would make possible
orderly elections, ... (The New Philippine Constitution by Aruego, 1973 Ed., p. 230).

This was also disclosed by Delegate Arturo F. Pacificador, who affirmed:

Under the first paragraph of this section, the incumbent President is mandated to initially convene the interim National
Assembly.

Note that the word used is "shall" to indicate the mandatory nature of the desire of the Constitutional Convention that
the interim National Assembly shall be convened by the incumbent President. The Constitutional Convention, however,
did not fix any definite time at which the incumbent President shall initially convene the interim National Assembly. This
decision was deliberate to allow the incumbent President enough latitude of discretion to decide whether in the light of
the emergency situation now prevailing, conditions have already normalized to permit the convening of the interim
National Assembly. (Montejo, The New Constitution, 1973 Ed., p. 314).

It is thus patent that the President is given the discretion as to when he shall convene the interim National Assembly
after determining whether the conditions warrant the same.

His decision to defer the initial convocation of the interim National Assembly was supported by the sovereign people at
the referendum in January, 1973 when the people voted to postpone the convening of the interim National Assembly
until after at least seven (7) years from the approval of the new Constitution. And the reason why the same question
was eliminated from the questions to be submitted at the referendum on February 27, 1975, is that even some
107

members of the Congress and delegates of the Constitutional Convention, who are already ipso facto members of the
interim National Assembly, are against such inclusion; because the issue was already decided in the January, 1973
referendum by the sovereign people indicating thereby their disenchantment with any Assembly as the former Congress
failed to institutionalize the reforms they demanded and had wasted public funds through the endless debates without
relieving the suffering of the general mass of citizenry.

Petitioners likewise impugn the scheduled referendum on the ground that there can be no true expression of the
people's will due to the climate of fear generated by Martial Law and that the period of free discussion and debate is
limited to two weeks from February 7 to 21, without right of rebuttal from February 22 until the day of the referendum.

The first objection is not tenable because during the senatorial elections in 1951 and 1971, the privilege of the writ of
habeas corpus was suspended, during which period of suspension there was fear of arrest and detention. Yet the
election was so free that a majority of the senatorial candidates of the opposition party were elected and there was no
reprisal against or harrassment of any voter thereafter. The same thing was true in the referendum of July 27-28, 1973,
which was done also through secret ballot. There was no Army, PC, or police truck, bus or other mode of transportation
utilized to transport the voters to the various precincts of the country. There was no PC, Army or police personnel
assigned to each election precinct or voting booth. And such assignment would be impossible; because the combined
membership of the police, PC, and Army was then as now very much less than the number of precincts, let alone the
number of voting booths. And no one would be left to fight the rebels or to maintain peace and order. And as heretofore
stated, the voting was done in secrecy. Only one voter at a time entered the voting booth. The voting was orderly. There
was no buying of votes or buying the right not to vote. And as opined by the Solicitor General, every qualified voter who
fails to register or go to the polling place on referendum day is subject to prosecution; but failure to fill up the ballot is
not penalized.

In the Habeas Corpus cases, We declared that the result of the referendum on July 27-28, 1973 was a decision by the
sovereign people which cannot be reviewed by this Court. Then again, it is too late now for petitioners to challenge the
validity of said referendum.

Moreover, as stressed by the Solicitor General, the previous referenda of January and July, 1973, were a lot more free
than the elections under the Old Society previous to the proclamation of Martial Law, where the will of the voter was
subverted through "guns, goons and gold", as well as through fraud. All modes of transportation were utilized by the
candidates and their leaders to transport the voters to the precinct. The voters were likewise wined and dined and so
prostituted that they refused to vote until the required monetary persuasion was proffered, if they were not being
subjected to various forms of intimidation. In some areas, the ballots were filled up and the election returns were
accomplished before election day. Even animals and dead persons voted. The decisions in the electoral contests filed
after every election under the Old Society attest to this very unflattering fact in our history.

The second objection that the two-week period for free debate is too short, is addressed to the wisdom of the President
who may still amend the proclamation to extend the period of free discussion.

At any rate, such a brief period of discussion has its counterpart in previous plebiscites for constitutional amendments.
Under the Old Society, 15 days were allotted for the publication in three consecutive issues of the Official Gazette of the
women's suffrage amendment to the Constitution before the scheduled plebiscite on April 30, 1937 (Com. Act No. 34).
The constitutional amendment to append as ordinance the complicated Tydings-Kocialskowski Act of the US Federal
Congress to the 1935 Constitution was published in only three consecutive issues of the Official Gazette for 10 days prior
to the scheduled plebiscite (Com. Act No. 492). For the 1940 constitutional amendments providing for the bicameral
Congress, the reelection of the President and Vice-President, and the creation of the Commission on Elections, 20 days
of publication in three consecutive issues of the Official Gazette was fixed (Com. Act No. 517).And the Parity
Amendment, an involved constitutional amendment affecting the economy as well as the independence of the Republic
was publicized in three consecutive issues of the Official Gazette for 20 days prior to the plebiscite (Rep. Act No. 73).

The period of 14 days for free discussion can compare favorably with the period required for publication of the proposed
amendments under the Old Society.

WHEREFORE, PRESIDENT FERDINAND E. MARCOS IS HEREBY DECLARED DE JURE PRESIDENT OF THE REPUBLIC,
PRESIDENTIAL PROCLAMATIONS NOS. 1366 AND 1366-A AND PRESIDENTIAL DECREES NOS. 629,630, 637 AND 637-A ARE
HEREBY DECLARED VALID, AND THE PETITION IS HEREBY DISMISSED. WITHOUT COSTS.
108

5. Estrada vs. Desierto (G.R. No. 146710-15, March 2, 2001) and Estrada vs. Macapagal-Arroyo (G.R. No. 146738,
March 2, 2001)

JOSEPH E. ESTRADA, petitioner,

vs.
ANIANO DESIERTO, in his capacity as Ombudsman, RAMON GONZALES, VOLUNTEERS AGAINST CRIME AND
CORRUPTION, GRAFT FREE PHILIPPINES FOUNDATION, INC., LEONARD DE VERA, DENNIS FUNA, ROMEO CAPULONG
and ERNESTO B. FRANCISCO, JR., respondent.

JOSEPH E. ESTRADA, petitioner,

vs.
GLORIA MACAPAGAL-ARROYO, respondent.

On the line in the cases at bar is the office of the President. Petitioner Joseph Ejercito Estrada alleges that he is the
President on leave while respondent Gloria Macapagal-Arroyo claims she is the President. The warring personalities are
important enough but more transcendental are the constitutional issues embedded on the parties' dispute. While the
significant issues are many, the jugular issue involves the relationship between the ruler and the ruled in a democracy,
Philippine style.

First, we take a view of the panorama of events that precipitated the crisis in the office of the President.

In the May 11, 1998 elections, petitioner Joseph Ejercito Estrada was elected President while respondent Gloria
Macapagal-Arroyo was elected Vice-President. Some ten (10) million Filipinos voted for the petitioner believing he
would rescue them from life's adversity. Both petitioner and the respondent were to serve a six-year term commencing
on June 30, 1998.

From the beginning of his term, however, petitioner was plagued by a plethora of problems that slowly but surely
eroded his popularity. His sharp descent from power started on October 4, 2000. Ilocos Sur Governor, Luis "Chavit"
109

Singson, a longtime friend of the petitioner, went on air and accused the petitioner, his family and friends of receiving
millions of pesos from jueteng lords.1

The exposẻ immediately ignited reactions of rage. The next day, October 5, 2000, Senator Teofisto Guingona, Jr., then
the Senate Minority Leader, took the floor and delivered a fiery privilege speech entitled "I Accuse." He accused the
petitioner of receiving some P220 million in jueteng money from Governor Singson from November 1998 to August
2000. He also charged that the petitioner took from Governor Singson P70 million on excise tax on cigarettes intended
for Ilocos Sur. The privilege speech was referred by then Senate President Franklin Drilon, to the Blue Ribbon Committee
(then headed by Senator Aquilino Pimentel) and the Committee on Justice (then headed by Senator Renato Cayetano)
for joint investigation.2

The House of Representatives did no less. The House Committee on Public Order and Security, then headed by
Representative Roilo Golez, decided to investigate the exposẻ of Governor Singson. On the other hand, Representatives
Heherson Alvarez, Ernesto Herrera and Michael Defensor spearheaded the move to impeach the petitioner.

Calls for the resignation of the petitioner filled the air. On October 11, Archbishop Jaime Cardinal Sin issued a pastoral
statement in behalf of the Presbyteral Council of the Archdiocese of Manila, asking petitioner to step down from the
presidency as he had lost the moral authority to govern.3 Two days later or on October 13, the Catholic Bishops
Conference of the Philippines joined the cry for the resignation of the petitioner.4 Four days later, or on October 17,
former President Corazon C. Aquino also demanded that the petitioner take the "supreme self-sacrifice" of resignation.5
Former President Fidel Ramos also joined the chorus. Early on, or on October 12, respondent Arroyo resigned as
Secretary of the Department of Social Welfare and Services6 and later asked for petitioner's resignation.7 However,
petitioner strenuously held on to his office and refused to resign.

The heat was on. On November 1, four (4) senior economic advisers, members of the Council of Senior Economic
Advisers, resigned. They were Jaime Augusto Zobel de Ayala, former Prime Minister Cesar Virata, former Senator
Vicente Paterno and Washington Sycip.8 On November 2, Secretary Mar Roxas II also resigned from the Department of
Trade and Industry.9 On November 3, Senate President Franklin Drilon, and House Speaker Manuel Villar, together with
some 47 representatives defected from the ruling coalition, Lapian ng Masang Pilipino.10

The month of November ended with a big bang. In a tumultuous session on November 13, House Speaker Villar
transmitted the Articles of Impeachment11 signed by 115 representatives, or more than 1/3 of all the members of the
House of Representatives to the Senate. This caused political convulsions in both houses of Congress. Senator Drilon was
replaced by Senator Pimentel as Senate President. Speaker Villar was unseated by Representative Fuentebella.12 On
November 20, the Senate formally opened the impeachment trial of the petitioner. Twenty-one (21) senators took their
oath as judges with Supreme Court Chief Justice Hilario G. Davide, Jr., presiding.13

The political temperature rose despite the cold December. On December 7, the impeachment trial started.14 The battle
royale was fought by some of the marquee names in the legal profession. Standing as prosecutors were then House
Minority Floor Leader Feliciano Belmonte and Representatives Joker Arroyo, Wigberto Tañada, Sergio Apostol, Raul
Gonzales, Oscar Moreno, Salacnib Baterina, Roan Libarios, Oscar Rodriguez, Clavel Martinez and Antonio Nachura. They
were assisted by a battery of private prosecutors led by now Secretary of Justice Hernando Perez and now Solicitor
General Simeon Marcelo. Serving as defense counsel were former Chief Justice Andres Narvasa, former Solicitor General
and Secretary of Justice Estelito P. Mendoza, former City Fiscal of Manila Jose Flaminiano, former Deputy Speaker of the
House Raul Daza, Atty. Siegfried Fortun and his brother, Atty. Raymund Fortun. The day to day trial was covered by live
TV and during its course enjoyed the highest viewing rating. Its high and low points were the constant conversational
piece of the chattering classes. The dramatic point of the December hearings was the testimony of Clarissa Ocampo,
senior vice president of Equitable-PCI Bank. She testified that she was one foot away from petitioner Estrada when he
affixed the signature "Jose Velarde" on documents involving a P500 million investment agreement with their bank on
February 4, 2000.15

After the testimony of Ocampo, the impeachment trial was adjourned in the spirit of Christmas. When it resumed on
January 2, 2001, more bombshells were exploded by the prosecution. On January 11, Atty. Edgardo Espiritu who served
as petitioner's Secretary of Finance took the witness stand. He alleged that the petitioner jointly owned BW Resources
Corporation with Mr. Dante Tan who was facing charges of insider trading.16 Then came the fateful day of January 16,
when by a vote of 11-1017 the senator-judges ruled against the opening of the second envelope which allegedly
contained evidence showing that petitioner held P3.3 billion in a secret bank account under the name "Jose Velarde."
The public and private prosecutors walked out in protest of the ruling. In disgust, Senator Pimentel resigned as Senate
President.18 The ruling made at 10:00 p.m. was met by a spontaneous outburst of anger that hit the streets of the
metropolis. By midnight, thousands had assembled at the EDSA Shrine and speeches full of sulphur were delivered
against the petitioner and the eleven (11) senators.
110

On January 17, the public prosecutors submitted a letter to Speaker Fuentebella tendering their collective resignation.
They also filed their Manifestation of Withdrawal of Appearance with the impeachment tribunal.19 Senator Raul Roco
quickly moved for the indefinite postponement of the impeachment proceedings until the House of Representatives
shall have resolved the issue of resignation of the public prosecutors. Chief Justice Davide granted the motion.20

January 18 saw the high velocity intensification of the call for petitioner's resignation. A 10-kilometer line of people
holding lighted candles formed a human chain from the Ninoy Aquino Monument on Ayala Avenue in Makati City to the
EDSA Shrine to symbolize the people's solidarity in demanding petitioner's resignation. Students and teachers walked
out of their classes in Metro Manila to show their concordance. Speakers in the continuing rallies at the EDSA Shrine, all
masters of the physics of persuasion, attracted more and more people.21

On January 19, the fall from power of the petitioner appeared inevitable. At 1:20 p.m., the petitioner informed Executive
Secretary Edgardo Angara that General Angelo Reyes, Chief of Staff of the Armed Forces of the Philippines, had
defected. At 2:30 p.m., petitioner agreed to the holding of a snap election for President where he would not be a
candidate. It did not diffuse the growing crisis. At 3:00 p.m., Secretary of National Defense Orlando Mercado and
General Reyes, together with the chiefs of all the armed services went to the EDSA Shrine.22 In the presence of former
Presidents Aquino and Ramos and hundreds of thousands of cheering demonstrators, General Reyes declared that "on
behalf of Your Armed Forces, the 130,000 strong members of the Armed Forces, we wish to announce that we are
withdrawing our support to this government."23 A little later, PNP Chief, Director General Panfilo Lacson and the major
service commanders gave a similar stunning announcement.24 Some Cabinet secretaries, undersecretaries, assistant
secretaries, and bureau chiefs quickly resigned from their posts.25 Rallies for the resignation of the petitioner exploded
in various parts of the country. To stem the tide of rage, petitioner announced he was ordering his lawyers to agree to
the opening of the highly controversial second envelope.26 There was no turning back the tide. The tide had become a
tsunami.

January 20 turned to be the day of surrender. At 12:20 a.m., the first round of negotiations for the peaceful and orderly
transfer of power started at Malacañang'' Mabini Hall, Office of the Executive Secretary. Secretary Edgardo Angara,
Senior Deputy Executive Secretary Ramon Bagatsing, Political Adviser Angelito Banayo, Asst. Secretary Boying Remulla,
and Atty. Macel Fernandez, head of the Presidential Management Staff, negotiated for the petitioner. Respondent
Arroyo was represented by now Executive Secretary Renato de Villa, now Secretary of Finance Alberto Romulo and now
Secretary of Justice Hernando Perez.27 Outside the palace, there was a brief encounter at Mendiola between pro and
anti-Estrada protesters which resulted in stone-throwing and caused minor injuries. The negotiations consumed all
morning until the news broke out that Chief Justice Davide would administer the oath to respondent Arroyo at high
noon at the EDSA Shrine.

At about 12:00 noon, Chief Justice Davide administered the oath to respondent Arroyo as President of the Philippines.28
At 2:30 p.m., petitioner and his family hurriedly left Malacañang Palace.29 He issued the following press statement:30

"20 January 2001

STATEMENT FROM

PRESIDENT JOSEPH EJERCITO ESTRADA

At twelve o'clock noon today, Vice President Gloria Macapagal-Arroyo took her oath as President of the Republic of the
Philippines. While along with many other legal minds of our country, I have strong and serious doubts about the legality
and constitutionality of her proclamation as President, I do not wish to be a factor that will prevent the restoration of
unity and order in our civil society.

It is for this reason that I now leave Malacañang Palace, the seat of the presidency of this country, for the sake of peace
and in order to begin the healing process of our nation. I leave the Palace of our people with gratitude for the
opportunities given to me for service to our people. I will not shirk from any future challenges that may come ahead in
the same service of our country.

I call on all my supporters and followers to join me in to promotion of a constructive national spirit of reconciliation and
solidarity.

May the Almighty bless our country and beloved people.

MABUHAY!

(Sgd.) JOSEPH EJERCITO ESTRADA"

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It also appears that on the same day, January 20, 2001, he signed the following letter:31

"Sir:

By virtue of the provisions of Section 11, Article VII of the Constitution, I am hereby transmitting this declaration that I
am unable to exercise the powers and duties of my office. By operation of law and the Constitution, the Vice-President
shall be the Acting President.

(Sgd.) JOSEPH EJERCITO ESTRADA"

A copy of the letter was sent to former Speaker Fuentebella at 8:30 a.m. on January 20.23 Another copy was transmitted
to Senate President Pimentel on the same day although it was received only at 9:00 p.m.33

On January 22, the Monday after taking her oath, respondent Arroyo immediately discharged the powers the duties of
the Presidency. On the same day, this Court issued the following Resolution in Administrative Matter No. 01-1-05-SC, to
wit:

"A.M. No. 01-1-05-SC — In re: Request of Vice President Gloria Macapagal-Arroyo to Take her Oath of Office as
President of the Republic of the Philippines before the Chief Justice — Acting on the urgent request of Vice President
Gloria Macapagal-Arroyo to be sworn in as President of the Republic of the Philippines, addressed to the Chief Justice
and confirmed by a letter to the Court, dated January 20, 2001, which request was treated as an administrative matter,
the court Resolve unanimously to confirm the authority given by the twelve (12) members of the Court then present to
the Chief Justice on January 20, 2001 to administer the oath of office of Vice President Gloria Macapagal-Arroyo as
President of the Philippines, at noon of January 20, 2001.1âwphi1.nêt

This resolution is without prejudice to the disposition of any justiciable case that may be filed by a proper party."

Respondent Arroyo appointed members of her Cabinet as well as ambassadors and special envoys.34 Recognition of
respondent Arroyo's government by foreign governments swiftly followed. On January 23, in a reception or vin d'
honneur at Malacañang, led by the Dean of the Diplomatic Corps, Papal Nuncio Antonio Franco, more than a hundred
foreign diplomats recognized the government of respondent Arroyo.35 US President George W. Bush gave the
respondent a telephone call from the White House conveying US recognition of her government.36

On January 24, Representative Feliciano Belmonte was elected new Speaker of the House of Representatives.37 The
House then passed Resolution No. 175 "expressing the full support of the House of Representatives to the
administration of Her Excellency, Gloria Macapagal-Arroyo, President of the Philippines."38 It also approved Resolution
No. 176 "expressing the support of the House of Representatives to the assumption into office by Vice President Gloria
Macapagal-Arroyo as President of the Republic of the Philippines, extending its congratulations and expressing its
support for her administration as a partner in the attainment of the nation's goals under the Constitution."39

On January 26, the respondent signed into law the Solid Waste Management Act.40 A few days later, she also signed
into law the Political Advertising ban and Fair Election Practices Act.41

On February 6, respondent Arroyo nominated Senator Teofisto Guingona, Jr., as her Vice President.42 The next day,
February 7, the Senate adopted Resolution No. 82 confirming the nomination of Senator Guingona, Jr.43 Senators
Miriam Defensor-Santiago, Juan Ponce Enrile, and John Osmena voted "yes" with reservations, citing as reason therefor
the pending challenge on the legitimacy of respondent Arroyo's presidency before the Supreme Court. Senators Teresa
Aquino-Oreta and Robert Barbers were absent.44 The House of Representatives also approved Senator Guingona's
nomination in Resolution No. 178.45 Senator Guingona, Jr. took his oath as Vice President two (2) days later.46

On February 7, the Senate passed Resolution No. 83 declaring that the impeachment court is functus officio and has
been terminated.47 Senator Miriam Defensor-Santiago stated "for the record" that she voted against the closure of the
impeachment court on the grounds that the Senate had failed to decide on the impeachment case and that the
resolution left open the question of whether Estrada was still qualified to run for another elective post.48

Meanwhile, in a survey conducted by Pulse Asia, President Arroyo's public acceptance rating jacked up from 16% on
January 20, 2001 to 38% on January 26, 2001.49 In another survey conducted by the ABS-CBN/SWS from February 2-7,
2001, results showed that 61% of the Filipinos nationwide accepted President Arroyo as replacement of petitioner
Estrada. The survey also revealed that President Arroyo is accepted by 60% in Metro Manila, by also 60% in the balance
of Luzon, by 71% in the Visayas, and 55% in Mindanao. Her trust rating increased to 52%. Her presidency is accepted by
majorities in all social classes: 58% in the ABC or middle-to-upper classes, 64% in the D or mass class, and 54% among
the E's or very poor class.50
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After his fall from the pedestal of power, the petitioner's legal problems appeared in clusters. Several cases previously
filed against him in the Office of the Ombudsman were set in motion. These are: (1) OMB Case No. 0-00-1629, filed by
Ramon A. Gonzales on October 23, 2000 for bribery and graft and corruption; (2) OMB Case No. 0-00-1754 filed by the
Volunteers Against Crime and Corruption on November 17, 2000 for plunder, forfeiture, graft and corruption, bribery,
perjury, serious misconduct, violation of the Code of Conduct for Government Employees, etc; (3) OMB Case No. 0-00-
1755 filed by the Graft Free Philippines Foundation, Inc. on November 24, 2000 for plunder, forfeiture, graft and
corruption, bribery, perjury, serious misconduct; (4) OMB Case No. 0-00-1756 filed by Romeo Capulong, et al., on
November 28, 2000 for malversation of public funds, illegal use of public funds and property, plunder, etc.; (5) OMB
Case No. 0-00-1757 filed by Leonard de Vera, et al., on November 28, 2000 for bribery, plunder, indirect bribery,
violation of PD 1602, PD 1829, PD 46, and RA 7080; and (6) OMB Case No. 0-00-1758 filed by Ernesto B. Francisco, Jr. on
December 4, 2000 for plunder, graft and corruption.

A special panel of investigators was forthwith created by the respondent Ombudsman to investigate the charges against
the petitioner. It is chaired by Overall Deputy Ombudsman Margarito P. Gervasio with the following as members, viz:
Director Andrew Amuyutan, Prosecutor Pelayo Apostol, Atty. Jose de Jesus and Atty. Emmanuel Laureso. On January 22,
the panel issued an Order directing the petitioner to file his counter-affidavit and the affidavits of his witnesses as well as
other supporting documents in answer to the aforementioned complaints against him.

Thus, the stage for the cases at bar was set. On February 5, petitioner filed with this Court GR No. 146710-15, a petition
for prohibition with a prayer for a writ of preliminary injunction. It sought to enjoin the respondent Ombudsman from
"conducting any further proceedings in Case Nos. OMB 0-00-1629, 1754, 1755, 1756, 1757 and 1758 or in any other
criminal complaint that may be filed in his office, until after the term of petitioner as President is over and only if legally
warranted." Thru another counsel, petitioner, on February 6, filed GR No. 146738 for Quo Warranto. He prayed for
judgment "confirming petitioner to be the lawful and incumbent President of the Republic of the Philippines temporarily
unable to discharge the duties of his office, and declaring respondent to have taken her oath as and to be holding the
Office of the President, only in an acting capacity pursuant to the provisions of the Constitution." Acting on GR Nos.
146710-15, the Court, on the same day, February 6, required the respondents "to comment thereon within a non-
extendible period expiring on 12 February 2001." On February 13, the Court ordered the consolidation of GR Nos.
146710-15 and GR No. 146738 and the filing of the respondents' comments "on or before 8:00 a.m. of February 15."

On February 15, the consolidated cases were orally argued in a four-hour hearing. Before the hearing, Chief Justice
Davide, Jr.51 and Associate Justice Artemio Panganiban52 recused themselves on motion of petitioner's counsel, former
Senator Rene A. Saguisag. They debunked the charge of counsel Saguisag that they have "compromised themselves by
indicating that they have thrown their weight on one side" but nonetheless inhibited themselves. Thereafter, the parties
were given the short period of five (5) days to file their memoranda and two (2) days to submit their simultaneous
replies.

In a resolution dated February 20, acting on the urgent motion for copies of resolution and press statement for "Gag
Order" on respondent Ombudsman filed by counsel for petitioner in G.R. No. 146738, the Court resolved:

"(1) to inform the parties that the Court did not issue a resolution on January 20, 2001 declaring the office of the
President vacant and that neither did the Chief Justice issue a press statement justifying the alleged resolution;

(2) to order the parties and especially their counsel who are officers of the Court under pain of being cited for contempt
to refrain from making any comment or discussing in public the merits of the cases at bar while they are still pending
decision by the Court, and

(3) to issue a 30-day status quo order effective immediately enjoining the respondent Ombudsman from resolving or
deciding the criminal cases pending investigation in his office against petitioner, Joseph E. Estrada and subject of the
cases at bar, it appearing from news reports that the respondent Ombudsman may immediately resolve the cases
against petitioner Joseph E. Estrada seven (7) days after the hearing held on February 15, 2001, which action will make
the cases at bar moot and academic."53

The parties filed their replies on February 24. On this date, the cases at bar were deemed submitted for decision.

The bedrock issues for resolution of this Court are:

Whether the petitions present a justiciable controversy.

II
113

Assuming that the petitions present a justiciable controversy, whether petitioner Estrada is a President on leave while
respondent Arroyo is an Acting President.

III

Whether conviction in the impeachment proceedings is a condition precedent for the criminal prosecution of petitioner
Estrada. In the negative and on the assumption that petitioner is still President, whether he is immune from criminal
prosecution.

IV

Whether the prosecution of petitioner Estrada should be enjoined on the ground of prejudicial publicity.

