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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

76633 October 18, 1988 EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents. Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law Office for respondent Kathleen D. Saco.

The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the ground of non-exhaustion of administrative remedies. Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is raising are essentially questions of law. 1 Moreover, the private respondent himself has not objected to the petitioner's direct resort to this Court, observing that the usual procedure would delay the disposition of the case to her prejudice. The Philippine Overseas Employment Administration was created under Executive Order No. 797, promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with "original and exclusive jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or by virtue of any law or contract involving Filipino contract workers, including seamen." These cases, according to the 1985 Rules and Regulations on Overseas Employment issued by the POEA, include "claims for death, disability and other benefits" arising out of such employment. 2 The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and consequently his widow's claim should have been filed with Social Security System, subject to appeal to the Employees Compensation Commission. We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985. Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as "employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract. 3 A contract worker is described as "any person working or who has worked overseas under a valid

CRUZ, J.: The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not an overseas worker. Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses.

employment contract and shall include seamen" 4 or "any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment contract and shall include seamen." 5 These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign country. 6 It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Saco's employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order NO. 797. 7 The second is its payment 8 of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas workers." Significantly, the office administering this fund, in the receipt it prepared for the private respondent's signature, described the subject of the burial benefits as "overseas contract worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee. The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although working abroad in its international flights, are not considered overseas workers. If this be so, the petitioner should not have found it necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under the definitions given be considered seamen nor are their appointments coursed through the POEA. The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas

employment. A similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this Court. 10 The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that "all parties to the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date." In the second place, even if it had not done so, the provisions of the said circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State. 11 But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows: ... The governing Board of the Administration (POEA), as hereunder provided shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, notwhat the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court held:

We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving commission a wide and sweeping authority that is not canalized within banks that keep it from overflowing,' in short a clearly profligate and therefore invalid delegation of legislative powers. There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it. 13 Under the sufficient standard test, there must be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. 14 Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally certain. In

the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its nondelegation the exception. The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the "power of subordinate legislation." With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in' the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices."

Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public convenience and welfare" in Calalang v. Williams 17 and "simplicity, economy and efficiency" in Cervantes v. Auditor General, 18 to mention only a few cases. In the United States, the "sense and experience of men" was accepted in Mutual Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v. United States. 20 It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondent's claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that Section C. Compensation and Benefits. 1. In case of death of the seamen during the term of his Contract, the employer shall pay his beneficiaries the amount of: a. P220,000.00 for master and chief engineers b. P180,000.00 for other officers, including radio operators and master electrician c. P 130,000.00 for ratings. 2. It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to whatever benefits which the seaman is entitled to under Philippine laws. ... 3. ... c. If the remains of the seaman is buried in the Philippines, the owners shall pay the

beneficiaries of the seaman an amount not exceeding P18,000.00 for burial expenses. The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July 12,1976, providing an follows: Income Benefits under this Rule Shall be Considered Additional Benefits. All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with such laws. The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy and the specific provisions in the Constitution for the protection of the working class and the promotion of its interest. One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been denied due process because the same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and the Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitumon their respective administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered violative of due process

as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial Relations 21 are observed. Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line with the express mandate of the Labor Code and the principle that those with less in life should have more in law. When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must be counterbalanced by the sympathy and compassion the law must accord the underprivileged worker. This is only fair if he is to be given the opportunity and the right to assert and defend his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner. WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered. Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 103144

April 4, 2001

PHILSA INTERNATIONAL PLACEMENT and SERVICES CORPORATION, petitioner, vs. THE HON. SECRETARY OF LABOR AND EMPLOYMENT, VIVENCIO DE MESA, RODRIGO MIKIN and CEDRIC LEYSON, respondents. GONZAGA-REYES, J.: This is a petition for certiorari from the Order dated November 25, 1991 issued by public respondent Secretary of Labor and Employment. The November 25, 1991 Order affirmed in toto the August 29, 1988 Order of the Philippine Overseas Employment Administration (hereinafter the "POEA") which found petitioner liable for three (3) counts of illegal exaction, two (2) counts of contract substitution and one count of withholding or unlawful deduction from salaries of workers in POEA Case No. (L) 85-05-0370. Petitioner Philsa International Placement and Services Corporation (hereinafter referred to as "Philsa") is a domestic corporation engaged in the recruitment of workers for overseas employment. Sometime in January 1985, private respondents, who were recruited by petitioner for employment in Saudi Arabia, were required to pay placement fees in the amount of P5,000.00 for private respondent Rodrigo L. Mikin and P6,500.00 each for private respondents Vivencio A. de Mesa and Cedric P. Leyson.1 After the execution of their respective work contracts, private respondents left for Saudi Arabia on January 29, 1985. They then began work for AlHejailan Consultants A/E, the foreign principal of petitioner. While in Saudi Arabia, private respondents were allegedly made to sign a second contract on February 4, 1985 which changed some of the provisions of their original contract resulting in the reduction of some of their benefits and privileges.2 On April 1, 1985, their foreign employer allegedly forced them to sign a third contract which increased their work hours from 48 hours to 60 hours a week without any corresponding increase in their basic monthly salary. When they refused to sign this third contract, the services of private respondents were terminated by AlHejailan and they were repatriated to the Philippines.3

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

Upon their arrival in the Philippines, private respondents demanded from petitioner Philsa the return of their placement fees and for the payment of their salaries for the unexpired portion of their contract. When petitioner refused, they filed a case before the POEA against petitioner Philsa and its foreign principal, Al-Hejailan., with the following causes of action: 1. Illegal dismissal; 2. Payment of salary differentials; 3. Illegal deduction/withholding of salaries; 4. Illegal exactions/refund of placement fees; and 5. Contract substitution.
4

Several hearings were conducted before the POEA Hearing Officer on the two aspects of private respondents' complaint. During these hearings, private respondents supported their complaint with the presentation of both documentary and testimonial evidence. When it was its turn to present its evidence, petitioner failed to do so and consequently, private respondents filed a motion to decide the case on the basis of the evidence on record. 8 On the aspects of the case involving money claims arising from the employer-employee relations and illegal dismissal, the POEA rendered a decision dated August 31, 1988 9 , the dispositive portion of which reads: "CONFORMABLY TO THE FOREGOING, judgment is hereby rendered ordering respondent PHILSA INTERNATIONAL PLACEMENT AND SERVICE CORPORATION to pay complainants, jointly and severally with its principal Al-Hejailan, the following amounts, to wit: 1. TWO THOUSAND TWO HUNDRED TWENTY FIVE SAUDI RIYALS (SR2,225.00) to each complainant, representing the refund of their unpaid separation pay; 2. ONE THOUSAND SAUDI RIYALS (SR1,000.00) for V.A. de Mesa alone, representing the salary deduction from his March salary; 3. TWO THOUSAND SAUDI RIYALS (SR2,000.00) each for R.I. Mikin and C.A.P. Leyson only, representing their differential pay for the months of February and March, 1985; and 4. Five percent (5%) of the total awards as and by way of attorney's fees. All payments of the abovestated awards shall be made in Philippine Currency equivalent to the prevailing exchange rate according to the Central Bank at the time of payment. All other claims of complainants as well as the counterclaims of respondent are dismissed for lack of merit. SO ORDERED."
10

The case was docketed as POEA Case No. (L) 85-05 0370. Under the rules of the POEA dated May 21, 1985, complaints involving employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers for overseas employment, including money claims, are adjudicated by the Workers' Assistance and Adjudication Office (hereinafter the "WAAO") thru the POEA Hearing Officers.5 On the other hand, complaints involving recruitment violations warranting suspension or cancellation of the license of recruiting agencies are cognizable by the POEA thru its Licensing and Recruitment Office (hereinafter the "LRO"). 6 In cases where a complaint partakes of the nature of both an employer-employee relationship case and a recruitment regulation case, the POEA Hearing Officer shall act as representative of both the WAAO and the LRO and both cases shall be heard simultaneously. In such cases, the Hearing Officer shall submit two separate recommendations for the two aspects of the case. 7 In the case at bench, the first two causes of action were in the nature of money claims arising from the employer-employee relations and were properly cognizable by the WAAO. The last two causes of action were in the nature of recruitment violations and may be investigated by the LRO. The third cause of action, illegal deduction/withholding of salary, is both a money claim and a violation of recruitment regulations and is thus under the investigatory jurisdiction of both the WAAO and the LRO.

Under the Rules and Regulations of the POEA, the decision of the POEAAdjudication Office on matters involving money claims arising from the employer-employee relationship of overseas Filipino workers may be appealed to the National Labor Relations Commission (hereinafter the "NLRC)11 . Thus, as both felt aggrieved by the said POEA Decision, petitioner and private respondents filed separate appeals from the August 31, 1988 POEA Decision to the NLRC. In a decision dated July 26, 1989 12 , the NLRC modified the appealed decision of the POEA Adjudication Office by deleting the award of salary deductions and differentials. These awards to private respondents were deleted by the NLRC considering that these were not raised in the complaint filed by private respondents. The NLRC likewise stated that there was nothing in the text of the decision which would justify the award. Private respondents filed a Motion for Reconsideration but the same was denied by the NLRC in a Resolution dated October 25; 1989. Private respondents then elevated the July 26, 1989 decision of the NLRC to the Supreme Court in a petition for review for certiorari where it was docketed as G.R. No. 89089. However, in a Resolution dated October 25, 1989, the petition was dismissed outright for "insufficiency in form and substance, having failed to comply with the Rules of Court and Circular No. 1-88 requiring submission of a certified true copy of the questioned resolution dated August 23, 1989." 13 Almost simultaneous with the promulgation of the August 31, 1988 decision of the POEA on private respondents' money claims, the POEA issued a separate Order dated August 29, 1988 14 resolving the recruitment violations aspect of private respondents' complaint. In this Order, the POEA found petitioner guilty of illegal exaction, contract substitution, and unlawful deduction. The dispositive portion of this August 29, 1988 POEA Order reads: "WHEREFORE, premises considered, this Office finds herein respondent PHILSA International Placement and Services Corporation liable for three (3) counts of illegal exaction, two (2) counts of contract substitution and one count of withholding or unlawful deduction from salaries of workers.

Accordingly, respondent is hereby ordered to refund the placement fees in the amount of P2,500.00 to Rodrigo L. Mikin, P4,000.00, each, to Vivencio A. de Mesa and Cedric A.P. Leyson plus restitution of the salaries withheld in the amount of SR1,000.00 to Vivencio A. de Mesa. Moreover, respondent's license is hereby suspended for eight (8) months to take effect immediately and to remain as such until full refund and restitution of the above-stated amounts have been effected or in lieu thereof, it is fined the amount of SIXTY THOUSAND (P60,000.00) PESOS plus restitution. SO ORDERED." In line with this August 29, 1988 Order, petitioner deposited the check equivalent to the claims of private respondents and paid the corresponding fine under protest. From the said Order, petitioner filed a Motion for Reconsideration which was subsequently denied in an Order dated October 10, 1989. Under the POEA Rules and Regulations, the decision of the POEA thru the LRO suspending or canceling a license or authority to act as a recruitment agency may be appealed to the Ministry (now Department) of Labor and Employment. 15 Accordingly, after the denial of its motion for reconsideration, petitioner appealed the August 21, 1988 Order to the Secretary of Labor and Employment. However, in an Order dated September 13, 1991,16public respondent Secretary of Labor and Employment affirmed in toto the assailed Order. Petitioner filed a Motion for Reconsideration but this was likewise denied in an Order dated November 25, 1991. Hence, the instant Petition for Certiorari where petitioner raises the following grounds for the reversal of the questioned Orders: I THE PUBLIC RESPONDENT HAS ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN HOLDING PETITIONER GUILTY OF ILLEGAL EXACTIONS. THE FINDING IS NOT SUPPORTED BY EVIDENCE AND IN ANY EVENT, THE LAW ON WHICH THE CONVICTION IS BASED IS VOID.

II THE PUBLIC RESPONDENT HAS ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN PENALIZING PETITIONER WITH CONTRACT SUBSTITUTION. IN THE PREMISES, THE CONTRACT SUBSTITUTION IS VALID AS IT IMPROVED THE TERMS AND CONDITIONS OF PRIVATE RESPONDENTS' EMPLOYMENT. III. THE PUBLIC RESPONDENT HAS ACTED WITHOUT OR IN EXCESS OF JURISDICTION, OR WITH GRAVE ABUSE OF DISCRETION IN HOLDING PETITIONER LIABLE FOR ILLEGAL DEDUCTIONS/WITHHOLDING OF SALARIES FOR THE SUPREME COURT ITSELF HAS ALREADY ABSOLVED PETITIONER FROM THIS CHARGE. With respect to the first ground, petitioner would want us to overturn the findings of the POEA, subsequently affirmed by the Secretary of the Department of Labor and Employment, that it is guilty of illegal exaction committed by collecting placement fees in excess of the amounts allowed by law. This issue, however, is a question of fact which cannot be raised in a petition for certiorari under Rule 65. 17 As we have previously held: "It should be noted, in the first place, that the instant petition is a special civil action for certiorari under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its use is available only and restrictively in truly exceptional cases wherein the action of an inferior court, board or officer performing judicial or quasi-judicial acts is challenged for being wholly void on grounds of jurisdiction. The sole office of the writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. It does not include correction of public respondent NLRC's evaluation of the evidence and factual findings based thereon, which are generally accorded not only great respect but even finality." 18 The question of whether or not petitioner charged private respondents placement fees in excess of that allowed by law is clearly a question of fact which is for public respondent POEA, as a trier of facts, to determine. As stated above, the settled rule is that the factual findings of quasi-

judicial agencies like the POEA, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but at times even finality if such findings are supported by substantial evidence. 19 On this point, we have carefully examined the records of the case and it is clear that the ruling of public respondent POEA that petitioner is guilty of illegal exaction is supported by substantial evidence. Aside from the testimonial evidence offered by private respondents, they also presented documentary evidence consisting of receipts issued by a duly authorized representative of petitioner which show the payment of amounts in excess of those allowed by the POEA. In contrast, petitioner did not present any evidence whatsoever to rebut the claims of private respondents despite the many opportunities for them to do so. Petitioner insists, however, that it cannot be held liable for illegal exaction as POEA Memorandum Circular No. 11, Series of 1983, which enumerated the allowable fees which may be collected from applicants, is void for lack of publication. There is merit in the argument. In Taada vs. Tuvera
20

, the Court held, as follows:

"We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution: Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and the public, need not be published. Neither is publication required of the so-called letter of instructions issued by the administrative

superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties." Applying this doctrine, we have previously declared as having no force and effect the following administrative issuances: a) Rules and Regulations issued by the Joint Ministry of Health-Ministry of Labor and Employment Accreditation Committee regarding the accreditation of hospitals, medical clinics and laboratories; 21 b) Letter of Instruction No. 416 ordering the suspension of payments due and payable by distressed copper mining companies to the national government; 22 c) Memorandum Circulars issued by the POEA regulating the recruitment of domestic helpers to Hong Kong; 23 d) Administrative Order No. SOCPEC 89-08-01 issued by the Philippine International Trading Corporation regulating applications for importation from the People's Republic of China;24and e) Corporate Compensation Circular No. 10 issued by the Department of Budget and Management discontinuing the payment of other allowances and fringe benefits to government officials and employees. 25 In all these cited cases, the administrative issuances questioned therein were uniformly struck down as they were not published or filed with the National Administrative Register as required by the Administrative Code of 1987. 26 POEA Memorandum Circular No. 2, Series of 1983 must likewise be declared ineffective as the same was never published or filed with the National Administrative Register. POEA Memorandum Order No. 2, Series of 1983 provides for the applicable schedule of placement and documentation fees for private employment agencies or authority holders. Under the said Order, the maximum amount which may be collected from prospective Filipino overseas workers is P2,500.00. The said circular was apparently issued in compliance with the provisions of Article 32 of the Labor Code which provides, as follows: "ARTICLE 32. Fees to be paid by workers. Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the approved receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees." (italic supplied)

It is thus clear that the administrative circular under consideration is one of those issuances which should be published for its effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation. 27 Considering that POEA Administrative Circular No. 2, Series of 1983 has not as yet been published or filed with the National Administrative Register, the same is ineffective and may not be enforced. The Office of the Solicitor General argues however that the imposition of administrative sanctions on petitioner was based not on the questioned administrative circular but on Article 32 and Article 34 (a) 28 of the Labor Code. The argument is not meritorious. The said articles of the Labor Code were never cited, much less discussed, in the body of the questioned Orders of the POEA and Secretary of Labor and Employment. In fact, the said Orders were consistent in mentioning that petitioner's violation of Administrative Circular No. 2, Series of 1983 was the basis for the imposition of administrative sanctions against petitioner. Furthermore, even assuming that petitioner was held liable under the said provisions of the Labor Code, Articles 32 and 34 (a) of the Labor Code presupposes the promulgation of a valid schedule of fees by the Department of Labor and Employment. Considering that, as, previously discussed, Administrative Circular No. 2, Series of 1983 embodying such a schedule of fees never took effect, there is thus no basis for the imposition of the administrative sanctions against petitioner. Moreover, under Book VI, Chapter II, Section 3 of the Administrative Code of 1987, "(r)ules in force on the date of the effectivity of this Code which are not filed within three (3) months from that date shall not thereafter be the basis of any sanction against any party or persons." Considering that POEA Administrative Circular No. 2 was never filed with the National Administrative Register, the same cannot be used as basis for the imposition of administrative sanctions against petitioner. The Office of the Solicitor General likewise argues that the questioned administrative circular is not among those requiring publication contemplated by Taada vs. Tuvera as it is addressed only to a specific group of persons and not to the general public. Again, there is no merit in this argument. The fact that the said circular is addressed only to a specified group, namely private employment agencies or authority holders, does not take

it away from the ambit of our ruling in Taada vs. Tuvera. In the case of Phil. Association of Service Exporters vs. Torres,29 the administrative circulars questioned therein were addressed to an even smaller group, namely Philippine and Hong Kong agencies engaged in the recruitment of workers for Hong Kong, and still the Court ruled therein that, for lack of proper publication, the said circulars may not be enforced or implemented. Our pronouncement in Taada vs. Tuvera is clear and categorical. Administrative rules and regulations must be published if their purpose is to enforce or implement existing law pursuant to a valid delegation., The only exceptions are interpretative regulations, those merely internal in nature, or those so-called letters of instructions issued by administrative superiors concerning the rules and guidelines to be followed by their subordinates in the performance of their duties. Administrative Circular No. 2, Series of 1983 has not been shown to fall under any of these exceptions. In this regard, the Solicitor General's reliance on the case of Yaokasin vs. Commissioner of Customs 30 is misplaced. In the said case, the validity of certain Customs Memorandum Orders were upheld despite their lack of publication as they were addressed to a particular class of persons, the customs collectors, who were also the subordinates of the Commissioner of the Bureau of Customs. As such, the said Memorandum Orders clearly fall under one of the exceptions to the publication requirement, namely those dealing with instructions from an administrative superior to a subordinate regarding the performance of their duties, a circumstance which does not obtain in the case at bench. With respect to the second ground, petitioner would want us to review the findings of fact of the POEA regarding the two counts of alleged contract substitution. Again, this is a question of fact which may not be disturbed if the same is supported by substantial evidence. A reading of the August 29, 1988 Order of the POEA shows that, indeed, the ruling that petitioner is guilty of two (2) counts of prohibited contract substitution is supported by substantial evidence. Thus: "2. As admitted by respondent, there was definitely a contract of substitution in the first count. The first contract was duly approved by the Administration and, therefore, the parties are bound by the terms and condition thereof until its expiration. The mere intention

of respondents to increase the number of hours of work, even if there was a corresponding increase in wage is clear violation of the contract as approved by the Administration, and notwithstanding the same, the amendment is evidently contrary to law, morals, good customs and public policy and hence, must be shunned (Art. 1306, Civil Code of the Philippines, Book III, Title I, Chapter 1, Article 83, Labor Code of the Philippines, as amended). Moreover, it would appear that the proposed salary increase corresponding to the increase in number of work bonus may just have been a ploy as complainant were (sic) thereafter not paid at the increased rate. As to contract substitution in the second part, a third contract was emphatically intended by respondent to be signed by complainants which, however, was not consummated due to the adamant refusal of complainants to sign thereon. Mere intention of the respondent to commit contract substitution for a second time should not be left unpunished. It is the duty of this Office to repress such acts by teaching agencies a lesson to avoid repetition of the same violation." 31 With respect to the third ground, petitioner argues that the public respondent committed grave abuse of discretion in holding petitioner liable for illegal deductions/withholding of salaries considering that the Supreme Court itself has already absolved petitioner from this charge. Petitioner premises its argument on the fact that the July 26, 1989 Decision of the NLRC absolving it from private respondent de Mesa's claim for salary deduction has already attained finality by reason of the dismissal of private respondents' petition for certiorari of the said NLRC decision by the Supreme Court. Petitioner is correct in stating that the July 26, 1989 Decision of the NLRC has attained finality by reason of the dismissal of the petition for certiorari assailing the same. However, the said NLRC Decision dealt only with the money claims of private respondents arising from employer-employee relations and illegal dismissal and as such, it is only for the payment of the said money claims that petitioner is absolved. The administrative sanctions, which are distinct and separate from the money claims of private respondents, may still be properly imposed by the POEA. In fact, in the August 31, 1988 Decision of the POEA dealing with the money claims of private respondents, the POEA Adjudication Office precisely declared that "respondent's liability for said money claims is without prejudice to

and independent of its liabilities for the recruitment violations aspect of the case which is the subject of a separate Order." 32 The NLRC Decision absolving petitioner from paying private respondent de Mesa's claim for salary deduction based its ruling on a finding that the said money claim was not raised in the complaint. 33 While there may be questions regarding such finding of the NLRC, the finality of the said NLRC Decision prevents us from modifying or reviewing the same. But the fact that the claim for salary deduction was not raised by private respondents in their complaint will not bar the POEA from holding petitioner liable for illegal deduction or withholding of salaries as a ground for the suspension or cancellation of petitioner's license. Under the POEA Rules and Regulations, the POEA, on its own initiative, may conduct the necessary proceeding for the suspension or cancellation of the license of any private placement agency on any of the grounds mentioned therein. 34 As such, even without a written complaint from an aggrieved party, the POEA can initiate proceedings against an erring private placement agency and, if the result of its investigation so warrants, impose the corresponding administrative sanction thereof. Moreover, the POEA, in an investigation of an employer-employee relationship case, may still hold a respondent liable for administrative sanctions if, in the course of its investigation, violations of recruitment regulations are uncovered. 35 It is thus clear that even if recruitment violations were not included in a complaint for money claims initiated by a private complainant, the POEA, under its rules, may still take cognizance of the same and impose administrative sanctions if the evidence so warrants. As such, the fact that petitioner has been absolved by final judgment for the payment of the money claim to private respondent de Mesa does not mean that it is likewise absolved from the administrative sanctions which may be imposed as a result of the unlawful deduction or withholding of private respondents' salary. The POEA thus committed no grave abuse of discretion in finding petitioner administratively liable of one count of unlawful deduction/withholding of salary. To summarize, petitioner should be absolved from the three (3) counts of illegal exaction as POEA Administrative Circular No. 2, Series of 1983 could not be the basis of administrative sanctions against petitioner for lack of publication. However, we affirm the ruling of the POEA and the