We shall discuss the issues in seriatim.

Whether or not the cases

At bar involve a political question

Private respondents54 raise the threshold issue that the cases at bar pose a political question, and hence, are beyond
the jurisdiction of this Court to decide. They contend that shorn of its embroideries, the cases at bar assail the
"legitimacy of the Arroyo administration." They stress that respondent Arroyo ascended the presidency through people
power; that she has already taken her oath as the 14th President of the Republic; that she has exercised the powers of
the presidency and that she has been recognized by foreign governments. They submit that these realities on ground
constitute the political thicket, which the Court cannot enter.

We reject private respondents' submission. To be sure, courts here and abroad, have tried to lift the shroud on political
question but its exact latitude still splits the best of legal minds. Developed by the courts in the 20th century, the
political question doctrine which rests on the principle of separation of powers and on prudential considerations,
continue to be refined in the mills of constitutional law.55 In the United States, the most authoritative guidelines to
determine whether a question is political were spelled out by Mr. Justice Brennan in the 1962 case or Baker v. Carr,56
viz:

"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. Unless one of these formulations is inextricable from the case at bar, there should be no
dismissal for non justiciability on the ground of a political question's presence. The doctrine of which we treat is one of
'political questions', not of 'political cases'."

In the Philippine setting, this Court has been continuously confronted with cases calling for a firmer delineation of the
inner and outer perimeters of a political question.57 Our leading case is Tanada v. Cuenco,58 where this Court, through
former Chief Justice Roberto Concepcion, 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." To a great degree, the 1987 Constitution has
narrowed the reach of the political question 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.59 Heretofore, the judiciary has focused on the "thou shalt not's" of the
Constitution directed against the exercise of its jurisdiction.60 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. Prominent of these provisions is section 18 of Article VII which empowers this
Court in limpid language to "x x x review, in an appropriate proceeding filed by any citizen, the sufficiency of the factual
basis of the proclamation of martial law or the suspension of the privilege of the writ (of habeas corpus) or the extension
thereof x x x."
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Respondents rely on the case of Lawyers League for a Better Philippines and/or Oliver A. Lozano v. President Corazon C.
Aquino, et al.61 and related cases62 to support their thesis that since the cases at bar involve the legitimacy of the
government of respondent Arroyo, ergo, they present a political question. A more cerebral reading of the cited cases will
show that they are inapplicable. In the cited cases, we held that the government of former President Aquino was the
result of a successful revolution by the sovereign people, albeit a peaceful one. No less than the Freedom Constitution63
declared that the Aquino government was installed through a direct exercise of the power of the Filipino people "in
defiance of the provisions of the 1973 Constitution, as amended." In is familiar learning that the legitimacy of a
government sired by a successful revolution by people power is beyond judicial scrutiny for that government
automatically orbits out of the constitutional loop. In checkered contrast, the government of respondent Arroyo is not
revolutionary in character. The oath that she took at the EDSA Shrine is the oath under the 1987 Constitution.64 In her
oath, she categorically swore to preserve and defend the 1987 Constitution. Indeed, she has stressed that she is
discharging the powers of the presidency under the authority of the 1987 Constitution.

In fine, the legal distinction between EDSA People Power I EDSA People Power II is clear. EDSA I involves the exercise of
the people power of revolution which overthrew the whole government. EDSA II is an exercise of people power of
freedom of speech and freedom of assembly to petition the government for redress of grievances which only affected
the office of the President. EDSA I is extra constitutional and the legitimacy of the new government that resulted from it
cannot be the subject of judicial review, but EDSA II is intra constitutional and the resignation of the sitting President
that it caused and the succession of the Vice President as President are subject to judicial review. EDSA I presented a
political question; EDSA II involves legal questions. A brief discourse on freedom of speech and of the freedom of
assembly to petition the government for redress of grievance which are the cutting edge of EDSA People Power II is not
inappropriate.

Freedom of speech and the right of assembly are treasured by Filipinos. Denial of these rights was one of the reasons of
our 1898 revolution against Spain. Our national hero, Jose P. Rizal, raised the clarion call for the recognition of freedom
of the press of the Filipinos and included it as among "the reforms sine quibus non."65 The Malolos Constitution, which
is the work of the revolutionary Congress in 1898, provided in its Bill of Rights that Filipinos shall not be deprived (1) of
the right to freely express his ideas or opinions, orally or in writing, through the use of the press or other similar means;
(2) of the right of association for purposes of human life and which are not contrary to public means; and (3) of the right
to send petitions to the authorities, individually or collectively." These fundamental rights were preserved when the
United States acquired jurisdiction over the Philippines. In the Instruction to the Second Philippine Commission of April
7, 1900 issued by President McKinley, it is specifically provided "that no law shall be passed abridging the freedom of
speech or of the press or of the rights of the people to peaceably assemble and petition the Government for redress of
grievances." The guaranty was carried over in the Philippine Bill, the Act of Congress of July 1, 1902 and the Jones Law,
the Act of Congress of August 29, 1966.66

Thence on, the guaranty was set in stone in our 1935 Constitution,67 and the 197368 Constitution. These rights are now
safely ensconced in section 4, Article III of the 1987 Constitution, viz:

"Sec. 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people
peaceably to assemble and petition the government for redress of grievances."

The indispensability of the people's freedom of speech and of assembly to democracy is now self-evident. The reasons
are well put by Emerson: first, freedom of expression is essential as a means of assuring individual fulfillment; second, it
is an essential process for advancing knowledge and discovering truth; third, it is essential to provide for participation in
decision-making by all members of society; and fourth, it is a method of achieving a more adaptable and hence, a more
stable community of maintaining the precarious balance between healthy cleavage and necessary consensus."69 In this
sense, freedom of speech and of assembly provides a framework in which the "conflict necessary to the progress of a
society can take place without destroying the society."70 In Hague v. Committee for Industrial Organization,71 this
function of free speech and assembly was echoed in the amicus curiae filed by the Bill of Rights Committee of the
American Bar Association which emphasized that "the basis of the right of assembly is the substitution of the expression
of opinion and belief by talk rather than force; and this means talk for all and by all."72 In the relatively recent case of
Subayco v. Sandiganbayan,73 this Court similar stressed that "… it should be clear even to those with intellectual deficits
that when the sovereign people assemble to petition for redress of grievances, all should listen. For in a democracy, it is
the people who count; those who are deaf to their grievances are ciphers."

Needless to state, the cases at bar pose legal and not political questions. The principal issues for resolution require the
proper interpretation of certain provisions in the 1987 Constitution, notably section 1 of Article II,74 and section 875 of
Article VII, and the allocation of governmental powers under section 1176 of Article VII. The issues likewise call for a
ruling on the scope of presidential immunity from suit. They also involve the correct calibration of the right of petitioner
against prejudicial publicity. As early as the 1803 case of Marbury v. Madison,77 the doctrine has been laid down that "it
115

is emphatically the province and duty of the judicial department to say what the law is . . ." Thus, respondent's in
vocation of the doctrine of political question is but a foray in the dark.

II

Whether or not the petitioner

Resigned as President

We now slide to the second issue. None of the parties considered this issue as posing a political question. Indeed, it
involves a legal question whose factual ingredient is determinable from the records of the case and by resort to judicial
notice. Petitioner denies he resigned as President or that he suffers from a permanent disability. Hence, he submits that
the office of the President was not vacant when respondent Arroyo took her oath as President.

The issue brings under the microscope the meaning of section 8, Article VII of the Constitution which provides:

"Sec. 8. In case of death, permanent disability, removal from office or resignation of the President, the Vice President
shall become the President to serve the unexpired term. In case of death, permanent disability, removal from office, or
resignation of both the President and Vice President, the President of the Senate or, in case of his inability, the Speaker
of the House of Representatives, shall then act as President until the President or Vice President shall have been elected
and qualified.

x x x."

The issue then is whether the petitioner resigned as President or should be considered resigned as of January 20, 2001
when respondent took her oath as the 14th President of the Public. Resignation is not a high level legal abstraction. It is
a factual question and its elements are beyond quibble: there must be an intent to resign and the intent must be
coupled by acts of relinquishment.78 The validity of a resignation is not government by any formal requirement as to
form. It can be oral. It can be written. It can be express. It can be implied. As long as the resignation is clear, it must be
given legal effect.

In the cases at bar, the facts show that petitioner did not write any formal letter of resignation before he evacuated
Malacañang Palace in the afternoon of January 20, 2001 after the oath-taking of respondent Arroyo. Consequently,
whether or not petitioner resigned has to be determined from his act and omissions before, during and after January 20,
2001 or by the totality of prior, contemporaneous and posterior facts and circumstantial evidence bearing a material
relevance on the issue.

Using this totality test, we hold that petitioner resigned as President.

To appreciate the public pressure that led to the resignation of the petitioner, it is important to follow the succession of
events after the exposẻ of Governor Singson. The Senate Blue Ribbon Committee investigated. The more detailed
revelations of petitioner's alleged misgovernance in the Blue Ribbon investigation spiked the hate against him. The
Articles of Impeachment filed in the House of Representatives which initially was given a near cipher chance of
succeeding snowballed. In express speed, it gained the signatures of 115 representatives or more than 1/3 of the House
of Representatives. Soon, petitioner's powerful political allies began deserting him. Respondent Arroyo quit as Secretary
of Social Welfare. Senate President Drilon and former Speaker Villar defected with 47 representatives in tow. Then, his
respected senior economic advisers resigned together with his Secretary of Trade and Industry.

As the political isolation of the petitioner worsened, the people's call for his resignation intensified. The call reached a
new crescendo when the eleven (11) members of the impeachment tribunal refused to open the second envelope. It
sent the people to paroxysms of outrage. Before the night of January 16 was over, the EDSA Shrine was swarming with
people crying for redress of their grievance. Their number grew exponentially. Rallies and demonstration quickly spread
to the countryside like a brush fire.

As events approached January 20, we can have an authoritative window on the state of mind of the petitioner. The
window is provided in the "Final Days of Joseph Ejercito Estrada," the diary of Executive Secretary Angara serialized in
the Philippine Daily Inquirer.79 The Angara Diary reveals that in the morning of January 19, petitioner's loyal advisers
were worried about the swelling of the crowd at EDSA, hence, they decided to create an ad hoc committee to handle it.
Their worry would worsen. At 1:20 p.m., petitioner pulled Secretary Angara into his small office at the presidential
residence and exclaimed: "Ed, seryoso na ito. Kumalas na si Angelo (Reyes) (Ed, this is serious. Angelo has defected.)"80
An hour later or at 2:30 p.m., the petitioner decided to call for a snap presidential election and stressed he would not be
a candidate. The proposal for a snap election for president in May where he would not be a candidate is an indicium that
petitioner had intended to give up the presidency even at that time. At 3:00 p.m., General Reyes joined the sea of EDSA
demonstrators demanding the resignation of the petitioner and dramatically announced the AFP's withdrawal of
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support from the petitioner and their pledge of support to respondent Arroyo. The seismic shift of support left petitioner
weak as a president. According to Secretary Angara, he asked Senator Pimentel to advise petitioner to consider the
option of "dignified exit or resignation."81 Petitioner did not disagree but listened intently.82 The sky was falling fast on
the petitioner. At 9:30 p.m., Senator Pimentel repeated to the petitioner the urgency of making a graceful and dignified
exit. He gave the proposal a sweetener by saying that petitioner would be allowed to go abroad with enough funds to
support him and his family.83 Significantly, the petitioner expressed no objection to the suggestion for a graceful and
dignified exit but said he would never leave the country.84 At 10:00 p.m., petitioner revealed to Secretary Angara, "Ed,
Angie (Reyes) guaranteed that I would have five days to a week in the palace."85 This is proof that petitioner had
reconciled himself to the reality that he had to resign. His mind was already concerned with the five-day grace period he
could stay in the palace. It was a matter of time.

The pressure continued piling up. By 11:00 p.m., former President Ramos called up Secretary Angara and requested, "Ed,
magtulungan tayo para magkaroon tayo ng (let's cooperate to ensure a) peaceful and orderly transfer of power."86
There was no defiance to the request. Secretary Angara readily agreed. Again, we note that at this stage, the problem
was already about a peaceful and orderly transfer of power. The resignation of the petitioner was implied.

The first negotiation for a peaceful and orderly transfer of power immediately started at 12:20 a.m. of January 20, that
fateful Saturday. The negotiation was limited to three (3) points: (1) the transition period of five days after the
petitioner's resignation; (2) the guarantee of the safety of the petitioner and his family, and (3) the agreement to open
the second envelope to vindicate the name of the petitioner.87 Again, we note that the resignation of petitioner was not
a disputed point. The petitioner cannot feign ignorance of this fact. According to Secretary Angara, at 2:30 a.m., he
briefed the petitioner on the three points and the following entry in the Angara Diary shows the reaction of the
petitioner, viz:

"x x x

I explain what happened during the first round of negotiations. The President immediately stresses that he just wants
the five-day period promised by Reyes, as well as to open the second envelope to clear his name.

If the envelope is opened, on Monday, he says, he will leave by Monday.

The President says. "Pagod na pagod na ako. Ayoko na masyado nang masakit. Pagod na ako sa red tape, bureaucracy,
intriga. (I am very tired. I don't want any more of this – it's too painful. I'm tired of the red tape, the bureaucracy, the
intrigue.)

I just want to clear my name, then I will go."88

Again, this is high grade evidence that the petitioner has resigned. The intent to resign is clear when he said "x x x Ayoko
na masyado nang masakit." "Ayoko na" are words of resignation.

The second round of negotiation resumed at 7:30 a.m. According to the Angara Diary, the following happened:

"Opposition's deal

7:30 a.m. – Rene arrives with Bert Romulo and (Ms. Macapagal's spokesperson) Rene Corona. For this round, I am
accompanied by Dondon Bagatsing and Macel.

Rene pulls out a document titled "Negotiating Points." It reads:

'1. The President shall sign a resignation document within the day, 20 January 2001, that will be effective on Wednesday,
24 January 2001, on which day the Vice President will assume the Presidency of the Republic of the Philippines.

2. Beginning to day, 20 January 2001, the transition process for the assumption of the new administration shall
commence, and persons designated by the Vice President to various positions and offices of the government shall start
their orientation activities in coordination with the incumbent officials concerned.

3. The Armed Forces of the Philippines and the Philippine National Police shall function under the Vice President as
national military and police authority effective immediately.

4. The Armed Forced of the Philippines, through its Chief of Staff, shall guarantee the security of the President and his
family as approved by the national military and police authority (Vice President).
117

5. It is to be noted that the Senate will open the second envelope in connection with the alleged savings account of the
President in the Equitable PCI Bank in accordance with the rules of the Senate, pursuant to the request to the Senate
President.

Our deal

We bring out, too, our discussion draft which reads:

The undersigned parties, for and in behalf of their respective principals, agree and undertake as follows:

'1. A transition will occur and take place on Wednesday, 24 January 2001, at which time President Joseph Ejercito
Estrada will turn over the presidency to Vice President Gloria Macapagal-Arroyo.

'2. In return, President Estrada and his families are guaranteed security and safety of their person and property
throughout their natural lifetimes. Likewise, President Estrada and his families are guarantee freedom from persecution
or retaliation from government and the private sector throughout their natural lifetimes.

This commitment shall be guaranteed by the Armed Forces of the Philippines (AFP) through the Chief of Staff, as
approved by the national military and police authorities – Vice President (Macapagal).

'3. Both parties shall endeavor to ensure that the Senate sitting as an impeachment court will authorize the opening of
the second envelope in the impeachment trial as proof that the subject savings account does not belong to President
Estrada.

'4. During the five-day transition period between 20 January 2001 and 24 January 2001 (the 'Transition Period"), the
incoming Cabinet members shall receive an appropriate briefing from the outgoing Cabinet officials as part of the
orientation program.

During the Transition Period, the AFP and the Philippine National Police (PNP) shall function Vice President (Macapagal)
as national military and police authorities.

Both parties hereto agree that the AFP chief of staff and PNP director general shall obtain all the necessary signatures as
affixed to this agreement and insure faithful implementation and observance thereof.

Vice President Gloria Macapagal-Arroyo shall issue a public statement in the form and tenor provided for in "Annex A"
heretofore attached to this agreement."89

The second round of negotiation cements the reading that the petitioner has resigned. It will be noted that during this
second round of negotiation, the resignation of the petitioner was again treated as a given fact. The only unsettled
points at that time were the measures to be undertaken by the parties during and after the transition period.

According to Secretary Angara, the draft agreement, which was premised on the resignation of the petitioner was
further refined. It was then, signed by their side and he was ready to fax it to General Reyes and Senator Pimentel to
await the signature of the United Opposition. However, the signing by the party of the respondent Arroyo was aborted
by her oath-taking. The Angara diary narrates the fateful events, viz;90

"xxx

11:00 a.m. – Between General Reyes and myself, there is a firm agreement on the five points to effect a peaceful
transition. I can hear the general clearing all these points with a group he is with. I hear voices in the background.

Agreement.

The agreement starts: 1. The President shall resign today, 20 January 2001, which resignation shall be effective on 24
January 2001, on which day the Vice President will assume the presidency of the Republic of the Philippines.

xxx

The rest of the agreement follows:

2. The transition process for the assumption of the new administration shall commence on 20 January 2001, wherein
persons designated by the Vice President to various government positions shall start orientation activities with
incumbent officials.
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'3. The Armed Forces of the Philippines through its Chief of Staff, shall guarantee the safety and security of the President
and his families throughout their natural lifetimes as approved by the national military and police authority – Vice
President.

'4. The AFP and the Philippine National Police (PNP) shall function under the Vice President as national military and
police authorities.

'5. Both parties request the impeachment court to open the second envelope in the impeachment trial, the contents of
which shall be offered as proof that the subject savings account does not belong to the President.

The Vice President shall issue a public statement in the form and tenor provided for in Annex "B" heretofore attached to
this agreement.

11:20 a.m. – I am all set to fax General Reyes and Nene Pimentel our agreement, signed by our side and awaiting the
signature of the United opposition.

And then it happens. General Reyes calls me to say that the Supreme Court has decided that Gloria Macapagal-Arroyo is
President and will be sworn in at 12 noon.

'Bakit hindi naman kayo nakahintay? Paano na ang agreement (why couldn't you wait? What about the agreement)?' I
asked.

Reyes answered: 'Wala na, sir (it's over, sir).'

I ask him: Di yung transition period, moot and academic na?'

And General Reyes answers: ' Oo nga, I delete na natin, sir (yes, we're deleting the part).'

Contrary to subsequent reports, I do not react and say that there was a double cross.

But I immediately instruct Macel to delete the first provision on resignation since this matter is already moot and
academic. Within moments, Macel erases the first provision and faxes the documents, which have been signed by
myself, Dondon and Macel, to Nene Pimentel and General Reyes.

I direct Demaree Ravel to rush the original document to General Reyes for the signatures of the other side, as it is
important that the provisions on security, at least, should be respected.

I then advise the President that the Supreme Court has ruled that Chief Justice Davide will administer the oath to Gloria
at 12 noon.

The President is too stunned for words:

Final meal

12 noon – Gloria takes her oath as president of the Republic of the Philippines.

12:20 p.m. – The PSG distributes firearms to some people inside the compound.

The president is having his final meal at the presidential Residence with the few friends and Cabinet members who have
gathered.

By this time, demonstrators have already broken down the first line of defense at Mendiola. Only the PSG is there to
protect the Palace, since the police and military have already withdrawn their support for the President.

1 p.m. – The President's personal staff is rushing to pack as many of the Estrada family's personal possessions as they
can.

During lunch, Ronnie Puno mentions that the president needs to release a final statement before leaving Malacañang.

The statement reads: At twelve o'clock noon today, Vice President Gloria Macapagal-Arroyo took her oath as President
of the Republic of the Philippines. While along with many other legal minds of our country, I have strong and serious
119

doubts about the legality and constitutionality of her proclamation as President, I do not wish to be a factor that will
prevent the restoration of unity and order in our civil society.

It is for this reason that I now leave Malacañang Palace, the seat of the presidency of this country, for the sake of peace
and in order to begin the healing process of our nation. I leave the Palace of our people with gratitude for the
opportunities given to me for service to our people. I will not shirk from any future challenges that may come ahead in
the same service of our country.

I call on all my supporters and followers to join me in the promotion of a constructive national spirit of reconciliation and
solidarity.

May the Almighty bless our country and our beloved people.

MABUHAY!"'

It was curtain time for the petitioner.

In sum, we hold that the resignation of the petitioner cannot be doubted. It was confirmed by his leaving Malacañang. In
the press release containing his final statement, (1) he acknowledged the oath-taking of the respondent as President of
the Republic albeit with reservation about its legality; (2) he emphasized he was leaving the Palace, the seat of the
presidency, for the sake of peace and in order to begin the healing process of our nation. He did not say he was leaving
the Palace due to any kind inability and that he was going to re-assume the presidency as soon as the disability
disappears: (3) he expressed his gratitude to the people for the opportunity to serve them. Without doubt, he was
referring to the past opportunity given him to serve the people as President (4) he assured that he will not shirk from
any future challenge that may come ahead in the same service of our country. Petitioner's reference is to a future
challenge after occupying the office of the president which he has given up; and (5) he called on his supporters to join
him in the promotion of a constructive national spirit of reconciliation and solidarity. Certainly, the national spirit of
reconciliation and solidarity could not be attained if he did not give up the presidency. The press release was petitioner's
valedictory, his final act of farewell. His presidency is now in the part tense.

It is, however, urged that the petitioner did not resign but only took a temporary leave dated January 20, 2001 of the
petitioner sent to Senate President Pimentel and Speaker Fuentebella is cited. Again, we refer to the said letter, viz:

"Sir.

By virtue of the provisions of Section II, Article VII of the Constitution, I am hereby transmitting this declaration that I am
unable to exercise the powers and duties of my office. By operation of law and the Constitution, the Vice President shall
be the Acting president.

(Sgd.) Joseph Ejercito Estrada"

To say the least, the above letter is wrapped in mystery.91 The pleadings filed by the petitioner in the cases at bar did
not discuss, may even intimate, the circumstances that led to its preparation. Neither did the counsel of the petitioner
reveal to the Court these circumstances during the oral argument. It strikes the Court as strange that the letter, despite
its legal value, was never referred to by the petitioner during the week-long crisis. To be sure, there was not the slightest
hint of its existence when he issued his final press release. It was all too easy for him to tell the Filipino people in his
press release that he was temporarily unable to govern and that he was leaving the reins of government to respondent
Arroyo for the time bearing. Under any circumstance, however, the mysterious letter cannot negate the resignation of
the petitioner. If it was prepared before the press release of the petitioner clearly as a later act. If, however, it was
prepared after the press released, still, it commands scant legal significance. Petitioner's resignation from the presidency
cannot be the subject of a changing caprice nor of a whimsical will especially if the resignation is the result of his
reputation by the people. There is another reason why this Court cannot given any legal significance to petitioner's letter
and this shall be discussed in issue number III of this Decision.

After petitioner contended that as a matter of fact he did not resign, he also argues that he could not resign as a matter
of law. He relies on section 12 of RA No. 3019, otherwise known as the Anti-graft and Corrupt Practices Act, which
allegedly prohibits his resignation, viz:

"Sec. 12. No public officer shall be allowed to resign or retire pending an investigation, criminals or administrative, or
pending a prosecution against him, for any offense under this Act or under the provisions of the Revised Penal Code on
bribery."
120

A reading of the legislative history of RA No. 3019 will hardly provide any comfort to the petitioner. RA No. 3019
originated form Senate Bill No. 293. The original draft of the bill, when it was submitted to the Senate, did not contain a
provision similar to section 12 of the law as it now stands. However, in his sponsorship speech, Senator Arturo Tolentino,
the author of the bill, "reserved to propose during the period of amendments the inclusion of a provision to the effect
that no public official who is under prosecution for any act of graft or corruption, or is under administrative
investigation, shall be allowed to voluntarily resign or retire."92 During the period of amendments, the following
provision was inserted as section 15:

"Sec. 15. Termination of office – No public official shall be allowed to resign or retire pending an investigation, criminal
or administrative, or pending a prosecution against him, for any offense under the Act or under the provisions of the
Revised Penal Code on bribery.

The separation or cessation of a public official form office shall not be a bar to his prosecution under this Act for an
offense committed during his incumbency."93

The bill was vetoed by then President Carlos P. Garcia who questioned the legality of the second paragraph of the
provision and insisted that the President's immunity should extend after his tenure.

Senate Bill No. 571, which was substantially similar Senate Bill No. 293, was thereafter passed. Section 15 above became
section 13 under the new bill, but the deliberations on this particular provision mainly focused on the immunity of the
President, which was one of the reasons for the veto of the original bill. There was hardly any debate on the prohibition
against the resignation or retirement of a public official with pending criminal and administrative cases against him. Be
that as it may, the intent of the law ought to be obvious. It is to prevent the act of resignation or retirement from being
used by a public official as a protective shield to stop the investigation of a pending criminal or administrative case
against him and to prevent his prosecution under the Anti-Graft Law or prosecution for bribery under the Revised Penal
Code. To be sure, no person can be compelled to render service for that would be a violation of his constitutional
right.94 A public official has the right not to serve if he really wants to retire or resign. Nevertheless, if at the time he
resigns or retires, a public official is facing administrative or criminal investigation or prosecution, such resignation or
retirement will not cause the dismissal of the criminal or administrative proceedings against him. He cannot use his
resignation or retirement to avoid prosecution.

There is another reason why petitioner's contention should be rejected. In the cases at bar, the records show that when
petitioner resigned on January 20, 2001, the cases filed against him before the Ombudsman were OMB Case Nos. 0-00-
1629, 0-00-1755, 0-00-1756, 0-00-1757 and 0-00-1758. While these cases have been filed, the respondent Ombudsman
refrained from conducting the preliminary investigation of the petitioner for the reason that as the sitting President
then, petitioner was immune from suit. Technically, the said cases cannot be considered as pending for the Ombudsman
lacked jurisdiction to act on them. Section 12 of RA No. 3019 cannot therefore be invoked by the petitioner for it
contemplates of cases whose investigation or prosecution do not suffer from any insuperable legal obstacle like the
immunity from suit of a sitting President.

Petitioner contends that the impeachment proceeding is an administrative investigation that, under section 12 of RA
3019, bars him from resigning. We hold otherwise. The exact nature of an impeachment proceeding is debatable. But
even assuming arguendo that it is an administrative proceeding, it can not be considered pending at the time petitioner
resigned because the process already broke down when a majority of the senator-judges voted against the opening of
the second envelope, the public and private prosecutors walked out, the public prosecutors filed their Manifestation of
Withdrawal of Appearance, and the proceedings were postponed indefinitely. There was, in effect, no impeachment
case pending against petitioner when he resigned.

III

Whether or not the petitioner Is only temporarily unable to Act as President.

We shall now tackle the contention of the petitioner that he is merely temporarily unable to perform the powers and
duties of the presidency, and hence is a President on leave. As aforestated, the inability claim is contained in the January
20, 2001 letter of petitioner sent on the same day to Senate President Pimentel and Speaker Fuentebella.

Petitioner postulates that respondent Arroyo as Vice President has no power to adjudge the inability of the petitioner to
discharge the powers and duties of the presidency. His significant submittal is that "Congress has the ultimate authority
under the Constitution to determine whether the President is incapable of performing his functions in the manner
provided for in section 11 of article VII."95 This contention is the centerpiece of petitioner's stance that he is a President
on leave and respondent Arroyo is only an Acting President.

An examination of section 11, Article VII is in order. It provides:

121

"SEC. 11. Whenever the President transmits to the President of the Senate and the Speaker of the House of
Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he
transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice-
President as Acting President.

Whenever a majority of all the Members of the Cabinet transmit to the President of the Senate and to the Speaker of
the House of Representatives their written declaration that the President is unable to discharge the powers and duties
of his office, the Vice-President shall immediately assume the powers and duties of the office as Acting President.

Thereafter, when the President transmits to the President of the Senate and to the Speaker of the House of
Representatives his written declaration that no inability exists, he shall reassume the powers and duties of his office.
Meanwhile, should a majority of all the Members of the Cabinet transmit within five days to the President of the Senate
and to the Speaker of the House of Representatives their written declaration that the President is unable to discharge
the powers and duties of his office, the Congress shall decide the issue. For that purpose, the Congress shall convene, if
it is not in session, within forty-eight hours, in accordance with its rules and without need of call.

If the Congress, within ten days after receipt of the last written declaration, or, if not in session, within twelve days after
it is required to assemble, determines by a two-thirds vote of both Houses, voting separately, that the President is
unable to discharge the powers and duties of his office, the Vice-President shall act as President; otherwise, the
President shall continue exercising the powers and duties of his office."

That is the law. Now, the operative facts:

Petitioner, on January 20, 2001, sent the above letter claiming inability to the Senate President and Speaker of the
House;
Unaware of the letter, respondent Arroyo took her oath of office as President on January 20, 2001 at about 12:30 p.m.;
Despite receipt of the letter, the House of Representatives passed on January 24, 2001 House Resolution No. 175;96
On the same date, the House of the Representatives passed House Resolution No. 17697 which states:

"RESOLUTION EXPRESSING THE SUPPORT OF THE HOUSE OF REPRESENTATIVES TO THE ASSUMPTION INTO OFFICE BY
VICE PRESIDENT GLORIA MACAPAGAL-ARROYO AS PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, EXTENDING ITS
CONGRATULATIONS AND EXPRESSING ITS SUPPORT FOR HER ADMINISTRATION AS A PARTNER IN THE ATTAINMENT OF
THE NATION'S GOALS UNDER THE CONSTITUTION

WHEREAS, as a consequence of the people's loss of confidence on the ability of former President Joseph Ejercito Estrada
to effectively govern, the Armed Forces of the Philippines, the Philippine National Police and majority of his cabinet had
withdrawn support from him;

WHEREAS, upon authority of an en banc resolution of the Supreme Court, Vice President Gloria Macapagal-Arroyo was
sworn in as President of the Philippines on 20 January 2001 before Chief Justice Hilario G. Davide, Jr.;

WHEREAS, immediately thereafter, members of the international community had extended their recognition to Her
Excellency, Gloria Macapagal-Arroyo as President of the Republic of the Philippines;

WHEREAS, Her Excellency, President Gloria Macapagal-Arroyo has espoused a policy of national healing and
reconciliation with justice for the purpose of national unity and development;

WHEREAS, it is axiomatic that the obligations of the government cannot be achieved if it is divided, thus by reason of the
constitutional duty of the House of Representatives as an institution and that of the individual members thereof of fealty
to the supreme will of the people, the House of Representatives must ensure to the people a stable, continuing
government and therefore must remove all obstacles to the attainment thereof;

WHEREAS, it is a concomitant duty of the House of Representatives to exert all efforts to unify the nation, to eliminate
fractious tension, to heal social and political wounds, and to be an instrument of national reconciliation and solidarity as
it is a direct representative of the various segments of the whole nation;

WHEREAS, without surrending its independence, it is vital for the attainment of all the foregoing, for the House of
Representatives to extend its support and collaboration to the administration of Her Excellency, President Gloria
Macapagal-Arroyo, and to be a constructive partner in nation-building, the national interest demanding no less: Now,
therefore, be it
122

Resolved by the House of Representatives, To express its support to the assumption into office by Vice President Gloria
Macapagal-Arroyo as President of the Republic of the Philippines, to extend its congratulations and to express its
support for her administration as a partner in the attainment of the Nation's goals under the Constitution.

Adopted,

(Sgd.) FELICIANO BELMONTE JR.

Speaker

This Resolution was adopted by the House of Representatives on January 24, 2001.

(Sgd.) ROBERTO P. NAZARENO

Secretary General"

On February 7, 2001, the House of the Representatives passed House Resolution No. 17898 which states:

"RESOLUTION CONFIRMING PRESIDENT GLORIA MACAPAGAL-ARROYO'S NOMINATION OF SENATOR TEOFISTO T.

GUINGONA, JR. AS VICE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES

WHEREAS, there is a vacancy in the Office of the Vice President due to the assumption to the Presidency of Vice
President Gloria Macapagal-Arroyo;

WHEREAS, pursuant to Section 9, Article VII of the Constitution, the President in the event of such vacancy shall
nominate a Vice President from among the members of the Senate and the House of Representatives who shall assume
office upon confirmation by a majority vote of all members of both Houses voting separately;

WHEREAS, Her Excellency, President Gloria Macapagal-Arroyo has nominated Senate Minority Leader Teofisto T.
Guingona Jr., to the position of Vice President of the Republic of the Philippines;

WHEREAS, Senator Teofisto T. Guingona Jr., is a public servant endowed with integrity, competence and courage; who
has served the Filipino people with dedicated responsibility and patriotism;

WHEREAS, Senator Teofisto T. Guingona, Jr. possesses sterling qualities of true statesmanship, having served the
government in various capacities, among others, as Delegate to the Constitutional Convention, Chairman of the
Commission on Audit, Executive Secretary, Secretary of Justice, Senator of the Philippines – qualities which merit his
nomination to the position of Vice President of the Republic: Now, therefore, be it

Resolved as it is hereby resolved by the House of Representatives, That the House of Representatives confirms the
nomination of Senator Teofisto T. Guingona, Jr. as the Vice President of the Republic of the Philippines.

Adopted,

(Sgd.) FELICIANO BELMONTE JR.

Speaker

This Resolution was adopted by the House of Representatives on February 7, 2001.

(Sgd.) ROBERTO P. NAZARENO

Secretary General"

(4) Also, despite receipt of petitioner's letter claiming inability, some twelve (12) members of the Senate signed the
following:

"RESOLUTION

WHEREAS, the recent transition in government offers the nation an opportunity for meaningful change and challenge;

WHEREAS, to attain desired changes and overcome awesome challenges the nation needs unity of purpose and resolve
cohesive resolute (sic) will;

WHEREAS, the Senate of the Philippines has been the forum for vital legislative measures in unity despite diversities in
perspectives;
123

WHEREFORE, we recognize and express support to the new government of President Gloria Macapagal-Arroyo and
resolve to discharge and overcome the nation's challenges." 99

On February 7, the Senate also passed Senate Resolution No. 82100 which states:

"RESOLUTION CONFIRMING PRESIDENT GLORIA MACAPAGAL ARROYO'S NOMINATION OF SEM. TEOFISTO T.

GUINGONA, JR. AS VICE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES

WHEREAS, there is vacancy in the Office of the Vice President due to the assumption to the Presidency of Vice President
Gloria Macapagal-Arroyo;

WHEREAS, pursuant to Section 9 Article VII of the Constitution, the President in the event of such vacancy shall
nominate a Vice President from among the members of the Senate and the House of Representatives who shall assume
office upon confirmation by a majority vote of all members of both Houses voting separately;

WHEREAS, Her Excellency, President Gloria Macapagal-Arroyo has nominated Senate Minority Leader Teofisto T.
Guingona, Jr. to the position of Vice President of the Republic of the Philippines;

WHEREAS, Sen. Teofisto T. Guingona, Jr. is a public servant endowed with integrity, competence and courage; who has
served the Filipino people with dedicated responsibility and patriotism;

WHEREAS, Sen. Teofisto T. Guingona, Jr. possesses sterling qualities of true statemanship, having served the government
in various capacities, among others, as Delegate to the Constitutional Convention, Chairman of the Commission on
Audit, Executive Secretary, Secretary of Justice, Senator of the land - which qualities merit his nomination to the position
of Vice President of the Republic: Now, therefore, be it

Resolved, as it is hereby resolved, That the Senate confirm the nomination of Sen. Teofisto T. Guingona, Jr. as Vice
President of the Republic of the Philippines.

Adopted,

(Sgd.) AQUILINO Q. PIMENTEL JR.

President of the Senate

This Resolution was adopted by the Senate on February 7, 2001.

(Sgd.) LUTGARDO B. BARBO

Secretary of the Senate"

On the same date, February 7, the Senate likewise passed Senate Resolution No. 83101 which states:

"RESOLUTION RECOGNIZING THAT THE IMPEACHMENT COURT IS FUNCTUS OFFICIO

Resolved, as it is hereby resolved. That the Senate recognize that the Impeachment Court is functus officio and has been
terminated.

Resolved, further, That the Journals of the Impeachment Court on Monday, January 15, Tuesday, January 16 and
Wednesday, January 17, 2001 be considered approved.

Resolved, further, That the records of the Impeachment Court including the "second envelope" be transferred to the
Archives of the Senate for proper safekeeping and preservation in accordance with the Rules of the Senate. Disposition
and retrieval thereof shall be made only upon written approval of the Senate president.

Resolved, finally. That all parties concerned be furnished copies of this Resolution.

Adopted,

(Sgd.) AQUILINO Q. PIMENTEL, JR.

President of the Senate

This Resolution was adopted by the Senate on February 7, 2001.

(Sgd.) LUTGARDO B. BARBO

124

Secretary of the Senate"

(5) On February 8, the Senate also passed Resolution No. 84 "certifying to the existence of vacancy in the Senate and
calling on the COMELEC to fill up such vacancy through election to be held simultaneously with the regular election on
May 14, 2001 and the Senatorial candidate garnering the thirteenth (13th) highest number of votes shall serve only for
the unexpired term of Senator Teofisto T. Guingona, Jr.'

(6) Both houses of Congress started sending bills to be signed into law by respondent Arroyo as President.

(7) Despite the lapse of time and still without any functioning Cabinet, without any recognition from any sector of
government, and without any support from the Armed Forces of the Philippines and the Philippine National Police, the
petitioner continues to claim that his inability to govern is only momentary.

What leaps to the eye from these irrefutable facts is that both houses of Congress have recognized respondent Arroyo
as the President. Implicitly clear in that recognition is the premise that the inability of petitioner Estrada. Is no longer
temporary. Congress has clearly rejected petitioner's claim of inability.

The question is whether this Court has jurisdiction to review the claim of temporary inability of petitioner Estrada and
thereafter revise the decision of both Houses of Congress recognizing respondent Arroyo as president of the Philippines.
Following Tañada v. Cuenco,102 we hold that this Court cannot exercise its judicial power or this is an issue "in regard to
which full discretionary authority has been delegated to the Legislative xxx branch of the government." Or to use the
language in Baker vs. Carr,103 there is a "textually demonstrable or a lack of judicially discoverable and manageable
standards for resolving it." Clearly, the Court cannot pass upon petitioner's claim of inability to discharge the power and
duties of the presidency. The question is political in nature and addressed solely to Congress by constitutional fiat. It is a
political issue, which cannot be decided by this Court without transgressing the principle of separation of powers.

In fine, even if the petitioner can prove that he did not resign, still, he cannot successfully claim that he is a President on
leave on the ground that he is merely unable to govern temporarily. That claim has been laid to rest by Congress and the
decision that respondent Arroyo is the de jure, president made by a co-equal branch of government cannot be reviewed
by this Court.

IV

Whether or not the petitioner enjoys immunity from suit.

Assuming he enjoys immunity, the extent of the immunity

Petitioner Estrada makes two submissions: first, the cases filed against him before the respondent Ombudsman should
be prohibited because he has not been convicted in the impeachment proceedings against him; and second, he enjoys
immunity from all kinds of suit, whether criminal or civil.

Before resolving petitioner's contentions, a revisit of our legal history executive immunity will be most enlightening. The
doctrine of executive immunity in this jurisdiction emerged as a case law. In the 1910 case of Forbes, etc. vs. Chuoco
Tiaco and Crosfield,104 the respondent Tiaco, a Chinese citizen, sued petitioner W. Cameron Forbes, Governor-General
of the Philippine Islands. J.E. Harding and C.R. Trowbridge, Chief of Police and Chief of the Secret Service of the City of
Manila, respectively, for damages for allegedly conspiring to deport him to China. In granting a writ of prohibition, this
Court, speaking thru Mr. Justice Johnson, held:

" The principle of nonliability, as herein enunciated, does not mean that the judiciary has no authority to touch the acts
of the Governor-General; that he may, under cover of his office, do what he will, unimpeded and unrestrained. Such a
construction would mean that tyranny, under the guise of the execution of the law, could walk defiantly abroad,
destroying rights of person and of property, wholly free from interference of courts or legislatures. This does not mean,
either that a person injured by the executive authority by an act unjustifiable under the law has n remedy, but must
submit in silence. On the contrary, it means, simply, that the governors-general, like the judges if the courts and the
members of the Legislature, may not be personally mulcted in civil damages for the consequences of an act executed in
the performance of his official duties. The judiciary has full power to, and will, when the mater is properly presented to it
and the occasion justly warrants it, declare an act of the Governor-General illegal and void and place as nearly as
possible in status quo any person who has been deprived his liberty or his property by such act. This remedy is assured
to every person, however humble or of whatever country, when his personal or property rights have been invaded, even
by the highest authority of the state. The thing which the judiciary can not do is mulct the Governor-General personally
in damages which result from the performance of his official duty, any more than it can a member of the Philippine
Commission of the Philippine Assembly. Public policy forbids it.
125

Neither does this principle of nonliability mean that the chief executive may not be personally sued at all in relation to
acts which he claims to perform as such official. On the contrary, it clearly appears from the discussion heretofore had,
particularly that portion which touched the liability of judges and drew an analogy between such liability and that of the
Governor-General, that the latter is liable when he acts in a case so plainly outside of his power and authority that he
can not be said to have exercised discretion in determining whether or not he had the right to act. What is held here is
that he will be protected from personal liability for damages not only when he acts within his authority, but also when
he is without authority, provided he actually used discretion and judgement, that is, the judicial faculty, in determining
whether he had authority to act or not. In other words, in determining the question of his authority. If he decide
wrongly, he is still protected provided the question of his authority was one over which two men, reasonably qualified
for that position, might honestly differ; but he s not protected if the lack of authority to act is so plain that two such men
could not honestly differ over its determination. In such case, be acts, not as Governor-General but as a private
individual, and as such must answer for the consequences of his act."

Mr. Justice Johnson underscored the consequences if the Chief Executive was not granted immunity from suit, viz "xxx.
Action upon important matters of state delayed; the time and substance of the chief executive spent in wrangling
litigation; disrespect engendered for the person of one of the highest officials of the state and for the office he occupies;
a tendency to unrest and disorder resulting in a way, in distrust as to the integrity of government itself."105

Our 1935 Constitution took effect but it did not contain any specific provision on executive immunity. Then came the
tumult of the martial law years under the late President Ferdinand E. Marcos and the 1973 Constitution was born. In
1981, it was amended and one of the amendments involved executive immunity. Section 17, Article VII stated:

"The President shall be immune from suit during his tenure. Thereafter, no suit whatsoever shall lie for official acts done
by him or by others pursuant to his specific orders during his tenure.

The immunities herein provided shall apply to the incumbent President referred to in Article XVII of this Constitution.

In his second Vicente G. Sinco professional Chair lecture entitled, "Presidential Immunity and All The King's Men: The
Law of Privilege As a Defense To Actions For Damages,"106 petitioner's learned counsel, former Dean of the UP College
of Law, Atty. Pacificao Agabin, brightened the modifications effected by this constitutional amendment on the existing
law on executive privilege. To quote his disquisition:

"In the Philippines, though, we sought to do the Americans one better by enlarging and fortifying the absolute immunity
concept. First, we extended it to shield the President not only form civil claims but also from criminal cases and other
claims. Second, we enlarged its scope so that it would cover even acts of the President outside the scope of official
duties. And third, we broadened its coverage so as to include not only the President but also other persons, be they
government officials or private individuals, who acted upon orders of the President. It can be said that at that point most
of us were suffering from AIDS (or absolute immunity defense syndrome)."

The Opposition in the then Batasan Pambansa sought the repeal of this Marcosian concept of executive immunity in the
1973 Constitution. The move was led by them Member of Parliament, now Secretary of Finance, Alberto Romulo, who
argued that the after incumbency immunity granted to President Marcos violated the principle that a public office is a
public trust. He denounced the immunity as a return to the anachronism "the king can do no wrong."107 The effort
failed.

The 1973 Constitution ceased to exist when President Marcos was ousted from office by the People Power revolution in
1986. When the 1987 Constitution was crafted, its framers did not reenact the executive immunity provision of the 1973
Constitution. The following explanation was given by delegate J. Bernas vis:108

"Mr. Suarez. Thank you.

The last question is with reference to the Committee's omitting in the draft proposal the immunity provision for the
President. I agree with Commissioner Nolledo that the Committee did very well in striking out second sentence, at the
very least, of the original provision on immunity from suit under the 1973 Constitution. But would the Committee
members not agree to a restoration of at least the first sentence that the President shall be immune from suit during his
tenure, considering that if we do not provide him that kind of an immunity, he might be spending all his time facing
litigation's, as the President-in-exile in Hawaii is now facing litigation's almost daily?

Fr. Bernas. The reason for the omission is that we consider it understood in present jurisprudence that during his tenure
he is immune from suit.

Mr. Suarez. So there is no need to express it here.

126

Fr. Bernas. There is no need. It was that way before. The only innovation made by the 1973 Constitution was to make
that explicit and to add other things.

Mr. Suarez. On that understanding, I will not press for any more query, Madam President.

I think the Commissioner for the clarifications."

We shall now rule on the contentions of petitioner in the light of this history. We reject his argument that he cannot be
prosecuted for the reason that he must first be convicted in the impeachment proceedings. The impeachment trial of
petitioner Estrada was aborted by the walkout of the prosecutors and by the events that led to his loss of the
presidency. Indeed, on February 7, 2001, the Senate passed Senate Resolution No. 83 "Recognizing that the
Impeachment Court is Functus Officio."109 Since, the Impeachment Court is now functus officio, it is untenable for
petitioner to demand that he should first be impeached and then convicted before he can be prosecuted. The plea if
granted, would put a perpetual bar against his prosecution. Such a submission has nothing to commend itself for it will
place him in a better situation than a non-sitting President who has not been subjected to impeachment proceedings
and yet can be the object of a criminal prosecution. To be sure, the debates in the Constitutional Commission make it
clear that when impeachment proceedings have become moot due to the resignation of the President, the proper
criminal and civil cases may already be filed against him, viz:110

"xxx

Mr. Aquino. On another point, if an impeachment proceeding has been filed against the President, for example, and the
President resigns before judgement of conviction has been rendered by the impeachment court or by the body, how
does it affect the impeachment proceeding? Will it be necessarily dropped?

Mr. Romulo. If we decide the purpose of impeachment to remove one from office, then his resignation would render the
case moot and academic. However, as the provision says, the criminal and civil aspects of it may continue in the ordinary
courts."

This is in accord with our ruling In Re: Saturnino Bermudez111 that 'incumbent Presidents are immune from suit or from
being brought to court during the period of their incumbency and tenure" but not beyond. Considering the peculiar
circumstance that the impeachment process against the petitioner has been aborted and thereafter he lost the
presidency, petitioner Estrada cannot demand as a condition sine qua non to his criminal prosecution before the
Ombudsman that he be convicted in the impeachment proceedings. His reliance on the case of Lecaroz vs.
Sandiganbayan112 and related cases113 are inapropos for they have a different factual milieu.

We now come to the scope of immunity that can be claimed by petitioner as a non-sitting President. The cases filed
against petitioner Estrada are criminal in character. They involve plunder, bribery and graft and corruption. By no stretch
of the imagination can these crimes, especially plunder which carries the death penalty, be covered by the alleged
mantle of immunity of a non-sitting president. Petitioner cannot cite any decision of this Court licensing the President to
commit criminal acts and wrapping him with post-tenure immunity from liability. It will be anomalous to hold that
immunity is an inoculation from liability for unlawful acts and conditions. The rule is that unlawful acts of public officials
are not acts of the State and the officer who acts illegally is not acting as such but stands in the same footing as any
trespasser.114

Indeed, critical reading of current literature on executive immunity will reveal a judicial disinclination to expand the
privilege especially when it impedes the search for truth or impairs the vindication of a right. In the 1974 case of US v.
Nixon,115 US President Richard Nixon, a sitting President, was subpoenaed to produce certain recordings and
documents relating to his conversations with aids and advisers. Seven advisers of President Nixon's associates were
facing charges of conspiracy to obstruct Justice and other offenses, which were committed in a burglary of the
Democratic National Headquarters in Washington's Watergate Hotel during the 972 presidential campaign. President
Nixon himself was named an unindicted co-conspirator. President Nixon moved to quash the subpoena on the ground,
among others, that the President was not subject to judicial process and that he should first be impeached and removed
from office before he could be made amenable to judicial proceedings. The claim was rejected by the US Supreme Court.
It concluded that "when the ground for asserting privilege as to subpoenaed materials sought for use in a criminal trial is
based only on the generalized interest in confidentiality, it cannot prevail over the fundamental demands of due process
of law in the fair administration of criminal justice." In the 1982 case of Nixon v. Fitzgerald,116 the US Supreme Court
further held that the immunity of the president from civil damages covers only "official acts." Recently, the US Supreme
Court had the occasion to reiterate this doctrine in the case of Clinton v. Jones117 where it held that the US President's
immunity from suits for money damages arising out of their official acts is inapplicable to unofficial conduct.

There are more reasons not to be sympathetic to appeals to stretch the scope of executive immunity in our jurisdiction.
One of the great themes of the 1987 Constitution is that a public office is a public trust.118 It declared as a state policy
127

that "the State shall maintain honesty and integrity in the public service and take positive and effective measures against
graft and corruptio."119 it ordained that "public officers and employees must at all times be accountable to the people,
serve them with utmost responsibility, integrity, loyalty, and efficiency act with patriotism and justice, and lead modest
lives."120 It set the rule that 'the right of the State to recover properties unlawfully acquired by public officials or
employees, from them or from their nominees or transferees, shall not be barred by prescription, latches or
estoppel."121 It maintained the Sandiganbayan as an anti-graft court.122 It created the office of the Ombudsman and
endowed it with enormous powers, among which is to "investigate on its own, or on complaint by any person, any act or
omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust
improper or inefficient."123 The Office of the Ombudsman was also given fiscal autonomy.124 These constitutional
policies will be devalued if we sustain petitioner's claim that a non-sitting president enjoys immunity from suit for
criminal acts committed during his incumbency.

Whether or not the prosecution of petitioner

Estrada should be enjoined due to prejudicial publicity

Petitioner also contends that the respondent Ombudsman should be stopped from conducting the investigation of the
cases filed against him due to the barrage of prejudicial publicity on his guilt. He submits that the respondent
Ombudsman has developed bias and is all set file the criminal cases violation of his right to due process.

There are two (2) principal legal and philosophical schools of thought on how to deal with the rain of unrestrained
publicity during the investigation and trial of high profile cases.125 The British approach the problem with the
presumption that publicity will prejudice a jury. Thus, English courts readily stay and stop criminal trials when the right
of an accused to fair trial suffers a threat.126 The American approach is different. US courts assume a skeptical approach
about the potential effect of pervasive publicity on the right of an accused to a fair trial. They have developed different
strains of tests to resolve this issue, i.e., substantial; probability of irreparable harm, strong likelihood, clear and present
danger, etc.

This is not the first time the issue of trial by publicity has been raised in this Court to stop the trials or annul convictions
in high profile criminal cases.127 In People vs. Teehankee, Jr.,128 later reiterated in the case of Larranaga vs. court of
Appeals, et al.,129 we laid down the doctrine that:

"We cannot sustain appellant's claim that he was denied the right to impartial trial due to prejudicial publicity. It is true
that the print and broadcast media gave the case at bar pervasive publicity, just like all high profile and high stake
criminal trials. Then and now, we rule that the right of an accused to a fair trial is not incompatible to a free press. To be
sure, responsible reporting enhances accused's right to a fair trial for, as well pointed out, a responsible press has always
been regarded as the criminal field xxx. The press does not simply publish information about trials but guards against the
miscarriage of justice by subjecting the police, prosecutors, and judicial processes to extensive public scrutiny and
criticism.