Secretary of Labor and Employment that petitioner should be held administratively liable for two (2) counts of contract substitution and one (1) count of withholding or unlawful deduction of salary. Under the applicable schedule of penalties imposed by the POEA, the penalty for each count of contract substitution is suspension of license for two (2) months or a fine of P10,000.00 while the penalty for withholding or unlawful deduction of salaries is suspension of license for two (2) months or fine equal to the salary withheld but not less than P10,000.00 plus restitution of the amount in both instances. 36 Applying the said schedule on the instant case, the license of petitioner should be suspended for six (6) months or, in lieu thereof, it should be ordered to pay fine in the amount of P30,000.00. Petitioner should likewise pay the amount of SR1,000.00 to private respondent Vivencio A. de Mesa as restitution for the amount withheld from his salary. WHEREFORE, premises considered, the September 13, 1991 and November 25, 1991 Orders of public respondent Secretary of Labor and Employment are hereby MODIFIED. As modified, the license of private respondent Philsa International Placement and Services Corporation is hereby suspended for six (6) months or, in lieu thereof, it is hereby ordered to pay the amount of P30,000.00 as fine. Petitioner is likewise ordered to pay the amount of SR1,000.00 to private respondent Vivencio A. de Mesa. All other monetary awards are deleted. SO ORDERED. Melo, Vitug, Panganiban and Sandoval-Gutierrez, JJ ., concur Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-15138 July 31, 1961

BILL MILLER, petitioner-appellee, vs. ATANACIO A. MARDO, and MANUEL GONZALES, respondentsappellants.

x---------------------------------------------------------x G.R. No. L-15377 July 31, 1961

NUMERIANA RAGANAS, plaintiff-appellant, vs. SEN BEE TRADING COMPANY, MACARIO TAN, and SERGIO TAN, defendants-appellees. x---------------------------------------------------------x G.R. No. L-16660 July 31, 1961

These appeals, although originating from different Courts of First Instance, are here treated together in this single decision because they present but one identical question of law, namely, the validity of Reorganization Plan No. 20-A, prepared and submitted by the Government Survey and Reorganization Commission under the authority of Republic Act No. 997, as amended by Republic Act No. 1241, insofar as it confers jurisdiction to the Regional Offices of the Department of Labor created in said Plan to decide claims of laborers for wages, overtime and separation pay, etc. In G.R. No. L-15138, Manuel Gonzales filed with Regional Office No. 3 of the Department of Labor, in Manila, a complaint (IS-1148) against Bill Miller (owner and manager of Miller Motors) claiming to be a driver of Miller from December 1, 1956 to October 31, 1957, on which latter date he was allegedly arbitrarily dismissed, without being paid separation pay. He prayed for judgement for the amount due him as separation pay plus damages. Upon receipt of said complaint, Chief Hearing Officer Atanacio Mardo of Regional Office No. 3 of the Department of Labor required Miller to file an answer. Whereupon, Miller filed with the Court of First Instance of Baguio a petition (Civil Case No. 759) praying for judgment prohibiting the Hearing Officer from proceeding with the case, for the reason that said Hearing Officer had no jurisdiction to hear and decide the subject matter of the complaint. The court then required the Hearing Officer and Gonzales to answer and, as prayed for, issued a writ of preliminary injunction. The latter file their separate motions to dismiss the petition, on the ground of lack of jurisdiction, improper venue, and non-exhaustion of administrative remedies, it being argued that pursuant to Republic Acts Nos. 997 and 1241, as implemented by Executive Order No. 218, series of 1956 and Reorganization Plan No. 20-A, regional offices of the Department of labor have exclusive and original jurisdiction over all cases affecting money claims arising from violations of labor standards or working conditions. Said motions to dismiss were denied by the court. Answers were then filed and the case was heard. Thereafter, the court rendered a decision holding that Republic Acts Nos. 997 and 1241, as well as Executive Order No. 218, series of 1956 and Reorganization Plan No. 20-A issued pursuant thereto, did not repeal the provision of the Judiciary Act conferring on courts of first instance original jurisdiction to take cognizance of money claims arising from violations of labor standards. The question of venue was also dismissed for being moot, the same having been already raised and decided in a petition for certiorari and prohibition previously filed with this Court in G.R. No. L-14007 (Mardo, etc. v. De Veyra, etc.) which was dismissed for lack of merit in our resolution of July 7, 1958. From the decision of the Court of First Instance of Baguio,

VICENTE ROMERO, petitioner-appellee, vs. ANGEL HERNANDO ETC., and SIA SENG, respondents-appellants. x---------------------------------------------------------x G.R. No. L-16781 July 31, 1961

CHIN HUA TRADING COMPANY, and LAO KANG SUY, petitionersappellees, vs. ATANACIO A. MARDO, JORGE BENEDICTO, and CRESENCIO ESTAO, respondents-appellants. x---------------------------------------------------------x G.R. No. L-17056 July 31, 1961

FRED WILSON & CO., INC., petitioner-appellant, vs. MELITON C. PARDUCHO, ETC., and MARIANO PABILIARE, respondents-appellees. R. L. Resurreccion for petitioner-appellee. Paciano C. C. Villavieja for respondents-appellants. BARRERA, J.:

respondents Hearing Officer and Gonzales interposed the present appeal now before us. In G.R. No. L-16781, Cresencio Estano filed with Regional Office No. 3 of the Department of Labor, a complaint (RO 3 Ls. Case No. 874) against Chin Hua Trading Co. and/or Lao Kang Suy and Ke Bon Chiong, as Manager and Assistant Manager thereof, respectively, claiming to have been their driver from June 17, 1947 to June 4, 1955, for which service he was not paid overtime pay (for work in excess of 8 hours and for Sundays and legal holidays) and vacation leave pay. He prayed for judgment for the amount due him, plus attorney's fees. Chin Hua Trading, et al., filed their answer and, issues having been joined, hearing thereof was started before Chief Hearing Officer Atanacio Mardo and Hearing Officer Jorge Benedicto. Before trial of the case could be terminated, however, Chin Hua Trading, et al., filed with the Court of First Instance of Manila a petition for prohibition with preliminary injunction (Civil Case No. 26826)), to restrain the hearing officers from proceeding with the disposition of the case, on the ground that they have no jurisdiction to entertain the same, as Reorganization Plan No. 20-A and Executive Order No. 218, series of 1956, in relation to Republic Act No. 997, as amended by Republic Act No. 1241, empowering them to adjudicate the complaint, is invalid or unconstitutional. As prayed for, a preliminary injunction was issued by the court. After due hearing the court rendered a decision holding that Reorganization Plan No. 20-A is null and void and therefore, granted the writ of prohibition making permanent the preliminary injunction previously issued. From this decision, the claimant and the hearing officers appealed to the Court of Appeals, which certified the case to us, as it involves only questions of law. In G.R. No. L-15377, appellant Numeriana Raganas filed with the Court of First Instance of Cebu a complaint (Civil Case No. R-5535) against appellees Sen Bee Trading Company, Macario Tan and Sergio Tan, claiming that she was employed by appellees as a seamstress from June 5, 1952 to January 11, 1958, for which service she was underpaid and was not given overtime, as well as vacation and sick leave pay. She prayed for judgment on the amount due her for the same plus damages. To said complaint, appellees filed a motion to dismiss, on the ground that the trial court has no jurisdiction to hear the case as it involves a money claim and should, under Reorganization Plan No. 20-A be filed with the Regional Office of the Department of Labor; and there is pending before the regional office of the Department of Labor, a claim for separation vacation, sick and maternity leave pay filed by the same plaintiff

(appellant) against the same defendants-appellees). Acting on said motion, the court dismissed the case, relying on the provision of Section 25, Article VI of Reorganization Plan No. 20-A and on our resolution in the case of NASSCO v. Arca, et al. (G.R. No. L-12249, May 6, 1957). From this order, appellant Raganas appealed to the Court of Appeals, but said court certified the case to us. In G.R. No. L-16660, Vicente B. Romero filed with Regional Officer No. 2 of the Department of Labor a complaint (Wage Case No. 196-W) against Sia Seng, for recovery of alleged unpaid wages, overtime and separation pay. Sia Seng, filed an answer. At the date set for hearing the latter did not appear despite due notice to him and counsel. Upon his petition, Romero was allowed to present his evidence. Thereafter, a decision was rendered by the Hearing Officer in favor of Romero. Upon the latter's motion for execution, the records of the case were referred to Regional Labor Administrator Angel Hernando for issuance of said writ of execution, being the officer charged with the duty of issuing the same. Hernando, believing that Sia Seng should be given a chance to present his evidence, refused to issue the writ of execution and ordered a re-hearing. As a consequence, Romero filed with the Court of First Instance of Isabela a petition for mandamus (Case No. Br. II-35) praying that an order be issued commanding respondent Regional Labor Administrator to immediately issue a writ of execution of the decision in Wage Case No. 196-W. To this petition, respondent Regional Labor Administrator filed a motion to dismiss, on the ground that it states no cause of action, but action thereon was deferred until the case is decided on the merits. Sia Seng filed his answer questioning the validity of the rules and regulations issued under the authority of Reorganization Plan No. 20-A. After hearing, the court rendered a decision ordering, inter alia, respondent Regional Labor Administrator to forthwith issue the corresponding writ of execution, as enjoined by Section 48, of the Rules and Regulations No. 1 of the Labor Standards Commission. From this decision of the Court of First Instance, Sia Seng and Regional Labor Administrator Hernando appealed to us. Appellant Sia Seng urges in his appeal that the trial court erred in not dismissing the petition, in spite of the fact that the decision sought to be enforced by appellee Romero was rendered by a hearing officer who had no authority to render the same, and in failing to hold that Reorganization Plan No. 20-A was not validly passed as a statute and is unconstitutional. In G.R. No. L-17056, Mariano Pabillare instituted in Regional Office No. 3 of the Department of Labor a complaint (IS-2168) against petitioner Fred Wilson & Co., Inc., alleging that petitioner engaged his services as Chief

Mechanic, Air conditioning Department, from October 1947 to February 19, 1959, when he was summarily dismissed without cause and without sufficient notice and separation pay. He also claimed that during his employment he was not paid for overtime rendered by him. He prayed for judgment for the amount due him for such overtime and separation pay. Petitioner moved to dismiss the complaint, on the ground that said regional office "being purely an administrative body, has no power, authority, nor jurisdiction to adjudicate the claim sought to be recovered in the action." Said motion to dismiss having been denied by respondent Hearing Officer Meliton Parducho, petitioner Fred Wilson & Co., Inc. filed with the Court of First Instance of Manila a petition for certiorariand prohibition, with preliminary injunction (Civil Case No. 41954) to restrain respondent hearing officer from proceeding with the case, and praying, among others, that Reorganization Plan No. 20-A, insofar as it vests original and exclusive jurisdiction over money claims (to the exclusion of regular courts of justice) on the Labor Standards Commission or the Regional Offices of the Department of Labor, be declared null and void and unconstitutional. As prayed for, the court granted a writ of preliminary injunction. Respondents Hearing Officer and Pabillare filed answer and the case was heard. After hearing, the court rendered a decision declaring that "by the force of Section 6 of R.A. No. 997, as amended by R.A. 1241, Plan No. 20-A was deemed approved by Congress when it adjourned its session in 1956' (Res. of May 6, 1957 in National Shipyards Steel Corporation v. Vicente Area, G.R. No. L-12249). It follows that the questioned reorganization Plan No. 20-A is valid.". Petitioner Fred Wilson & Co., Inc. appealed directly to us from this decision. The specific legal provision invoked for the authority of the regional offices to take cognizance of the subject matter involved in these cases is paragraph 25 of Article VI of Reorganization Plan No. 20-A, which is hereunder quoted: 25 Each regional office shall have original and exclusive jurisdiction over all cases falling under the Workmen's Compensation law, and cases affecting all money claims arising from violations of labor standards on working conditions including but not restrictive to: unpaid wages, underpayment, overtime, separation pay and maternity leave of employees and laborers; and unpaid wages,

overtime, separation pay, vacation pay and payment for medical services of domestic help. Under this provision, the regional offices have been given original and exclusive jurisdiction over: (a) all cases falling under the Workmen's Compensation law; (b) all cases affecting money claims arising from violations of labor standards on working conditions, unpaid wages, underpayment, overtime, separation pay and maternity leave of employees and laborers; and . (c) all cases for unpaid wages, overtime, separation pay, vacation pay and payment for medical services of domestic help. Before the effectivity of Reorganization Plan No. 20-A, however, the Department of Labor, except the Workmen's Compensation Commission with respect to claims for compensation under the Workmen's Compensation law, had no compulsory power to settle cases under (b) and (c) above, the only authority it had being to mediate merely or arbitrate when the parties so agree in writing, In case of refusal by a party to submit to such settlement, the remedy is to file a complaint in the proper court.1 It is evident, therefore, that the jurisdiction to take cognizance of cases affecting money claims such as those sought to be enforced in these proceedings, is a new conferment of power to the Department of Labor not theretofore exercised by it. The question thus presented by these cases is whether this is valid under our Constitution and applicable statutes. It is true that in Republic Act No. 1241, amending Section 4 of Republic Act 997, which created the Government Survey and Reorganization Commission, the latter was empowered (2) To abolish departments, offices, agencies, or functions which may not be necessary, or create those which way be necessary for the efficient conduct of the government service, activities, and functions. (Emphasis supplied.)

But these "functions" which could thus be created, obviously refer merely to administrative, not judicial functions. For the Government Survey and Reorganization Commission was created to carry out the reorganization of theExecutive Branch of the National Government (See Section 3 of R.A. No. 997, as amended by R.A. No. 1241), which plainly did not include the creation of courts. And the Constitution expressly provides that "the Judicial power shall be vested in one Supreme Court and in such inferior courts as may be established by law.(Sec. 1, Art. VII of the Constitution). Thus, judicial power rests exclusively in the judiciary. It may be conceded that the legislature may confer on administrative boards or bodies quasijudicial powers involving the exercise of judgment and discretion, as incident to the performance of administrative functions. 2 But in so doing, the legislature must state its intention in express terms that would leave no doubt, as even such quasi-judicial prerogatives must be limited, if they are to be valid, only to those incidental to or in connection with the performance of jurisdiction over a matter exclusively vested in the courts.3 If a statute itself actually passed by the Congress must be clear in its terms when clothing administrative bodies with quasi-judicial functions, then certainly such conferment can not be implied from a mere grant of power to a body such as the Government Survey and Reorganization Commission to create "functions" in connection with the reorganization of the Executive Branch of the Government. And so we held in Corominas et al. v. Labor Standards Commission, et al. (G.R. No. L-14837 and companion cases, June 30, 1961); . . . it was not the intention of Congress, in enacting Republic Act No. 997, to authorize the transfer of powers and jurisdiction granted to the courts of justice, from these to the officials to be appointed or offices to be created by the Reorganization Plan. Congress is well aware of the provisions of the Constitution that judicial powers are vested 'only in the Supreme Court and in such courts as the law may establish'. The Commission was not authorized to create courts of justice, or to take away from these their jurisdiction and transfer said jurisdiction to the officials appointed or offices created under the Reorganization Plan. The Legislature could not have intended to grant such powers to the Reorganization Commission, an executive body, as the Legislature may not and cannot delegate its power to legislate or create courts of justice any other agency of the Government. (Chinese Flour Importers Assoc. vs. Price Stabilization

Board, G.R. No. L-4465, July 12, 1951; Surigao Consolidated vs. Collector of Internal Revenue G.R. No. L-5692, March 5, 1954; U.S. vs. Shreveport, 287 U.S. 77, 77 L. ed 175, and Johnson vs. San Diego, 42 P. 249, cited in 11 Am. Jur 921-922.) (Emphasis supplied.) But it is urged, in one of the cases, that the defect in the conferment of judicial or quasi-judicial functions to the Regional offices, emanating from the lack of authority of the Reorganization Commission has been cured by the non-disapproval of Reorganization Plan No. 20-A by Congress under the provisions of Section 6(a) of Republic Act No. 997, as amended. It is, in effect, argued that Reorganization Plan No. 20-A is not merely the creation of the Reorganization Commission, exercising its delegated powers, but is in fact an act of Congress itself, a regular statute directly and duly passed by Congress in the exercise of its legislative powers in the mode provided in the enabling act. The pertinent provision of Republic Act No. 997, as amended, invoked in favor of this argument reads as follows: SEC. 6 (a) The provisions of the reorganization plan or plans submitted by the President during the Second Session of the Third Congress shall be deemed approved after the adjournment of the said session, and those of the plan or plans or modifications of any plan or plans to be submitted after the adjournment of the Second Session, shall be deemed approved after the expiration of the seventy session days of the Congress following the date on which the plan is transmitted to it, unless between the date of transmittal and the expiration of such period, either House by simple resolution disapproves the reorganization plan or any, modification thereof. The said plan of reorganization or any modification thereof may, likewise, be approved by Congress in a concurrent Resolution within such period. It is an established fact that the Reorganization Commission submitted Reorganization Plan No. 20-A to the President who, in turn, transmitted the same to Congress on February 14, 1956. Congress adjourned its sessions without passing a resolution disapproving or adopting the said reorganization plan. It is now contended that, independent of the matter of delegation of legislative authority (discussed earlier in this opinion), said plan, nevertheless became a law by non-action on the part of Congress, pursuant to the above-quoted provision.