Pervasive publicity is not per se prejudicial to the right of an accused to fair trial. The mere fact that the trial of appellant
was given a day-to-day, gavel-to-gavel coverage does not by itself prove that the publicity so permeated the mind of the
trial judge and impaired his impartiality. For one, it is impossible to seal the minds of members of the bench from pre-
trial and other off-court publicity of sensational criminal cases. The state of the art of our communication system brings
news as they happen straight to our breakfast tables and right to our bedrooms. These news form part of our everyday
menu of the facts and fictions of life. For another, our idea of a fair and impartial judge is not that of a hermit who is out
of touch with the world. We have not installed the jury system whose members are overly protected from publicity lest
they lose there impartially. xxx xxx xxx. Our judges are learned in the law and trained to disregard off-court evidence and
on-camera performances of parties to litigation. Their mere exposure to publications and publicity stunts does not per se
fatally infect their impartiality.

At best, appellant can only conjure possibility of prejudice on the part of the trial judge due to the barrage of publicity
that characterized the investigation and trial of the case. In Martelino, et al. v. Alejandro, et al., we rejected this
standard of possibility of prejudice and adopted the test of actual prejudice as we ruled that to warrant a finding of
prejudicial publicity, there must be allegation and proof that the judges have been unduly influenced, not simply that
they might be, by the barrage of publicity. In the case at a bar, the records do not show that the trial judge developed
actual bias against appellants as a consequence of the extensive media coverage of the pre-trial and trial of his case. The
totality of circumstances of the case does not prove that the trial judge acquired a fixed opinion as a result of prejudicial
publicity, which is incapable of change even by evidence presented during the trial. Appellant has the burden to prove
this actual bias and he has not discharged the burden.'
128

We expounded further on this doctrine in the subsequent case of Webb vs. Hon. Raul de Leon, etc.130 and its
companion cases, viz:

"Again petitioners raise the effect of prejudicial publicity on their right to due process while undergoing preliminary
investigation. We find no procedural impediment to its early invocation considering the substantial risk to their liberty
while undergoing a preliminary investigation.

xxx

The democratic settings, media coverage of trials of sensational cases cannot be avoided and oftentimes, its
excessiveness has been aggravated by kinetic developments in the telecommunications industry. For sure, few cases can
match the high volume and high velocity of publicity that attended the preliminary investigation of the case at bar. Our
daily diet of facts and fiction about the case continues unabated even today. Commentators still bombard the public
with views not too many of which are sober and sublime. Indeed, even the principal actors in the case – the NBI, the
respondents, their lawyers and their sympathizers have participated in this media blitz. The possibility of media abuses
and their threat to a fair trial notwithstanding, criminal trials cannot be completely closed to the press and public. In the
seminal case of Richmond Newspapers, Inc. v. Virginia, it was

xxx

The historical evidence of the evolution of the criminal trial in Anglo-American justice demonstrates conclusively that at
the time this Nation's organic laws were adopted, criminal trials both here and in England had long been presumptively
open, thus giving assurance that the proceedings were conducted fairly to all concerned and discouraging perjury, the
misconduct of participants, or decisions based on secret bias or partiality. In addition, the significant community
therapeutic value of public trials was recognized when a shocking crime occurs a community reaction of outrage and
public protest often follows, and thereafter the open processes of justice serve an important prophylactic purpose,
providing an outlet for community concern, hostility and emotion. To work effectively, it is important that society's
criminal process satisfy the appearance of justice,' Offutt v. United States, 348 US 11, 14, 99 L ED 11, 75 S Ct 11, which
can best be provided by allowing people to observe such process. From this unbroken, uncontradicted history,
supported by reasons as valid today as in centuries past, it must be concluded that a presumption of openness inheres in
the very nature of a criminal trial under this Nation's system of justice, Cf., e,g., Levine v. United States, 362 US 610, 4 L
Ed 2d 989, 80 S Ct 1038.
The freedoms of speech. Press and assembly, expressly guaranteed by the First Amendment, share a common core
purpose of assuring freedom of communication on matters relating to the functioning of government. In guaranteeing
freedom such as those of speech and press, the First Amendment can be read as protecting the right of everyone to
attend trials so as give meaning to those explicit guarantees; the First Amendment right to receive information and ideas
means, in the context of trials, that the guarantees of speech and press, standing alone, prohibit government from
summarily closing courtroom doors which had long been open to the public at the time the First Amendment was
adopted. Moreover, the right of assembly is also relevant, having been regarded not only as an independent right but
also as a catalyst to augment the free exercise of the other First Amendment rights with which the draftsmen
deliberately linked it. A trial courtroom is a public place where the people generally and representatives of the media
have a right to be present, and where their presence historically has been thought to enhance the integrity and quality
of what takes place.
Even though the Constitution contains no provision which be its terms guarantees to the public the right to attend
criminal trials, various fundamental rights, not expressly guaranteed, have been recognized as indispensable to the
enjoyment of enumerated rights. The right to attend criminal trial is implicit in the guarantees of the First Amendment:
without the freedom to attend such trials, which people have exercised for centuries, important aspects of freedom of
speech and of the press be eviscerated.
Be that as it may, we recognize that pervasive and prejudicial publicity under certain circumstances can deprive an
accused of his due process right to fair trial. Thus, in Martelino, et al. vs. Alejandro, et al., we held that to warrant a
finding of prejudicial publicity there must be allegation and proof that the judges have been unduly influenced, not
simply that they might be, by the barrage of publicity. In the case at bar, we find nothing in the records that will prove
that the tone and content of the publicity that attended the investigation of petitioners fatally infected the fairness and
impartiality of the DOJ Panel. Petitioners cannot just rely on the subliminal effects of publicity on the sense of fairness of
the DOJ Panel, for these are basically unbeknown and beyond knowing. To be sure, the DOJ Panel is composed of an
Assistant Chief State Prosecutor and Senior State Prosecutors. Their long experience in criminal investigation is a factor
to consider in determining whether they can easily be blinded by the klieg lights of publicity. Indeed, their 26-page
Resolution carries no indubitable indicia of bias for it does not appear that they considered any extra-record evidence
except evidence properly adduced by the parties. The length of time the investigation was conducted despite its
summary nature and the generosity with which they accommodated the discovery motions of petitioners speak well of
their fairness. At no instance, we note, did petitioners seek the disqualification of any member of the DOJ Panel on the
ground of bias resulting from their bombardment of prejudicial publicity." (emphasis supplied)
129

Applying the above ruling, we hold that there is not enough evidence to warrant this Court to enjoin the preliminary
investigation of the petitioner by the respondent Ombudsman. Petitioner needs to offer more than hostile headlines to
discharge his burden of proof.131 He needs to show more weighty social science evidence to successfully prove the
impaired capacity of a judge to render a bias-free decision. Well to note, the cases against the petitioner are still
undergoing preliminary investigation by a special panel of prosecutors in the office of the respondent Ombudsman. No
allegation whatsoever has been made by the petitioner that the minds of the members of this special panel have already
been infected by bias because of the pervasive prejudicial publicity against him. Indeed, the special panel has yet to
come out with its findings and the Court cannot second guess whether its recommendation will be unfavorable to the
petitioner.1âwphi1.nêt

The records show that petitioner has instead charged respondent Ombudsman himself with bias. To quote petitioner's
submission, the respondent Ombudsman "has been influenced by the barrage of slanted news reports, and he has
buckled to the threats and pressures directed at him by the mobs."132 News reports have also been quoted to establish
that the respondent Ombudsman has already prejudged the cases of the petitioner133 and it is postulated that the
prosecutors investigating the petitioner will be influenced by this bias of their superior.

Again, we hold that the evidence proffered by the petitioner is insubstantial. The accuracy of the news reports referred
to by the petitioner cannot be the subject of judicial notice by this Court especially in light of the denials of the
respondent Ombudsman as to his alleged prejudice and the presumption of good faith and regularity in the
performance of official duty to which he is entitled. Nor can we adopt the theory of derivative prejudice of petitioner,
i.e., that the prejudice of respondent Ombudsman flows to his subordinates. In truth, our Revised Rules of Criminal
Procedure, give investigation prosecutors the independence to make their own findings and recommendations albeit
they are reviewable by their superiors.134 They can be reversed but they can not be compelled cases which they believe
deserve dismissal. In other words, investigating prosecutors should not be treated like unthinking slot machines.
Moreover, if the respondent Ombudsman resolves to file the cases against the petitioner and the latter believes that the
findings of probable cause against him is the result of bias, he still has the remedy of assailing it before the proper court.

VI.

Epilogue

A word of caution to the "hooting throng." The cases against the petitioner will now acquire a different dimension and
then move to a new stage - - - the Office of the Ombudsman. Predictably, the call from the majority for instant justice
will hit a higher decibel while the gnashing of teeth of the minority will be more threatening. It is the sacred duty of the
respondent Ombudsman to balance the right of the State to prosecute the guilty and the right of an accused to a fair
investigation and trial which has been categorized as the "most fundamental of all freedoms."135 To be sure, the duty of
a prosecutor is more to do justice and less to prosecute. His is the obligation to insure that the preliminary investigation
of the petitioner shall have a circus-free atmosphere. He has to provide the restraint against what Lord Bryce calls "the
impatient vehemence of the majority." Rights in a democracy are not decided by the mob whose judgment is dictated by
rage and not by reason. Nor are rights necessarily resolved by the power of number for in a democracy, the dogmatism
of the majority is not and should never be the definition of the rule of law. If democracy has proved to be the best form
of government, it is because it has respected the right of the minority to convince the majority that it is wrong.
Tolerance of multiformity of thoughts, however offensive they may be, is the key to man's progress from the cave to
civilization. Let us not throw away that key just to pander to some people's prejudice.

IN VIEW WHEREOF, the petitions of Joseph Ejercito Estrada challenging the respondent Gloria Macapagal-Arroyo as the
de jure 14th President of the Republic are DISMISSED.

SO ORDERED.

Estrada vs Desierto
G.R. No. 146710-15 March 2, 2001 
Facts: 
In the May 11, 1998 elections, petitioner Joseph Ejercito Estrada was elected President while respondent Gloria
Macapagal-Arroyo was elected Vice-President. Some ten (10) million Filipinos voted for the petitioner believing he
would rescue them from life’s adversity. Both petitioner and the respondent were to serve a six-year term commencing
on June 30, 1998. From the beginning of his term, however, petitioner was plagued by a plethora of problems that
slowly but surely eroded his popularity. His sharp descent from power started on October 4, 2000. Ilocos Sur Governor,
Luis “Chavit” Singson, a longtime friend of the petitioner, went on air and accused the petitioner, his family and friends
of receiving millions of pesos from jueteng lords. The exposẻ immediately ignited reactions of rage. The next day,
October 5, 2000, Senator Teofisto Guingona, Jr., then the Senate Minority Leader, took the floor and delivered a fiery
privilege speech entitled “I Accuse.” He accused the petitioner of receiving some P220 million in jueteng money from
Governor Singson from November 1998 to August 2000. He also charged that the petitioner took from Governor Singson
130

P70 million on excise tax on cigarettes intended for Ilocos Sur. The privilege speech was referred by then Senate
President Franklin Drilon, to the Blue Ribbon Committee (then headed by Senator Aquilino Pimentel) and the Committee
on Justice (then headed by Senator Renato Cayetano) for joint investigation. The House of Representatives did no less.
The House Committee on Public Order and Security, then headed by Representative Roilo Golez, decided to investigate
the exposẻ of Governor Singson. On the other hand, Representatives Heherson Alvarez, Ernesto Herrera and Michael
Defensor spearheaded the move to impeach the petitioner. Calls for the resignation of the petitioner filled the air.
Petitioner’s allies started to cut connections with him. The political temperature rose despite the cold December. On
December 7, the impeachment trial started. The battle royale was fought by some of the marquee names in the legal
profession. The dramatic point of the December hearings was the testimony of Clarissa Ocampo, senior vice president of
Equitable-PCI Bank. She testified that she was one foot away from petitioner Estrada when he affixed the signature “Jose
Velarde” on documents involving a P500 million investment agreement with their bank on February 4, 2000. After the
testimony of Ocampo, the impeachment trial was adjourned in the spirit of Christmas. When it resumed on January 2,
2001, more bombshells were exploded by the prosecution. On January 11, Atty. Edgardo Espiritu who served as
petitioner’s Secretary of Finance took the witness stand. He alleged that the petitioner jointly owned BW Resources
Corporation with Mr. Dante Tan who was facing charges of insider trading. Then came the fateful day of January 16,
when by a vote of 11-10 the senator-judges ruled against the opening of the second envelope which allegedly contained
evidence showing that petitioner held P3.3 billion in a secret bank account under the name “Jose Velarde.” The public
and private prosecutors walked out in protest of the ruling. In disgust, Senator Pimentel resigned as Senate President.
The ruling made at 10:00 p.m. was met by a spontaneous outburst of anger that hit the streets of the metropolis. By
midnight, thousands had assembled at the EDSA Shrine and speeches full of sulphur were delivered against the
petitioner and the eleven (11) senators. At about 12:00 noon, Chief Justice Davide administered the oath to respondent
Arroyo as President of the Philippines. At 2:30 p.m., petitioner and his family hurriedly left Malacañang Palace. After his
fall from the pedestal of power, the petitioner’s legal problems appeared in clusters. Several cases previously filed
against him in the Office of the Ombudsman were set in motion. These are: (1) OMB Case No. 0-00-1629, filed by Ramon
A. Gonzales on October 23, 2000 for bribery and graft and corruption; (2) OMB Case No. 0-00-1754 filed by the
Volunteers Against Crime and Corruption on November 17, 2000 for plunder, forfeiture, graft and corruption, bribery,
perjury, serious misconduct, violation of the Code of Conduct for Government Employees, etc; (3) OMB Case No. 0-
001755 filed by the Graft Free Philippines Foundation, Inc. on November 24, 2000 for plunder, forfeiture, graft and
corruption, bribery, perjury, serious misconduct; (4) OMB Case No. 0-00-1756 filed by Romeo Capulong, et al., on
November 28, 2000 for malversation of public funds, illegal use of public funds and property, plunder, etc.; (5) OMB
Case No. 0-00-1757 filed by Leonard de Vera, et al., on November 28, 2000 for bribery, plunder, indirect bribery,
violation of PD 1602, PD 1829, PD 46, and RA 7080; and (6) OMB Case No. 0-00-1758 filed by Ernesto B. Francisco, Jr. on
December 4, 2000 for plunder, graft and corruption. 

Issue: 
Whether or not petitioner’s allegation against respondent Ombudsman is meritorious.

Held: 
No. The evidence proffered by the petitioner is insubstantial. The accuracy of the news reports referred to by the
petitioner cannot be the subject of judicial notice by this Court especially in light of the denials of the respondent
Ombudsman as to his alleged prejudice and the presumption of good faith and regularity in the performance of official
duty to which he is entitled. Nor can we adopt the theory of derivative prejudice of petitioner, i.e., that the prejudice of
respondent Ombudsman flows to his subordinates. In truth, our Revised Rules of Criminal Procedure, give investigation
prosecutors the independence to make their own findings and recommendations albeit they are reviewable by their
superiors. They can be reversed but they can not be compelled cases which they believe deserve dismissal. In other
words, investigating prosecutors should not be treated like unthinking slot machines. Moreover, if the respondent
Ombudsman resolves to file the cases against the petitioner and the latter believes that the findings of probable cause
against him is the result of bias, he still has the remedy of assailing it before the proper court. 
There is not enough evidence to warrant this Court to enjoin the preliminary investigation of the petitioner by the
respondent Ombudsman. Petitioner needs to offer more than hostile headlines to discharge his burden of proof. He
needs to show more weighty social science evidence to successfully prove the impaired capacity of a judge to render a
bias-free decision. Well to note, the cases against the petitioner are still undergoing preliminary investigation by a
special panel of prosecutors in the office of the respondent Ombudsman. No allegation whatsoever has been made by
the petitioner that the minds of the members of this special panel have already been infected by bias because of the
pervasive prejudicial publicity against him. Indeed, the special panel has yet to come out with its findings and the Court
cannot second guess whether its recommendation will be unfavorable to the petitioner.
The question is whether this Court has jurisdiction to review the claim of temporary inability of petitioner Estrada and
thereafter revise the decision of both Houses of Congress recognizing respondent Arroyo as president of the Philippines.
Following Tañada v. Cuenco, we hold that this Court cannot exercise its judicial power or this is an issue “in regard to
which full discretionary authority has been delegated to the Legislative xxx branch of the government.” Or to use the
language in Baker vs. Carr, there is a “textually demonstrable or a lack of judicially discoverable and manageable
standards for resolving it.” Clearly, the Court cannot pass upon petitioner’s claim of inability to discharge the power and
131

duties of the presidency. The question is political in nature and addressed solely to  Congress by constitutional fiat. It is a
political issue, which cannot be decided by this Court without transgressing the principle of separation of powers. 
In fine, even if the petitioner can prove that he did not resign, still, he cannot successfully claim that he is a President on
leave on the ground that he is merely unable to govern temporarily. That claim has been laid to rest by Congress and the
decision that respondent Arroyo is the de jure, president made by a coequal branch of government cannot be reviewed
by this Court.

Estrada vs Arroyo
JOSEPH E. ESTRADA vs. ANIANO DESIERTO, in his capacity as Ombudsman, RAMON GONZALES, VOLUNTEERS AGAINST
CRIME AND CORRUPTION, GRAFT FREE PHILIPPINES FOUNDATION, INC., LEONARD DE VERA, DENNIS FUNA, ROMEO
CAPULONG and ERNESTO B. FRANCISCO, JR.
G.R. No. 146710-15
March 2, 2001
 
FACTS: 
On October 4, 2000, then President Joseph Estrada was embroiled in a corruption scandal after a close friend, Ilocos Sur
Governor Luis Chavit Singson, revealed that Estrada and his family allegedly received money from Jueteng lords.
The revelation prompted Senator Teofisto Guingona to deliver a privilege speech, detailing the anomalies done by
President Estrada. The public now calls for Estrada’s resignation. Eventually, he had to face an impeachment trial in the
Senate by December 7.
On January 16, 2001, in a vote of 11-10, the Senator-Judges ruled against opening the second envelope which allegedly
contains evidence wherein Estrada held P3.3 billion in a secret bank account under the name “Jose Velarde.”
At this point, everyone snapped. The prosecutors tendered their resignation – prompting the Senate to postpone the
impeachment proceedings indefinitely. People started marching towards EDSA to call for Estrada’s resignation. On
January 19, both the AFP and PNP declared that they are withdrawing their support of the Estrada administration.
On January 20, (12 noon), Chief Justice Davide administered Vice President Gloria Macapagal Arroyo’s oath as the new
President of the Republic of the Philippines. At around 2:30 PM, Estrada and his family hurriedly left Malacanang.
Estrada then issued the following statement:
“At twelve o’clock noon today, Vice President Gloria Macapagal-Arroyo took her oath as President of the Republic of the
Philippines. While along with many other legal minds of our country, I have strong and serious doubts about the legality
and constitutionality of her proclamation as President, I do not wish to be a factor that will prevent the restoration of
unity and order in our civil society.
It is for this reason that I now leave Malacañang Palace, the seat of the presidency of this country, for the sake of peace
and in order to begin the healing process of our nation. I leave the Palace of our people with gratitude for the
opportunities given to me for service to our people. I will not shirk from any future challenges that may come ahead in
the same service of our country.
I call on all my supporters and followers to join me in to promotion of a constructive national spirit of reconciliation and
solidarity. May the Almighty bless our country and beloved people.
MABUHAY! (Sgd.) JOSEPH EJERCITO ESTRADA”
It also appears that on the same day, January 20, 2001, he signed the following letter (sent to House Speaker
Fuentebella and Senate President Pimentel):
“Sir: By virtue of the provisions of Section 11, Article VII of the Constitution, I am hereby transmitting this declaration that
I am unable to exercise the powers and duties of my office. By operation of law and the Constitution, the Vice-President
shall be the Acting President. (Sgd.) JOSEPH EJERCITO ESTRADA”
On January 22, now President Arroyo started discharging her functions as President. She appointed new cabinet
members, ambassadors and special envoys. Foreign state leaders also expressed their recognition to Arroyo’s
administration (including then President George Bush from the White House). Congress issued House Resolution 175 to
express support to the new admin. The court also issued the following Resolution in Administrative Matter No. 01-1-05-
SC, to wit:
“A.M. No. 01-1-05-SC — In re: Request of Vice President Gloria Macapagal-Arroyo to Take her Oath of Office as President
of the Republic of the Philippines before the Chief Justice — Acting on the urgent request of Vice President Gloria
Macapagal-Arroyo to be sworn in as President of the Republic of the Philippines, addressed to the Chief Justice and
confirmed by a letter to the Court, dated January 20, 2001, which request was treated as an administrative matter, the
court Resolve unanimously to confirm the authority given by the twelve (12) members of the Court then present to the
Chief Justice on January 20, 2001 to administer the oath of office of Vice President Gloria Macapagal-Arroyo as President
of the Philippines, at noon of January 20, 2001.
This resolution is without prejudice to the disposition of any justiciable case that may be filed by a proper party.”
The Senate then passed Resolution No. 83 which officially moved to terminate the impeachment proceeding. Senator
Miriam Defensor-Santiago stated “for the record” that she voted against the closure of the impeachment court on the
grounds that the Senate had failed to decide on the impeachment case and that the resolution left open the question of
whether Estrada was still qualified to run for another elective post.
132

Estrada on the other hand is now facing charges of plunder, graft, and corruption under the office of the Ombudsman.
He then filed a writ of preliminary injunction to enjoin the Ombudsman from “conducting any further proceedings in or
any other criminal complaint that may be filed in his office, until after the term of petitioner as President is over.
Thru another counsel, Estrada filed for Quo Warranto. He prayed for judgment to confirm him as the lawful and
incumbent President of the Republic of the Philippines temporarily unable to discharge the duties of his office, and
declaring respondent (Arroyo) to have taken her oath as and to be holding the Office of the President, only in an acting
capacity.
ISSUES:
1. WON Estrada officially resigned as a president.
2. WON Estrada is only temporarily unable to act as president.
3. WON the prosecution of Estrada should be enjoined due to prejudicial publicity.
HELD:
(1) YES. – please also read Section 8, Article VII of the Constitution
We hold that the resignation of the petitioner cannot be doubted. It was confirmed by his leaving Malacañang. In the
press release containing his final statement: (1) he acknowledged the oath-taking of the respondent as President of the
Republic albeit with reservation about its legality; (2) he emphasized he was leaving the Palace, the seat of the
presidency, for the sake of peace and in order to begin the healing process of our nation.
He also called on his supporters to join him in the promotion of a constructive national spirit of reconciliation and
solidarity. Certainly, the national spirit of reconciliation and solidarity could not be attained if he did not give up the
presidency. The press release was petitioner’s valedictory, his final act of farewell.
As to the second letter (addressed to Fuentebella and Pimentel), the court held that it is wrapped in mystery since
Estrada did not reveal the circumstances that led to its preparation. It was all too easy for him to tell the Filipino people
in his press release that he was temporarily unable to govern and that he was leaving the reins of government to
respondent Arroyo for the time bearing.
Under any circumstance, however, the mysterious letter cannot negate the resignation of Estrada. If it was prepared
before the press release as a later act. If, however, it was prepared after the press release, still, it commands scant legal
significance. Estrada’s resignation from the presidency cannot be the subject of a changing caprice nor of a whimsical
will especially if the resignation is the result of his reputation by the people.
Petitioner contends that the impeachment proceeding is an administrative investigation that, under section 12 of RA
3019, bars him from resigning. The court held otherwise. The exact nature of an impeachment proceeding is debatable.
Even assuming arguendo that it is an administrative proceeding, it can not be considered pending at the time Estrada
resigned because the process already broke down when a majority of the senator-judges voted against the opening of
the second envelope, the public and private prosecutors walked out, the public prosecutors filed their Manifestation of
Withdrawal of Appearance, and the proceedings were postponed indefinitely. There was, in effect, no impeachment
case pending against Estrada when he resigned.
(2) NO – please read section 11, Article VII of the Constitution.
By virtue of the said letter, Estrada has officially resigned and has in effect, relinquished his powers as president.
Even if the petitioner can prove that he did not resign, still, he cannot successfully claim that he is a President on leave
on the ground that he is merely unable to govern temporarily. That claim has been laid to rest by Congress and the
decision that respondent Arroyo is the de jure, president made by a co-equal branch of government cannot be reviewed
by this Court.
(3) NO
Estrada also contends that respondent Ombudsman should be stopped from conducting the investigation of the cases
filed against him due to the barrage of prejudicial publicity on his guilt. He submits that the respondent Ombudsman has
developed bias and is all set file the criminal cases violation of his right to due process.
The court held that to warrant a finding of prejudicial publicity, there must be allegation and proof that the judges have
been unduly influenced, not simply that they might be, by the barrage of publicity.
There is not enough evidence to warrant this Court to enjoin the preliminary investigation of the petitioner by the
respondent Ombudsman. Petitioner needs to offer more than hostile headlines to discharge his burden of proof.
The accuracy of the news reports referred to by the petitioner cannot be the subject of judicial notice by this Court
especially in light of the denials of the respondent Ombudsman as to his alleged prejudice and the presumption of good
faith and regularity in the performance of official duty to which he is entitled.
PETITION IS DISMISSED.

6. In Re: Saturnino Bermudez (145 SCRA 160)

G.R. No. 76180 October 24, 1986

IN RE: SATURNINO V. BERMUDEZ, petitioner.

R E S O L U T IO N

PER CURIAM:
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In a petition for declaratory relief impleading no respondents, petitioner, as a lawyer, quotes the first paragraph of
Section 5 (not Section 7 as erroneously stated) of Article XVIII of the proposed 1986 Constitution, which provides in full
as follows:

Sec. 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.

Claiming that the said provision "is not clear" as to whom it refers, he then asks the Court "to declare and answer the
question of the construction and definiteness as to who, among the present incumbent President Corazon Aquino and
Vice-President Salvador Laurel and the elected President Ferdinand E. Marcos and Vice-President Arturo M. Tolentino
being referred to under the said Section 7 (sic) of ARTICLE XVIII of the TRANSITORY PROVISIONS of the proposed 1986
Constitution refers to, . ...

The petition is dismissed outright for lack of jurisdiction and for lack for cause of action.

Prescinding from petitioner's lack of personality to sue or to bring this action, (Tan vs. Macapagal, 43 SCRA 677), it is
elementary that this Court assumes no jurisdiction over petitions for declaratory relief. More importantly, the petition
amounts in effect to a suit against the incumbent President of the Republic, President Corazon C. Aquino, and it is
equally elementary that incumbent Presidents are immune from suit or from being brought to court during the period of
their incumbency and tenure.

The petition furthermore states no cause of action. Petitioner's allegation of ambiguity or vagueness of the aforequoted
provision is manifestly gratuitous, it being a matter of public record and common public knowledge that the
Constitutional Commission refers therein to incumbent President Corazon C. Aquino and Vice-President Salvador H.
Laurel, and to no other persons, and provides for the extension of their term to noon of June 30, 1992 for purposes of
synchronization of elections. Hence, the second paragraph of the cited section provides for the holding on the second
Monday of May, 1992 of the first regular elections for the President and Vice-President under said 1986 Constitution. In
previous cases, the legitimacy of the government of President Corazon C. Aquino was likewise sought to be questioned
with the claim that it was not established pursuant to the 1973 Constitution. The said cases were dismissed outright by
this court which held that:

Petitioners have no personality to sue and their petitions state no cause of action. For the legitimacy of the Aquino
government is not a justiciable matter. It belongs to the realm of politics where only the people of the Philippines are
the judge. And the people have made the judgment; they have accepted the government of President Corazon C. Aquino
which is in effective control of the entire country so that it is not merely a de facto government but in fact and law a de
jure government. Moreover, the community of nations has recognized the legitimacy of tlie present government. All the
eleven members of this Court, as reorganized, have sworn to uphold the fundamental law of the Republic under her
government. (Joint Resolution of May 22, 1986 in G.R. No. 73748 [Lawyers League for a Better Philippines, etc. vs.
President Corazon C. Aquino, et al.]; G.R. No. 73972 [People's Crusade for Supremacy of the Constitution. etc. vs. Mrs.
Cory Aquino, et al.]; and G.R. No. 73990 [Councilor Clifton U. Ganay vs. Corazon C. Aquino, et al.])

For the above-quoted reason, which are fully applicable to the petition at bar, mutatis mutandis, there can be no
question that President Corazon C. Aquino and Vice-President Salvador H. Laurel are the incumbent and legitimate
President and Vice-President of the Republic of the Philippines.or the above-quoted reasons, which are fully applicable
to the petition at bar,

ACCORDINGLY, the petition is hereby dismissed.

FACTS:
Saturnino Bermudez, as a lawyer, quotes the first paragraph of Section 5 (not Section 7 as erroneously stated) of Article
XVIII of the proposed 1986 Constitution, which provides in full as follows:
Sec. 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.

Claiming that the said provision "is not clear" as to whom it refers, petitioner then asks the Court "to declare and answer
the question of the construction and definiteness as to who, among the present incumbent President Corazon Aquino
and Vice-President Salvador Laurel and the elected President Ferdinand E. Marcos and Vice-President Arturo M.
134

Tolentino being referred to under the said Section 7 (sic) of ARTICLE XVIII of the TRANSITORY PROVISIONS of the
proposed 1986 Constitution refers to, . ...

ISSUE:
Whether or not the said provision is ambiguous.

HELD:
No. The petition is dismissed outright for lack of jurisdiction and for lack for cause of action. Petitioner's allegation of
ambiguity or vagueness of the aforequoted provision is manifestly gratuitous, it being a matter of public record and
common public knowledge that the Constitutional Commission refers therein to incumbent President Corazon C. Aquino
and Vice-President Salvador H. Laurel, and to no other persons, and provides for the extension of their term to noon of
June 30, 1992 for purposes of synchronization of elections. Hence, the second paragraph of the cited section provides
for the holding on the second Monday of May, 1992 of the first regular elections for the President and Vice-President
under said 1986 Constitution. In previous cases, the legitimacy of the government of President Corazon C. Aquino was
likewise sought to be questioned with the claim that it was not established pursuant to the 1973 Constitution.

1.2.4. Sovereignty
a. Definition
b. Kinds and Characteristics
c. Effects of Change in Sovereignty
d. Effects of Military Occupation
e. Territorial, personal and extraterritorial jurisdiction
f. Acts of State

Cases:
1. Laurel vs. Misa (G.R. No. L-409, January 30, 1947)

RESOLUTION
In G.R. No. L-409, Anastacio Laurel vs. Eriberto Misa, etc.,  the Court, acting on the petition for habeas corpus filed by
Anastacio Laurel and based on a theory that a Filipino citizen who adhered to the enemy giving the latter aid and
comfort during the Japanese occupation cannot be prosecuted for the crime of treason defined and penalized by article
114 of the Revised Penal Code, for the reason (1) that the sovereignty of the legitimate government in the Philippines
and, consequently, the correlative allegiance of Filipino citizens thereto was then suspended; and (2) that there was a
change of sovereignty over these Islands upon the proclamation of the Philippine Republic:
(1) Considering that a citizen or subject owes, not a qualified and temporary, but an absolute and permanent allegiance,
which consists in the obligation of fidelity and obedience to his government or sovereign; and that this absolute and
permanent allegiance should not be confused with the qualified and temporary allegiance which a foreigner owes to the
government or sovereign of the territory wherein he resides, so long as he remains there, in return for the protection he
receives, and which consists in the obedience to the laws of the government or sovereign. (Carlisle vs. Unite States, 21
Law. ed., 429; Secretary of State Webster Report to the President of the United States in the case of Thraser, 6 Web.
Works, 526);
Considering that the absolute and permanent allegiance of the inhabitants of a territory occupied by the enemy of their
legitimate government or sovereign is not abrogated or severed by the enemy occupation, because the sovereignty of
the government or sovereign de jure  is not transferred thereby to the occupier, as we have held in the cases of  Co Kim
Cham vs. Valdez Tan Keh and Dizon  (75 Phil., 113) and of Peralta vs. Director of Prisons  (75 Phil., 285), and if it is not
transferred to the occupant it must necessarily remain vested in the legitimate government; that the sovereignty vested
in the titular government (which is the supreme power which governs a body politic or society which constitute the
state) must be distinguished from the exercise of the rights inherent thereto, and may be destroyed, or severed and
transferred to another, but it cannot be suspended because the existence of sovereignty cannot be suspended without
putting it out of existence or divesting the possessor thereof at least during the so-called period of suspension; that what
may be suspended is the exercise of the rights of sovereignty with the control and government of the territory occupied
by the enemy passes temporarily to the occupant; that the subsistence of the sovereignty of the legitimate government
in a territory occupied by the military forces of the enemy during the war, "although the former is in fact prevented from
exercising the supremacy over them" is one of the "rules of international law of our times"; (II Oppenheim, 6th
Lauterpacht ed., 1944, p. 482), recognized, by necessary implication, in articles 23, 44, 45, and 52 of Hague Regulation;
and that, as a corollary of the conclusion that the sovereignty itself is not suspended and subsists during the enemy
occupation, the allegiance of the inhabitants to their legitimate government or sovereign subsists, and therefore there is
no such thing as suspended allegiance, the basic theory on which the whole fabric of the petitioner's contention rests;
Considering that the conclusion that the sovereignty of the United State was suspended in Castine, set forth in the
decision in the case of United States vs. Rice, 4 Wheaton, 246, 253, decided in 1819, and quoted in our decision in the
cases of Co Kim Cham vs. Valdez Tan Keh and Dizon  and Peralta vs. Director of Prisons, supra,  in connection with the
question, not of sovereignty, but of the existence of a government de facto therein and its power to promulgate rules
and laws in the occupied territory, must have been based, either on the theory adopted subsequently in the Hague
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Convention of 1907, that the military occupation of an enemy territory does not transfer the sovereignty to the
occupant; that, in the first case, the word "sovereignty" used therein should be construed to mean the exercise of the
rights of sovereignty, because as this remains vested in the legitimate government and is not transferred to the
occupier, it cannot be suspended without putting it out of existence or divesting said government thereof; and that in
the second case, that is, if the said conclusion or doctrine refers to the suspension of the sovereignty itself, it has
become obsolete after the adoption of the Hague Regulations in 1907, and therefore it can not be applied to the present
case;
Considering that even adopting the words "temporarily allegiance," repudiated by Oppenheim and other publicists, as
descriptive of the relations borne by the inhabitants of the territory occupied by the enemy toward the military
government established over them, such allegiance may, at most, be considered similar to the temporary allegiance
which a foreigner owes to the government or sovereign of the territory wherein he resides in return for the protection
he receives as above described, and does not do away with the absolute and permanent allegiance which the citizen
residing in a foreign country owes to his own government or sovereign; that just as a citizen or subject of a government
or sovereign may be prosecuted for and convicted of treason committed in a foreign country, in the same way an
inhabitant of a territory occupied by the military forces of the enemy may commit treason against his own legitimate
government or sovereign if he adheres to the enemies of the latter by giving them aid and comfort; and that if the
allegiance of a citizen or subject to his government or sovereign is nothing more than obedience to its laws in return for
the protection he receives, it would necessarily follow that a citizen who resides in a foreign country or state would, on
one hand, ipso facto acquire the citizenship thereof since he has enforce public order and regulate the social and
commercial life, in return for the protection he receives, and would, on the other hand, lose his original citizenship,
because he would not be bound to obey most of the laws of his own government or sovereign, and would not receive,
while in a foreign country, the protection he is entitled to in his own;
Considering that, as a corollary of the suspension of the exercise of the rights of sovereignty by the legitimate
government in the territory occupied by the enemy military forces, because the authority of the legitimate power to
govern has passed into the hands of the occupant (Article 43, Hague Regulations), the political laws which prescribe the
reciprocal rights, duties and obligation of government and citizens, are suspended or in abeyance during military
occupation (Co Kim cham vs. Valdez Tan Keh and dizon, supra), for the only reason that as they exclusively bear relation
to the ousted legitimate government, they are inoperative or not applicable to the government established by the
occupant; that the crimes against national security, such as treason and espionage; inciting to war, correspondence with
hostile country, flight to enemy's country, as well as those against public order, such as rebellion, sedition, and
disloyalty, illegal possession of firearms, which are of political complexion because they bear relation to, and are
penalized by our Revised Penal Code as crimes against the legitimate government, are also suspended or become
inapplicable as against the occupant, because they can not be committed against the latter (Peralta  vs. Director of
Prisons, supra); and that, while the offenses against public order to be preserved by the legitimate government were
inapplicable as offenses against the invader for the reason above stated, unless adopted by him, were also inoperative
as against the ousted government for the latter was not responsible for the preservation of the public order in the
occupied territory, yet article 114 of the said Revised Penal Code, was applicable to treason committed against the
national security of the legitimate government, because the inhabitants of the occupied territory were still bound by
their allegiance to the latter during the enemy occupation;
Considering that, although the military occupant is enjoined to respect or continue in force, unless absolutely prevented
by the circumstances, those laws that enforce public order and regulate the social and commercial life of the country, he
has, nevertheless, all the powers of de facto government and may, at his pleasure, either change the existing laws or
make new ones when the exigencies of the military service demand such action, that is, when it is necessary for the
occupier to do so for the control of the country and the protection of his army, subject to the restrictions or limitations
imposed by the Hague Regulations, the usages established by civilized nations, the laws of humanity and the
requirements of public conscience (Peralta vs. Director of Prisons, supra; 1940 United States Rules of Land Warfare 76,
77); and that, consequently, all acts of the military occupant dictated within these limitations are obligatory upon the
inhabitants of the territory, who are bound to obey them, and the laws of the legitimate government which have not
been adopted, as well and those which, though continued in force, are in conflict with such laws and orders of the
occupier, shall be considered as suspended or not in force and binding upon said inhabitants;
Considering that, since the preservation of the allegiance or the obligation of fidelity and obedience of a citizen or
subject to his government or sovereign does not demand from him a positive action, but only passive attitude or
forbearance from adhering to the enemy by giving the latter aid and comfort, the occupant has no power, as a corollary
of the preceding consideration, to repeal or suspend the operation of the law of treason, essential for the preservation
of the allegiance owed by the inhabitants to their legitimate government, or compel them to adhere and give aid and
comfort to him; because it is evident that such action is not demanded by the exigencies of the military service or not
necessary for the control of the inhabitants and the safety and protection of his army, and because it is tantamount to
practically transfer temporarily to the occupant their allegiance to the titular government or sovereign; and that,
therefore, if an inhabitant of the occupied territory were compelled illegally by the military occupant, through force,
threat or intimidation, to give him aid and comfort, the former may lawfully resist and die if necessary as a hero, or
submit thereto without becoming a traitor;
Considering that adoption of the petitioner's theory of suspended allegiance would lead to disastrous consequences for
small and weak nations or states, and would be repugnant to the laws of humanity and requirements of public
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conscience, for it would allow invaders to legally recruit or enlist the Quisling inhabitants of the occupied territory to
fight against their own government without the latter incurring the risk of being prosecuted for treason, and even
compel those who are not aid them in their military operation against the resisting enemy forces in order to completely
subdue and conquer the whole nation, and thus deprive them all of their own independence or sovereignty — such
theory would sanction the action of invaders in forcing the people of a free and sovereign country to be a party in the
nefarious task of depriving themselves of their own freedom and independence and repressing the exercise by them of
their own sovereignty; in other words, to commit a political suicide;
(2) Considering that the crime of treason against the government of the Philippines defined and penalized in article 114
of the Penal Code, though originally intended to be a crime against said government as then organized by authority of
the sovereign people of the United States, exercised through their authorized representative, the Congress and the
President of the United States, was made, upon the establishment of the Commonwealth Government in 1935, a crime
against the Government of the Philippines established by authority of the people of the Philippines, in whom the
sovereignty resides according to section 1, Article II, of the Constitution of the Philippines, by virtue of the provision of
section 2, Article XVI thereof, which provides that "All laws of the Philippine Islands . . . shall remain operative, unless
inconsistent with this Constitution . . . and all references in such laws to the Government or officials of the Philippine
Islands, shall be construed, in so far as applicable, to refer to the Government and corresponding officials under this
constitution;
Considering that the Commonwealth of the Philippines was a sovereign government, though not absolute but subject to
certain limitations imposed in the Independence Act and incorporated as Ordinance appended to our Constitution, was
recognized not only by the Legislative Department or Congress of the United States in approving the Independence Law
above quoted and the Constitution of the Philippines, which contains the declaration that "Sovereignty resides in the
people and all government authority emanates from them" (section 1, Article II), but also by the Executive Department
of the United States; that the late President Roosevelt in one of his messages to Congress said, among others, "As I
stated on August 12, 1943, the United States in practice regards the Philippines as having now the status as a
government of other independent nations — in fact all the attributes of complete and respected nationhood"
(Congressional Record, Vol. 29, part 6, page 8173); and that it is a principle upheld by the Supreme Court of the United
States in many cases, among them in the case of Jones vs. United States (137 U.S., 202; 34 Law. ed., 691, 696) that the
question of sovereignty is "a purely political question, the determination of which by the legislative and executive
departments of any government conclusively binds the judges, as well as all other officers, citizens and subjects of the
country.
Considering that section I (1) of the Ordinance appended to the Constitution which provides that pending the final and
complete withdrawal of the sovereignty of the United States "All citizens of the Philippines shall owe allegiance to the
United States", was one of the few limitations of the sovereignty of the Filipino people retained by the United States,
but these limitations do not away or are not inconsistent with said sovereignty, in the same way that the people of each
State of the Union preserves its own sovereignty although limited by that of the United States conferred upon the latter
by the States; that just as to reason may be committed against the Federal as well as against the State Government, in
the same way treason may have been committed during the Japanese occupation against the sovereignty of the United
States as well as against the sovereignty of the Philippine Commonwealth; and that the change of our form of
government from Commonwealth to Republic does not affect the prosecution of those charged with the crime of
treason committed during the Commonwealth, because it is an offense against the same government and the same
sovereign people, for Article XVIII of our Constitution provides that "The government established by this constitution
shall be known as the Commonwealth of the Philippines. Upon the final and complete withdrawal of the sovereignty of
the United States and the proclamation of Philippine independence, the Commonwealth of the Philippines shall
thenceforth be known as the Republic of the Philippines";
This Court resolves, without prejudice to write later on a more extended opinion, to deny the petitioner's petition, as it
is hereby denied, for the reasons above set forth and for others to be stated in the said opinion, without prejudice to
concurring opinion therein, if any. Messrs. Justices Paras and Hontiveros dissent in a separate opinion. Mr. justice
Perfecto concurs in a separate opinion.

FACTS:
Anastacio Laurel filed a petition for habeas corpus based on a theory that a Filipino citizen who adhered to the enemy
giving the latter aid and comfort during the Japanese occupation cannot be prosecuted for the crime of treason defined
and penalized by article 114 of the Revised Penal Code, for the reason (1) that the sovereignty of the legitimate
government in the Philippines and, consequently, the correlative allegiance of Filipino citizens thereto was then
suspended; and (2) that there was a change of sovereignty over these Islands upon the proclamation of the Philippine
Republic.

ISSUE:
Whether or not Anastacio Laurel can be prosecuted for the crime of treason?
RULING:

Yes, Anastacio Laurel can be prosecuted for the crime of treason.

137

Laurel’s contentions are without merit because (1) the absolute and permanent allegiance of the inhabitants of a
territory occupied by the enemy of their legitimate government or sovereign is not abrogated or severed by the enemy
occupation, because the sovereignty of the government or sovereign de jure is not transferred thereby to the occupier;
and (2) the change of form of government does not affect the prosecution of those charged with the crime of treason
because it is an offense to the same government and same sovereign people.

2. Macariola vs. Asuncion (114 SCRA 77)

A.M. No. 133-J May 31, 1982

BERNARDITA R. MACARIOLA, complainant,

vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B. Asuncion of the
Court of First Instance of Leyte, now Associate Justice of the Court of Appeals, with "acts unbecoming a judge."

The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice Cecilia Muñoz Palma
of the Court of Appeals now retired Associate Justice of the Supreme Court, to whom this case was referred on October
28, 1968 for investigation, thus:

Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for partition filed by Sinforosa R. Bales, Luz R.
Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola,
defendant, concerning the properties left by the deceased Francisco Reyes, the common father of the plaintiff and
defendant.

In her defenses to the complaint for partition, Mrs. Macariola alleged among other things that; a) plaintiff Sinforosa R.
Bales was not a daughter of the deceased Francisco Reyes; b) the only legal heirs of the deceased were defendant
Macariola, she being the only offspring of the first marriage of Francisco Reyes with Felisa Espiras, and the remaining
plaintiffs who were the children of the deceased by his second marriage with Irene Ondez; c) the properties left by the
deceased were all the conjugal properties of the latter and his first wife, Felisa Espiras, and no properties were acquired
by the deceased during his second marriage; d) if there was any partition to be made, those conjugal properties should
first be partitioned into two parts, and one part is to be adjudicated solely to defendant it being the share of the latter's
deceased mother, Felisa Espiras, and the other half which is the share of the deceased Francisco Reyes was to be divided
equally among his children by his two marriages.

On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010, the dispositive portion of
which reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a preponderance of evidence, finds and so holds, and
hereby renders judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and
Priscilla Reyes as the only children legitimated by the subsequent marriage of Francisco Reyes Diaz to Irene Ondez; (2)
Declaring the plaintiff Sinforosa R. Bales to have been an illegitimate child of Francisco Reyes Diaz; (3) Declaring Lots
Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot 1145 as belonging to the conjugal partnership of the
spouses Francisco Reyes Diaz and Felisa Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to the
spouses Francisco Reyes Diaz and Irene Ondez in common partnership; (5) Declaring that 1/2 of Lot No. 1184 as
belonging exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R. Macariola, being
the only legal and forced heir of her mother Felisa Espiras, as the exclusive owner of one-half of each of Lots Nos. 4474,
4475, 4892, 5265, 4803, 4581, 4506; and the remaining one-half (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265,
4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as belonging to the estate of Francisco Reyes
Diaz; (7) Declaring Irene Ondez to be the exclusive owner of one-half (1/2) of Lot No. 2304 and one-half (1/2) of one-
fourth (1/4) of Lot No. 3416; the remaining one-half (1/2) of Lot 2304 and the remaining one-half (1/2) of one-fourth
(1/4) of Lot No. 3416 as belonging to the estate of Francisco Reyes Diaz; (8) Directing the division or partition of the
estate of Francisco Reyes Diaz in such a manner as to give or grant to Irene Ondez, as surviving widow of Francisco Reyes
Diaz, a hereditary share of. one-twelfth (1/12) of the whole estate of Francisco Reyes Diaz (Art. 996 in relation to Art.
892, par 2, New Civil Code), and the remaining portion of the estate to be divided among the plaintiffs Sinforosa R. Bales,
Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola, in
such a way that the extent of the total share of plaintiff Sinforosa R. Bales in the hereditary estate shall not exceed the
equivalent of two-fifth (2/5) of the total share of any or each of the other plaintiffs and the defendant (Art. 983, New
Civil Code), each of the latter to receive equal shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil. 528;
Diancin vs. Bishop of Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days after this judgment shall have
become final to submit to this court, for approval a project of partition of the hereditary estate in the proportion above
indicated, and in such manner as the parties may, by agreement, deemed convenient and equitable to them taking into
138

consideration the location, kind, quality, nature and value of the properties involved; (10) Directing the plaintiff
Sinforosa R. Bales and defendant Bernardita R. Macariola to pay the costs of this suit, in the proportion of one-third
(1/3) by the first named and two-thirds (2/3) by the second named; and (I 1) Dismissing all other claims of the parties [pp
27-29 of Exh. C].

The decision in civil case 3010 became final for lack of an appeal, and on October 16, 1963, a project of partition was
submitted to Judge Asuncion which is marked Exh. A. Notwithstanding the fact that the project of partition was not
signed by the parties themselves but only by the respective counsel of plaintiffs and defendant, Judge Asuncion
approved it in his Order dated October 23, 1963, which for convenience is quoted hereunder in full:

The parties, through their respective counsels, presented to this Court for approval the following project of partition:

COMES NOW, the plaintiffs and the defendant in the above-entitled case, to this Honorable Court respectfully submit
the following Project of Partition:

l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to Bernardita Reyes Macariola;

2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along the eastern part of the lot shall be awarded
likewise to Bernardita R. Macariola;

3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes Bales;

4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along the western part of the lot shall likewise be
awarded to Sinforosa Reyes-Bales;

5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela
Reyes and Priscilla Reyes in equal shares;

6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the portions awarded under item (2) and (4)
above shall be awarded to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in
equal shares, provided, however that the remaining portion of Lot No. 3416 shall belong exclusively to Priscilla Reyes.

WHEREFORE, it is respectfully prayed that the Project of Partition indicated above which is made in accordance with the
decision of the Honorable Court be approved.

Tacloban City, October 16, 1963.

(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City

(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City

While the Court thought it more desirable for all the parties to have signed this Project of Partition, nevertheless, upon
assurance of both counsels of the respective parties to this Court that the Project of Partition, as above- quoted, had
been made after a conference and agreement of the plaintiffs and the defendant approving the above Project of
Partition, and that both lawyers had represented to the Court that they are given full authority to sign by themselves the
Project of Partition, the Court, therefore, finding the above-quoted Project of Partition to be in accordance with law,
hereby approves the same. The parties, therefore, are directed to execute such papers, documents or instrument
sufficient in form and substance for the vesting of the rights, interests and participations which were adjudicated to the
respective parties, as outlined in the Project of Partition and the delivery of the respective properties adjudicated to
each one in view of said Project of Partition, and to perform such other acts as are legal and necessary to effectuate the
said Project of Partition.

SO ORDERED.

Given in Tacloban City, this 23rd day of October, 1963.

(SGD) ELIAS B. ASUNCION Judge

EXH. B.

The above Order of October 23, 1963, was amended on November 11, 1963, only for the purpose of giving authority to
the Register of Deeds of the Province of Leyte to issue the corresponding transfer certificates of title to the respective
adjudicatees in conformity with the project of partition (see Exh. U).
139

One of the properties mentioned in the project of partition was Lot 1184 or rather one-half thereof with an area of
15,162.5 sq. meters. This lot, which according to the decision was the exclusive property of the deceased Francisco
Reyes, was adjudicated in said project of partition to the plaintiffs Luz, Anacorita Ruperto, Adela, and Priscilla all
surnamed Reyes in equal shares, and when the project of partition was approved by the trial court the adjudicatees
caused Lot 1184 to be subdivided into five lots denominated as Lot 1184-A to 1184-E inclusive (Exh. V).

Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's court (Exhs. F, F-1 and V-1), while
Lot 1184-E which had an area of 2,172.5556 sq. meters was sold on July 31, 1964 to Dr. Arcadio Galapon (Exh. 2) who
was issued transfer certificate of title No. 2338 of the Register of Deeds of the city of Tacloban (Exh. 12).

On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot 1184-E with an area of around 1,306 sq. meters
to Judge Asuncion and his wife, Victoria S. Asuncion (Exh. 11), which particular portion was declared by the latter for
taxation purposes (Exh. F).