Such a procedure of enactment of law by legislative in action is not countenanced in this jurisdiction. By specific provision of the Constitution No bill shall be passed or become a law unless it shall have been printed and copies thereof in its final form furnished the Members at least three calendar clays prior to its passage by the National Assembly (Congress), except when the President shall have certified to the necessity of its immediate enactment. Upon the last reading of a bill no amendment thereof shall be allowed, and the question upon its final passage shall be taken immediately thereafter, and the yeas and nays entered on the Journal. (Sec. 21[a], Art. VI). Every bill passed by the Congress shall, before it becomes a law, be presented to the President. If he approves the same, he shall sign it, but if not, he shall return it with his objections to the House where it originated, which shall enter the objections at large on its Journal and proceed to reconsider it. If, after such reconsideration, two-thirds of all the Members of such House shall agree to pass the bill, it shall be sent, together with the objections, to the other House by which it shall likewise be reconsidered, and if approved by twothirds of all the Members voting for and against shall be entered on its journal. If any bill shall not be returned by the President as herein provided within twenty days (Sundays excepted) after it shall have been presented to him, the same shall become a law in like manner as if he has signed it, unless the Congress by adjournment prevent its return, in which case it shall become a law unless vetoed by the President within thirty days after adjournment. (Sec. 20[1]. Art. VI of the Constitution). A comparison between the procedure of enactment provided in section 6 (a) of the Reorganization Act and that prescribed by the Constitution will show that the former is in distinct contrast to the latter. Under the first, consent or approval is to be manifested by silence or adjournment or by "concurrent resolution." In either case, the contemplated procedure violates the constitutional provisions requiring positive and separate action by each House of Congress. It is contrary to the "settled and wellunderstood parliamentary law (which requires that the) two houses are to hold separate sessions for their deliberations, and the determination of the one upon a proposed law is to be submitted to the separate

determination of the other," (Cooley, Constitutional Limitations, 7th ed., p. 187). Furthermore, Section 6 (a) of the Act would dispense with the "passage" of any measure, as that word is commonly used and understood, and with the requirement presentation to the President. In a sense, the section, if given the effect suggested in counsel's argument, would be a reversal of the democratic processes required by the Constitution, for under it, the President would propose the legislative action by action taken by Congress. Such a procedure would constitute a very dangerous precedent opening the way, if Congress is so disposed, because of weakness or indifference, to eventual abdication of its legislative prerogatives to the Executive who, under our Constitution, is already one of the strongest among constitutional heads of state. To sanction such a procedure will be to strike at the very root of the tri-departmental scheme four democracy. Even in the United States (in whose Federal Constitution there is no counterpart to the specific method of passaging laws prescribed in Section 21[2] of our Constitution) and in England (under whose parliamentary system the Prime Minister, real head of the Government, is a member of Parliament), the procedure outlined in Section 6(a) herein before quoted, is but a technique adopted in the delegation of the rule-making power, to preserve the control of the legislature and its share in the responsibility for the adoption of proposed regulations.4The procedure has ever been intended or utilized or interpreted as another mode of passing or enacting any law or measure by the legislature, as seems to be the impression expressed in one these cases. On the basis of the foregoing considerations, we hold ad declare that Reorganization Plan No. 20-A, insofar as confers judicial power to the Regional Offices over cases other than these falling under the Workmen's Compensation on Law, is invalid and of no effect. This ruling does not affect the resolution of this Court in the case of National Steel & Shipyards Corporation v. Arca et al., G.R. No. L-12249, dated May 6, 1957, considering that the said case refers to a claim before the Workmen's Compensation Commission, which exercised quasi-judicial powers even before the reorganization of the Department of Labor. WHEREFORE

(a) The decision of the Court of First Instance of Baguio involved in case G.R. No. L-15138 is hereby affirmed, without costs; (b) The decision of the Court of First Instance of Manila questioned in case G.R. No. L-16781 is hereby affirmed, without costs; (c) The order of dismissal issued by the Court of First Instance of Cebu appealed from in case G.R. No. L-15377 is set aside and the case remanded to the court of origin for further proceedings, without costs; (d) In case G.R. No. L-16660, the decision of the Court of First Instance of Isabela, directing the Regional Labor Administrator to issue a writ of execution of the order of the Regional Office No. 2, is hereby reversed, without costs; and . (e) In case G.R. No. L-17056, the decision rendered after hearing by the Court of First Instance of Manila, dismissing the complaint for annulment of the proceedings before the Regional office No. 3, is hereby reversed and the preliminary injunction at first issued by the trial court is revived and made permanents without costs. SO ORDERED. Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Dizon, De Leon and Natividad, JJ., concur. Bautista Angelo, J., on leave, took no part. Concepcion and Paredes JJ., took no part. The Case

EN BANC G.R. No. 177597 July 16, 2008

BAI SANDRA S. A. SEMA, Petitioner, vs. COMMISSION ON ELECTIONS and DIDAGEN P. DILANGALEN, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 178628 PERFECTO F. MARQUEZ, Petitioner, vs. COMMISSION ON ELECTIONS, Respondent. DECISION CARPIO, J.:

These consolidated petitions1 seek to annul Resolution No. 7902, dated 10 May 2007, of the Commission on Elections (COMELEC) treating Cotabato City as part of the legislative district of the Province of Shariff Kabunsuan.2 The Facts The Ordinance appended to the 1987 Constitution apportioned two legislative districts for the Province of Maguindanao. The first legislative district consists of Cotabato City and eight municipalities. 3 Maguindanao forms part of the Autonomous Region in Muslim Mindanao (ARMM), created under its Organic Act, Republic Act No. 6734 (RA 6734), as amended by Republic Act No. 9054 (RA 9054).4 Although under the Ordinance, Cotabato City forms part of Maguindanaos first legislative district, it is not part of the ARMM but of Region XII, having voted against its inclusion in the ARMM in the plebiscite held in November 1989.

Republic of the Philippines SUPREME COURT Manila

On 28 August 2006, the ARMMs legislature, the ARMM Regional Assembly, exercising its power to create provinces under Section 19,

Article VI of RA 9054,5 enacted Muslim Mindanao Autonomy Act No. 201 (MMA Act 201) creating the Province of Shariff Kabunsuan composed of the eight municipalities in the first district of Maguindanao. MMA Act 201 provides: Section 1. The Municipalities of Barira, Buldon, Datu Odin Sinsuat, Kabuntalan, Matanog, Parang, Sultan Kudarat, Sultan Mastura, and Upi are hereby separated from the Province of Maguindanao and constituted into a distinct and independent province, which is hereby created, to be known as the Province of Shariff Kabunsuan. xxxx Sec. 5. The corporate existence of this province shall commence upon the appointment by the Regional Governor or election of the governor and majority of the regular members of the Sangguniang Panlalawigan. The incumbent elective provincial officials of the Province of Maguindanao shall continue to serve their unexpired terms in the province that they will choose or where they are residents: Provided, that where an elective position in both provinces becomes vacant as a consequence of the creation of the Province of Shariff Kabunsuan, all incumbent elective provincial officials shall have preference for appointment to a higher elective vacant position and for the time being be appointed by the Regional Governor, and shall hold office until their successors shall have been elected and qualified in the next local elections; Provided, further, that they shall continue to receive the salaries they are receiving at the time of the approval of this Act until the new readjustment of salaries in accordance with law. Provided, furthermore, that there shall be no diminution in the number of the members of the Sangguniang Panlalawigan of the mother province. Except as may be provided by national law, the existing legislative district, which includes Cotabato as a part thereof, shall remain. Later, three new municipalities6 were carved out of the original nine municipalities constituting Shariff Kabunsuan, bringing its total number of municipalities to 11. Thus, what was left of Maguindanao were the municipalities constituting its second legislative district. Cotabato City, although part of Maguindanaos first legislative district, is not part of the Province of Maguindanao.

The voters of Maguindanao ratified Shariff Kabunsuans creation in a plebiscite held on 29 October 2006. On 6 February 2007, the Sangguniang Panlungsod of Cotabato City passed Resolution No. 3999 requesting the COMELEC to "clarify the status of Cotabato City in view of the conversion of the First District of Maguindanao into a regular province" under MMA Act 201. In answer to Cotabato Citys query, the COMELEC issued Resolution No. 07-0407 on 6 March 2007 "maintaining the status quo with Cotabato City as part of Shariff Kabunsuan in the First Legislative District of Maguindanao." Resolution No. 07-0407, which adopted the recommendation of the COMELECs Law Department under a Memorandum dated 27 February 2007,7 provides in pertinent parts: Considering the foregoing, the Commission RESOLVED, as it hereby resolves, to adopt the recommendation of the Law Department that pending the enactment of the appropriate law by Congress, to maintain the status quo with Cotabato City as part of Shariff Kabunsuan in the First Legislative District of Maguindanao. (Emphasis supplied) However, in preparation for the 14 May 2007 elections, the COMELEC promulgated on 29 March 2007 Resolution No. 7845 stating that Maguindanaos first legislative district is composed only of Cotabato City because of the enactment of MMA Act 201.8 On 10 May 2007, the COMELEC issued Resolution No. 7902, subject of these petitions, amending Resolution No. 07-0407 by renaming the legislative district in question as "Shariff Kabunsuan Province with Cotabato City (formerly First District of Maguindanao with Cotabato City)."91avvphi1 In G.R. No. 177597, Sema, who was a candidate in the 14 May 2007 elections for Representative of "Shariff Kabunsuan with Cotabato City," prayed for the nullification of COMELEC Resolution No. 7902 and the exclusion from canvassing of the votes cast in Cotabato City for that office. Sema contended that Shariff Kabunsuan is entitled to one representative in Congress under Section 5 (3), Article VI of the Constitution10 and Section 3 of the Ordinance appended to the Constitution.11 Thus, Sema asserted that the COMELEC acted without or in excess of its jurisdiction in issuing Resolution No. 7902 which maintained

the status quo in Maguindanaos first legislative district despite the COMELECs earlier directive in Resolution No. 7845 designating Cotabato City as the lone component of Maguindanaos reapportioned first legislative district.12 Sema further claimed that in issuing Resolution No. 7902, the COMELEC usurped Congress power to create or reapportion legislative districts. In its Comment, the COMELEC, through the Office of the Solicitor General (OSG), chose not to reach the merits of the case and merely contended that (1) Sema wrongly availed of the writ of certiorari to nullify COMELEC Resolution No. 7902 because the COMELEC issued the same in the exercise of its administrative, not quasi-judicial, power and (2) Semas prayer for the writ of prohibition in G.R. No. 177597 became moot with the proclamation of respondent Didagen P. Dilangalen (respondent Dilangalen) on 1 June 2007 as representative of the legislative district of Shariff Kabunsuan Province with Cotabato City. In his Comment, respondent Dilangalen countered that Sema is estopped from questioning COMELEC Resolution No. 7902 because in her certificate of candidacy filed on 29 March 2007, Sema indicated that she was seeking election as representative of "Shariff Kabunsuan including Cotabato City." Respondent Dilangalen added that COMELEC Resolution No. 7902 is constitutional because it did not apportion a legislative district for Shariff Kabunsuan or reapportion the legislative districts in Maguindanao but merely renamed Maguindanaos first legislative district. Respondent Dilangalen further claimed that the COMELEC could not reapportion Maguindanaos first legislative district to make Cotabato City its sole component unit as the power to reapportion legislative districts lies exclusively with Congress, not to mention that Cotabato City does not meet the minimum population requirement under Section 5 (3), Article VI of the Constitution for the creation of a legislative district within a city.13 Sema filed a Consolidated Reply controverting the matters raised in respondents Comments and reiterating her claim that the COMELEC acted ultra vires in issuing Resolution No. 7902. In the Resolution of 4 September 2007, the Court required the parties in G.R. No. 177597 to comment on the issue of whether a province created by the ARMM Regional Assembly under Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without

need of a national law creating a legislative district for such new province. The parties submitted their compliance as follows: (1) Sema answered the issue in the affirmative on the following grounds: (a) the Court in Felwa v. Salas14stated that "when a province is created by statute, the corresponding representative district comes into existence neither by authority of that statute which cannot provide otherwise nor by apportionment, but by operation of the Constitution, without a reapportionment"; (b) Section 462 of Republic Act No. 7160 (RA 7160) "affirms" the apportionment of a legislative district incident to the creation of a province; and (c) Section 5 (3), Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution mandate the apportionment of a legislative district in newly created provinces. (2) The COMELEC, again represented by the OSG, apparently abandoned its earlier stance on the propriety of issuing Resolution Nos. 07-0407 and 7902 and joined causes with Sema, contending that Section 5 (3), Article VI of the Constitution is "self-executing." Thus, every new province created by the ARMM Regional Assembly is ipso facto entitled to one representative in the House of Representatives even in the absence of a national law; and (3) Respondent Dilangalen answered the issue in the negative on the following grounds: (a) the "province" contemplated in Section 5 (3), Article VI of the Constitution is one that is created by an act of Congress taking into account the provisions in RA 7160 on the creation of provinces; (b) Section 3, Article IV of RA 9054 withheld from the ARMM Regional Assembly the power to enact measures relating to national elections, which encompasses the apportionment of legislative districts for members of the House of Representatives; (c) recognizing a legislative district in every province the ARMM Regional Assembly creates will lead to the disproportionate representation of the ARMM in the House of Representatives as the Regional Assembly can create provinces without regard to the requirements in Section 461 of RA 7160; and (d) Cotabato City, which has a population of less than 250,000, is not entitled to a representative in the House of Representatives.

On 27 November 2007, the Court heard the parties in G.R. No. 177597 in oral arguments on the following issues: (1) whether Section 19, Article VI of RA 9054, delegating to the ARMM Regional Assembly the power to create provinces, is constitutional; and (2) if in the affirmative, whether a province created under Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such new province.15 In compliance with the Resolution dated 27 November 2007, the parties in G.R. No. 177597 filed their respective Memoranda on the issues raised in the oral arguments.16 On the question of the constitutionality of Section 19, Article VI of RA 9054, the parties in G.R. No. 177597 adopted the following positions: (1) Sema contended that Section 19, Article VI of RA 9054 is constitutional (a) as a valid delegation by Congress to the ARMM of the power to create provinces under Section 20 (9), Article X of the Constitution granting to the autonomous regions, through their organic acts, legislative powers over "other matters as may be authorized by law for the promotion of the general welfare of the people of the region" and (b) as an amendment to Section 6 of RA 7160.17 However, Sema concedes that, if taken literally, the grant in Section 19, Article VI of RA 9054 to the ARMM Regional Assembly of the power to "prescribe standards lower than those mandated" in RA 7160 in the creation of provinces contravenes Section 10, Article X of the Constitution.18 Thus, Sema proposed that Section 19 "should be construed as prohibiting the Regional Assembly from prescribing standards x x x that do not comply with the minimum criteria" under RA 7160.19 (2) Respondent Dilangalen contended that Section 19, Article VI of RA 9054 is unconstitutional on the following grounds: (a) the power to create provinces was not among those granted to the autonomous regions under Section 20, Article X of the Constitution and (b) the grant under Section 19, Article VI of RA 9054 to the ARMM Regional Assembly of the power to prescribe standards lower than those mandated in Section 461 of RA 7160 on the creation of provinces contravenes Section 10, Article X of the Constitution and the Equal Protection Clause; and

(3) The COMELEC, through the OSG, joined causes with respondent Dilangalen (thus effectively abandoning the position the COMELEC adopted in its Compliance with the Resolution of 4 September 2007) and contended that Section 19, Article VI of RA 9054 is unconstitutional because (a) it contravenes Section 10 and Section 6,20 Article X of the Constitution and (b) the power to create provinces was withheld from the autonomous regions under Section 20, Article X of the Constitution. On the question of whether a province created under Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such new province, Sema and respondent Dilangalen reiterated in their Memoranda the positions they adopted in their Compliance with the Resolution of 4 September 2007. The COMELEC deemed it unnecessary to submit its position on this issue considering its stance that Section 19, Article VI of RA 9054 is unconstitutional. The pendency of the petition in G.R. No. 178628 was disclosed during the oral arguments on 27 November 2007. Thus, in the Resolution of 19 February 2008, the Court ordered G.R. No. 178628 consolidated with G.R. No. 177597. The petition in G.R. No. 178628 echoed Sema's contention that the COMELEC acted ultra vires in issuing Resolution No. 7902 depriving the voters of Cotabato City of a representative in the House of Representatives. In its Comment to the petition in G.R. No. 178628, the COMELEC, through the OSG, maintained the validity of COMELEC Resolution No. 7902 as a temporary measure pending the enactment by Congress of the "appropriate law." The Issues The petitions raise the following issues: I. In G.R. No. 177597: (A) Preliminarily (1) whether the writs of Certiorari, Prohibition, and Mandamus are proper to test the constitutionality of COMELEC Resolution No. 7902; and

(2) whether the proclamation of respondent Dilangalen as representative of Shariff Kabunsuan Province with Cotabato City mooted the petition in G.R. No. 177597. (B) On the merits (1) whether Section 19, Article VI of RA 9054, delegating to the ARMM Regional Assembly the power to create provinces, cities, municipalities and barangays, is constitutional; and (2) if in the affirmative, whether a province created by the ARMM Regional Assembly under MMA Act 201 pursuant to Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such province. II. In G.R No. 177597 and G.R No. 178628, whether COMELEC Resolution No. 7902 is valid for maintaining the status quo in the first legislative district of Maguindanao (as "Shariff Kabunsuan Province with Cotabato City [formerly First District of Maguindanao with Cotabato City]"), despite the creation of the Province of Shariff Kabunsuan out of such district (excluding Cotabato City). The Ruling of the Court The petitions have no merit. We rule that (1) Section 19, Article VI of RA 9054 is unconstitutional insofar as it grants to the ARMM Regional Assembly the power to create provinces and cities; (2) MMA Act 201 creating the Province of Shariff Kabunsuan is void; and (3) COMELEC Resolution No. 7902 is valid. On the Preliminary Matters The Writ of Prohibition is Appropriate to Test the Constitutionality of Election Laws, Rules and Regulations The purpose of the writ of Certiorari is to correct grave abuse of discretion by "any tribunal, board, or officer exercising judicial or quasi-judicial functions."21 On the other hand, the writ of Mandamus will issue to compel

a tribunal, corporation, board, officer, or person to perform an act "which the law specifically enjoins as a duty."22True, the COMELEC did not issue Resolution No. 7902 in the exercise of its judicial or quasi-judicial functions.23Nor is there a law which specifically enjoins the COMELEC to exclude from canvassing the votes cast in Cotabato City for representative of "Shariff Kabunsuan Province with Cotabato City." These, however, do not justify the outright dismissal of the petition in G.R. No. 177597 because Sema also prayed for the issuance of the writ of Prohibition and we have long recognized this writ as proper for testing the constitutionality of election laws, rules, and regulations.24 Respondent Dilangalens Does Not Moot the Petition Proclamation

There is also no merit in the claim that respondent Dilangalens proclamation as winner in the 14 May 2007 elections for representative of "Shariff Kabunsuan Province with Cotabato City" mooted this petition. This case does not concern respondent Dilangalens election. Rather, it involves an inquiry into the validity of COMELEC Resolution No. 7902, as well as the constitutionality of MMA Act 201 and Section 19, Article VI of RA 9054. Admittedly, the outcome of this petition, one way or another, determines whether the votes cast in Cotabato City for representative of the district of "Shariff Kabunsuan Province with Cotabato City" will be included in the canvassing of ballots. However, this incidental consequence is no reason for us not to proceed with the resolution of the novel issues raised here. The Courts ruling in these petitions affects not only the recently concluded elections but also all the other succeeding elections for the office in question, as well as the power of the ARMM Regional Assembly to create in the future additional provinces. On the Main Whether the ARMM Regional Can Create the Province of Shariff Kabunsuan Issues Assembly

The creation of local government units is governed by Section 10, Article X of the Constitution, which provides: Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished or its boundary substantially altered except in accordance with the criteria established in the local government code and

subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. Thus, the creation of any of the four local government units province, city, municipality or barangay must comply with three conditions. First, the creation of a local government unit must follow the criteria fixed in the Local Government Code. Second, such creation must not conflict with any provision of the Constitution. Third, there must be a plebiscite in the political units affected. There is neither an express prohibition nor an express grant of authority in the Constitution for Congress to delegate to regional or local legislative bodies the power to create local government units. However, under its plenary legislative powers, Congress can delegate to local legislative bodies the power to create local government units, subject to reasonable standards and provided no conflict arises with any provision of the Constitution. In fact, Congress has delegated to provincial boards, and city and municipal councils, the power to create barangays within their jurisdiction,25 subject to compliance with the criteria established in the Local Government Code, and the plebiscite requirement in Section 10, Article X of the Constitution. However, under the Local Government Code, "only x x x an Act of Congress" can create provinces, cities or municipalities.261avvphi1 Under Section 19, Article VI of RA 9054, Congress delegated to the ARMM Regional Assembly the power to create provinces, cities, municipalities and barangays within the ARMM. Congress made the delegation under its plenary legislative powers because the power to create local government units is not one of the express legislative powers granted by the Constitution to regional legislative bodies.27 In the present case, the question arises whether the delegation to the ARMM Regional Assembly of the power to create provinces, cities, municipalities and barangays conflicts with any provision of the Constitution. There is no provision in the Constitution that conflicts with the delegation to regional legislative bodies of the power to create municipalities and barangays, provided Section 10, Article X of the Constitution is followed. However, the creation of provinces and cities is another matter. Section 5 (3), Article VI of the Constitution provides, "Each city with a population of at least two hundred fifty thousand, or each province, shall have at least one representative" in the House of Representatives. Similarly, Section 3

of the Ordinance appended to the Constitution provides, "Any province that may hereafter be created, or any city whose population may hereafter increase to more than two hundred fifty thousand shall be entitled in the immediately following election to at least one Member x x x." Clearly, a province cannot be created without a legislative district because it will violate Section 5 (3), Article VI of the Constitution as well as Section 3 of the Ordinance appended to the Constitution. For the same reason, a city with a population of 250,000 or more cannot also be created without a legislative district. Thus, the power to create a province, or a city with a population of 250,000 or more, requires also the power to create a legislative district. Even the creation of a city with a population of less than 250,000 involves the power to create a legislative district because once the citys population reaches 250,000, the city automatically becomes entitled to one representative under Section 5 (3), Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution. Thus, the power to create a province or city inherently involves the power to create a legislative district. For Congress to delegate validly the power to create a province or city, it must also validly delegate at the same time the power to create a legislative district. The threshold issue then is, can Congress validly delegate to the ARMM Regional Assembly the power to create legislative districts for the House of Representatives? The answer is in the negative. Legislative Districts are Only by an Act of Congress Created or Reapportioned