On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and interest in Lot 1184-E
to "The Traders Manufacturing and Fishing Industries Inc." (Exit 15 & 16). At the time of said sale the stockholders of the
corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan, Jaime Arigpa Tan, Judge Asuncion, and the latter's wife,
Victoria S. Asuncion, with Judge Asuncion as the President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The
Articles of Incorporation of "The Traders Manufacturing and Fishing Industries, Inc." which we shall henceforth refer to
as "TRADERS" were registered with the Securities and Exchange Commission only on January 9, 1967 (Exh. E) [pp. 378-
385, rec.].

Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6, 1968 alleging four
causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New Civil Code in
acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010
decided by him; [2] that he likewise violated Article 14, paragraphs I and 5 of the Code of Commerce, Section 3,
paragraph H, of R.A. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil
Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the Traders Manufacturing and
Fishing Industries, Inc., as a stockholder and a ranking officer while he was a judge of the Court of First Instance of Leyte;
[3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by closely fraternizing
with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth
and in fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar; and [4] that
there was a culpable defiance of the law and utter disregard for ethics by respondent Judge (pp. 1-7, rec.).

Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on October 16, 1968 by
herein complainant. In Our resolution of October 28, 1968, We referred this case to then Justice Cecilia Muñoz Palma of
the Court of Appeals, for investigation, report and recommendation. After hearing, the said Investigating Justice
submitted her report dated May 27, 1971 recommending that respondent Judge should be reprimanded or warned in
connection with the first cause of action alleged in the complaint, and for the second cause of action, respondent should
be warned in case of a finding that he is prohibited under the law to engage in business. On the third and fourth causes
of action, Justice Palma recommended that respondent Judge be exonerated.

The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant herein instituted an
action before the Court of First Instance of Leyte, entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa R. Bales, et
al., defendants," which was docketed as Civil Case No. 4235, seeking the annulment of the project of partition made
pursuant to the decision in Civil Case No. 3010 and the two orders issued by respondent Judge approving the same, as
well as the partition of the estate and the subsequent conveyances with damages. It appears, however, that some
defendants were dropped from the civil case. For one, the case against Dr. Arcadio Galapon was dismissed because he
was no longer a real party in interest when Civil Case No. 4234 was filed, having already conveyed on March 6, 1965 a
portion of lot 1184-E to respondent Judge and on August 31, 1966 the remainder was sold to the Traders Manufacturing
and Fishing Industries, Inc. Similarly, the case against defendant Victoria Asuncion was dismissed on the ground that she
was no longer a real party in interest at the time the aforesaid Civil Case No. 4234 was filed as the portion of Lot 1184
acquired by her and respondent Judge from Dr. Arcadio Galapon was already sold on August 31, 1966 to the Traders
Manufacturing and Fishing industries, Inc. Likewise, the cases against defendants Serafin P. Ramento, Catalina Cabus,
Ben Barraza Go, Jesus Perez, Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial,
Leopoldo Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were dismissed
with the conformity of complainant herein, plaintiff therein, and her counsel.

On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was directed and
authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now Minister of National Defense Juan
Ponce Enrile to hear and decide Civil Case No. 4234, rendered a decision, the dispositive portion of which reads as
follows:
140

A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION

(1) declaring that only Branch IV of the Court of First Instance of Leyte has jurisdiction to take cognizance of the issue of
the legality and validity of the Project of Partition [Exhibit "B"] and the two Orders [Exhibits "C" and "C- 3"] approving
the partition;

(2) dismissing the complaint against Judge Elias B. Asuncion;

(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias B. Asuncion,

(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00] for moral damages;

(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001 for exemplary damages;

(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal damages; and

(d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's Fees.

B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR HERSELF AND FOR THE HEIRS OF THE DECEASED
GERARDO VILLASIN —

(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs of the deceased Gerardo Villasin;

(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of Gerardo Villasin the cost of the suit.

C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL., WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010
—

(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer, Priscilla R. Solis, Luz R. Bakunawa,
Anacorita R. Eng and Ruperto O. Reyes.

D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO —

(1) Dismissing the complaint against Bonifacio Ramo;

(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit.

SO ORDERED [pp. 531-533, rec.]

It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals upon perfection of
the appeal on February 22, 1971.

WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her first cause of action,
that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by
purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010. 'That Article
provides:

Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or
through the mediation of another:

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees
connected with the administration of justice, the property and rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of
any litigation in which they may take part by virtue of their profession [emphasis supplied].

The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of
litigation to the persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the sale or
141

assignment of the property must take place during the pendency of the litigation involving the property" (The Director of
Lands vs. Ababa et al., 88 SCRA 513, 519 [1979], Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).

In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil
Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal
within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at the time
of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended order dated November 11,
1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963 decision, had long become
final for there was no appeal from said orders.

Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the plaintiffs in Civil Case
No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of the plaintiffs,
namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the finality of the decision in Civil Case No. 3010. It may
be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes, Adela
Reyes, Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was subdivided into
five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for
which he was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and on March 6, 1965 he sold a portion of
said lot to respondent Judge and his wife who declared the same for taxation purposes only. The subsequent sale on
August 31, 1966 by spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to
the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and his wife was the
secretary, took place long after the finality of the decision in Civil Case No. 3010 and of the subsequent two aforesaid
orders therein approving the project of partition.

While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before the Court of First
Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of partition and the two orders approving
the same, as well as the partition of the estate and the subsequent conveyances, the same, however, is of no moment.

The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from Dr. Arcadio Galapon;
hence, after the finality of the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and his two questioned
orders dated October 23, 1963 and November 11, 1963. Therefore, the property was no longer subject of litigation.

The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter, change or affect the
aforesaid facts — that the questioned sale to respondent Judge, now Court of Appeals Justice, was effected and
consummated long after the finality of the aforesaid decision or orders.

Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality
of the decision in Civil Case No. 3010 as well as the two orders approving the project of partition, and not during the
pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code.

It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio Galapon by Priscilla
Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal the illegal and unethical transfer of said lot
to respondent Judge as a consideration for the approval of the project of partition. In this connection, We agree with the
findings of the Investigating Justice thus:

And so we are now confronted with this all-important question whether or not the acquisition by respondent of a
portion of Lot 1184-E and the subsequent transfer of the whole lot to "TRADERS" of which respondent was the President
and his wife the Secretary, was intimately related to the Order of respondent approving the project of partition, Exh. A.

Respondent vehemently denies any interest or participation in the transactions between the Reyeses and the Galapons
concerning Lot 1184-E, and he insists that there is no evidence whatsoever to show that Dr. Galapon had acted, in the
purchase of Lot 1184-E, in mediation for him and his wife. (See p. 14 of Respondent's Memorandum).

xxx xxx xxx

On this point, I agree with respondent that there is no evidence in the record showing that Dr. Arcadio Galapon acted as
a mere "dummy" of respondent in acquiring Lot 1184-E from the Reyeses. Dr. Galapon appeared to this investigator as a
respectable citizen, credible and sincere, and I believe him when he testified that he bought Lot 1184-E in good faith and
for valuable consideration from the Reyeses without any intervention of, or previous understanding with Judge Asuncion
(pp. 391- 394, rec.).

On the contention of complainant herein that respondent Judge acted illegally in approving the project of partition
although it was not signed by the parties, We quote with approval the findings of the Investigating Justice, as follows:
142

1. I agree with complainant that respondent should have required the signature of the parties more particularly that of
Mrs. Macariola on the project of partition submitted to him for approval; however, whatever error was committed by
respondent in that respect was done in good faith as according to Judge Asuncion he was assured by Atty. Bonifacio
Ramo, the counsel of record of Mrs. Macariola, That he was authorized by his client to submit said project of partition,
(See Exh. B and tsn p. 24, January 20, 1969). While it is true that such written authority if there was any, was not
presented by respondent in evidence, nor did Atty. Ramo appear to corroborate the statement of respondent, his
affidavit being the only one that was presented as respondent's Exh. 10, certain actuations of Mrs. Macariola lead this
investigator to believe that she knew the contents of the project of partition, Exh. A, and that she gave her conformity
thereto. I refer to the following documents:

1) Exh. 9 — Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban Cadastral Survey in which the
deceased Francisco Reyes holds a "1/4 share" (Exh. 9-a). On tills certificate of title the Order dated November 11, 1963,
(Exh. U) approving the project of partition was duly entered and registered on November 26, 1963 (Exh. 9-D);

2) Exh. 7 — Certified copy of a deed of absolute sale executed by Bernardita Reyes Macariola on October 22, 1963,
conveying to Dr. Hector Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale
the vendee stated that she was the absolute owner of said one-fourth share, the same having been adjudicated to her
as her share in the estate of her father Francisco Reyes Diaz as per decision of the Court of First Instance of Leyte under
case No. 3010 (Exh. 7-A). The deed of sale was duly registered and annotated at the back of OCT 19520 on December 3,
1963 (see Exh. 9-e).

In connection with the abovementioned documents it is to be noted that in the project of partition dated October 16,
1963, which was approved by respondent on October 23, 1963, followed by an amending Order on November 11, 1963,
Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. Macariola. It is this 1/4 share in Lot 1154 which complainant sold
to Dr. Decena on October 22, 1963, several days after the preparation of the project of partition.

Counsel for complainant stresses the view, however, that the latter sold her one-fourth share in Lot 1154 by virtue of
the decision in Civil Case 3010 and not because of the project of partition, Exh. A. Such contention is absurd because
from the decision, Exh. C, it is clear that one-half of one- fourth of Lot 1154 belonged to the estate of Francisco Reyes
Diaz while the other half of said one-fourth was the share of complainant's mother, Felisa Espiras; in other words, the
decision did not adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see Exhs. C-3 & C-4).
Complainant became the owner of the entire one-fourth of Lot 1154 only by means of the project of partition, Exh. A.
Therefore, if Mrs. Macariola sold Lot 1154 on October 22, 1963, it was for no other reason than that she was wen aware
of the distribution of the properties of her deceased father as per Exhs. A and B. It is also significant at this point to state
that Mrs. Macariola admitted during the cross-examination that she went to Tacloban City in connection with the sale of
Lot 1154 to Dr. Decena (tsn p. 92, November 28, 1968) from which we can deduce that she could not have been kept
ignorant of the proceedings in civil case 3010 relative to the project of partition.

Complainant also assails the project of partition because according to her the properties adjudicated to her were
insignificant lots and the least valuable. Complainant, however, did not present any direct and positive evidence to
prove the alleged gross inequalities in the choice and distribution of the real properties when she could have easily done
so by presenting evidence on the area, location, kind, the assessed and market value of said properties. Without such
evidence there is nothing in the record to show that there were inequalities in the distribution of the properties of
complainant's father (pp. 386389, rec.).

Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring
by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have
acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A judge's
official conduct should be free from the appearance of impropriety, and his personal behavior, not only upon the bench
and in the performance of judicial duties, but also in his everyday life, should be beyond reproach." And as aptly
observed by the Investigating Justice: "... it was unwise and indiscreet on the part of respondent to have purchased or
acquired a portion of a piece of property that was or had been in litigation in his court and caused it to be transferred to
a corporation of which he and his wife were ranking officers at the time of such transfer. One who occupies an exalted
position in the judiciary has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of
justice, so that not only must he be truly honest and just, but his actuations must be such as not give cause for doubt
and mistrust in the uprightness of his administration of justice. In this particular case of respondent, he cannot deny that
the transactions over Lot 1184-E are damaging and render his actuations open to suspicion and distrust. Even if
respondent honestly believed that Lot 1184-E was no longer in litigation in his court and that he was purchasing it from a
third person and not from the parties to the litigation, he should nonetheless have refrained from buying it for himself
and transferring it to a corporation in which he and his wife were financially involved, to avoid possible suspicion that his
acquisition was related in one way or another to his official actuations in civil case 3010. The conduct of respondent gave
cause for the litigants in civil case 3010, the lawyers practising in his court, and the public in general to doubt the
honesty and fairness of his actuations and the integrity of our courts of justice" (pp. 395396, rec.).
143

II

With respect to the second cause of action, the complainant alleged that respondent Judge violated paragraphs 1 and 5,
Article 14 of the Code of Commerce when he associated himself with the Traders Manufacturing and Fishing Industries,
Inc. as a stockholder and a ranking officer, said corporation having been organized to engage in business. Said Article
provides that:

Article 14 — The following cannot engage in commerce, either in person or by proxy, nor can they hold any office or
have any direct, administrative, or financial intervention in commercial or industrial companies within the limits of the
districts, provinces, or towns in which they discharge their duties:

1. Justices of the Supreme Court, judges and officials of the department of public prosecution in active service. This
provision shall not be applicable to mayors, municipal judges, and municipal prosecuting attorneys nor to those who by
chance are temporarily discharging the functions of judge or prosecuting attorney.

xxx xxx xxx

5. Those who by virtue of laws or special provisions may not engage in commerce in a determinate territory.

It is Our considered view that although the aforestated provision is incorporated in the Code of Commerce which is part
of the commercial laws of the Philippines, it, however, partakes of the nature of a political law as it regulates the
relationship between the government and certain public officers and employees, like justices and judges.

Political Law has been defined as that branch of public law which deals with the organization and operation of the
governmental organs of the State and define the relations of the state with the inhabitants of its territory (People vs.
Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that political law embraces constitutional law, law of public
corporations, administrative law including the law on public officers and elections. Specifically, Article 14 of the Code of
Commerce partakes more of the nature of an administrative law because it regulates the conduct of certain public
officers and employees with respect to engaging in business: hence, political in essence.

It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of 1885, with some
modifications made by the "Commission de Codificacion de las Provincias de Ultramar," which was extended to the
Philippines by the Royal Decree of August 6, 1888, and took effect as law in this jurisdiction on December 1, 1888.

Upon the transfer of sovereignty from Spain to the United States and later on from the United States to the Republic of
the Philippines, Article 14 of this Code of Commerce must be deemed to have been abrogated because where there is
change of sovereignty, the political laws of the former sovereign, whether compatible or not with those of the new
sovereign, are automatically abrogated, unless they are expressly re-enacted by affirmative act of the new sovereign.

Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:

By well-settled public law, upon the cession of territory by one nation to another, either following a conquest or
otherwise, ... those laws which are political in their nature and pertain to the prerogatives of the former government
immediately cease upon the transfer of sovereignty. (Opinion, Atty. Gen., July 10, 1899).

While municipal laws of the newly acquired territory not in conflict with the, laws of the new sovereign continue in force
without the express assent or affirmative act of the conqueror, the political laws do not. (Halleck's Int. Law, chap. 34,
par. 14). However, such political laws of the prior sovereignty as are not in conflict with the constitution or institutions of
the new sovereign, may be continued in force if the conqueror shall so declare by affirmative act of the commander-in-
chief during the war, or by Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S. 220, 43 L. Ed. 142).
In the case of American and Ocean Ins. Cos. vs. 356 Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice
Marshall said:

On such transfer (by cession) of territory, it has never been held that the relations of the inhabitants with each other
undergo any change. Their relations with their former sovereign are dissolved, and new relations are created between
them and the government which has acquired their territory. The same act which transfers their country, transfers the
allegiance of those who remain in it; and the law which may be denominated political, is necessarily changed, although
that which regulates the intercourse and general conduct of individuals, remains in force, until altered by the newly-
created power of the State.

Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general principle of the public
law that on acquisition of territory the previous political relations of the ceded region are totally abrogated. "
144

There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of the Code of
Commerce after the change of sovereignty from Spain to the United States and then to the Republic of the Philippines.
Consequently, Article 14 of the Code of Commerce has no legal and binding effect and cannot apply to the respondent,
then Judge of the Court of First Instance, now Associate Justice of the Court of Appeals.

It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of Republic Act No. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act, which provides that:

Sec. 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already penalized by
existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

xxx xxx xxx

(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in connection with
which he intervenes or takes part in his official capacity, or in which he is prohibited by the Constitution or by any Iaw
from having any interest.

Respondent Judge cannot be held liable under the aforestated paragraph because there is no showing that respondent
participated or intervened in his official capacity in the business or transactions of the Traders Manufacturing and
Fishing Industries, Inc. In the case at bar, the business of the corporation in which respondent participated has obviously
no relation or connection with his judicial office. The business of said corporation is not that kind where respondent
intervenes or takes part in his capacity as Judge of the Court of First Instance. As was held in one case involving the
application of Article 216 of the Revised Penal Code which has a similar prohibition on public officers against directly or
indirectly becoming interested in any contract or business in which it is his official duty to intervene, "(I)t is not enough
to be a public official to be subject to this crime; it is necessary that by reason of his office, he has to intervene in said
contracts or transactions; and, hence, the official who intervenes in contracts or transactions which have no relation to
his office cannot commit this crime.' (People vs. Meneses, C.A. 40 O.G. 11th Supp. 134, cited by Justice Ramon C.
Aquino; Revised Penal Code, p. 1174, Vol. 11 [1976]).

It does not appear also from the records that the aforesaid corporation gained any undue advantage in its business
operations by reason of respondent's financial involvement in it, or that the corporation benefited in one way or another
in any case filed by or against it in court. It is undisputed that there was no case filed in the different branches of the
Court of First Instance of Leyte in which the corporation was either party plaintiff or defendant except Civil Case No.
4234 entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa O. Bales, et al.," wherein the complainant herein
sought to recover Lot 1184-E from the aforesaid corporation. It must be noted, however, that Civil Case No. 4234 was
filed only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI Judge Jose D. Nepomuceno when
respondent Judge was no longer connected with the corporation, having disposed of his interest therein on January 31,
1967.

Furthermore, respondent is not liable under the same paragraph because there is no provision in both the 1935 and
1973 Constitutions of the Philippines, nor is there an existing law expressly prohibiting members of the Judiciary from
engaging or having interest in any lawful business.

It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of 1948, does not contain
any prohibition to that effect. As a matter of fact, under Section 77 of said law, municipal judges may engage in teaching
or other vocation not involving the practice of law after office hours but with the permission of the district judge
concerned.

Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is, as heretofore
stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to America, because it is political
in nature.

Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase by judges of a
property in litigation before the court within whose jurisdiction they perform their duties, cannot apply to respondent
Judge because the sale of the lot in question to him took place after the finality of his decision in Civil Case No. 3010 as
well as his two orders approving the project of partition; hence, the property was no longer subject of litigation.

In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil Service Act of 1959
prohibits an officer or employee in the civil service from engaging in any private business, vocation, or profession or be
connected with any commercial, credit, agricultural or industrial undertaking without a written permission from the
head of department, the same, however, may not fall within the purview of paragraph h, Section 3 of the Anti-Graft and
Corrupt Practices Act because the last portion of said paragraph speaks of a prohibition by the Constitution or law on
145

any public officer from having any interest in any business and not by a mere administrative rule or regulation. Thus, a
violation of the aforesaid rule by any officer or employee in the civil service, that is, engaging in private business without
a written permission from the Department Head may not constitute graft and corrupt practice as defined by law.

On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil Service Rules, We
hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules promulgated thereunder, particularly
Section 12 of Rule XVIII, do not apply to the members of the Judiciary. Under said Section 12: "No officer or employee
shall engage directly in any private business, vocation, or profession or be connected with any commercial, credit,
agricultural or industrial undertaking without a written permission from the Head of Department ..."

It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered by Republic Act No.
296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7, Article X, 1973 Constitution.

Under Section 67 of said law, the power to remove or dismiss judges was then vested in the President of the Philippines,
not in the Commissioner of Civil Service, and only on two grounds, namely, serious misconduct and inefficiency, and
upon the recommendation of the Supreme Court, which alone is authorized, upon its own motion, or upon information
of the Secretary (now Minister) of Justice to conduct the corresponding investigation. Clearly, the aforesaid section
defines the grounds and prescribes the special procedure for the discipline of judges.

And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can discipline judges of
inferior courts as well as other personnel of the Judiciary.

It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for ... violation of the existing
Civil Service Law and rules or of reasonable office regulations, or in the interest of the service, remove any subordinate
officer or employee from the service, demote him in rank, suspend him for not more than one year without pay or fine
him in an amount not exceeding six months' salary." Thus, a violation of Section 12 of Rule XVIII is a ground for
disciplinary action against civil service officers and employees.

However, judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary
authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not the head of the Judicial
Department to which they belong. The Revised Administrative Code (Section 89) and the Civil Service Law itself state
that the Chief Justice is the department head of the Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and under the 1973
Constitution, the Judiciary is the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution).
Besides, a violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against judges
because to recognize the same as applicable to them, would be adding another ground for the discipline of judges and,
as aforestated, Section 67 of the Judiciary Act recognizes only two grounds for their removal, namely, serious
misconduct and inefficiency.

Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service who has original and
exclusive jurisdiction "(T)o decide, within one hundred twenty days, after submission to it, all administrative cases
against permanent officers and employees in the competitive service, and, except as provided by law, to have final
authority to pass upon their removal, separation, and suspension and upon all matters relating to the conduct,
discipline, and efficiency of such officers and employees; and prescribe standards, guidelines and regulations governing
the administration of discipline" (emphasis supplied). There is no question that a judge belong to the non-competitive or
unclassified service of the government as a Presidential appointee and is therefore not covered by the aforesaid
provision. WE have already ruled that "... in interpreting Section 16(i) of Republic Act No. 2260, we emphasized that only
permanent officers and employees who belong to the classified service come under the exclusive jurisdiction of the
Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710,713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619 [1963]).

Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing and
Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the provissions of Article 14 of the Code
of Commerce and Section 3(h) of the Anti-Graft and Corrupt Practices Act as well as Section 12, Rule XVIII of the Civil
Service Rules promulgated pursuant to the Civil Service Act of 1959, the impropriety of the same is clearly
unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that:

A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his
court; and, after his accession to the bench, he should not retain such investments previously made, longer than a
period sufficient to enable him to dispose of them without serious loss. It is desirable that he should, so far as
reasonably possible, refrain from all relations which would normally tend to arouse the suspicion that such relations
warp or bias his judgment, or prevent his impartial attitude of mind in the administration of his judicial duties. ...

WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on January 31, 1967
from the aforesaid corporation and sold their respective shares to third parties, and it appears also that the aforesaid
146

corporation did not in anyway benefit in any case filed by or against it in court as there was no case filed in the different
branches of the Court of First Instance of Leyte from the time of the drafting of the Articles of Incorporation of the
corporation on March 12, 1966, up to its incorporation on January 9, 1967, and the eventual withdrawal of respondent
on January 31, 1967 from said corporation. Such disposal or sale by respondent and his wife of their shares in the
corporation only 22 days after the incorporation of the corporation, indicates that respondent realized that early that
their interest in the corporation contravenes the aforesaid Canon 25. Respondent Judge and his wife therefore deserve
the commendation for their immediate withdrawal from the firm after its incorporation and before it became involved
in any court litigation

III

With respect to the third and fourth causes of action, complainant alleged that respondent was guilty of coddling an
impostor and acted in disregard of judicial decorum, and that there was culpable defiance of the law and utter disregard
for ethics. WE agree, however, with the recommendation of the Investigating Justice that respondent Judge be
exonerated because the aforesaid causes of action are groundless, and WE quote the pertinent portion of her report
which reads as follows:

The basis for complainant's third cause of action is the claim that respondent associated and closely fraternized with
Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney (see Exhs. I, I-1 and J) when in
truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys and is not a member of the
Philippine Bar as certified to in Exh. K.

The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and claims that all the time he believed
that the latter was a bona fide member of the bar. I see no reason for disbelieving this assertion of respondent. It has
been shown by complainant that Dominador Arigpa Tan represented himself publicly as an attorney-at-law to the extent
of putting up a signboard with his name and the words "Attorney-at Law" (Exh. I and 1- 1) to indicate his office, and it
was but natural for respondent and any person for that matter to have accepted that statement on its face value. "Now
with respect to the allegation of complainant that respondent is guilty of fraternizing with Dominador Arigpa Tan to the
extent of permitting his wife to be a godmother of Mr. Tan's child at baptism (Exh. M & M-1), that fact even if true did
not render respondent guilty of violating any canon of judicial ethics as long as his friendly relations with Dominador A.
Tan and family did not influence his official actuations as a judge where said persons were concerned. There is no
tangible convincing proof that herein respondent gave any undue privileges in his court to Dominador Arigpa Tan or that
the latter benefitted in his practice of law from his personal relations with respondent, or that he used his influence, if
he had any, on the Judges of the other branches of the Court to favor said Dominador Tan.

Of course it is highly desirable for a member of the judiciary to refrain as much as possible from maintaining close
friendly relations with practising attorneys and litigants in his court so as to avoid suspicion 'that his social or business
relations or friendship constitute an element in determining his judicial course" (par. 30, Canons of Judicial Ethics), but if
a Judge does have social relations, that in itself would not constitute a ground for disciplinary action unless it be clearly
shown that his social relations be clouded his official actuations with bias and partiality in favor of his friends (pp. 403-
405, rec.).

In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not violate any law in
acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business by joining a private
corporation during his incumbency as judge of the Court of First Instance of Leyte, he should be reminded to be more
discreet in his private and business activities, because his conduct as a member of the Judiciary must not only be
characterized with propriety but must always be above suspicion.

WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY REMINDED TO BE MORE
DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.

SO ORDERED.

Facts:
On June 8, 1963, respondent Judge Elias Asuncion rendered a decision in Civil Case 3010 final for lack of an appeal.

On October 16, 1963, a project of partition was submitted to Judge Asuncion. The project of partition of lots was not
signed by the parties themselves but only by the respective counsel of plaintiffs and petitioner Bernardita R. Macariola.
The Judge approved it in his order dated October 23, 1963.

One of the lots in the project of partition was Lot 1184, which was subdivided into 5 lots denominated as Lot 1184 A – E.
Dr. Arcadio Galapon bought Lot 1184-E on July 31, 1964, who was issued transfer of certificate of Title No, 2338 of the
Register of Deeds of Tacloban City. On March 6, 1965, Galapon sold a portion of the lot to Judge Asuncion and his wife.
147

On August 31, 1966, spouses Asuncion and Galapon conveyed their respective shares and interest inn Lot 1184-E to the
Traders Manufacturing & Fishing Industries Inc. Judge Asuncion was the President and his wife Victoria was the
Secretary. The Asuncions and Galapons were also the stockholder of the corporation.

Respondent Macariola charged Judge Asuncion with "Acts unbecoming a Judge" for violating the following provisions:
Article 1491, par. 5 of the New Civil Code, Article 14, par. 1 & 5 of the Code of Commerce, Sec. 3 par H of RA 3019 also
known as the Anti-Graft & Corrupt Practice Act., Sec. 12, Rule XVIII of the Civil Service Rules and Canon 25 of the Canons
of Judicial Ethics.

On November 2, 1970 a certain Judge Jose D. Nepomuceno dismissed the complaints filed against Asuncion.

Issue:
Whether or Not the respondent Judge violated the mentioned provisions.

Ruling:
No. Judge Asuncion did not violate the mentioned provisions constituting of "Acts unbecoming a Judge" but was
reminded to be more discreet in his private and business activities.

Respondent Judge did not buy the lot 1184-E directly on the plaintiffs in Civil Case No. 3010 but from Dr. Galapon who
earlier purchased the lot from 3 of the plaintiffs. When the Asuncion bought the lot on March 6, 1965 from Dr. Galapon
after the finality of the decision which he rendered on June 8, 1963 in Civil Case No 3010 and his two orders dated
October and November, 1963. The said property was no longer the subject of litigation.

In the case at bar, Article 14 of Code of Commerce has no legal and binding effect and cannot apply to the respondent.
Upon the sovereignty from the Spain to the US and to the Republic of the Philippines, Art. 14 of this Code of Commerce,
which sourced from the Spanish Code of Commerce, appears to have been abrogated because whenever there is a
change in the sovereignty, political laws of the former sovereign are automatically abrogated, unless they are reenacted
by Affirmative Act of the New Sovereign.

Asuncion cannot also be held liable under the par. H, Sec. 3 of RA 3019, citing that the public officers cannot partake in
any business in connection with this office, or intervened or take part in his official capacity. The Judge and his wife had
withdrawn on January 31, 1967 from the corporation and sold their respective shares to 3rd parties, and it appears that
the corporation did not benefit in any case filed by or against it in court as there was no case filed in the different
branches of the Court of First Instance from the time of the drafting of the Articles of Incorporation of the corporation
on March 12, 1966 up to its incorporation on January 9, 1967. The Judge realized early that their interest in the
corporation contravenes against Canon 25.

3. Ruffy vs. Chief of Staff (G.R. No. L-533, August 20, 1946)

RAMON RUFFY, ET AL., petitioners,

vs.
THE CHIEF OF STAFF, PHILIPPINE ARMY, ET AL., respondents.

This was a petition for prohibition, praying that the respondents, the Chief of Staff and the General Court Martial of the
Philippine Army, be commanded to desist from further proceedings in the trial of petitioners before that body.
Preliminary injunction having been denied by us and the General Court Martial having gone ahead with the trial, which
eventually resulted in the acquittal of one of the defendants, Ramon Ruffy, the dismissal of the case as to another,
Victoriano Dinglasan, and the conviction of Jose L. Garcia, Prudente M. Francisco, Dominador Adeva and Andres Fortus,
the last-named four petitioners now seek in their memorandum to convert the petition into one for certiorari, with the
prayer that the records of the proceedings before the General Court Martial be ordered certified to this court for review.

The ground of the petition was that the petitioners were not subject to military law at the time the offense for which
they had been placed on trial was committed. In their memorandum they have raised an additional question of law —
that the 93d Article of War is unconstitutional.

An outline of the petitioner's previous connection with the Philippine Army, the Philippine Constabulary, and/or with
guerrilla organizations will presently be made. This outline is based on allegations in the petition and the answer, and on
exhibits attached thereto and to the parties' memoranda, exhibits which were offered in the course of the oral argument
and admitted without objection. The said exhibits are public documents certified by the officials who had them in
custody in their official capacity. They are presumed to be authentic, as we have no doubt they are.
148

It appears that at the outbreak of war on December 8, 1941, Ramon Ruffy was the Provincial Commander, Prudente M.
Francisco, a junior officer, and Andres Fortus, a corporal, all of the Philippine Constabulary garrison stationed in
Mindoro. When, on February 27, 1942, the Japanese forces landed in Mindoro, Major Ruffy retreated to the mountains
instead of surrendering to the enemy, disbanded his company, and organized and led a guerrilla outfit known as Bolo
Combat team of Bolo Area. Lieutenant Francisco, Corporal Fortus and Jose L. Garcia, the last then a civilian joined Major
Ruffy's organization towards the latter part of 1942, while Dominador Adeva and Victoriano Dinglasan, then likewise
civilians, became its members some time in 1943..

Meanwhile, Brigadier General Macario Peralta, Jr., then a lieutenant colonel of the Philippine Army, also took to the hills
of Panay and led the operation of the 6th Military District, one of the districts into which the Philippine Army had been
divided before the war. About November, 1942, Colonel Peralta succeeded in contacting the General Headquarters of
General MacArthur in Australia as the result of which on February 13, 1943, the 6th Military District was recognized by
the Headquarters of the Southwest Pacific Area as a military unit and part of its command.

Even before General MacArthur's recognition of the 6th Military District Colonel Peralta had extended its sphere of
operation to comprise Mindoro and Marinduque, and had, on January 2, 1943, named Major Ruffy as Acting
Commander for those two provinces and Commanding Officer of the 3rd Battalion, 66 Infantry 61st Division, Philippine
Corps. After the recognition, 2d Lieut. Prudente M. Francisco, by virtue of Special Orders No. 99, dated November 2,
1943, and signed by Enrique L. Jurado, Major, OSE, Commanding, was assigned as S-3 in the Bolo Area. Major, later
Lieut. Col., Jurado, it should be noted, had been dispatched by the 6th Military District to Mindoro to assume
operational control supervision over the Bolo Area unit and to make and direct the necessary report to the
Headquarters, 6th Military District, in Panay. On April 26, 1944, by General Orders No. 40 of the 6th Military District, 2d
Lieutenant Francisco was promoted to the rank of 1st Lieutenant (Brevet), effective April 15, 1944, subject to approval
by the President of the Philippines, and was re-assigned to the Bolo Area. As to Andres Fortus he was assigned to the
same Bolo Area as probationary 3d lieutenant for two-month probationary training, by the Headquarters of the 6th
Military District, as per Special Orders No. 70, dated May 15, 1944.

According to a memorandum of the Chief of Staff, 6th Military District, dated January 1943, and signed by L.R. Relunia,
Lieut. Col., CE, Chief of Staff, Jose L. Garcia and Dominador Adeva were appointed 3d lieutenants, infantry as of
December 31, 1942. Garcia later was promoted to the rank of captain, effective March 15, 1943, as per Special Orders
No. 82, issued in the field, 6th Military District, and dated August 28, 1943. On May 24, 1943, Jose L. Garcia took his oath
before Captain Esteban P. Beloncio, then Acting Commanding Officer, 3d Battalion, 66th Infantry Regiment, 61st
Division, 6th Military District.

As has been said, the 6th Military District sent Lieut. Col. Enrique L. Jurado to be Commanding Officer of the Bolo
Combat Team in Mindoro and to undertake other missions of Military character. Pursuant to instructions, Colonel
Jurado on November 2, 1943, assigned Major Ruffy as Commanding Officer of the Bolo Area with 3d Lieut. Dominador
Adeva and 2d Lieut. Prudente M. Francisco as members of his staff and Victoriano Dinglasan as Finance Officer, as per
Special Orders No. 99 dated November 2, 1943. In a memorandum of Colonel Jurado for Major Ruffy bearing date 25
June, 1944, it was stated that Captain Garcia had been given P5,000 for palay and Lieut. Francisco P9,000, P5,000 for
palay and P4,000 for salary of the personnel B. Company.

A change in the command of the Bolo Area was effected by Colonel Jurado on June 8, 1944: Major Ruffy was relieved of
his assignment as Commanding Officer, Bolo Battalion, and Capt. Esteban P. Beloncio was put in Ruffy's place. On
October 19, 1944, Lieut. Col. Jurado was slain allegedly by the petitioners. After the commission of this crime, the
petitioners, it is alleged, seceded from the 6th Military District. It was this murder which gave rise to petitioner's trial,
the legality of which is now being contested.

On July 26, 1941, the President of the Untied States issued a military order the pertinent paragraph of which stated: ". . .
as Commander in Chief of the Army and Navy of the United States, I hereby call and order into the service of the armed
forces of the United States Army, for the period of the existing emergency, and place under the command of the general
officer, United States Army, to be designated by the Secretary of War, from time to time, all of the organized military
forces of the Government of the Commonwealth." Following the issuance of President Roosevelt's order General
Douglas MacArthur was appointed Commanding General of the United States Armed Forces in the Far East.

It is contended, in behalf of Captain Francisco and Lieutenant Fortus, that "by the enemy occupation of the Philippines,
the National Defense Act and all laws and regulations creating and governing the existence of the Philippine Army
including the Articles of War, were suspended and in abeyance during such belligerent occupation."

The paragraph quoted in the petitioner's memorandum from Winthrop's Military Law and Precedents and the
subsequent paragraph which has been omitted furnish a complete answer to petitioner's contention of the Philippines
by Japanese forces, the officers and men of the Philippine Army did not cease to be fully in the service, though in a
measure,' only in a measure, they were not subject to the military jurisdiction, if they were not active duty. In the latter
149

case, like officers and soldiers on leave of absence or held as prisoners of war, they could not be held guilty of a breach
of the discipline of the command or of a neglect of duty, or disobedience of orders, or mutiny, or subject to a military
trial therefor; but for an act unbecoming an officer and a gentleman, or an act which constitutes an offense of the class
specified in the 95th Article of War, they may in general be legally held subject to military jurisdiction and trial. "So a
prisoner of war, though not subject, while held by the enemy, to the discipline of his own army, would, when exchanged
of paroled, be not exempt from liability for such offenses as criminal acts or injuriuos conduct committed during his
captivity against other officers or soldiers in the same status." (Winthrop's Military Law and Precedents, 2d Edition, pp.
91, 92.)

The rule invoked by counsel, namely, that laws of political nature or affecting political relations are considered
superseded or in abeyance during the military occupation, is intended for the governing of the civil inhabitants of the
occupied territory. It is not intended for and does not bind the enemies in arms. This is self-evident from the very nature
of things. The paradox of a contrary ruling should readily manifest itself. Under the petitioner's theory the forces of
resistance operating in an occupied territory would have to abide by the outlawing of their own existence. They would
be stripped of the very life-blood of an army, the right and the ability to maintain order and discipline within the
organization and to try the men guilty of breach thereof.

The surrender by General Wainright of the Fil-American Forces does not profit the petitioner's who were former
members of the Philippine Constabulary any more than does the rule of war or international law they cite. The fall of
Bataan and Corregidor did not end the war. It did not, legally or otherwise, keep the United States and the
Commonwealth of the Philippines from organizing a new army, regular or irregular, out of new men and men in the old
service who had refused to surrender or who having surrendered, had decided to carry on the fight through other
diverse means and methods. The fall of Corregidor and Bataan just marked the beginning of the gigantic preparation for
the gigantic drive that was to fight its way to and beyond the Philippines in fulfillment of General MacArthur's classic
promise, "I shall return." The heroic role which the guerrillas played in that preparation and in the subsequent liberation
of the Philippines is now history.

Independently of their previous connection with the Philippine Army and the Philippine Constabulary, Captain Francisco
and Lieutenant Fortus as well as Major Garcia and Lieutenant Adeva were subject to military jurisdiction.

The 2d Article of War defines and enumerates the persons subject to military law as follows:

Art. 2. Persons Subject to Military Law. — The following persons are subject to these articles and shall be understood as
included in the term "any person subject to military law" or "persons subject to military law," whenever used in these
articles:

(a) All officers, members of the Nurse Corps and soldiers belonging to the Regular Force of the Philippine Army; all
reservists, from the dates of their call to active duty and while on such active duty; all trainees undergoing military
instructions; and all other persons lawfully called, drafted, or order to obey the same;

(b) Cadets, flying cadets, and probationary third lieutenants;

(c) All retainers to the camp and all persons accompanying or serving with the Army of the Philippines in the field in time
of war or when martial law is declared though not otherwise subject to these articles;

(d) All persons under sentences adjudged by courts-martial.

It is our opinion that the petitioners come within the general application of the clause in sub-paragraph (a); "and all
other persons lawfully called, drafted, or ordered into, or to duty for training in, the said service, from the dates they are
required by the terms of the call, draft, or order to obey the same." By their acceptance of appointments as officers in
the Bolo Area from the General Headquarters of the 6th Military District, they became members of the Philippine Army
amendable to the Articles of War. The Bolo Area, as has been seen, was a contigent of the 6th Military District which, as
has also been pointed out, had been recognized by and placed under the operational control of the United States Army
in the Southwest Pacific. The Bolo Area received supplies and funds for the salaries of its officers and men from the
Southwest Pacific Command. As officers in the Bolo Area and the 6th Military District, the petitioners operated under
the orders of duly established and duly appointed commanders of the United States Army.

The attitude of the enemy toward underground movements did not affect the military status of guerrillas who had been
called into the service of the Philippine Army. If the invaders refused to look upon guerrillas, without distinctions, as
legitimate troops, that did not stop the guerillas who had been inducted into the service of the Philippine Army from
being component parts thereof, bound to obey military status of guerrillas was to be judged not by the concept of the
army of the country for which they fought.
150

The constitutionality of the 93d Article of War is assailed. This article ordains "that any person subject to military law
who commits murder in time of was shall suffer death or imprisonment for life, as the court martial may direct." It is
argued that since "no review is provided by that law to be made by the Supreme Court, irrespective of whether the
punishment is for life imprisonment or death", it violates Article VIII, section 2, paragraph 4, of the Constitution of the
Philippines which provides that "the National Assembly may not deprive the Supreme Court of its original jurisdiction
over all criminal cases in which the penalty imposed is death or life imprisonment."

We think the petitioners are in error. This error arose from failure to perceive the nature of courts martial and the
sources of the authority for their creation.

Courts martial are agencies of executive character, and one of the authorities "for the ordering of courts martial has
been held to be attached to the constitutional functions of the President as Commander in Chief, independently of
legislation." (Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Unlike courts of law, they are not a portion of
the judiciary. "The Supreme Court of the United States referring to the provisions of the Constitution authorizing
Congress to provide for the government of the army, excepting military offenses from the civil jurisdiction, and making
the President Commander in Chief, observes as follows: "These provisions show that Congress has the power to provide
for the trial and punishment of military and naval offenses in the manner then and now practiced by civilized nations,
and that the power to do so is given without any connection between it and the 3d Article of the United States; indeed
that the two powers are entirely independent of each other."

"Not belonging to the judicial branch of the government, it follows that courts-martial must pertain to the executive
department; and they are in fact simply instrumentalities of the executive power, provided by Congress 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." (Winthrop's Military Law and
Precedents, 2d Edition, p. 49.) Of equal interest Clode, 2 M. F., 361, says of these courts in the British law: "It must never
be lost sight of that the only legitimate object of military tribunals is to aid the Crown to maintain the discipline and
government of the Army." (Footnote No. 24, p. 49, Winthrop's Military Law and Precedents, 2d Edition.)

Our conclusion, therefore, is that the petition has no merit and that it should be dismissed with costs. It is so ordered.
151

4. Commissioner vs. Robertson (143 SCRA 397)

G.R. Nos. 70116-19 August 12, 1986

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
FRANK ROBERTSON, JAMES W. ROBERTSON, ROBERT H. CATHEY, JOHN L. GARRISON AND THE COURT OF TAX
APPEALS, respondents.

This is a Petition for Review of the consolidated decision dated 14 December 1984 of the Court of Tax Appeals (C.T.A.) in
C.T.A. Case No. 2735, entitled "Frank Robertson vs. Coconut commissioner of Internal Revenue," C.T.A. Case No. 2736,
entitled "James W. Robertson vs. Commissioner of Internal Revenue;" C.T.A. Case No. 2738, entitled "Robert H. Cathey
vs. Commissioner of Internal Revenue" and C.T.A. Case No. 2739, entitled "John L. Garrison vs. Commissioner of Internal
Revenue," cancelling the assessments for deficiency income tax for taxable years 1969-1972, inclusive of interests and
penalties against:

Frank Robertson (CTA Case No. 2735)-P l32,750.65

James W. Robertson (CTA Case No. 2736)-190,433.17

Robert H. Cathey (CTA Case No. 2738)-92,013.17

John L. Garrison (CTA Case No. 2739)-196,754.32

The above-entitled cases are consolidated as these involve similar or Identical fact situations on a question involving the
scope of the tax exemption provision in Article XII, Par. 2, of the RP-US Military Bases Agreement of 1947, quoted as
follows:

2. No national of the United States serving in or employed in the Philippines in connection with the construction,
maintenance, operation or defense of the bases and residing in the Philippines by reason only of such employment, or
his spouse and minor children and dependent parents of either spouse, shall be liable to pay income tax in the
Philippines except in respect of income derived from Philippine sources or sources other than the United States sources.

The Court of Tax Appeals found the following undisputed antecedent facts:

Petitioner Frank Robertson (CTA Case No. 2735) is an American citizen born in the Philippines on July 8, 1924. He resided
in the Philippines until repatriated to the United States in 1945 and took residence at Long Beach, California. Soon after
he was employed by the U.S. Federal Government with a job at the U.S. Navy. His work brought him to the U.S. Navy's
various installations overseas with eventual assignment at the U.S. Naval Ship Repair Facility at Subic Bay, Olongapo,
Philippines, in 1962.

Like his brother Frank Robertson, petitioner James Robertson (CTA Case No. 2736) was born in the Philippines on
December 22, 1918 and had since resided in this country until repatriated to the United States in 1945 and there,
established his domicile. He landed a job with the U.S. Navy Shipyard at Long Beach, California as a U.S. Federal Civil
Service employee. He returned to the Philippines in 1958 with assignment at the U.S. Naval Base at Subic Bay, Olongapo,
and has since remained thru 1972.

In CTA Case No. 2738, petitioner Robert H. Cathey is a United States born citizen who first came to the Philippines with
the U.S. liberation force in 1944, and upon discharge from the military service in 1946 turned a U.S. Navy's civilian
employee with station at Makati, Metro Manila.

Petitioner John Garrison (CTA Case No. 2739) is a Philippine born American citizen also repatriated to the United States
in 1945 establishing his domicile at San Francisco, California. Soon after he was employed by the U.S. Federal
Government in its military installations. He returned to the Philippines in 1952 assigned at the U.S. Naval Base, Subic
Bay, Philippines.

All told, the petitioners are citizens of the United States; holders of American passports and admitted as Special
Temporary Visitors under Section 9 (a) visa of the Philippine Immigration Act of 1940, as amended; civilian employees in
the U.S. Military Base in the Philippines in connection with its construction, maintenance, operation, and defense; and
incomes are solely derived from salaries from the U.S. government by reason of their employment in the U.S. Bases in
the Philippines." (pp. 76-78, Record)
152

The Court a quo after due hearing, rendered its judgment in favor of respondents cancelling and setting aside the
assessments for deficiency income taxes of respondents for the taxable years 1969-1972, inclusive of interests and
penalties.

Petitioner Commissioner of Internal Revenue now comes before Us assigning one alleged error, to wit:

The Court of Tax Appeals erred in holding that private respondents are, by virtue of Article XII, Par 2 of the RP-US
Military Bases Agreement of 1947, exempt from Philippine income tax.

Petitioner, to support his contentions, argues that the laws granting tax exemptions must be construed in strictissimi
juris against the taxpayer, and that the burden of proof is on private respondents, Frank Robertson, James W.
Robertson, Robert J. Cathey and John L. Garrison to establish that their residence in the country is by reason only of
their employment in connection with the construction, maintenance, operation or defense of the U.S. Bases in the
Philippines as provided for under Article XII, Par. 2 of the RP-US Military Bases Agreement of 1947 (supra). Petitioner
avers in his Brief, dated February 4, 1986, filed before this Court, that private respondents have failed to discharge this
burden, alleging, among other things, (1) that both respondents Frank Robertson and James Robertson, who are
brothers, own residential properties respectively declared in the name of James Robertson and in the name of Frank
Robertson's wife for taxation purposes; (2) that James Robertson is now a retired Federal Civil Service employee and
presently living with his family in Olongapo City, which circumstance indicate that respondents' residence in this country
is not by reason only of his employment in the U.S. naval base; (4) that respondent Robert H. Cathey owns the house at
Quezon City where he presently resides; (5) that the stay of respondent John Garrison who returned to the Philippines in
the year 1948 is uninterrupted except for a two-year stint in Okinawa in the years 1950 to 1952; (6) that the issuance in
San Francisco, California of a Voter's Certificate to respondent John Garrison in 1945 does not in any way indicate that
he was a U.S. resident, in the years 1969 to 1972.

The aforegoing facts were the main argument of petitioner in support of his contentions against respondents. Such
contentions do not impress Us as meritorious.

The law and the facts of the case are so clear that there is no room left for Us to doubt the validity of private
respondents' defense. In order to avail oneself of the tax exemption under the RP-US Military Bases Agreement: he must
be a national of the United States employed in connection with the construction, maintenance, operation or defense, of
the bases, residing in the Philippines by reason of such employment, and the income derived is from the U.S.
Government (Art. XII par. 2 of PI-US Military Bases Agreement of 1947). Said circumstances are all present in the case at
bar. Likewise, We find no justifiable reason to disturb the findings and rulings of the lower court in its decision reading as
follows:

We find nothing in the said treaty provision that justified the lifting of the tax exemption privilege of the petitioners
(private respondents herein). Respondent (petitioner herein) has grafted a meaning other than that conveyed by the
plain and clear tenor of the Agreement. An examination of the words used and the circumstances in which they were
used, shows the basic intendment "to exempt all U.S. citizens working in the Military Bases from the burden of paying
Philippine Income Tax without distinction as to whether born locally or born in their country of origin." Ubi lex non
distinguit nec nos distinguere debemos (one must not distinguish where the law does not distinguish) (Emphasis
supplied). Moreover, the ruling has altered a satisfactorily settled application of the exemption clause and has fallen
short of measuring up to the familiar principle of International Law that, "The obligation to fulfill in good faith a treaty
engagement requires that the stipulations be observed in their spirit as well as according to their letter and that what
has been promised be performed without evasion, or subterfuge, honestly and to the best of the ability of the party
which made the promise." (Kunz, The Meaning and Range of the Norm (Pacta Sunt Servanda, 29 A.J.I.L. 180 (1945); cited
in Freidmann, Lisstzyn, Pugh, International Law (1969) 329). Somehow, the ruling becomes an anacoluthon and a
persiflage.

It bears repeating as so disclosed in the records that the petitioners together with families upon repatriation in 1945 had
since acquired domicile and residency in the United States. And, obtained employment with the United States Federal
Service. Not until after several years of a hiatus, petitioners did return to the Philippines not so much of honoring a
pledge nor of sentimental journey but by reason of taking up assigned duties with the United States military bases in the
Philippines where they were gainfully employed by the U.S. Federal Government. The situation of the petitioners is of no
different mold as of the rest of the U.S. civilian employees who continued to enjoy the benefits of tax exemption under
the Agreement, Petitioners' circumstances before the questioned ruling remained obtaining thru the taxable years 1969-
1972. It appears too much of a stretch to hold petitioners straight-jacketed to an irreversible situs of birth constraint and
by reason thereof deny altogether any opportunity to a serendipitous enjoyment of a tax relief accorded in the
Agreement. Such a random quirk of pirouette in the tax treatment fags sharply at odds with the shared expectations of
the high contracting parties. This Court will not deem itself authorized to depart from the plain meaning of the tax
exemption provision so explicit in terms and so searching in extent. (Emphasis supplied) This does not however foreclose
153

the possibility of petitioners' coming to roost in the country contingent upon the termination of their tour of duty, but
only then may the bridge be crossed for tax purposes. (pp. 82-84, Record)

The circumstances in the case of Reagan vs. Commissioner of Internal Revenue (30 SCRA 968) relied upon by petitioner
in support of the government's claim are different from the circumstances of the case herein and the ruling obtained in
the former case cannot be invoked or applied in support of petitioner's contention. A cursory reading of said case shows
that William Reagan was at one time a civilian employee of an American corporation providing technical assistance to
the U.S. Air Force in the Philippines. He questioned the payment of the income tax assessed on him by respondent
Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to a member of the US
Marine Corps., the transaction having taken place at the Clark Field Air Base in Pampanga. It was his contention that in
legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax.
Clearly, the facts in said case are different from those obtaining in the present suit.

WHEREFORE, premises considered, the appealed decision of the Court of Tax Appeals is AFFIRMED and the petition for
review is hereby DISMISSED. No costs.

SO ORDERED.

5. Reagan vs. Commissioner of Internal Revenue (30 SCRA 968)

G.R. No. L-26379      December 27, 1969

WILLIAM C. REAGAN, ETC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete, Solicitor Lolita O.
Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.