Under the present Constitution, as well as in past 28 Constitutions, the power to increase the allowable membership in the House of Representatives, and to reapportion legislative districts, is vested exclusively in Congress. Section 5, Article VI of the Constitution provides: SECTION 5. (1) The House of Representatives shall be composed of not more than two hundred and fifty members, unless otherwise fixed by law, who shall be elected from legislative districts apportioned among the provinces, cities, and the Metropolitan Manila area in accordance with the number of their respective inhabitants, and on the basis of a uniform and progressive ratio, and those who, as provided by law, shall be elected

through a party-list system of registered national, regional, and sectoral parties or organizations. xxxx (3) Each legislative district shall comprise, as far as practicable, contiguous, compact, and adjacent territory. Each city with a population of at least two hundred fifty thousand, or each province, shall have at least one representative. (4) Within three years following the return of every census, the Congress shall make a reapportionment of legislative districts based on the standards provided in this section. (Emphasis supplied) Section 5 (1), Article VI of the Constitution vests in Congress the power to increase, through a law, the allowable membership in the House of Representatives. Section 5 (4) empowers Congress to reapportion legislative districts. The power to reapportion legislative districts necessarily includes the power to create legislative districts out of existing ones. Congress exercises these powers through a law that Congress itself enacts, and not through a law that regional or local legislative bodies enact. The allowable membership of the House of Representatives can be increased, and new legislative districts of Congress can be created, only through a national law passed by Congress. In Montejo v. COMELEC,29 we held that the "power of redistricting x x x is traditionally regarded as part of the power (of Congress) to make laws," and thus is vested exclusively in Congress. This textual commitment to Congress of the exclusive power to create or reapportion legislative districts is logical. Congress is a national legislature and any increase in its allowable membership or in its incumbent membership through the creation of legislative districts must be embodied in a national law. Only Congress can enact such a law. It would be anomalous for regional or local legislative bodies to create or reapportion legislative districts for a national legislature like Congress. An inferior legislative body, created by a superior legislative body, cannot change the membership of the superior legislative body. The creation of the ARMM, and the grant of legislative powers to its Regional Assembly under its organic act, did not divest Congress of its

exclusive authority to create legislative districts. This is clear from the Constitution and the ARMM Organic Act, as amended. Thus, Section 20, Article X of the Constitution provides: SECTION 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the organic act of autonomous regions shall provide for legislative powers over: (1) Administrative organization; (2) Creation of sources of revenues; (3) Ancestral domain and natural resources; (4) Personal, family, and property relations; (5) Regional urban and rural planning development; (6) Economic, social, and tourism development; (7) Educational policies; (8) Preservation and development of the cultural heritage; and (9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of the region. Nothing in Section 20, Article X of the Constitution authorizes autonomous regions, expressly or impliedly, to create or reapportion legislative districts for Congress. On the other hand, Section 3, Article IV of RA 9054 amending the ARMM Organic Act, provides, "The Regional Assembly may exercise legislative power x x x except on the following matters: x x x (k) National elections. x x x." Since the ARMM Regional Assembly has no legislative power to enact laws relating to national elections, it cannot create a legislative district whose representative is elected in national elections. Whenever Congress enacts a law creating a legislative district, the first representative is always elected in the "next national elections" from the effectivity of the law.30

Indeed, the office of a legislative district representative to Congress is a national office, and its occupant, a Member of the House of Representatives, is a national official.31 It would be incongruous for a regional legislative body like the ARMM Regional Assembly to create a national office when its legislative powers extend only to its regional territory. The office of a district representative is maintained by national funds and the salary of its occupant is paid out of national funds. It is a self-evident inherent limitation on the legislative powers of every local or regional legislative body that it can only create local or regional offices, respectively, and it can never create a national office. To allow the ARMM Regional Assembly to create a national office is to allow its legislative powers to operate outside the ARMMs territorial jurisdiction. This violates Section 20, Article X of the Constitution which expressly limits the coverage of the Regional Assemblys legislative powers "[w]ithin its territorial jurisdiction x x x." The ARMM Regional Assembly itself, in creating Shariff Kabunsuan, recognized the exclusive nature of Congress power to create or reapportion legislative districts by abstaining from creating a legislative district for Shariff Kabunsuan. Section 5 of MMA Act 201 provides that: Except as may be provided by national law, the existing legislative district, which includes Cotabato City as a part thereof, shall remain. (Emphasis supplied) However, a province cannot legally be created without a legislative district because the Constitution mandates that "each province shall have at least one representative." Thus, the creation of the Province of Shariff Kabunsuan without a legislative district is unconstitutional. Sema, petitioner in G.R. No. 177597, contends that Section 5 (3), Article VI of the Constitution, which provides: Each legislative district shall comprise, as far as practicable, contiguous, compact, and adjacent territory. Each city with a population of at least two hundred fifty thousand, or each province, shall have at least one representative. (Emphasis supplied) and Section 3 of the Ordinance appended to the Constitution, which states:

Any province that may hereafter be created, or any city whose population may hereafter increase to more than two hundred fifty thousand shall be entitled in the immediately following election to at least one Member or such number of Members as it may be entitled to on the basis of the number of its inhabitants and according to the standards set forth in paragraph (3), Section 5 of Article VI of the Constitution. The number of Members apportioned to the province out of which such new province was created or where the city, whose population has so increased, is geographically located shall be correspondingly adjusted by the Commission on Elections but such adjustment shall not be made within one hundred and twenty days before the election. (Emphasis supplied) serve as bases for the conclusion that the Province of Shariff Kabunsuan, created on 29 October 2006, is automatically entitled to one member in the House of Representatives in the 14 May 2007 elections. As further support for her stance, petitioner invokes the statement in Felwa that "when a province is created by statute, the corresponding representative district comes into existence neither by authority of that statute which cannot provide otherwise nor by apportionment, but by operation of the Constitution, without a reapportionment." The contention has no merit. First. The issue in Felwa, among others, was whether Republic Act No. 4695 (RA 4695), creating the provinces of Benguet, Mountain Province, Ifugao, and Kalinga-Apayao and providing for congressional representation in the old and new provinces, was unconstitutional for "creati[ng] congressional districts without the apportionment provided in the Constitution." The Court answered in the negative, thus: The Constitution ordains: "The House of Representatives shall be composed of not more than one hundred and twenty Members who shall be apportioned among the several provinces as nearly as may be according to the number of their respective inhabitants, but each province shall have at least one Member. The Congress shall by law make an apportionment within three years after the return of every enumeration, and not otherwise. Until such apportionment shall have been made, the House of Representatives shall have the same number of Members as that fixed by law for the National

Assembly, who shall be elected by the qualified electors from the present Assembly districts. Each representative district shall comprise as far as practicable, contiguous and compact territory." Pursuant to this Section, a representative district may come into existence: (a) indirectly, through the creation of a province for "each province shall have at least one member" in the House of Representatives; or (b) by direct creation of several representative districts within a province. The requirements concerning the apportionment of representative districts and the territory thereof refer only to the second method of creation of representative districts, and do not apply to those incidental to the creation of provinces, under the first method. This is deducible, not only from the general tenor of the provision above quoted, but, also, from the fact that the apportionment therein alluded to refers to that which is made by an Act of Congress. Indeed, when a province is created by statute, the corresponding representative district, comes into existence neither by authority of that statute which cannot provide otherwise nor by apportionment, but by operation of the Constitution, without a reapportionment. There is no constitutional limitation as to the time when, territory of, or other conditions under which a province may be created, except, perhaps, if the consequence thereof were to exceed the maximum of 120 representative districts prescribed in the Constitution, which is not the effect of the legislation under consideration. As a matter of fact, provinces have been created or subdivided into other provinces, with the consequent creation of additional representative districts, without complying with the aforementioned requirements.32 (Emphasis supplied) Thus, the Court sustained the constitutionality of RA 4695 because (1) it validly created legislative districts "indirectly" through a special law enacted by Congress creating a province and (2) the creation of the legislative districts will not result in breaching the maximum number of legislative districts provided under the 1935 Constitution. Felwa does not apply to the present case because in Felwa the new provinces were created by anational law enacted by Congress itself. Here, the new province was created merely by a regional law enacted by the ARMM Regional Assembly.

What Felwa teaches is that the creation of a legislative district by Congress does not emanate alone from Congress power to reapportion legislative districts, but also from Congress power to create provinces which cannot be created without a legislative district. Thus, when a province is created, a legislative district is created by operation of the Constitution because the Constitution provides that "each province shall have at least one representative" in the House of Representatives. This does not detract from the constitutional principle that the power to create legislative districts belongs exclusively to Congress. It merely prevents any other legislative body, except Congress, from creating provinces because for a legislative body to create a province such legislative body must have the power to create legislative districts. In short, only an act of Congress can trigger the creation of a legislative district by operation of the Constitution. Thus, only Congress has the power to create, or trigger the creation of, a legislative district. Moreover, if as Sema claims MMA Act 201 apportioned a legislative district to Shariff Kabunsuan upon its creation, this will leave Cotabato City as the lone component of the first legislative district of Maguindanao. However, Cotabato City cannot constitute a legislative district by itself because as of the census taken in 2000, it had a population of only 163,849. To constitute Cotabato City alone as the surviving first legislative district of Maguindanao will violate Section 5 (3), Article VI of the Constitution which requires that "[E]ach city with a population of at least two hundred fifty thousand x x x, shall have at least one representative." Second. Semas theory also undermines the composition and independence of the House of Representatives. Under Section 19,33 Article VI of RA 9054, the ARMM Regional Assembly can create provinces and cities within the ARMM with or without regard to the criteria fixed in Section 461 of RA 7160, namely: minimum annual income of P20,000,000, and minimum contiguous territory of 2,000 square kilometers or minimum population of 250,000.34 The following scenarios thus become distinct possibilities: (1) An inferior legislative body like the ARMM Regional Assembly can create 100 or more provinces and thus increase the membership of a superior legislative body, the House of Representatives, beyond the maximum limit of 250 fixed in the Constitution (unless a national law provides otherwise);

(2) The proportional representation in the House of Representatives based on one representative for at least every 250,000 residents will be negated because the ARMM Regional Assembly need not comply with the requirement in Section 461(a)(ii) of RA 7160 that every province created must have a population of at least 250,000; and (3) Representatives from the ARMM provinces can become the majority in the House of Representatives through the ARMM Regional Assemblys continuous creation of provinces or cities within the ARMM. The following exchange during the oral arguments of the petition in G.R. No. 177597 highlights the absurdity of Semas position that the ARMM Regional Assembly can create provinces: Justice Carpio: So, you mean to say [a] Local Government can create legislative district[s] and pack Congress with their own representatives [?] Atty. Vistan II:35 Yes, Your Honor, because the Constitution allows that. Justice Carpio: So, [the] Regional Assembly of [the] ARMM can create and create x x x provinces x x x and, therefore, they can have thirty-five (35) new representatives in the House of Representatives without Congress agreeing to it, is that what you are saying? That can be done, under your theory[?] Atty. Vistan II: Yes, Your Honor, under the correct factual circumstances. Justice Carpio: Under your theory, the ARMM legislature can create thirty-five (35) new provinces, there may be x x x [only] one hundred thousand (100,000)

[population], x x x, and they will each have one representative x x x to Congress without any national law, is that what you are saying? Atty. Vistan II: Without law passed by Congress, yes, Your Honor, that is what we are saying. xxxx Justice Carpio: So, they can also create one thousand (1000) new provinces, sen[d] one thousand (1000) representatives to the House of Representatives without a national law[,] that is legally possible, correct? Atty. Vistan II: Yes, Your Honor.36 (Emphasis supplied) Neither the framers of the 1987 Constitution in adopting the provisions in Article X on regional autonomy,37 nor Congress in enacting RA 9054, envisioned or intended these disastrous consequences that certainly would wreck the tri-branch system of government under our Constitution. Clearly, the power to create or reapportion legislative districts cannot be delegated by Congress but must be exercised by Congress itself. Even the ARMM Regional Assembly recognizes this. The Constitution empowered Congress to create or reapportion legislative districts, not the regional assemblies. Section 3 of the Ordinance to the Constitution which states, "[A]ny province that may hereafter be created x x x shall be entitled in the immediately following election to at least one Member," refers to a province created by Congress itself through a national law. The reason is that the creation of a province increases the actual membership of the House of Representatives, an increase that only Congress can decide. Incidentally, in the present 14th Congress, there are 21938 district representatives out of the maximum 250 seats in the House of Representatives. Since party-list members shall constitute 20 percent of total membership of the House, there should at least be 50 party-list seats available in every election in case 50 party-list candidates are proclaimed winners. This leaves only 200 seats for district

representatives, much less than the 219 incumbent district representatives. Thus, there is a need now for Congress to increase by law the allowable membership of the House, even before Congress can create new provinces. It is axiomatic that organic acts of autonomous regions cannot prevail over the Constitution. Section 20, Article X of the Constitution expressly provides that the legislative powers of regional assemblies are limited "[w]ithin its territorial jurisdiction and subject to the provisions of the Constitution and national laws, x x x." The Preamble of the ARMM Organic Act (RA 9054) itself states that the ARMM Government is established "within the framework of the Constitution." This follows Section 15, Article X of the Constitution which mandates that the ARMM "shall be created x x x within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines." The present case involves the creation of a local government unit that necessarily involves also the creation of a legislative district. The Court will not pass upon the constitutionality of the creation of municipalities and barangays that does not comply with the criteria established in Section 461 of RA 7160, as mandated in Section 10, Article X of the Constitution, because the creation of such municipalities and barangays does not involve the creation of legislative districts. We leave the resolution of this issue to an appropriate case. In summary, we rule that Section 19, Article VI of RA 9054, insofar as it grants to the ARMM Regional Assembly the power to create provinces and cities, is void for being contrary to Section 5 of Article VI and Section 20 of Article X of the Constitution, as well as Section 3 of the Ordinance appended to the Constitution. Only Congress can create provinces and cities because the creation of provinces and cities necessarily includes the creation of legislative districts, a power only Congress can exercise under Section 5, Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution. The ARMM Regional Assembly cannot create a province without a legislative district because the Constitution mandates that every province shall have a legislative district. Moreover, the ARMM Regional Assembly cannot enact a law creating a national office like the office of a district representative of Congress because the legislative powers of the ARMM Regional Assembly operate only within its territorial jurisdiction as provided in Section 20, Article X of the

Constitution. Thus, we rule that MMA Act 201, enacted by the ARMM Regional Assembly and creating the Province of Shariff Kabunsuan, is void. Resolution No. 7902 Complies with the Constitution Consequently, we hold that COMELEC Resolution No. 7902, preserving the geographic and legislative district of the First District of Maguindanao with Cotabato City, is valid as it merely complies with Section 5 of Article VI and Section 20 of Article X of the Constitution, as well as Section 1 of the Ordinance appended to the Constitution. WHEREFORE, we declare Section 19, Article VI of Republic Act No. 9054 UNCONSTITUTIONAL insofar as it grants to the Regional Assembly of the Autonomous Region in Muslim Mindanao the power to create provinces and cities. Thus, we declare VOID Muslim Mindanao Autonomy Act No. 201 creating the Province of Shariff Kabunsuan. Consequently, we rule that COMELEC Resolution No. 7902 is VALID. Let a copy of this ruling be served on the President of the Senate and the Speaker of the House of Representatives. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 166715 August 14, 2008

ABAKADA GURO PARTY LIST (formerly AASJS)1 OFFICERS/MEMBERS SAMSON S. ALCANTARA, ED VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R. SANDOVAL, petitioners, vs. HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON. GUILLERMO L. PARAYNO, JR., in his capacity as

Commissioner of the Bureau of Internal Revenue, and HON. ALBERTO D. LINA, in his Capacity as Commissioner of Bureau of Customs, respondents. DECISION CORONA, J.: This petition for prohibition1 seeks to prevent respondents from implementing and enforcing Republic Act (RA) 93352 (Attrition Act of 2005). RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC officials and employees to exceed their revenue targets by providing a system of rewards and sanctions through the creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board (Board).3 It covers all officials and employees of the BIR and the BOC with at least six months of service, regardless of employment status.4 The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the year, as determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or reward is taken from the fund and allocated to the BIR and the BOC in proportion to their contribution in the excess collection of the targeted amount of tax revenue.5 The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance (DOF) or his/her Undersecretary, the Secretary of the Department of Budget and Management (DBM) or his/her Undersecretary, the Director General of the National Economic Development Authority (NEDA) or his/her Deputy Director General, the Commissioners of the BIR and the BOC or their Deputy Commissioners, two representatives from the rank-and-file employees and a representative from the officials nominated by their recognized organization.6 Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and release of the Fund; (2) set criteria and procedures for removing from the service officials and employees whose

revenue collection falls short of the target; (3) terminate personnel in accordance with the criteria adopted by the Board; (4) prescribe a system for performance evaluation; (5) perform other functions, including the issuance of rules and regulations and (6) submit an annual report to Congress.7 The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate and issue the implementing rules and regulations of RA 9335,8 to be approved by a Joint Congressional Oversight Committee created for such purpose.9 Petitioners, invoking their right as taxpayers filed this petition challenging the constitutionality of RA 9335, a tax reform legislation. They contend that, by establishing a system of rewards and incentives, the law "transform[s] the officials and employees of the BIR and the BOC into mercenaries and bounty hunters" as they will do their best only in consideration of such rewards. Thus, the system of rewards and incentives invites corruption and undermines the constitutionally mandated duty of these officials and employees to serve the people with utmost responsibility, integrity, loyalty and efficiency. Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials and employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There is no valid basis for classification or distinction as to why such a system should not apply to officials and employees of all other government agencies. In addition, petitioners assert that the law unduly delegates the power to fix revenue targets to the President as it lacks a sufficient standard on that matter. While Section 7(b) and (c) of RA 9335 provides that BIR and BOC officials may be dismissed from the service if their revenue collections fall short of the target by at least 7.5%, the law does not, however, fix the revenue targets to be achieved. Instead, the fixing of revenue targets has been delegated to the President without sufficient standards. It will therefore be easy for the President to fix an unrealistic and unattainable target in order to dismiss BIR or BOC personnel. Finally, petitioners assail the committee on the ground that powers. While the legislative completed upon the enactment creation of a congressional oversight it violates the doctrine of separation of function is deemed accomplished and and approval of the law, the creation of

the congressional oversight committee permits legislative participation in the implementation and enforcement of the law. In their comment, respondents, through the Office of the Solicitor General, question the petition for being premature as there is no actual case or controversy yet. Petitioners have not asserted any right or claim that will necessitate the exercise of this Courts jurisdiction. Nevertheless, respondents acknowledge that public policy requires the resolution of the constitutional issues involved in this case. They assert that the allegation that the reward system will breed mercenaries is mere speculation and does not suffice to invalidate the law. Seen in conjunction with the declared objective of RA 9335, the law validly classifies the BIR and the BOC because the functions they perform are distinct from those of the other government agencies and instrumentalities. Moreover, the law provides a sufficient standard that will guide the executive in the implementation of its provisions. Lastly, the creation of the congressional oversight committee under the law enhances, rather than violates, separation of powers. It ensures the fulfillment of the legislative policy and serves as a check to any over-accumulation of power on the part of the executive and the implementing agencies. After a careful consideration of the conflicting contentions of the parties, the Court finds that petitioners have failed to overcome the presumption of constitutionality in favor of RA 9335, except as shall hereafter be discussed. Actual Case And Ripeness An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial adjudication.10 A closely related requirement is ripeness, that is, the question must be ripe for adjudication. And a constitutional question is ripe for adjudication when the governmental act being challenged has a direct adverse effect on the individual challenging it.11 Thus, to be ripe for judicial adjudication, the petitioner must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision of the Court.12 In this case, aside from the general claim that the dispute has ripened into a judicial controversy by the mere enactment of the law even without any further overt act,13 petitioners fail either to assert any specific and

concrete legal claim or to demonstrate any direct adverse effect of the law on them. They are unable to show a personal stake in the outcome of this case or an injury to themselves. On this account, their petition is procedurally infirm. This notwithstanding, public interest requires the resolution of the constitutional issues raised by petitioners. The grave nature of their allegations tends to cast a cloud on the presumption of constitutionality in favor of the law. And where an action of the legislative branch is alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.14 Accountability Public Officers Section 1, Article 11 of the Constitution states: Sec. 1. Public office is a public trust. 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. Public office is a public trust. It must be discharged by its holder not for his own personal gain but for the benefit of the public for whom he holds it in trust. By demanding accountability and service with responsibility, integrity, loyalty, efficiency, patriotism and justice, all government officials and employees have the duty to be responsive to the needs of the people they are called upon to serve. Public officers enjoy the presumption of regularity in the performance of their duties. This presumption necessarily obtains in favor of BIR and BOC officials and employees. RA 9335 operates on the basis thereof and reinforces it by providing a system of rewards and sanctions for the purpose of encouraging the officials and employees of the BIR and the BOC to exceed their revenue targets and optimize their revenuegeneration capability and collection.15 The presumption is disputable but proof to the contrary is required to rebut it. It cannot be overturned by mere conjecture or denied in advance (as petitioners would have the Court do) specially in this case where it is an underlying principle to advance a declared public policy. of

Petitioners claim that the implementation of RA 9335 will turn BIR and BOC officials and employees into "bounty hunters and mercenaries" is not only without any factual and legal basis; it is also purely speculative. A law enacted by Congress enjoys the strong presumption of constitutionality. To justify its nullification, there must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal one.16 To invalidate RA 9335 based on petitioners baseless supposition is an affront to the wisdom not only of the legislature that passed it but also of the executive which approved it. Public service is its own reward. Nevertheless, public officers may by law be rewarded for exemplary and exceptional performance. A system of incentives for exceeding the set expectations of a public office is not anathema to the concept of public accountability. In fact, it recognizes and reinforces dedication to duty, industry, efficiency and loyalty to public service of deserving government personnel. In United States v. Matthews,17 the U.S. Supreme Court validated a law which awards to officers of the customs as well as other parties an amount not exceeding one-half of the net proceeds of forfeitures in violation of the laws against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme Court said: The offer of a portion of such penalties to the collectors is to stimulate and reward their zeal and industry in detecting fraudulent attempts to evade payment of duties and taxes. In the same vein, employees of the BIR and the BOC may by law be entitled to a reward when, as a consequence of their zeal in the enforcement of tax and customs laws, they exceed their revenue targets. In addition, RA 9335 establishes safeguards to ensure that the reward will not be claimed if it will be either the fruit of "bounty hunting or mercenary activity" or the product of the irregular performance of official duties. One of these precautionary measures is embodied in Section 8 of the law: SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the BOC. The officials, examiners, and employees of the [BIR] and the [BOC] who violate this Act or who are guilty of negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of their duties shall be

held liable for any loss or injury suffered by any business establishment or taxpayer as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence. Equal Protection Equality guaranteed under the equal protection clause is equality under the same conditions and among persons similarly situated; it is equality among equals, not similarity of treatment of persons who are classified based on substantial differences in relation to the object to be accomplished.19 When things or persons are different in fact or circumstance, they may be treated in law differently. In Victoriano v. Elizalde Rope Workers Union,20 this Court declared: The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate. The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for

real differences, that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not necessary that the classification be based on scientific or marked differences of things or in their relation. Neither is it necessary that the classification be made with mathematical nicety. Hence, legislative classification may in many cases properly rest on narrow distinctions, for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear. 21 (emphasis supplied) The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable foundation or rational basis and not arbitrary.22 With respect to RA 9335, its expressed public policy is the optimization of the revenue-generation capability and collection of the BIR and the BOC.23 Since the subject of the law is the revenue- generation capability and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said agencies. Moreover, the law concerns only the BIR and the BOC because they have the common distinct primary function of generating revenues for the national government through the collection of taxes, customs duties, fees and charges. The BIR performs the following functions: Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue, which shall be headed by and subject to the supervision and control of the Commissioner of Internal Revenue, who shall be appointed by the President upon the recommendation of the Secretary [of the DOF], shall have the following functions: (1) Assess and collect all taxes, fees and charges and account for all revenues collected;

(2) Exercise duly delegated police performance of its functions and duties;

powers

for

the

proper

(3) Prevent and prosecute tax evasions and all other illegal economic activities; (4) Exercise supervision and control over its constituent and subordinate units; and (5) Perform such other functions as may be provided by law.24 xxx xxx xxx (emphasis supplied)

On the other hand, the BOC has the following functions: Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed and subject to the management and control of the Commissioner of Customs, who shall be appointed by the President upon the recommendation of the Secretary[of the DOF] and hereinafter referred to as Commissioner, shall have the following functions: (1) Collect custom duties, taxes and the corresponding fees, charges and penalties; (2) Account for all customs revenues collected; (3) Exercise police authority for the enforcement of tariff and customs laws; (4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of entry; (5) Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts in all ports of entry; (6) Administer all legal requirements that are appropriate; (7) Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;

(8) Exercise supervision and control over its constituent units; (9) Perform such other functions as may be provided by law.25 xxx xxx xxx (emphasis supplied)

Section 4 "canalized within banks that keep it from overflowing"29 the delegated power to the President to fix revenue targets: SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund, hereinafter referred to as the Fund, is hereby created, to be sourced from the collection of the BIR and the BOC in excess of their respective revenue targets of the year, as determined by the Development Budget and Coordinating Committee (DBCC), in the following percentages: Excess of Collection of the Percent (%) of the Excess Collection Excess the Revenue to Accrue to the Fund Targets 30% or below 15% More than 30% 15% of the first 30% plus 20% of the remaining excess The Fund shall be deemed automatically appropriated the year immediately following the year when the revenue collection target was exceeded and shall be released on the same fiscal year. Revenue targets shall refer to the original estimated revenue collection expected of the BIR and the BOC for a given fiscal year as stated in the Budget of Expenditures and Sources of Financing (BESF) submitted by the President to Congress. The BIR and the BOC shall submit to the DBCC the distribution of the agencies revenue targets as allocated among its revenue districts in the case of the BIR, and the collection districts in the case of the BOC. xxx xxx xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of being the instrumentalities through which the State exercises one of its great inherent functions taxation. Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection. Undue Delegation Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried out or implemented by the delegate.26 It lays down a sufficient standard when it provides adequate guidelines or limitations in the law to map out the boundaries of the delegates authority and prevent the delegation from running riot.27 To be sufficient, the standard must specify the limits of the delegates authority, announce the legislative policy and identify the conditions under which it is to be implemented.28 RA 9335 adequately states the policy and standards to guide the President in fixing revenue targets and the implementing agencies in carrying out the provisions of the law. Section 2 spells out the policy of the law: SEC. 2. Declaration of Policy. It is the policy of the State to optimize the revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) by providing for a system of rewards and sanctions through the creation of a Rewards and Incentives Fund and a Revenue Performance Evaluation Board in the above agencies for the purpose of encouraging their officials and employees to exceed their revenue targets.

Revenue targets are based on the original estimated revenue collection expected respectively of the BIR and the BOC for a given fiscal year as approved by the DBCC and stated in the BESF submitted by the President to Congress.30 Thus, the determination of revenue targets does not rest solely on the President as it also undergoes the scrutiny of the DBCC. On the other hand, Section 7 specifies the limits of the Boards authority and identifies the conditions under which officials and employees whose

revenue collection falls short of the target by at least 7.5% may be removed from the service: SEC. 7. Powers and Functions of the Board. The Board in the agency shall have the following powers and functions: xxx xxx xxx

public officers and employees, such as the Code of Conduct and Ethical Standards of Public Officers and Employees and the Anti-Graft and Corrupt Practices Act; xxx xxx xxx (emphasis supplied)

(b) To set the criteria and procedures for removing from service officials and employees whose revenue collection falls short of the target by at least seven and a half percent (7.5%), with due consideration of all relevant factors affecting the level of collection as provided in the rules and regulations promulgated under this Act, subject to civil service laws, rules and regulations and compliance with substantive and procedural due process: Provided, That the following exemptions shall apply: 1. Where the district or area of responsibility is newlycreated, not exceeding two years in operation, as has no historical record of collection performance that can be used as basis for evaluation; and 2. Where the revenue or customs official or employee is a recent transferee in the middle of the period under consideration unless the transfer was due to nonperformance of revenue targets or potential nonperformance of revenue targets: Provided, however, That when the district or area of responsibility covered by revenue or customs officials or employees has suffered from economic difficulties brought about by natural calamities or force majeure or economic causes as may be determined by the Board, termination shall be considered only after careful and proper review by the Board. (c) To terminate personnel in accordance with the criteria adopted in the preceding paragraph: Provided, That such decision shall be immediately executory: Provided, further, That the application of the criteria for the separation of an official or employee from service under this Act shall be without prejudice to the application of other relevant laws on accountability of

Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR and the BOC. The guarantee of security of tenure only means that an employee cannot be dismissed from the service for causes other than those provided by law and only after due process is accorded the employee.31 In the case of RA 9335, it lays down a reasonable yardstick for removal (when the revenue collection falls short of the target by at least 7.5%) with due consideration of all relevant factors affecting the level of collection. This standard is analogous to inefficiency and incompetence in the performance of official duties, a ground for disciplinary action under civil service laws.32 The action for removal is also subject to civil service laws, rules and regulations and compliance with substantive and procedural due process. At any rate, this Court has recognized the following as sufficient standards: "public interest," "justice and equity," "public convenience and welfare" and "simplicity, economy and welfare."33 In this case, the declared policy of optimization of the revenue-generation capability and collection of the BIR and the BOC is infused with public interest. Separation Of Powers Section 12 of RA 9335 provides: SEC. 12. Joint Congressional Oversight Committee. There is hereby created a Joint Congressional Oversight Committee composed of seven Members from the Senate and seven Members from the House of Representatives. The Members from the Senate shall be appointed by the Senate President, with at least two senators representing the minority. The Members from the House of Representatives shall be appointed by the Speaker with at least two members representing the minority. After the Oversight Committee will have approved the implementing rules and regulations (IRR) it shall thereafter become functus officio and therefore cease to exist.

The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of approving the implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On May 22, 2006, it approved the said IRR. From then on, it became functus officio and ceased to exist. Hence, the issue of its alleged encroachment on the executive function of implementing and enforcing the law may be considered moot and academic. This notwithstanding, this might be as good a time as any for the Court to confront the issue of the constitutionality of the Joint Congressional Oversight Committee created under RA 9335 (or other similar laws for that matter). The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of congressional oversight in Macalintal v. Commission on Elections34 is illuminating: Concept and bases of congressional oversight Broadly defined, the power of oversight embraces all activities undertaken by Congress to enhance its understanding of and influence over the implementation of legislation it has enacted. Clearly, oversight concerns postenactment measures undertaken by Congress: (a) to monitor bureaucratic compliance with program objectives, (b) to determine whether agencies are properly administered, (c) to eliminate executive waste and dishonesty, (d) to prevent executive usurpation of legislative authority, and (d) to assess executive conformity with the congressional perception of public interest. The power of oversight has been held to be intrinsic in the grant of legislative power itself and integral to the checks and balances inherent in a democratic system of government. x x x x x x x x x Over the years, Congress has invoked its oversight power with increased frequency to check the perceived "exponential accumulation of power" by the executive branch. By the beginning of the 20th century, Congress has delegated an enormous amount of legislative authority to the executive branch and the administrative agencies. Congress, thus, uses its oversight power to make sure

that the administrative agencies perform their functions within the authority delegated to them. x x x x x x x x x Categories of congressional oversight functions The acts done by Congress purportedly in the exercise of its oversight powers may be divided intothree categories, namely: scrutiny, investigation and supervision. a. Scrutiny Congressional scrutiny implies a lesser intensity and continuity of attention to administrative operations. Its primary purpose is to determine economy and efficiency of the operation of government activities. In the exercise of legislative scrutiny, Congress may request information and report from the other branches of government. It can give recommendations or pass resolutions for consideration of the agency involved. xxx xxx xxx

b. Congressional investigation While congressional scrutiny is regarded as a passive process of looking at the facts that are readily available, congressional investigation involves a more intense digging of facts. The power of Congress to conduct investigation is recognized by the 1987 Constitution under section 21, Article VI, xxx xxx xxx c. Legislative supervision The third and most encompassing form by which Congress exercises its oversight power is thru legislative supervision. "Supervision" connotes a continuing and informed awareness on the part of a congressional committee regarding executive operations in a given administrative area. While both congressional scrutiny and investigation involve inquiry into past executive branch actions in order to influence future executive branch performance, congressional supervision allows Congress to

scrutinize the exercise of delegated law-making authority, and permits Congress to retain part of that delegated authority. Congress exercises supervision over the executive agencies through its veto power. It typically utilizes veto provisions when granting the President or an executive agency the power to promulgate regulations with the force of law. These provisions require the President or an agency to present the proposed regulations to Congress, which retains a "right" to approve or disapprove any regulation before it takes effect. Such legislative veto provisions usually provide that a proposed regulation will become a law after the expiration of a certain period of time, only if Congress does not affirmatively disapprove of the regulation in the meantime. Less frequently, the statute provides that a proposed regulation will become law if Congress affirmatively approves it. Supporters of legislative veto stress that it is necessary to maintain the balance of power between the legislative and the executive branches of government as it offers lawmakers a way to delegate vast power to the executive branch or to independent agencies while retaining the option to cancel particular exercise of such power without having to pass new legislation or to repeal existing law. They contend that this arrangement promotes democratic accountability as it provides legislative check on the activities of unelected administrative agencies. One proponent thus explains: It is too late to debate the merits of this delegation policy: the policy is too deeply embedded in our law and practice. It suffices to say that the complexities of modern government have often led Congress-whether by actual or perceived necessity- to legislate by declaring broad policy goals and general statutory standards, leaving the choice of policy options to the discretion of an executive officer. Congress articulates legislative aims, but leaves their implementation to the judgment of parties who may or may not have participated in or agreed with the development of those aims. Consequently, absent safeguards, in many instances the reverse of our constitutional scheme could be effected: Congress proposes, the Executive disposes. One safeguard, of course, is the legislative power to enact new legislation or to change existing law. But without some means of

overseeing post enactment activities of the executive branch, Congress would be unable to determine whether its policies have been implemented in accordance with legislative intent and thus whether legislative intervention is appropriate. Its opponents, however, criticize the legislative veto as undue encroachment upon the executive prerogatives. They urge that any post-enactment measures undertaken by the legislative branch should be limited to scrutiny and investigation; any measure beyond that would undermine the separation of powers guaranteed by the Constitution. They contend that legislative veto constitutes an impermissible evasion of the Presidents veto authority and intrusion into the powers vested in the executive or judicial branches of government. Proponents counter that legislative veto enhances separation of powers as it prevents the executive branch and independent agencies from accumulating too much power. They submit that reporting requirements and congressional committee investigations allow Congress to scrutinize only the exercise of delegated lawmaking authority. They do not allow Congress to review executive proposals before they take effect and they do not afford the opportunity for ongoing and binding expressions of congressional intent. In contrast, legislative veto permits Congress to participate prospectively in the approval or disapproval of "subordinate law" or those enacted by the executive branch pursuant to a delegation of authority by Congress. They further argue that legislative veto "is a necessary response by Congress to the accretion of policy control by forces outside its chambers." In an era of delegated authority, they point out that legislative veto "is the most efficient means Congress has yet devised to retain control over the evolution and implementation of its policy as declared by statute." In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court resolved the validity of legislative veto provisions. The case arose from the order of the immigration judge suspending the deportation of Chadha pursuant to 244(c)(1) of the Immigration and Nationality Act. The United States House of Representatives passed a resolution vetoing the suspension pursuant to 244(c)(2) authorizing either House of Congress, by resolution, to invalidate the decision of the executive branch to allow a particular deportable alien to remain in the United States.

The immigration judge reopened the deportation proceedings to implement the House order and the alien was ordered deported. The Board of Immigration Appeals dismissed the aliens appeal, holding that it had no power to declare unconstitutional an act of Congress. The United States Court of Appeals for Ninth Circuit held that the House was without constitutional authority to order the aliens deportation and that 244(c)(2) violated the constitutional doctrine on separation of powers. On appeal, the U.S. Supreme Court declared 244(c)(2) unconstitutional. But the Court shied away from the issue of separation of powers and instead held that the provision violates the presentment clause and bicameralism. It held that the onehouse veto was essentially legislative in purpose and effect. As such, it is subject to the procedures set out in Article I of the Constitution requiring the passage by a majority of both Houses and presentment to the President. x x x x x x x x x Two weeks after the Chadha decision, the Court upheld, in memorandum decision, two lower court decisions invalidating the legislative veto provisions in the Natural Gas Policy Act of 1978 and the Federal Trade Commission Improvement Act of 1980. Following this precedence, lower courts invalidated statutes containing legislative veto provisions although some of these provisions required the approval of both Houses of Congress and thus met the bicameralism requirement of Article I. Indeed, some of these veto provisions were not even exercised.35 (emphasis supplied) In Macalintal, given the concept and configuration of the power of congressional oversight and considering the nature and powers of a constitutional body like the Commission on Elections, the Court struck down the provision in RA 9189 (The Overseas Absentee Voting Act of 2003) creating a Joint Congressional Committee. The committee was tasked not only to monitor and evaluate the implementation of the said law but also to review, revise, amend and approve the IRR promulgated by the Commission on Elections. The Court held that these functions infringed on the constitutional independence of the Commission on Elections.36 With this backdrop, it is clear that congressional oversight is not unconstitutional per se, meaning, it neither necessarily constitutes an

encroachment on the executive power to implement laws nor undermines the constitutional separation of powers. Rather, it is integral to the checks and balances inherent in a democratic system of government. It may in fact even enhance the separation of powers as it prevents the overaccumulation of power in the executive branch. However, to forestall the danger of congressional encroachment "beyond the legislative sphere," the Constitution imposes two basic and related constraints on Congress.37 It may not vest itself, any of its committees or its members with either executive or judicial power. 38 And, when it exercises its legislative power, it must follow the "single, finely wrought and exhaustively considered, procedures" specified under the Constitution,39 including the procedure for enactment of laws and presentment. Thus, any post-enactment congressional measure such as this should be limited to scrutiny and investigation. In particular, congressional oversight must be confined to the following: (1) scrutiny based primarily on Congress power of appropriation and the budget hearings conducted in connection with it, its power to ask heads of departments to appear before and be heard by either of its Houses on any matter pertaining to their departments and its power of confirmation40 and (2) investigation and monitoring41 of the implementation of laws pursuant to the power of Congress to conduct inquiries in aid of legislation.42 Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution. Legislative vetoes fall in this class. Legislative veto is a statutory provision requiring the President or an administrative agency to present the proposed implementing rules and regulations of a law to Congress which, by itself or through a committee formed by it, retains a "right" or "power" to approve or disapprove such regulations before they take effect. As such, a legislative veto in the form of a congressional oversight committee is in the form of an inward-turning delegation designed to attach a congressional leash (other than through scrutiny and investigation) to an agency to which Congress has by law initially delegated broad powers.43It radically changes the design or

structure of the Constitutions diagram of power as it entrusts to Congress a direct role in enforcing, applying or implementing its own laws.44 Congress has two options when enacting legislation to define national policy within the broad horizons of its legislative competence.45 It can itself formulate the details or it can assign to the executive branch the responsibility for making necessary managerial decisions in conformity with those standards.46 In the latter case, the law must be complete in all its essential terms and conditions when it leaves the hands of the legislature.47 Thus, what is left for the executive branch or the concerned administrative agency when it formulates rules and regulations implementing the law is to fill up details (supplementary rule-making) or ascertain facts necessary to bring the law into actual operation (contingent rule-making).48 Administrative regulations enacted by administrative agencies to implement and interpret the law which they are entrusted to enforce have the force of law and are entitled to respect. 49 Such rules and regulations partake of the nature of a statute 50 and are just as binding as if they have been written in the statute itself. As such, they have the force and effect of law and enjoy the presumption of constitutionality and legality until they are set aside with finality in an appropriate case by a competent court.51 Congress, in the guise of assuming the role of an overseer, may not pass upon their legality by subjecting them to its stamp of approval without disturbing the calculated balance of powers established by the Constitution. In exercising discretion to approve or disapprove the IRR based on a determination of whether or not they conformed with the provisions of RA 9335, Congress arrogated judicial power unto itself, a power exclusively vested in this Court by the Constitution. Considered Mr. Justice Dante O. Tinga Opinion of

Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum. (emphasis supplied) Legislative power (or the power to propose, enact, amend and repeal laws)53 is vested in Congress which consists of two chambers, the Senate and the House of Representatives. A valid exercise of legislative power requires the act of both chambers. Corrollarily, it can be exercised neither solely by one of the two chambers nor by a committee of either or both chambers. Thus, assuming the validity of a legislative veto, both a singlechamber legislative veto and a congressional committee legislative veto are invalid. Additionally, Section 27(1), Article VI of the Constitution provides: Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, be presented to the President. If he approves the same, he shall sign it, otherwise, he shall veto it and return the same with his objections to the House where it originated, which shall enter the objections at large in its Journal and proceed to reconsider it. If, after such reconsideration, twothirds of all the Members of such House shall agree to pass the bill, it shall be sent, together with the objections, to the other House by which it shall likewise be reconsidered, and if approved by twothirds of all the Members of that House, it shall become a law. In all such cases, the votes of each House shall be determined by yeas or nays, and the names of the members voting for or against shall be entered in its Journal. The President shall communicate his veto of any bill to the House where it originated within thirty days after the date of receipt thereof; otherwise, it shall become a law as if he had signed it. (emphasis supplied) Every bill passed by Congress must be presented to the President for approval or veto. In the absence of presentment to the President, no bill passed by Congress can become a law. In this sense, law-making under the Constitution is a joint act of the Legislature and of the Executive. Assuming that legislative veto is a valid legislative act with the force of law, it cannot take effect without such presentment even if approved by both chambers of Congress.