A question novel in character, the answer to which has far-reaching implications, is raised by petitioner William C.
Reagan, at one time a civilian employee of an American corporation providing technical assistance to the United States
Air Force in the Philippines. He would dispute the payment of the income tax assessed on him by respondent
Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to a member of the United
States Marine Corps, the transaction having taken place at the Clark Field Air Base at Pampanga. It is his contention,
seriously and earnestly expressed, that in legal contemplation the sale was made outside Philippine territory and
therefore beyond our jurisdictional power to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify by invoking,
mistakenly as will hereafter be more fully shown an observation to that effect in a 1951 opinion,  1 petitioner ignoring
that such utterance was made purely as a flourish of rhetoric and by way of emphasizing the decision reached, that the
trading firm as purchaser of army goods must respond for the sales taxes due from an importer, as the American armed
forces being exempt could not be taxed as such under the National Internal Revenue Code. 2 Such an assumption,
inspired by the commendable aim to render unavailing any attempt at tax evasion on the part of such vendee, found
expression anew in a 1962 decision,3 coupled with the reminder however, to render the truth unmistakable, that "the
areas covered by the United States Military Bases are not foreign territories both in the political and geographical
sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is moreover obiter. It certainly
cannot control the resolution of the specific question that confronts us. We declare our stand in an unequivocal manner.
The sale having taken place on what indisputably is Philippine territory, petitioner's liability for the income tax due as a
result thereof was unavoidable. As the Court of Tax Appeals reached a similar conclusion, we sustain its decision now
before us on appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started the recital of facts
thus: "It appears that petitioner, a citizen of the United States and an employee of Bendix Radio, Division of Bendix
Aviation Corporation, which provides technical assistance to the United States Air Force, was assigned at Clark Air Base,
Philippines, on or about July 7, 1959 ... . Nine (9) months thereafter and before his tour of duty expired, petitioner
imported on April 22, 1960 a tax-free 1960 Cadillac car with accessories valued at $6,443.83, including freight, insurance
and other charges."4 Then came the following: "On July 11, 1960, more than two (2) months after the 1960 Cadillac car
was imported into the Philippines, petitioner requested the Base Commander, Clark Air Base, for a permit to sell the car,
which was granted provided that the sale was made to a member of the United States Armed Forces or a citizen of the
United States employed in the U.S. military bases in the Philippines. On the same date, July 11, 1960, petitioner sold his
car for $6,600.00 to a certain Willie Johnson, Jr. (Private first class), United States Marine Corps, Sangley Point, Cavite,
154

Philippines, as shown by a Bill of Sale . . . executed at Clark Air Base. On the same date, Pfc. Willie (William) Johnson, Jr.
sold the car to Fred Meneses for P32,000.00 as evidenced by a deed of sale executed in Manila." 5
As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after deducting the landed cost
of the car as well as the personal exemption to which petitioner was entitled, fixed as his net taxable income arising
from such transaction the amount of P17,912.34, rendering him liable for income tax in the sum of P2,979.00. After
paying the sum, he sought a refund from respondent claiming that he was exempt, but pending action on his request for
refund, he filed the case with the Court of Tax Appeals seeking recovery of the sum of P2,979.00 plus the legal rate of
interest.
As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the said income tax of
P2,979.00 was legally collected by respondent for petitioner." 6 After discussing the legal issues raised, primarily the
contention that the Clark Air Base "in legal contemplation, is a base outside the Philippines" the sale therefore having
taken place on "foreign soil", the Court of Tax Appeals found nothing objectionable in the assessment and thereafter the
payment of P2,979.00 as income tax and denied the refund on the same. Hence, this appeal predicated on a legal theory
we cannot accept. Petitioner cannot make out a case for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner apparently feeling
justified in his refusal to defer to basic postulates of constitutional and international law, induced no doubt by the
weight he would accord to the observation made by this Court in the two opinions earlier referred to. To repeat, scant
comfort, if at all is to be derived from such an obiter dictum, one which is likewise far from reflecting the fact as it is.
Nothing is better settled than that the Philippines being independent and sovereign, its authority may be exercised over
its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its
commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms. That is the
extent of its jurisdiction, both territorial and personal. Necessarily, likewise, it has to be exclusive. If it were not thus,
there is a diminution of its sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its sovereign rights.
There may thus be a curtailment of what otherwise is a power plenary in character. That is the concept of sovereignty as
auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force due to which it has the
exclusive capacity of legal self-determination and self-restriction." 7 A state then, if it chooses to, may refrain from the
exercise of what otherwise is illimitable competence.
Its laws may as to some persons found within its territory no longer control. Nor does the matter end there. It is not
precluded from allowing another power to participate in the exercise of jurisdictional right over certain portions of its
territory. If it does so, it by no means follows that such areas become impressed with an alien character. They retain
their status as native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does not
disappear. So it is with the bases under lease to the American armed forces by virtue of the military bases agreement of
1947. They are not and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with impressive
unanimity. We start with the citation from Chief Justice Marshall, announced in the leading case of  Schooner Exchange
v. M'Faddon,8 an 1812 decision: "The jurisdiction of the nation within its own territory is necessarily exclusive and
absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external
source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that
sovereignty to the same extent in that power which could impose such restriction." After which came this paragraph:
"All exceptions, therefore, to the full and complete power of a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision, 9 affirmed the fundamental principle of everyone within the territorial domain of
a state being subject to its commands: "For undoubtedly every person who is found within the limits of a government,
whether the temporary purposes or as a resident, is bound by its laws." It is no exaggeration then for Justice Brewer to
stress that the United States government "is one having jurisdiction over every foot of soil within its territory, and acting
directly upon each [individual found therein]; . . ." 10
Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van Devanter. Thus: "It now is
settled in the United States and recognized elsewhere that the territory subject to its jurisdiction includes the land areas
under its dominion and control the ports, harbors, bays, and other in closed arms of the sea along its coast, and a
marginal belt of the sea extending from the coast line outward a marine league, or 3 geographic miles." 11 He could cite
moreover, in addition to many American decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson,
Westlake, Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as interpreted and
applied by the United States, made clear that not even the embassy premises of a foreign power are to be considered
outside the territorial domain of the host state. Thus: "The ground occupied by an embassy is not in fact the territory of
the foreign State to which the premises belong through possession or ownership. The lawfulness or unlawfulness of acts
there committed is determined by the territorial sovereign. If an attache commits an offense within the precincts of an
embassy, his immunity from prosecution is not because he has not violated the local law, but rather for the reason that
the individual is exempt from prosecution. If a person not so exempt, or whose immunity is waived, similarly commits a
crime therein, the territorial sovereign, if it secures custody of the offender, may subject him to prosecution, even
though its criminal code normally does not contemplate the punishment of one who commits an offense outside of the
national domain. It is not believed, therefore, that an ambassador himself possesses the right to exercise jurisdiction,
155

contrary to the will of the State of his sojourn, even within his embassy with respect to acts there committed. Nor is
there apparent at the present time any tendency on the part of States to acquiesce in his exercise of it." 12
2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect that it should
have held that the Clark Air Force is foreign soil or territory for purposes of income tax legislation is clearly without
support in law. As thus correctly viewed, petitioner's hope for the reversal of the decision completely fades away. There
is nothing in the Military Bases Agreement that lends support to such an assertion. It has not become foreign soil or
territory. This country's jurisdictional rights therein, certainly not excluding the power to tax, have been preserved. As to
certain tax matters, an appropriate exemption was provided for.
Petitioner could not have been unaware that to maintain the contrary would be to defy reality and would be an affront
to the law. While his first assigned error is thus worded, he would seek to impart plausibility to his claim by the
ostensible invocation of the exemption clause in the Agreement by virtue of which a "national of the United States
serving in or employed in the Philippines in connection with the construction, maintenance, operation or defense of the
bases and residing in the Philippines only by reason of such employment" is not to be taxed on his income unless
"derived from Philippine source or sources other than the United States sources." 13 The reliance, to repeat, is more
apparent than real for as noted at the outset of this opinion, petitioner places more faith not on the language of the
provision on exemption but on a sentiment given expression in a 1951 opinion of this Court, which would be made to
yield such an unwarranted interpretation at war with the controlling constitutional and international law principles. At
any rate, even if such a contention were more adequately pressed and insisted upon, it is on its face devoid of merit as
the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court affirmed a decision rendered about
seven months previously,15 holding liable as an importer, within the contemplation of the National Internal Revenue
Code provision, the trading firm that purchased army goods from a United States government agency in the Philippines.
It is easily understandable why. If it were not thus, tax evasion would have been facilitated. The United States forces that
brought in such equipment later disposed of as surplus, when no longer needed for military purposes, was beyond the
reach of our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the earlier opinion. He
could have stopped there. He chose not to do so. The transaction having occurred in 1946, not so long after the
liberation of the Philippines, he proceeded to discuss the role of the American military contingent in the Philippines as a
belligerent occupant. In the course of such a dissertion, drawing on his well-known gift for rhetoric and cognizant that he
was making an as if  statement, he did say: "While in army bases or installations within the Philippines those goods were
in contemplation of law on foreign soil."
It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes as an importer by
the purchaser, could have been reached without any need for such expression as that given utterance by Justice Tuason.
Its value then as an authoritative doctrine cannot be as much as petitioner would mistakenly attach to it. It was
clearly obiter not being necessary for the resolution of the issue before this Court. 16 It was an opinion "uttered by the
way."17 It could not then be controlling on the question before us now, the liability of the petitioner for income tax
which, as announced at the opening of this opinion, is squarely raised for the first time. 18
On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to be disregarded,
that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are
used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit
when the very point is presented for decision." 19
Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of Internal Revenue,20 a 1962
decision relied upon by petitioner, put a different complexion on the matter. Again, it was by way of pure
embellishment, there being no need to repeat it, to reach the conclusion that it was the purchaser of army goods, this
time from military bases, that must respond for the advance sales taxes as importer. Again, the purpose that animated
the reiteration of such a view was clearly to emphasize that through the employment of such a fiction, tax evasion is
precluded. What is more, how far divorced from the truth was such statement was emphasized by Justice Barrera, who
penned the Co Po opinion, thus: "It is true that the areas covered by the United States Military Bases are not foreign
territories both in the political and geographical sense." 21
Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by him was in the way
of a legal fiction. Note his stress on "in contemplation of law." To lend further support to a conclusion already
announced, being at that a confirmation of what had been arrived at in the earlier case, distinguished by its sound
appreciation of the issue then before this Court and to preclude any tax evasion, an observation certainly not to be
taken literally was thus given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as it undoubtedly
was, especially so for the purpose intended, namely to stigmatize as without support in law any attempt on the part of a
taxpayer to escape an obligation incumbent upon him. So it was quoted with that end in view in the Co Po case. It
certainly does not justify any effort to render futile the collection of a tax legally due, as here. That was farthest from the
thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of a   fictio juris  in the
science of the law. It was Cardozo who pointed out its value as a device "to advance the ends of justice" although at
times it could be "clumsy" and even "offensive". 22 Certainly, then, while far from objectionable as thus enunciated, this
observation of Justice Tuason could be misused or misconstrued in a clumsy manner to reach an offensive result. To
156

repeat, properly used, a legal fiction could be relied upon by the law, as Frankfurter noted, in the pursuit of legitimate
ends.23 Petitioner then would be well-advised to take to heart such counsel of care and circumspection before invoking
not a legal fiction that would avoid a mockery of the law by avoiding tax evasion but what clearly is a misinterpretation
thereof, leading to results that would have shocked its originator.
The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to the effect that
for income tax purposes the Clark Air Force Base is outside Philippine territory, is utterly without merit. So we have said
earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is, to paraphrase
Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is, whether by design or inadvertence,
to misread it. It certainly is not susceptible of the mischievous consequences now sought to be fastened on it by
petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on the military bases under lease to the
American armed forces could not have been within the contemplation of Justice Tuason. To so attribute such a bizarre
consequence is to be guilty of a grave disservice to the memory of a great jurist. For his real and genuine sentiment on
the matter in consonance with the imperative mandate of controlling constitutional and international law concepts was
categorically set forth by him, not as an obiter but as the rationale of the decision, in People v. Acierto24 thus: "By the
[Military Bases] Agreement, it should be noted, the Philippine Government merely consents that the United States
exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency over
the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed
therein."
Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do not admit of
doubt. Thus: "This provision is not and can not on principle or authority be construed as a limitation upon the rights of
the Philippine Government. If anything, it is an emphatic recognition and reaffirmation of Philippine sovereignty over the
bases and of the truth that all jurisdictional rights granted to the United States and not exercised by the latter are
reserved by the Philippines for itself."25
It is in the same spirit that we approach the specific question confronting us in this litigation. We hold, as announced at
the outset, that petitioner was liable for the income tax arising from a sale of his automobile in the Clark Field Air Base,
which clearly is and cannot otherwise be other than, within our territorial jurisdiction to tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in the way of an
affirmance of the Court of Tax Appeals decision. No useful purpose would be served by discussing the other assigned
errors, petitioner himself being fully aware that if the Clark Air Force Base is to be considered, as it ought to be and as it
is, Philippine soil or territory, his claim for exemption from the income tax due was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. We thus manifest
fealty to a pronouncement made time and time again that the law does not look with favor on tax exemptions and that
he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.26 Petitioner had not done so. Petitioner cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of P2,979.00 as the income
tax paid by petitioner is affirmed. With costs against petitioner.

FACTS:
Petitioner Reagan, a civilian employee of an American corporation providing technical assistance to the US Air Force in
the Philippines, questioned the payment of the income tax assessed on him by respondent CIR on an amount realized by
him on a sale of his automobile to a member of the US Marine Corps, the transaction having taken place at the Clark
Field Air Base at Pampanga. It is his contention, that in legal contemplation the sale was made outside Philippine
territory and therefore beyond our jurisdictional power to tax. He seeks that an amount of P2,979.00 as the income tax
paid by him be refunded.

ISSUE:
WON the Clark Field Air Base is a foreign property therefore excluded from the power of Philippine taxation.

HELD:
NO. By the [Military Bases] Agreement, it should be noted, the Philippine Government merely consents that the United
States exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency
over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed
therein. This provision is not and can not on principle or authority be construed as a limitation upon the rights of the
Philippine Government.

The State is not precluded from allowing another power to participate in the exercise of jurisdictional right over certain
portions of its territory. If it does so, it by no means follows that such areas become impressed with an alien character.
They retain their status as native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does
not disappear. So it is with the bases under lease to the American armed forces by virtue of the military bases
agreement of 1947. They are not and cannot be foreign territory.
157

6. People vs. Gozo (G.R. No. L-36409, October 26, 1973)

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
LORETA GOZO, defendant-appellant.

Appellant seeks to set aside a judgment of the Court of First Instance of Zambales, convicting her of a violation of an
ordinance of Olongapo, Zambales, requiring a permit from the municipal mayor for the construction or erection of a
building, as well as any modification, alteration, repair or demolition thereof. She questions its validity, or at the very
least, its applicability to her, by invoking due process,1 a contention she would premise on what for her is the teaching
of People v. Fajardo.2 If such a ground were far from being impressed with solidity, she stands on quicksand when she
would deny the applicability of the ordinance to her, on the pretext that her house was constructed within the naval
base leased to the American armed forces. While yielding to the well-settled doctrine that it does not thereby cease to
be Philippine territory, she would, in effect, seek to emasculate our sovereign rights by the assertion that we cannot
exercise therein administrative jurisdiction. To state the proposition is to make patent how much it is tinged with
unorthodoxy. Clearly then, the lower court decision must be affirmed with the sole modification that she is given thirty
days from the finality of a judgment to obtain a permit, failing which, she is required to demolish the same.

The facts are undisputed. As set forth in the decision of the lower court: "The accused bought a house and lot located
inside the United States Naval Reservation within the territorial jurisdiction of Olongapo City. She demolished the house
and built another one in its place, without a building permit from the City Mayor of Olongapo City, because she was told
by one Ernesto Evalle, an assistant in the City Mayor's office, as well as by her neighbors in the area, that such building
permit was not necessary for the construction of the house. On December 29, 1966, Juan Malones, a building and lot
inspector of the City Engineer's Office, Olongapo City, together with Patrolman Ramon Macahilas of the Olongapo City
police force apprehended four carpenters working on the house of the accused and they brought the carpenters to the
Olongapo City police headquarters for interrogation. ... After due investigation, Loreta Gozo was charged with violation
of Municipal Ordinance No. 14, S. of 1964 with the City Fiscal's Office."3 The City Court of Olongapo City found her guilty
of violating Municipal Ordinance No. 14, Series of 1964 and sentenced her to an imprisonment of one month as well as
to pay the costs. The Court of Instance of Zambales, on appeal, found her guilty on the above facts of violating such
municipal ordinance but would sentence her merely to pay a fine of P200.00 and to demolish the house thus erected.
She elevated the case to the Court of Appeals but in her brief, she would put in issue the validity of such an ordinance on
constitutional ground or at the very least its applicability to her in view of the location of her dwelling within the naval
base. Accordingly, the Court of Appeals, in a resolution of January 29, 1973, noting the constitutional question raised,
certified the case to this Court.

There is, as mentioned in the opening paragraph of this petition, no support in law for the stand taken by appellant.

1. It would be fruitless for her to assert that local government units are devoid of authority to require building permits.
This Court, from Switzer v. Municipality of
Cebu,4 decided in 1911, has sanctioned the validity of such measures. It is much too late in the day to contend that such
a requirement cannot be validly imposed. Even appellant, justifiably concerned about the unfavorable impression that
could be created if she were to deny that such competence is vested in municipal corporations and chartered cities, had
to concede in her brief: "If, at all; the questioned ordinance may be predicated under the general welfare clause ... ."5 Its
scope is wide, well-nigh all embracing, covering every aspect of public health, public morals, public safety, and the well
being and good order of the community.6

It goes without saying that such a power is subject to limitations. Certainly, if its exercise is violative of any constitutional
right, then its validity could be impugned, or at the very least, its applicability to the person adversely affected could be
questioned. So much is settled law. Apparently, appellant has adopted the view that a due process question may indeed
be raised in view of what for her is its oppressive character. She is led to such a conclusion, relying on People v.
Fajardo.7 A more careful scrutiny of such a decision would not have led her astray, for that case is easily distinguishable.
The facts as set forth in the opinion follow: "It appears that on August 15, 1950, during the incumbency of defendant-
appellant Juan F. Fajardo as mayor of the municipality of Baao, Camarines Sur, the municipal council passed the
ordinance in question providing as follows: "... 1. Any person or persons who will construct or repair a building should,
before constructing or repairing, obtain a written permit from the Municipal Mayor. ... 2. A fee of not less than P2.00
should be charged for each building permit and P1.00 for each repair permit issued. ... 3. [Penalty]-Any violation of the
provisions of the above, this ordinance, shall make the violator liable to pay a fine of not less than P25 nor more than
P50 or imprisonment of not less than 12 days nor more than 24 days or both, at the discretion of the court. If said
building destroys the view of the Public Plaza or occupies any public property, it shall be removed at the expense of the
owner of the building or house. ... ." Four years later, after the term of appellant Fajardo as mayor had expired, he and
his son-in-law, appellant Babilonia, filed a written request with the incumbent municipal mayor for a permit to construct
a building adjacent to their gasoline station on a parcel of land registered in Fajardo's name, located along the national
highway and separated from the public plaza by a creek ... . On January 16, 1954, the request was denied, for the reason
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among others that the proposed building would destroy the view or beauty of the public plaza ... . On January 18, 1954,
defendants reiterated their request for a building permit ..., but again the request was turned down by the mayor.
Whereupon, appellants proceeded with the construction of the building without a permit, because they needed a place
of residence very badly, their former house having been destroyed by a typhoon and hitherto they had been living on
leased property."8

Clearly then, the application of such an ordinance to Fajardo was oppressive. A conviction therefore for a violation
thereof both in the justice of the peace court of Baao, Camarines Sur as well as in the Court of First Instance could not be
sustained. In this case, on the contrary, appellant never bothered to comply with the ordinance. Perhaps aware of such a
crucial distinction, she would assert in her brief: "The evidence showed that even if the accused were to secure a permit
from the Mayor, the same would not have been granted. To require the accused to obtain a permit before constructing
her house would be an exercise in futility. The law will not require anyone to perform an impossibility, neither in law or
in fact: ... ."9 It would be from her own version, at the very least then, premature to anticipate such an adverse result,
and thus to condemn an ordinance which certainly lends itself to an interpretation that is neither oppressive, unfair, or
unreasonable. That kind of interpretation suffices to remove any possible question of its validity, as was expressly
announced in Primicias v. Fugoso. 10 So it appears from this portion of the opinion of Justice Feria, speaking for the
Court: "Said provision is susceptible of two constructions: one is that the Mayor of the City of Manila is vested with
unregulated discretion to grant or refuse to grant permit for the holding of a lawful assembly or meeting, parade, or
procession in the streets and other public places of the City of Manila; and the other is that the applicant has the right to
a permit which shall be granted by the Mayor, subject only to the latter's reasonable discretion to determine or specify
the streets or public places to be used for the purpose, with a view to prevent confusion by overlapping, to secure
convenient use of the streets and public places by others, and to provide adequate and proper policing to minimize the
risk of disorder. After a mature deliberation, we have arrived at the conclusion that we must adopt the second
construction, that is, construe the provisions of the said ordinance to mean that it does not confer upon the Mayor the
power to refuse to grant the permit, but only the discretion, in issuing the permit, to determine or specify the streets or
public places where the parade or procession may pass or the meeting may be held." 11 If, in a case affecting such a
preferred freedom as the right to assembly, this Court could construe an ordinance of the City of Manila so as to avoid
offending against a constitutional provision, there is nothing to preclude it from a similar mode of approach in order to
show the lack of merit of an attack against an ordinance requiring a permit. Appellant cannot therefore take comfort
from any broad statement in the Fajardo opinion, which incidentally is taken out of context, considering the admitted
oppressive application of the challenged measure in that litigation. So much then for the contention that she could not
have been validly convicted for a violation of such ordinance. Nor should it be forgotten that she did suffer the same fate
twice, once from the City Court and thereafter from the Court of First Instance. The reason is obvious.Such ordinance
applies to her.

2. Much less is a reversal indicated because of the alleged absence of the rather novel concept of administrative
jurisdiction on the part of Olongapo City. Nor is novelty the only thing that may be said against it. Far worse is the
assumption at war with controlling and authoritative doctrines that the mere existence of military or naval bases of a
foreign country cuts deeply into the power to govern. Two leading cases may be cited to show how offensive is such
thinking to the juristic concept of sovereignty, People v. Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13
As was so emphatically set forth by Justice Tuason in Acierto: "By the Agreement, it should be noted, the Philippine
Government merely consents that the United States exercise jurisdiction in certain cases. The consent was given purely
as a matter of comity, courtesy, or expediency. The Philippine Government has not abdicated its sovereignty over the
bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein.
Under the terms of the treaty, the United States Government has prior or preferential but not exclusive jurisdiction of
such offenses. The Philippine Government retains not only jurisdictional rights not granted, but also all such ceded rights
as the United States Military authorities for reasons of their own decline to make use of. The first proposition is implied
from the fact of Philippine sovereignty over the bases; the second from the express provisions of the treaty." 14 There
was a reiteration of such a view in Reagan. Thus: "Nothing is better settled than that the Philippines being independent
and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its
power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to
whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily,
likewise, it has to be exclusive. If it were not thus, there is a diminution of sovereignty." 15 Then came this paragraph
dealing with the principle of auto-limitation: "It is to be admitted any state may, by its consent, express or implied,
submit to a restriction of its sovereign rights. There may thus be a curtailment of what otherwise is a power plenary in
character. That is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the
property of a state-force due to which it has the exclusive capacity of legal self-determination and self-restriction." A
state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable competence." 16 The opinion
was at pains to point out though that even then, there is at the most diminution of jurisdictional rights, not its
disappearance. The words employed follow: "Its laws may as to some persons found within its territory no longer
control. Nor does the matter end there. It is not precluded from allowing another power to participate in the exercise of
jurisdictional right over certain portions of its territory. If it does so, it by no means follows that such areas become
impressed with an alien character. They retain their status as native soil. They are still subject to its authority. Its
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jurisdiction may be diminished, but it does not disappear. So it is with the bases under lease to the American armed
forces by virtue of the military bases agreement of 1947. They are not and cannot be foreign territory." 17

Can there be anything clearer, therefore, than that only a turnabout, unwarranted and unjustified, from what is settled
and orthodox law can lend the slightest degree of plausibility to the contention of absence of administrative jurisdiction.
If it were otherwise, what was aptly referred to by Justice Tuason "as a matter of comity, courtesy, or expediency"
becomes one of obeisance and submission. If on a concern purely domestic in its implications, devoid of any connection
with national security, the Military-Bases Agreement could be thus interpreted, then sovereignty indeed becomes a
mockery and an illusion. Nor does appellant's thesis rest on less shaky foundation by the mere fact that Acierto and
Reagan dealt with the competence of the national government, while what is sought to be emasculated in this case is
the so-called administrative jurisdiction of a municipal corporation. Within the limits of its territory, whatever statutory
powers are vested upon it may be validly exercised. Any residual authority and therein conferred, whether expressly or
impliedly, belongs to the national government, not to an alien country. What is even more to be deplored in this stand
of appellant is that no such claim is made by the American naval authorities, not that it would do them any good if it
were so asserted. To quote from Acierto anew: "The carrying out of the provisions of the Bases Agreement is the
concern of the contracting parties alone. Whether, therefore, a given case which by the treaty comes within the United
States jurisdiction should be transferred to the Philippine authorities is a matter about which the accused has nothing to
do or say. In other words, the rights granted to the United States by the treaty insure solely to that country and can not
be raised by the offender." 18 If an accused would suffer from such disability, even if the American armed forces were
the beneficiary of a treaty privilege, what is there for appellant to take hold of when there is absolutely no showing of
any alleged grant of what is quaintly referred to as administrative jurisdiction? That is all, and it is more than enough, to
make manifest the futility of seeking a reversal.

WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found the accused, Loreta Gozo,
guilty beyond reasonable doubt of a violation of Municipal Ordinance No. 14, series of 1964 and sentencing her to pay a
fine of P200.00 with subsidiary imprisonment in case of insolvency, and modified insofar as she is required to demolish
the house that is the subject matter of the case, she being given a period of thirty days from the finality of this decision
within which to obtain the required permit. Only upon her failure to do so will that portion of the appealed decision
requiringdemolition be enforced. Costs against the accused.