Moreover, the requirement that the implementing rules of a law be subjected to approval by Congress as a condition for their effectivity violates the cardinal constitutional principles of bicameralism and the rule on presentment.52 Section 1, Article VI of the Constitution states:

In sum, two steps are required before a bill becomes a law. First, it must be approved by both Houses of Congress.54 Second, it must be presented to and approved by the President.55 As summarized by Justice Isagani Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the procedure for the approval of bills: A bill is introduced by any member of the House of Representatives or the Senate except for some measures that must originate only in the former chamber. The first reading involves only a reading of the number and title of the measure and its referral by the Senate President or the Speaker to the proper committee for study. The bill may be "killed" in the committee or it may be recommended for approval, with or without amendments, sometimes after public hearings are first held thereon. If there are other bills of the same nature or purpose, they may all be consolidated into one bill under common authorship or as a committee bill. Once reported out, the bill shall be calendared for second reading. It is at this stage that the bill is read in its entirety, scrutinized, debated upon and amended when desired. The second reading is the most important stage in the passage of a bill. The bill as approved on second reading is printed in its final form and copies thereof are distributed at least three days before the third reading. On the third reading, the members merely register their votes and explain them if they are allowed by the rules. No further debate is allowed. Once the bill passes third reading, it is sent to the other chamber, where it will also undergo the three readings. If there are differences between the versions approved by the two chambers, a conference committee58 representing both Houses will draft a compromise measure that if ratified by the Senate and the House of Representatives will then be submitted to the President for his consideration.

The bill is enrolled when printed as finally approved by the Congress, thereafter authenticated with the signatures of the Senate President, the Speaker, and the Secretaries of their respective chambers59 The Presidents role in law-making. The final step is submission to the President for approval. Once approved, it takes effect as law after the required publication.60 Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to sufficient standards established in the said law, the law must be complete in all its essential terms and conditions when it leaves the hands of the legislature. And it may be deemed to have left the hands of the legislature when it becomes effective because it is only upon effectivity of the statute that legal rights and obligations become available to those entitled by the language of the statute. Subject to the indispensable requisite of publication under the due process clause,61 the determination as to when a law takes effect is wholly the prerogative of Congress.62 As such, it is only upon its effectivity that a law may be executed and the executive branch acquires the duties and powers to execute the said law. Before that point, the role of the executive branch, particularly of the President, is limited to approving or vetoing the law.63 From the moment the law becomes effective, any provision of law that empowers Congress or any of its members to play any role in the implementation or enforcement of the law violates the principle of separation of powers and is thus unconstitutional. Under this principle, a provision that requires Congress or its members to approve the implementing rules of a law after it has already taken effect shall be unconstitutional, as is a provision that allows Congress or its members to overturn any directive or ruling made by the members of the executive branch charged with the implementation of the law. Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. While there may be similar provisions of other laws that may be invalidated for failure to pass this standard, the Court refrains from invalidating them wholesale but will do so at the proper time when an appropriate case assailing those provisions is brought before us.64

The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 of RA 9335 on the other provisions of the law? Will it render the entire law unconstitutional? No. Section 13 of RA 9335 provides: SEC. 13. Separability Clause. If any provision of this Act is declared invalid by a competent court, the remainder of this Act or any provision not affected by such declaration of invalidity shall remain in force and effect. In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules: The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced. The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than complete nullity of the statute. To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally enact the other. Enough must remain to make a complete, intelligible and valid statute, which carries out the legislative intent. x x x The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest. In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if one part is void, in which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them. The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach any invalid provision from the other provisions so that the latter may continue in force and effect. The valid portions can stand independently of the invalid section. Without Section 12, the

remaining provisions still constitute a complete, intelligible and valid law which carries out the legislative intent to optimize the revenue-generation capability and collection of the BIR and the BOC by providing for a system of rewards and sanctions through the Rewards and Incentives Fund and a Revenue Performance Evaluation Board. To be effective, administrative rules and regulations must be published in full if their purpose is to enforce or implement existing law pursuant to a valid delegation. The IRR of RA 9335 were published on May 30, 2006 in two newspapers of general circulation66 and became effective 15 days thereafter.67 Until and unless the contrary is shown, the IRR are presumed valid and effective even without the approval of the Joint Congressional Oversight Committee. WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating a Joint Congressional Oversight Committee to approve the implementing rules and regulations of the law is declared UNCONSTITUTIONAL and therefore NULL and VOID. The constitutionality of the remaining provisions of RA 9335 is UPHELD. Pursuant to Section 13 of RA 9335, the rest of the provisions remain in force and effect. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 157870 November 3, 2008

As far as pertinent, the challenged section reads as follows: SEC. 36. Authorized Drug Testing. - Authorized drug testing shall be done by any government forensic laboratories or by any of the drug testing laboratories accredited and monitored by the DOH to safeguard the quality of the test results. x x x The drug testing shall employ, among others, two (2) testing methods, the screening test which will determine the positive result as well as the type of drug used and the confirmatory test which will confirm a positive screening test. x x x The following shall be subjected to undergo drug testing: xxxx (c) Students of secondary and tertiary schools. - Students of secondary and tertiary schools shall, pursuant to the related rules and regulations as contained in the school's student handbook and with notice to the parents, undergo a random drug testing x x x; (d) Officers and employees of public and private offices. - Officers and employees of public and private offices, whether domestic or overseas, shall be subjected to undergo a random drug test as contained in the company's work rules and regulations, x x x for purposes of reducing the risk in the workplace. Any officer or employee found positive for use of dangerous drugs shall be dealt with administratively which shall be a ground for suspension or termination, subject to the provisions of Article 282 of the Labor Code and pertinent provisions of the Civil Service Law; xxxx (f) All persons charged before the prosecutor's office with a criminal offense having an imposable penalty of imprisonment of not less than six (6) years and one (1) day shall undergo a mandatory drug test; (g) All candidates for public office whether appointed or elected both in the national or local government shall undergo a mandatory drug test.

SOCIAL JUSTICE SOCIETY (SJS), petitioner vs. DANGEROUS DRUGS BOARD and PHILIPPINE DRUG ENFORCEMENT AGENCY (PDEA),respondents. x-----------------------------------------------x G.R. No. 158633 November 3, 2008

ATTY. MANUEL J. LASERNA, JR., petitioner vs. DANGEROUS DRUGS BOARD and PHILIPPINE DRUG ENFORCEMENT AGENCY, respondents. x-----------------------------------------------x G.R. No. 161658 November 3, 2008

AQUILINO Q. PIMENTEL, JR., petitioner vs. COMMISSION ON ELECTIONS, respondents. DECISION VELASCO, JR., J.: In these kindred petitions, the constitutionality of Section 36 of Republic Act No. (RA) 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002, insofar as it requires mandatory drug testing of candidates for public office, students of secondary and tertiary schools, officers and employees of public and private offices, and persons charged before the prosecutor's office with certain offenses, among other personalities, is put in issue.

In addition to the above stated penalties in this Section, those found to be positive for dangerous drugs use shall be subject to the provisions of Section 15 of this Act. G.R. No. 161658 (Aquilino Q. Pimentel, Jr. v. Commission on Elections) On December 23, 2003, the Commission on Elections (COMELEC) issued Resolution No. 6486, prescribing the rules and regulations on the mandatory drug testing of candidates for public office in connection with the May 10, 2004 synchronized national and local elections. The pertinent portions of the said resolution read as follows: WHEREAS, Section 36 (g) of Republic Act No. 9165 provides: SEC. 36. Authorized Drug Testing. - x x x xxxx (g) All candidates for public office x x x both in the national or local government shall undergo a mandatory drug test. WHEREAS, Section 1, Article XI of the 1987 Constitution provides that public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency; WHEREAS, by requiring candidates to undergo mandatory drug test, the public will know the quality of candidates they are electing and they will be assured that only those who can serve with utmost responsibility, integrity, loyalty, and efficiency would be elected x x x. NOW THEREFORE, The [COMELEC], pursuant to the authority vested in it under the Constitution, Batas Pambansa Blg. 881 (Omnibus Election Code), [RA] 9165 and other election laws, RESOLVED to promulgate, as it hereby promulgates, the following rules and regulations on the conduct of mandatory drug testing to candidates for public office[:] SECTION 1. Coverage. - All candidates for public office, both national and local, in the May 10, 2004 Synchronized

National and Local Elections shall undergo mandatory drug test in government forensic laboratories or any drug testing laboratories monitored and accredited by the Department of Health. SEC. 3. x x x On March 25, 2004, in addition to the drug certificates filed with their respective offices, the Comelec Offices and employees concerned shall submit to the Law Department two (2) separate lists of candidates. The first list shall consist of those candidates who complied with the mandatory drug test while the second list shall consist of those candidates who failed to comply x x x. SEC. 4. Preparation and publication of names of candidates. Before the start of the campaign period, the [COMELEC] shall prepare two separate lists of candidates. The first list shall consist of those candidates who complied with the mandatory drug test while the second list shall consist of those candidates who failed to comply with said drug test. x x x SEC. 5. Effect of failure to undergo mandatory drug test and file drug test certificate. - No person elected to any public office shall enter upon the duties of his office until he has undergone mandatory drug test and filed with the offices enumerated under Section 2 hereof the drug test certificate herein required. (Emphasis supplied.) Petitioner Aquilino Q. Pimentel, Jr., a senator of the Republic and a candidate for re - election in the May 10, 2004 elections,1 filed a Petition for Certiorari and Prohibition under Rule 65. In it, he seeks (1) to nullify Sec. 36(g) of RA 9165 and COMELEC Resolution No. 6486 dated December 23, 2003 for being unconstitutional in that they impose a qualification for candidates for senators in addition to those already provided for in the 1987 Constitution; and (2) to enjoin the COMELEC from implementing Resolution No. 6486. Pimentel invokes as legal basis for his petition Sec. 3, Article VI of the Constitution, which states: SECTION 3. No person shall be a Senator unless he is a natural born citizen of the Philippines, and, on the day of the election, is at

least thirty - five years of age, able to read and write, a registered voter, and a resident of the Philippines for not less than two years immediately preceding the day of the election. According to Pimentel, the Constitution only prescribes a maximum of five (5) qualifications for one to be a candidate for, elected to, and be a member of the Senate. He says that both the Congress and COMELEC, by requiring, via RA 9165 and Resolution No. 6486, a senatorial aspirant, among other candidates, to undergo a mandatory drug test, create an additional qualification that all candidates for senator must first be certified as drug free. He adds that there is no provision in the Constitution authorizing the Congress or COMELEC to expand the qualification requirements of candidates for senator. G.R. No. 157870 (Social Justice Society Drugs Board and Philippine Drug Enforcement Agency) v. Dangerous

First off, we shall address the justiciability of the cases at bench and the matter of the standing of petitioners SJS and Laserna to sue. As respondents DDB and PDEA assert, SJS and Laserna failed to allege any incident amounting to a violation of the constitutional rights mentioned in their separate petitions.2 It is basic that the power of judicial review can only be exercised in connection with a bona fidecontroversy which involves the statute sought to be reviewed.3 But even with the presence of an actual case or controversy, the Court may refuse to exercise judicial review unless the constitutional question is brought before it by a party having the requisite standing to challenge it.4 To have standing, one must establish that he or she has suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action.5 The rule on standing, however, is a matter of procedure; hence, it can be relaxed for non - traditional plaintiffs, like ordinary citizens, taxpayers, and legislators when the public interest so requires, such as when the matter is of transcendental importance, of overarching significance to society, or of paramount public interest.6 There is no doubt that Pimentel, as senator of the Philippines and candidate for the May 10, 2004 elections, possesses the requisite standing since he has substantial interests in the subject matter of the petition, among other preliminary considerations. Regarding SJS and Laserna, this Court is wont to relax the rule on locus standi owing primarily to the transcendental importance and the paramount public interest involved in the enforcement of Sec. 36 of RA 9165. The Consolidated Issues The principal issues before us are as follows:

In its Petition for Prohibition under Rule 65, petitioner Social Justice Society (SJS), a registered political party, seeks to prohibit the Dangerous Drugs Board (DDB) and the Philippine Drug Enforcement Agency (PDEA) from enforcing paragraphs (c), (d), (f), and (g) of Sec. 36 of RA 9165 on the ground that they are constitutionally infirm. For one, the provisions constitute undue delegation of legislative power when they give unbridled discretion to schools and employers to determine the manner of drug testing. For another, the provisions trench in the equal protection clause inasmuch as they can be used to harass a student or an employee deemed undesirable. And for a third, a person's constitutional right against unreasonable searches is also breached by said provisions. G.R. No. 158633 (Atty. Manuel J. Laserna, Jr. Drugs Board and Philippine Drug Enforcement Agency) v. Dangerous

Petitioner Atty. Manuel J. Laserna, Jr., as citizen and taxpayer, also seeks in his Petition for Certiorari and Prohibition under Rule 65 that Sec. 36(c), (d), (f), and (g) of RA 9165 be struck down as unconstitutional for infringing on the constitutional right to privacy, the right against unreasonable search and seizure, and the right against self incrimination, and for being contrary to the due process and equal protection guarantees. The Issue on Locus Standi

(1) Do Sec. 36(g) of RA 9165 and COMELEC Resolution No. 6486 impose an additional qualification for candidates for senator? Corollarily, can Congress enact a law prescribing qualifications for candidates for senator in addition to those laid down by the Constitution? and (2) Are paragraphs (c), (d), (f), and (g) of Sec. 36, RA 9165 unconstitutional? Specifically, do these paragraphs violate the right to privacy, the right against unreasonable searches and seizure, and the

equal protection clause? Or do they constitute undue delegation of legislative power? Pimentel (Constitutionality of Sec. COMELEC Resolution No. 6486) 36[g] of RA Petition 9165 and

exercise such powers as are necessarily implied from the given powers. The Constitution is the shore of legislative authority against which the waves of legislative enactment may dash, but over which it cannot leap.10 Thus, legislative power remains limited in the sense that it is subject to substantive and constitutional limitations which circumscribe both the exercise of the power itself and the allowable subjects of legislation.11 The substantive constitutional limitations are chiefly found in the Bill of Rights12 and other provisions, such as Sec. 3, Art. VI of the Constitution prescribing the qualifications of candidates for senators. In the same vein, the COMELEC cannot, in the guise of enforcing and administering election laws or promulgating rules and regulations to implement Sec. 36(g), validly impose qualifications on candidates for senator in addition to what the Constitution prescribes. If Congress cannot require a candidate for senator to meet such additional qualification, the COMELEC, to be sure, is also without such power. The right of a citizen in the democratic process of election should not be defeated by unwarranted impositions of requirement not otherwise specified in the Constitution.13 Sec. 36(g) of RA 9165, as sought to be implemented by the assailed COMELEC resolution, effectively enlarges the qualification requirements enumerated in the Sec. 3, Art. VI of the Constitution. As couched, said Sec. 36(g) unmistakably requires a candidate for senator to be certified illegal drug clean, obviously as a pre - condition to the validity of a certificate of candidacy for senator or, with like effect, a condition sine qua non to be voted upon and, if proper, be proclaimed as senator - elect. The COMELEC resolution completes the chain with the proviso that "[n]o person elected to any public office shall enter upon the duties of his office until he has undergone mandatory drug test." Viewed, therefore, in its proper context, Sec. 36(g) of RA 9165 and the implementing COMELEC Resolution add another qualification layer to what the 1987 Constitution, at the minimum, requires for membership in the Senate. Whether or not the drug - free bar set up under the challenged provision is to be hurdled before or after election is really of no moment, as getting elected would be of little value if one cannot assume office for non - compliance with the drug - testing requirement. It may of course be argued, in defense of the validity of Sec. 36(g) of RA 9165, that the provision does not expressly state that non - compliance

In essence, Pimentel claims that Sec. 36(g) of RA 9165 and COMELEC Resolution No. 6486 illegally impose an additional qualification on candidates for senator. He points out that, subject to the provisions on nuisance candidates, a candidate for senator needs only to meet the qualifications laid down in Sec. 3, Art. VI of the Constitution, to wit: (1) citizenship, (2) voter registration, (3) literacy, (4) age, and (5) residency. Beyond these stated qualification requirements, candidates for senator need not possess any other qualification to run for senator and be voted upon and elected as member of the Senate. The Congress cannot validly amend or otherwise modify these qualification standards, as it cannot disregard, evade, or weaken the force of a constitutional mandate,7 or alter or enlarge the Constitution. Pimentel's contention is well - taken. Accordingly, Sec. 36(g) of RA 9165 should be, as it is hereby declared as, unconstitutional. It is basic that if a law or an administrative rule violates any norm of the Constitution, that issuance is null and void and has no effect. The Constitution is the basic law to which all laws must conform; no act shall be valid if it conflicts with the Constitution.8 In the discharge of their defined functions, the three departments of government have no choice but to yield obedience to the commands of the Constitution. Whatever limits it imposes must be observed.9 Congress' inherent legislative powers, broad as they may be, are subject to certain limitations. As early as 1927, in Government v. Springer, the Court has defined, in the abstract, the limits on legislative power in the following wise: Someone has said that the powers of the legislative department of the Government, like the boundaries of the ocean, are unlimited. In constitutional governments, however, as well as governments acting under delegated authority, the powers of each of the departments x x x are limited and confined within the four walls of the constitution or the charter, and each department can only

with the drug test imposition is a disqualifying factor or would work to nullify a certificate of candidacy. This argument may be accorded plausibility if the drug test requirement is optional. But the particular section of the law, without exception, made drug - testing on those covered mandatory, necessarily suggesting that the obstinate ones shall have to suffer the adverse consequences for not adhering to the statutory command. And since the provision deals with candidates for public office, it stands to reason that the adverse consequence adverted to can only refer to and revolve around the election and the assumption of public office of the candidates. Any other construal would reduce the mandatory nature of Sec. 36(g) of RA 9165 into a pure jargon without meaning and effect whatsoever. While it is anti - climactic to state it at this juncture, COMELEC Resolution No. 6486 is no longer enforceable, for by its terms, it was intended to cover only the May 10, 2004 synchronized elections and the candidates running in that electoral event. Nonetheless, to obviate repetition, the Court deems it appropriate to review and rule, as it hereby rules, on its validity as an implementing issuance. It ought to be made abundantly clear, however, that the unconstitutionality of Sec. 36(g) of RA 9165 is rooted on its having infringed the constitutional provision defining the qualification or eligibility requirements for one aspiring to run for and serve as senator. SJS Petition (Constitutionality of Sec. 36[c], [d], [f], and [g] of RA 9165) The drug test prescribed under Sec. 36(c), (d), and (f) of RA 9165 for secondary and tertiary level students and public and private employees, while mandatory, is a random and suspicionless arrangement. The objective is to stamp out illegal drug and safeguard in the process "the well being of [the] citizenry, particularly the youth, from the harmful effects of dangerous drugs." This statutory purpose, per the policy declaration portion of the law, can be achieved via the pursuit by the state of "an intensive and unrelenting campaign against the trafficking and use of dangerous drugs x x x through an integrated system of planning, implementation and enforcement of anti - drug abuse policies, programs and projects."14 The primary legislative intent is not criminal prosecution, as those found positive for illegal drug use as a result of this random testing are not necessarily treated as criminals. They may even be

exempt from criminal liability should the illegal drug user consent to undergo rehabilitation. Secs. 54 and 55 of RA 9165 are clear on this point: Sec. 54. Voluntary Submission of a Drug Dependent to Confinement, Treatment and Rehabilitation. - A drug dependent or any person who violates Section 15 of this Act may, by himself/herself or through his/her parent, [close relatives] x x x apply to the Board x x x for treatment and rehabilitation of the drug dependency. Upon such application, the Board shall bring forth the matter to the Court which shall order that the applicant be examined for drug dependency. If the examination x x x results in the certification that the applicant is a drug dependent, he/she shall be ordered by the Court to undergo treatment and rehabilitation in a Center designated by the Board x x x. xxxx Sec. 55. Exemption from the Criminal Liability Under the Voluntary Submission Program. - A drug dependent under the voluntary submission program, who is finally discharged from confinement, shall be exempt from the criminal liability under Section 15 of this Act subject to the following conditions: xxxx School children, the US Supreme Court noted, are most vulnerable to the physical, psychological, and addictive effects of drugs. Maturing nervous systems of the young are more critically impaired by intoxicants and are more inclined to drug dependency. Their recovery is also at a depressingly low rate.15 The right to privacy has been accorded recognition in this jurisdiction as a facet of the right protected by the guarantee against unreasonable search and seizure16 under Sec. 2, Art. III17 of the Constitution. But while the right to privacy has long come into its own, this case appears to be the first time that the validity of a state - decreed search or intrusion through the medium of mandatory random drug testing among students and employees is, in this jurisdiction, made the focal point. Thus, the issue tendered in these proceedings is veritably one of first impression.

US jurisprudence is, however, a rich source of persuasive jurisprudence. With respect to random drug testing among school children, we turn to the teachings of Vernonia School District 47J v. Acton (Vernonia) and Board of Education of Independent School District No. 92 of Pottawatomie County, et al. v. Earls, et al. (Board of Education),18 both fairly pertinent US Supreme Court - decided cases involving the constitutionality of governmental search. In Vernonia, school administrators in Vernonia, Oregon wanted to address the drug menace in their respective institutions following the discovery of frequent drug use by school athletes. After consultation with the parents, they required random urinalysis drug testing for the school's athletes. James Acton, a high school student, was denied participation in the football program after he refused to undertake the urinalysis drug testing. Acton forthwith sued, claiming that the school's drug testing policy violated, inter alia, the Fourth Amendment19 of the US Constitution. The US Supreme Court, in fashioning a solution to the issues raised in Vernonia, considered the following: (1) schools stand in loco parentis over their students; (2) school children, while not shedding their constitutional rights at the school gate, have less privacy rights; (3) athletes have less privacy rights than non - athletes since the former observe communal undress before and after sports events; (4) by joining the sports activity, the athletes voluntarily subjected themselves to a higher degree of school supervision and regulation; (5) requiring urine samples does not invade a student's privacy since a student need not undress for this kind of drug testing; and (6) there is need for the drug testing because of the dangerous effects of illegal drugs on the young. The US Supreme Court held that the policy constituted reasonable search under the Fourth20 and 14th Amendments and declared the random drug testing policy constitutional. In Board of Education, the Board of Education of a school in Tecumseh, Oklahoma required a drug test for high school students desiring to join extra - curricular activities. Lindsay Earls, a member of the show choir, marching band, and academic team declined to undergo a drug test and averred that the drug - testing policy made to apply to non - athletes violated the Fourth and 14th Amendments. As Earls argued, unlike athletes who routinely undergo physical examinations and undress before their peers in locker rooms, non - athletes are entitled to more privacy.

The US Supreme Court, citing Vernonia, upheld the constitutionality of drug testing even among non - athletes on the basis of the school's custodial responsibility and authority. In so ruling, said court made no distinction between a non - athlete and an athlete. It ratiocinated that schools and teachers act in place of the parents with a similar interest and duty of safeguarding the health of the students. And in holding that the school could implement its random drug - testing policy, the Court hinted that such a test was a kind of search in which even a reasonable parent might need to engage. In sum, what can reasonably be deduced from the above two cases and applied to this jurisdiction are: (1) schools and their administrators stand in loco parentis with respect to their students; (2) minor students have contextually fewer rights than an adult, and are subject to the custody and supervision of their parents, guardians, and schools; (3) schools, acting in loco parentis, have a duty to safeguard the health and well - being of their students and may adopt such measures as may reasonably be necessary to discharge such duty; and (4) schools have the right to impose conditions on applicants for admission that are fair, just, and non-discriminatory. Guided by Vernonia and Board of Education, the Court is of the view and so holds that the provisions of RA 9165 requiring mandatory, random, and suspicionless drug testing of students are constitutional. Indeed, it is within the prerogative of educational institutions to require, as a condition for admission, compliance with reasonable school rules and regulations and policies. To be sure, the right to enroll is not absolute; it is subject to fair, reasonable, and equitable requirements. The Court can take judicial notice of the proliferation of prohibited drugs in the country that threatens the well - being of the people,21 particularly the youth and school children who usually end up as victims. Accordingly, and until a more effective method is conceptualized and put in motion, a random drug testing of students in secondary and tertiary schools is not only acceptable but may even be necessary if the safety and interest of the student population, doubtless a legitimate concern of the government, are to be promoted and protected. To borrow from Vernonia, "[d]eterring drug use by our Nation's schoolchildren is as important as enhancing efficient enforcement of the Nation's laws against the importation of drugs"; the necessity for the State to act is magnified by the fact that the effects of a drug - infested school are visited not just upon the users, but

upon the entire student body and faculty.22Needless to stress, the random testing scheme provided under the law argues against the idea that the testing aims to incriminate unsuspecting individual students. Just as in the case of secondary and tertiary level students, the mandatory but random drug test prescribed by Sec. 36 of RA 9165 for officers and employees of public and private offices is justifiable, albeit not exactly for the same reason. The Court notes in this regard that petitioner SJS, other than saying that "subjecting almost everybody to drug testing, without probable cause, is unreasonable, an unwarranted intrusion of the individual right to privacy,"23 has failed to show how the mandatory, random, and suspicionless drug testing under Sec. 36(c) and (d) of RA 9165 violates the right to privacy and constitutes unlawful and/or unconsented search under Art. III, Secs. 1 and 2 of the Constitution.24Petitioner Laserna's lament is just as simplistic, sweeping, and gratuitous and does not merit serious consideration. Consider what he wrote without elaboration: The US Supreme Court and US Circuit Courts of Appeals have made various rulings on the constitutionality of mandatory drug tests in the school and the workplaces. The US courts have been consistent in their rulings that the mandatory drug tests violate a citizen's constitutional right to privacy and right against unreasonable search and seizure. They are quoted extensively hereinbelow.25 The essence of privacy is the right to be left alone. In context, the right to privacy means the right to be free from unwarranted exploitation of one's person or from intrusion into one's private activities in such a way as to cause humiliation to a person's ordinary sensibilities. 27 And while there has been general agreement as to the basic function of the guarantee against unwarranted search, "translation of the abstract prohibition against unreasonable searches and seizures' into workable broad guidelines for the decision of particular cases is a difficult task," to borrow from C. Camara v. Municipal Court.28Authorities are agreed though that the right to privacy yields to certain paramount rights of the public and defers to the state's exercise of police power.29 As the warrantless clause of Sec. 2, Art III of the Constitution is couched and as has been held, "reasonableness" is the touchstone of the validity of a government search or intrusion.30 And whether a search at issue hews to the reasonableness standard is judged by the balancing of the
26

government - mandated intrusion on the individual's privacy interest against the promotion of some compelling state interest.31 In the criminal context, reasonableness requires showing of probable cause to be personally determined by a judge. Given that the drug - testing policy for employees--and students for that matter--under RA 9165 is in the nature of administrative search needing what was referred to in Vernonia as "swift and informal disciplinary procedures," the probable - cause standard is not required or even practicable. Be that as it may, the review should focus on the reasonableness of the challenged administrative search in question. The first factor to consider in the matter of reasonableness is the nature of the privacy interest upon which the drug testing, which effects a search within the meaning of Sec. 2, Art. III of the Constitution, intrudes. In this case, the office or workplace serves as the backdrop for the analysis of the privacy expectation of the employees and the reasonableness of drug testing requirement. The employees' privacy interest in an office is to a large extent circumscribed by the company's work policies, the collective bargaining agreement, if any, entered into by management and the bargaining unit, and the inherent right of the employer to maintain discipline and efficiency in the workplace. Their privacy expectation in a regulated office environment is, in fine, reduced; and a degree of impingement upon such privacy has been upheld. Just as defining as the first factor is the character of the intrusion authorized by the challenged law. Reduced to a question form, is the scope of the search or intrusion clearly set forth, or, as formulated inOple v. Torres, is the enabling law authorizing a search "narrowly drawn" or "narrowly focused"?32 The poser should be answered in the affirmative. For one, Sec. 36 of RA 9165 and its implementing rules and regulations (IRR), as couched, contain provisions specifically directed towards preventing a situation that would unduly embarrass the employees or place them under a humiliating experience. While every officer and employee in a private establishment is under the law deemed forewarned that he or she may be a possible subject of a drug test, nobody is really singled out in advance for drug testing. The goal is to discourage drug use by not telling in advance anyone when and who is to be tested. And as may be observed, Sec. 36(d) of RA 9165 itself prescribes what, in Ople, is a narrowing ingredient by providing that the employees concerned shall be subjected to "random

drug test as contained in the company's work rules and regulations x x x for purposes of reducing the risk in the work place." For another, the random drug testing shall be undertaken under conditions calculated to protect as much as possible the employee's privacy and dignity. As to the mechanics of the test, the law specifies that the procedure shall employ two testing methods, i.e., the screening test and the confirmatory test, doubtless to ensure as much as possible the trustworthiness of the results. But the more important consideration lies in the fact that the test shall be conducted by trained professionals in access - controlled laboratories monitored by the Department of Health (DOH) to safeguard against results tampering and to ensure an accurate chain of custody.33 In addition, the IRR issued by the DOH provides that access to the drug results shall be on the "need to know" basis;34 that the "drug test result and the records shall be [kept] confidential subject to the usual accepted practices to protect the confidentiality of the test results."35Notably, RA 9165 does not oblige the employer concerned to report to the prosecuting agencies any information or evidence relating to the violation of the Comprehensive Dangerous Drugs Act received as a result of the operation of the drug testing. All told, therefore, the intrusion into the employees' privacy, under RA 9165, is accompanied by proper safeguards, particularly against embarrassing leakages of test results, and is relatively minimal. To reiterate, RA 9165 was enacted as a measure to stamp out illegal drug in the country and thus protect the well - being of the citizens, especially the youth, from the deleterious effects of dangerous drugs. The law intends to achieve this through the medium, among others, of promoting and resolutely pursuing a national drug abuse policy in the workplace via a mandatory random drug test.36 To the Court, the need for drug testing to at least minimize illegal drug use is substantial enough to override the individual's privacy interest under the premises. The Court can consider that the illegal drug menace cuts across gender, age group, and social economic lines. And it may not be amiss to state that the sale, manufacture, or trafficking of illegal drugs, with their ready market, would be an investor's dream were it not for the illegal and immoral components of any of such activities. The drug problem has hardly abated since the martial law public execution of a notorious drug trafficker. The state can no longer assume a laid back stance with respect to this modern - day scourge. Drug enforcement agencies perceive a mandatory random drug test to be an effective way of preventing and deterring drug use among employees in private offices, the threat of detection by random testing

being higher than other modes. The Court holds that the chosen method is a reasonable and enough means to lick the problem. Taking into account the foregoing factors, i.e., the reduced expectation of privacy on the part of the employees, the compelling state concern likely to be met by the search, and the well - defined limits set forth in the law to properly guide authorities in the conduct of the random testing, we hold that the challenged drug test requirement is, under the limited context of the case, reasonable and, ergo, constitutional. Like their counterparts in the private sector, government officials and employees also labor under reasonable supervision and restrictions imposed by the Civil Service law and other laws on public officers, all enacted to promote a high standard of ethics in the public service. 37 And if RA 9165 passes the norm of reasonableness for private employees, the more reason that it should pass the test for civil servants, who, by constitutional command, are required to be accountable at all times to the people and to serve them with utmost responsibility and efficiency.38 Petitioner SJS' next posture that Sec. 36 of RA 9165 is objectionable on the ground of undue delegation of power hardly commends itself for concurrence. Contrary to its position, the provision in question is not so extensively drawn as to give unbridled options to schools and employers to determine the manner of drug testing. Sec. 36 expressly provides how drug testing for students of secondary and tertiary schools and officers/employees of public/private offices should be conducted. It enumerates the persons who shall undergo drug testing. In the case of students, the testing shall be in accordance with the school rules as contained in the student handbook and with notice to parents. On the part of officers/employees, the testing shall take into account the company's work rules. In either case, the random procedure shall be observed, meaning that the persons to be subjected to drug test shall be picked by chance or in an unplanned way. And in all cases, safeguards against misusing and compromising the confidentiality of the test results are established. Lest it be overlooked, Sec. 94 of RA 9165 charges the DDB to issue, in consultation with the DOH, Department of the Interior and Local Government, Department of Education, and Department of Labor and Employment, among other agencies, the IRR necessary to enforce the law. In net effect then, the participation of schools and offices in the drug

testing scheme shall always be subject to the IRR of RA 9165. It is, therefore, incorrect to say that schools and employers have unchecked discretion to determine how often, under what conditions, and where the drug tests shall be conducted. The validity of delegating legislative power is now a quiet area in the constitutional landscape.39 In the face of the increasing complexity of the task of the government and the increasing inability of the legislature to cope directly with the many problems demanding its attention, resort to delegation of power, or entrusting to administrative agencies the power of subordinate legislation, has become imperative, as here. Laserna Petition (Constitutionality [f], and [g] of RA 9165) of Sec. 36[c], [d],

as a tool for criminal prosecution, contrary to the stated objectives of RA 9165. Drug testing in this case would violate a persons' right to privacy guaranteed under Sec. 2, Art. III of the Constitution. Worse still, the accused persons are veritably forced to incriminate themselves. WHEREFORE, the Court resolves to GRANT the petition in G.R. No. 161658 and declares Sec. 36(g)of RA 9165 and COMELEC Resolution No. 6486 as UNCONSTITUTIONAL; and to PARTIALLY GRANT the petition in G.R. Nos. 157870 and 158633 by declaring Sec. 36(c) and (d) of RA 9165 CONSTITUTIONAL, but declaring its Sec. 36(f) UNCONSTITUTIONAL. All concerned agencies are, accordingly, permanently enjoined from implementing Sec. 36(f) and (g) of RA 9165. No costs. SO ORDERED.

Unlike the situation covered by Sec. 36(c) and (d) of RA 9165, the Court finds no valid justification for mandatory drug testing for persons accused of crimes. In the case of students, the constitutional viability of the mandatory, random, and suspicionless drug testing for students emanates primarily from the waiver by the students of their right to privacy when they seek entry to the school, and from their voluntarily submitting their persons to the parental authority of school authorities. In the case of private and public employees, the constitutional soundness of the mandatory, random, and suspicionless drug testing proceeds from the reasonableness of the drug test policy and requirement. We find the situation entirely different in the case of persons charged before the public prosecutor's office with criminal offenses punishable with six (6) years and one (1) day imprisonment. The operative concepts in the mandatory drug testing are "randomness" and "suspicionless." In the case of persons charged with a crime before the prosecutor's office, a mandatory drug testing can never be random or suspicionless. The ideas of randomness and being suspicionless are antithetical to their being made defendants in a criminal complaint. They are not randomly picked; neither are they beyond suspicion. When persons suspected of committing a crime are charged, they are singled out and are impleaded against their will. The persons thus charged, by the bare fact of being haled before the prosecutor's office and peaceably submitting themselves to drug testing, if that be the case, do not necessarily consent to the procedure, let alone waive their right to privacy.40 To impose mandatory drug testing on the accused is a blatant attempt to harness a medical test

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 170338 December 23, 2008

VIRGILIO O. GARCILLANO, petitioner, vs. THE HOUSE OF REPRESENTATIVES COMMITTEES ON PUBLIC INFORMATION, PUBLIC ORDER AND SAFETY, NATIONAL DEFENSE AND SECURITY, INFORMATION AND COMMUNICATIONS TECHNOLOGY, and SUFFRAGE AND ELECTORAL REFORMS, respondents. x----------------------x G.R. No. 179275 December 23, 2008

More than three years ago, tapes ostensibly containing a wiretapped conversation purportedly between the President of the Philippines and a high-ranking official of the Commission on Elections (COMELEC) surfaced. They captured unprecedented public attention and thrust the country into a controversy that placed the legitimacy of the present administration on the line, and resulted in the near-collapse of the Arroyo government. The tapes, notoriously referred to as the "Hello Garci" tapes, allegedly contained the Presidents instructions to COMELEC Commissioner Virgilio Garcillano to manipulate in her favor results of the 2004 presidential elections. These recordings were to become the subject of heated legislative hearings conducted separately by committees of both Houses of Congress.1 In the House of Representatives (House), on June 8, 2005, then Minority Floor Leader Francis G. Escudero delivered a privilege speech, "Tale of Two Tapes," and set in motion a congressional investigation jointly conducted by the Committees on Public Information, Public Order and Safety, National Defense and Security, Information and Communications Technology, and Suffrage and Electoral Reforms (respondent House Committees). During the inquiry, several versions of the wiretapped conversation emerged. But on July 5, 2005, National Bureau of Investigation (NBI) Director Reynaldo Wycoco, Atty. Alan Paguia and the lawyer of former NBI Deputy Director Samuel Ong submitted to the respondent House Committees seven alleged "original" tape recordings of the supposed three-hour taped conversation. After prolonged and impassioned debate by the committee members on the admissibility and authenticity of the recordings, the tapes were eventually played in the chambers of the House.2 On August 3, 2005, the respondent House Committees decided to suspend the hearings indefinitely. Nevertheless, they decided to prepare committee reports based on the said recordings and the testimonies of the resource persons.3 Alarmed by these developments, petitioner Virgilio O. Garcillano (Garcillano) filed with this Court a Petition for Prohibition and Injunction, with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction4docketed as G.R. No. 170338. He prayed that the respondent House Committees be restrained from using these tape recordings of the "illegally obtained" wiretapped conversations in their committee reports and for any other purpose. He further implored that the said recordings

SANTIAGO JAVIER RANADA and OSWALDO D. AGCAOILI, petitioners, vs. THE SENATE OF THE REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE SENATE PRESIDENT THE HONORABLE MANUEL VILLAR, respondents. x----------------------x MAJ. LINDSAY REX SAGGE, petitioner-in-intervention x----------------------x AQUILINO Q. PIMENTEL, JR., BENIGNO NOYNOY C. AQUINO, RODOLFO G. BIAZON, PANFILO M. LACSON, LOREN B. LEGARDA, M.A. JAMBY A.S. MADRIGAL, and ANTONIO F. TRILLANES, respondents-intervenors DECISION NACHURA, J.:

and any reference thereto be ordered stricken off the records of the inquiry, and the respondent House Committees directed to desist from further using the recordings in any of the House proceedings.5 Without reaching its denouement, the House discussion and debates on the "Garci tapes" abruptly stopped. After more than two years of quiescence, Senator Panfilo Lacson roused the slumbering issue with a privilege speech, "The Lighthouse That Brought Darkness." In his discourse, Senator Lacson promised to provide the public "the whole unvarnished truth the whats, whens, wheres, whos and whys" of the alleged wiretap, and sought an inquiry into the perceived willingness of telecommunications providers to participate in nefarious wiretapping activities. On motion of Senator Francis Pangilinan, Senator Lacsons speech was referred to the Senate Committee on National Defense and Security, chaired by Senator Rodolfo Biazon, who had previously filed two bills6 seeking to regulate the sale, purchase and use of wiretapping equipment and to prohibit the Armed Forces of the Philippines (AFP) from performing electoral duties.7 In the Senates plenary session the following day, a lengthy debate ensued when Senator Richard Gordon aired his concern on the possible transgression of Republic Act (R.A.) No. 42008 if the body were to conduct a legislative inquiry on the matter. On August 28, 2007, Senator Miriam Defensor-Santiago delivered a privilege speech, articulating her considered view that the Constitution absolutely bans the use, possession, replay or communication of the contents of the "Hello Garci" tapes. However, she recommended a legislative investigation into the role of the Intelligence Service of the AFP (ISAFP), the Philippine National Police or other government entities in the alleged illegal wiretapping of public officials.9 On September 6, 2007, petitioners Santiago Ranada and Oswaldo Agcaoili, retired justices of the Court of Appeals, filed before this Court a Petition for Prohibition with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,10 docketed as G.R. No. 179275, seeking to bar the Senate from conducting its scheduled legislative inquiry. They argued in the main that the intended legislative

inquiry violates R.A. No. 4200 and Section 3, Article III of the Constitution.11 As the Court did not issue an injunctive writ, the Senate proceeded with its public hearings on the "Hello Garci" tapes on September 7,12 1713 and October 1,14 2007. Intervening as respondents,15 Senators Aquilino Q. Pimentel, Jr., Benigno Noynoy C. Aquino, Rodolfo G. Biazon, Panfilo M. Lacson, Loren B. Legarda, M.A. Jamby A.S. Madrigal and Antonio F. Trillanes filed their Comment16 on the petition on September 25, 2007. The Court subsequently heard the case on oral argument.17 On October 26, 2007, Maj. Lindsay Rex Sagge, a member of the ISAFP and one of the resource persons summoned by the Senate to appear and testify at its hearings, moved to intervene as petitioner in G.R. No. 179275.18 On November 20, 2007, the Court resolved to consolidate G.R. Nos. 170338 and 179275.19 It may be noted that while both petitions involve the "Hello Garci" recordings, they have different objectivesthe first is poised at preventing the playing of the tapes in the House and their subsequent inclusion in the committee reports, and the second seeks to prohibit and stop the conduct of the Senate inquiry on the wiretapped conversation. The Court dismisses the first petition, G.R. No. 170338, and grants the second, G.R. No. 179275. -IBefore delving into the merits of the case, the Court shall first resolve the issue on the parties standing, argued at length in their pleadings. In Tolentino v. COMELEC,20 we explained that "[l]egal standing or locus standi refers to a personal and substantial interest in a case such that the party has sustained or will sustain direct injury because of the challenged governmental act x x x," thus,

generally, a party will be allowed to litigate only when (1) he can show that he has personally suffered some actual or threatened injury because of the allegedly illegal conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a favorable action.21 The gist of the question of standing is whether a party has "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."22 However, considering that locus standi is a mere procedural technicality, the Court, in recent cases, has relaxed the stringent direct injury test. David v. Macapagal-Arroyo23 articulates that a "liberal policy has been observed, allowing ordinary citizens, members of Congress, and civic organizations to prosecute actions involving the constitutionality or validity of laws, regulations and rulings."24 The fairly recent Chavez v. Gonzales25 even permitted a non-member of the broadcast media, who failed to allege a personal stake in the outcome of the controversy, to challenge the acts of the Secretary of Justice and the National Telecommunications Commission. The majority, in the said case, echoed the current policy that "this Court has repeatedly and consistently refused to wield procedural barriers as impediments to its addressing and resolving serious legal questions that greatly impact on public interest, in keeping with the Courts duty under the 1987 Constitution to determine whether or not other branches of government have kept themselves within the limits of the Constitution and the laws, and that they have not abused the discretion given to them."26 In G.R. No. 170338, petitioner Garcillano justifies his standing to initiate the petition by alleging that he is the person alluded to in the "Hello Garci" tapes. Further, his was publicly identified by the members of the respondent committees as one of the voices in the recordings.27 Obviously, therefore, petitioner Garcillano stands to be directly injured by the House committees actions and charges of electoral fraud. The Court recognizes his standing to institute the petition for prohibition. In G.R. No. 179275, petitioners Ranada and Agcaoili justify their standing by alleging that they are concerned citizens, taxpayers, and members of

the IBP. They are of the firm conviction that any attempt to use the "Hello Garci" tapes will further divide the country. They wish to see the legal and proper use of public funds that will necessarily be defrayed in the ensuing public hearings. They are worried by the continuous violation of the laws and individual rights, and the blatant attempt to abuse constitutional processes through the conduct of legislative inquiries purportedly in aid of legislation.28 Intervenor Sagge alleges violation of his right to due process considering that he is summoned to attend the Senate hearings without being apprised not only of his rights therein through the publication of the Senate Rules of Procedure Governing Inquiries in Aid of Legislation, but also of the intended legislation which underpins the investigation. He further intervenes as a taxpayer bewailing the useless and wasteful expenditure of public funds involved in the conduct of the questioned hearings.29 Given that petitioners Ranada and Agcaoili allege an interest in the execution of the laws and that intervenor Sagge asserts his constitutional right to due process,30 they satisfy the requisite personal stake in the outcome of the controversy by merely being citizens of the Republic. Following the Courts ruling in Francisco, Jr. v. The House of Representatives,31 we find sufficient petitioners Ranadas and Agcaoilis and intervenor Sagges allegation that the continuous conduct by the Senate of the questioned legislative inquiry will necessarily involve the expenditure of public funds.32 It should be noted that inFrancisco, rights personal to then Chief Justice Hilario G. Davide, Jr. had been injured by the alleged unconstitutional acts of the House of Representatives, yet the Court granted standing to the petitioners therein for, as in this case, they invariably invoked the vindication of their own rightsas taxpayers, members of Congress, citizens, individually or in a class suit, and members of the bar and of the legal professionwhich were also supposedly violated by the therein assailed unconstitutional acts.33 Likewise, a reading of the petition in G.R. No. 179275 shows that the petitioners and intervenor Sagge advance constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents. The issues are of transcendental and paramount importance not only to the public but also to the Bench and the Bar, and should be resolved for the guidance of all.34

Thus, in the exercise of its sound discretion and given the liberal attitude it has shown in prior cases climaxing in the more recent case of Chavez, the Court recognizes the legal standing of petitioners Ranada and Agcaoili and intervenor Sagge. - II The Court, however, dismisses G.R. No. 170338 for being moot and academic. Repeatedly stressed in our prior decisions is the principle that the exercise by this Court of judicial power is limited to the determination and resolution of actual cases and controversies.35 By actual cases, we mean existing conflicts appropriate or ripe for judicial determination, not conjectural or anticipatory, for otherwise the decision of the Court will amount to an advisory opinion. The power of judicial inquiry does not extend to hypothetical questions because any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.36 Neither will the Court determine a moot question in a case in which no practical relief can be granted. A case becomes moot when its purpose has become stale.37 It is unnecessary to indulge in academic discussion of a case presenting a moot question as a judgment thereon cannot have any practical legal effect or, in the nature of things, cannot be enforced.38 In G.R. No. 170338, petitioner Garcillano implores from the Court, as aforementioned, the issuance of an injunctive writ to prohibit the respondent House Committees from playing the tape recordings and from including the same in their committee report. He likewise prays that the said tapes be stricken off the records of the House proceedings. But the Court notes that the recordings were already played in the House and heard by its members.39 There is also the widely publicized fact that the committee reports on the "Hello Garci" inquiry were completed and submitted to the House in plenary by the respondent committees.40 Having been overtaken by these events, the Garcillano petition has to be dismissed for being moot and academic. After all, prohibition is a preventive remedy to restrain the doing of an act about to be done, and not intended to provide a remedy for an act already accomplished.41 - III -

As to the petition in G.R. No. 179275, the Court grants the same. The Senate cannot be allowed to continue with the conduct of the questioned legislative inquiry without duly published rules of procedure, in clear derogation of the constitutional requirement. Section 21, Article VI of the 1987 Constitution explicitly provides that "[t]he Senate or the House of Representatives, or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure." The requisite of publication of the rules is intended to satisfy the basic requirements of due process.42 Publication is indeed imperative, for it will be the height of injustice to punish or otherwise burden a citizen for the transgression of a law or rule of which he had no notice whatsoever, not even a constructive one.43 What constitutes publication is set forth in Article 2 of the Civil Code, which provides that "[l]aws shall take effect after 15 days following the completion of their publication either in the Official Gazette, or in a newspaper of general circulation in the Philippines."44 The respondents in G.R. No. 179275 admit in their pleadings and even on oral argument that the Senate Rules of Procedure Governing Inquiries in Aid of Legislation had been published in newspapers of general circulation only in 1995 and in 2006.45 With respect to the present Senate of the 14th Congress, however, of which the term of half of its members commenced on June 30, 2007, no effort was undertaken for the publication of these rules when they first opened their session. Recently, the Court had occasion to rule on this very same question. In Neri v. Senate Committee on Accountability of Public Officers and Investigations,46 we said: Fourth, we find merit in the argument of the OSG that respondent Committees likewise violated Section 21 of Article VI of the Constitution, requiring that the inquiry be in accordance with the "duly published rules of procedure." We quote the OSGs explanation: The phrase "duly published rules of procedure" requires the Senate of every Congress to publish its rules of procedure governing inquiries in aid of legislation because every Senate is distinct from the one before it or after it. Since Senatorial elections are held every three (3) years for one-half of the

Senates membership, the composition of the Senate also changes by the end of each term. Each Senate may thus enact a different set of rules as it may deem fit. Not having published its Rules of Procedure, the subject hearings in aid of legislation conducted by the 14th Senate, are therefore, procedurally infirm. Justice Antonio T. Carpio, in his Dissenting and Concurring Opinion, reinforces this ruling with the following rationalization: The present Senate under the 1987 Constitution is no longer a continuing legislative body. The present Senate has twenty-four members, twelve of whom are elected every three years for a term of six years each. Thus, the term of twelve Senators expires every three years, leaving less than a majority of Senators to continue into the next Congress. The 1987 Constitution, like the 1935 Constitution, requires a majority of Senators to "constitute a quorum to do business." Applying the same reasoning in Arnault v. Nazareno, the Senate under the 1987 Constitution is not a continuing body because less than majority of the Senators continue into the next Congress. The consequence is that the Rules of Procedure must be republished by the Senate after every expiry of the term of twelve Senators.47 The subject was explained with greater lucidity in our Resolution48 (On the Motion for Reconsideration) in the same case, viz.: On the nature of the Senate as a "continuing body," this Court sees fit to issue a clarification. Certainly, there is no debate that the Senate as an institution is "continuing," as it is not dissolved as an entity with each national election or change in the composition of its members. However, in the conduct of its day-to-day business the Senate of each Congress acts separately and independently of the Senate of the Congress before it. The Rules of the Senate itself confirms this when it states: RULE UNFINISHED BUSINESS XLIV

All pending matters and proceedings shall terminate upon the expiration of one (1) Congress, but may be taken by the succeeding Congress as if present for the first time. Undeniably from the foregoing, all pending matters and proceedings, i.e., unpassed bills and even legislative investigations, of the Senate of a particular Congress are considered terminated upon the expiration of that Congress and it is merely optional on the Senate of the succeeding Congress to take up such unfinished matters, not in the same status, but as if presented for the first time. The logic and practicality of such a rule is readily apparent considering that the Senate of the succeeding Congress (which will typically have a different composition as that of the previous Congress) should not be bound by the acts and deliberations of the Senate of which they had no part. If the Senate is a continuing body even with respect to the conduct of its business, then pending matters will not be deemed terminated with the expiration of one Congress but will, as a matter of course, continue into the next Congress with the same status. This dichotomy of the continuity of the Senate as an institution and of the opposite nature of the conduct of its business is reflected in its Rules. The Rules of the Senate (i.e. the Senates main rules of procedure) states: RULE AMENDMENTS TO, OR REVISIONS OF, THE RULES LI

SEC. 136. At the start of each session in which the Senators elected in the preceding elections shall begin their term of office, the President may endorse the Rules to the appropriate committee for amendment or revision. The Rules may also be amended by means of a motion which should be presented at least one day before its consideration, and the vote of the majority of the Senators present in the session shall be required for its approval. RULE DATE OF TAKING EFFECT LII

SEC. 123. Unfinished business at the end of the session shall be taken up at the next session in the same status.

SEC. 137. These Rules shall take effect on the date of their adoption and shall remain in force until they are amended or repealed. Section 136 of the Senate Rules quoted above takes into account the new composition of the Senate after an election and the possibility of the amendment or revision of the Rules at the start of each session in which the newly elected Senators shall begin their term. However, it is evident that the Senate has determined that its main rules are intended to be valid from the date of their adoption until they are amended or repealed. Such language is conspicuously absent from theRules. The Rules simply state "(t)hese Rules shall take effect seven (7) days after publication in two (2) newspapers of general circulation." The latter does not explicitly provide for the continued effectivity of such rules until they are amended or repealed. In view of the difference in the language of the two sets of Senate rules, it cannot be presumed that the Rules (on legislative inquiries) would continue into the next Congress. The Senate of the next Congress may easily adopt different rules for its legislative inquiries which come within the rule on unfinished business. The language of Section 21, Article VI of the Constitution requiring that the inquiry be conducted in accordance with the duly published rules of procedure is categorical. It is incumbent upon the Senate to publish the rules for its legislative inquiries in each Congress or otherwise make the published rules clearly state that the same shall be effective in subsequent Congresses or until they are amended or repealed to sufficiently put public on notice. If it was the intention of the Senate for its present rules on legislative inquiries to be effective even in the next Congress, it could have easily adopted the same language it had used in its main rules regarding effectivity. Respondents justify their non-observance of the constitutionally mandated publication by arguing that the rules have never been amended since 1995 and, despite that, they are published in booklet form available to anyone for free, and accessible to the public at the Senates internet web page.49

The Court does not agree. The absence of any amendment to the rules cannot justify the Senates defiance of the clear and unambiguous language of Section 21, Article VI of the Constitution. The organic law instructs, without more, that the Senate or its committees may conduct inquiries in aid of legislation only in accordance with duly published rules of procedure, and does not make any distinction whether or not these rules have undergone amendments or revision. The constitutional mandate to publish the said rules prevails over any custom, practice or tradition followed by the Senate. Justice Carpios response to the same argument raised by the respondents is illuminating: The publication of the Rules of Procedure in the website of the Senate, or in pamphlet form available at the Senate, is not sufficient under the Taada v. Tuvera ruling which requires publication either in the Official Gazette or in a newspaper of general circulation. The Rules of Procedure even provide that the rules "shall take effect seven (7) days after publication in two (2) newspapers of general circulation," precluding any other form of publication. Publication in accordance with Taada is mandatory to comply with the due process requirement because the Rules of Procedure put a persons liberty at risk. A person who violates the Rules of Procedure could be arrested and detained by the Senate. The invocation by the respondents of the provisions of R.A. No. 8792,50 otherwise known as the Electronic Commerce Act of 2000, to support their claim of valid publication through the internet is all the more incorrect. R.A. 8792 considers an electronic data message or an electronic document as the functional equivalent of a written document only for evidentiary purposes.51 In other words, the law merely recognizes the admissibility in evidence (for their being the original) of electronic data messages and/or electronic documents.52 It does not make the internet a medium for publishing laws, rules and regulations. Given this discussion, the respondent Senate Committees, therefore, could not, in violation of the Constitution, use its unpublished rules in the legislative inquiry subject of these consolidated cases. The conduct of inquiries in aid of legislation by the Senate has to be deferred until it shall

have caused the publication of the rules, because it can do so only "in accordance with its duly published rules of procedure." Very recently, the Senate caused the publication of the Senate Rules of Procedure Governing Inquiries in Aid of Legislation in the October 31, 2008 issues of Manila Bulletin and Malaya. While we take judicial notice of this fact, the recent publication does not cure the infirmity of the inquiry sought to be prohibited by the instant petitions. Insofar as the consolidated cases are concerned, the legislative investigation subject thereof still could not be undertaken by the respondent Senate Committees, because no published rules governed it, in clear contravention of the Constitution. With the foregoing disquisition, the Court finds it unnecessary to discuss the other issues raised in the consolidated petitions. WHEREFORE, the petition in G.R. No. 170338 is DISMISSED, and the petition in G.R. No. 179275 is GRANTED. Let a writ of prohibition be issued enjoining the Senate of the Republic of the Philippines and/or any of its committees from conducting any inquiry in aid of legislation centered on the "Hello Garci" tapes. SO ORDERED.

G.R. No. 163935

February 2, 2006

NATIONAL ASSOCIATION OF ELECTRICITY CONSUMERS FOR REFORMS (NASECORE), represented by PETRONILO ILAGAN, FEDERATION OF VILLAGE ASSOCIATIONS (FOVA), represented by SIEGFRIEDO VELOSO, and FEDERATION OF LAS PIAS HOMEOWNERS ASSOCIATIONS (FOLPHA), represented by BONIFACIO DAZO, Petitioners, vs. ENERGY REGULATORY COMMISSION (ERC) and MANILA ELECTRIC and COMPANY (MERALCO)Respondents. DECISION CALLEJO, SR., J.: Before the Court is the petition for certiorari, prohibition and injunction filed by National Association of Electricity Consumers for Reforms (NASECORE), Federation of Village Associations (FOVA) and Federation of Las Pias Homeowners Associations (FOLPHA),1 seeking to nullify the Order dated June 2, 2004 of the Energy Regulation Commission (ERC) in ERC Case No. 2004-112. The assailed order approved the increase of respondent Manila Electric Companys (MERALCOs) generation charge from P3.1886 per kilowatthour (kWh) to P3.3213 per kWh effective immediately. Factual and Procedural Antecedents Congress enacted Republic Act (RA) No. 9136, known as the Electric Power Industry Reform Act of 2001 (EPIRA) on June 8, 2001. Among others, EPIRA declares as policy of the State the following: (b) To ensure the quality, reliability, security and affordability of the supply of electric power;

Republic of the Philippines SUPREME COURT Manila EN BANC

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;

(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors; (e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; (j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; 2 The ERC was created under the EPIRA.3 The said regulatory body superseded the Energy Regulatory Board (ERB) which was created under Executive Order (EO) No. 172, as amended.4 The ERC is tasked to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry.5 Towards this end, the ERC is granted, inter alia, the following functions: (a) Enforce the implementing rules and regulations of this Act; (b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with law, a National Grid Code and a Distribution Code which shall include, but not limited to, the following: (c) Enforce the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants in the spot market, for the purpose of ensuring a greater supply and rational pricing of electricity; (d) Determine the level of cross subsidies in the existing retail rate until the same is removed pursuant to Section 74 hereof; (e) Amend or revoke, after due notice and hearing, the authority to operate of any person or entity which fails to comply with the

provisions hereof, the IRR or any order or resolution of the ERC. In the event that a divestment is required, the ERC shall allow the affected party sufficient time to remedy the infraction or for an orderly disposal, but in no case exceed twelve (12) months from the issuance of the order; (f) In the public interest, establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency or inefficiency of the regulated entities. The rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably. The ERC may adopt alternative forms of internationally-accepted rate-setting methodology as it may deem appropriate. The rate-setting methodology so adopted and applied must ensure a reasonable price of electricity. The rates prescribed shall be non-discriminatory. To achieve this objective and to ensure the complete removal of cross subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate. The ERC shall determine such form of rate-setting methodology, which shall promote efficiency. In case the ratesetting methodology used is RORB, it shall be subject to the following guidelines: (u) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector. All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees shall be published at least twice for two successive weeks in two (2) newspapers of nationwide circulation.6

Section 36 of the EPIRA required every distribution utility to file its revised rates for the approval of the ERC. The said provision reads: Sec. 36. Unbundling of Rates and Functions. Within six (6) months from the effectivity of this Act, NPC [National Power Corporation] shall file with the ERC its revised rates. The rates of NPC shall be unbundled between transmission and generation rates and the rates shall reflect the respective costs of providing each service. Inter-grid and intra-grid cross subsidies for both the transmission and the generation rates shall be removed in accordance with this Act. Within six (6) months from the effectivity of this Act, each distribution utility shall file its revised rates for the approval by the ERC. The distribution wheeling charge shall be unbundled from the retail rate and the rates shall reflect the respective costs of providing each service. For both the distribution retail wheeling and suppliers charges, inter-class subsidies shall be removed in accordance with this Act. Within six (6) months from the date of submission of revised rates by NPC and each distribution utility, the ERC shall notify the entities of their approval. Any electric power industry participant shall functionally and structurally unbundle its business activities and rates in accordance with the sectors as identified in Section 5 hereof. The ERC shall ensure full compliance with this provision. On October 30, 2001, pursuant to the above provision, the ERC issued an Order requiring all distribution utilities to file their application for unbundled rates. In compliance therewith, respondent MERALCO filed on December 26, 2001 its application with the ERC for the approval of its unbundled rates and appraisal of its properties. The case was docketed as ERC Case No. 2001-9007 and consolidated with ERC Case No. 2001-646.8 Acting thereon, the ERC issued an Order and a Notice of Public Hearing both dated February 1, 2002 setting the case for initial hearing on March 11 and 12, 2002. In the same order, MERALCO was directed to cause the publication of the notice of public hearing at its own expense twice for two successive weeks in two newspapers of nationwide circulation, the last date of publication to be made not later than two weeks before the scheduled date of initial hearing.

The Office of the Solicitor General (OSG), the Commission on Audit and the Committees on Energy of both Houses of Congress were furnished with copies of the order and the notice of public hearing and were requested to have their respective duly authorized representatives present at the said hearing. Likewise, the Offices of the Municipal/City Mayors within MERALCOs franchise area were furnished with copies of the order and the notice of public hearing for the appropriate posting thereof on their respective bulletin boards. At the initial hearing, representatives of MERALCO were present. Also at the said hearing were a representative from the OSG for the public and oppositors to the application including Mr. Pete Ilagan, representing herein petitioner NASECORE. After a series of hearings, the ERC rendered the Decision dated March 20, 2003, approving MERALCOs unbundled schedule of rates effective on the next billing cycle. However, in the same decision, the ERC directed MERALCO, among others: a) To discontinue charging the PPA [Purchased Power Adjustment] upon effectivity of the approved unbundled rates; any change in the cost of power purchased shall be reflected as deferred charges or credits which shall be recovered through the Generation Rate Adjustment Mechanism (GRAM) approved by the Commission for implementation per ERC Order effective February 24, 2003;9 In other words, MERALCO was directed to recover the costs of power purchased from the National Power Corporation (NAPOCOR) through a new adjustment mechanism called the Generation Rate Adjustment Mechanism (GRAM). Prior thereto, the said costs were recovered through the Purchased Power Adjustment (PPA) mechanism. It appears that in another proceeding, ERC Case No. 2003-44,10 the ERC issued an Order dated January 29, 2003 setting for public consultation on February 17, 2003 its proposed Implementing Rules for the Recovery of Deferred Fuel and Independent Power Producers Costs (DCOR) and Deferred Incremental Currency Exchange Recovery (DICER). The proposed DCOR and DICER were formulated by the ERC to replace the PPA and the Currency Exchange Rate Adjustment (CERA), the automatic adjustment mechanisms then in effect, on its view that they (PPA and CERA) did not meet the goal of balancing the need for timely recoveries of costs by the

utilities with the ERCs need to review the reasonableness and prudence of such costs. A notice of the public consultation on the proposed implementing rules for the recovery of DCOR and DICER was caused to be published by the ERC in the Philippine Star on February 3, 2003. In the said notice and order, the ERC directed the parties to submit their comments on the proposed implementing rules on or before February 12, 2003. Several distribution utilities and consumer groups, including petitioner NASECORE, filed their respective comments on the said proposed implementing rules for the recovery of DCOR and DICER. Most of the utilities manifested their strong objections to the adoption of the DCOR and DICER contending that these mechanisms would defeat the purpose of escalator clauses such as the PPA and CERA. For their part, the consumer groups expressed that the ERC should have taken into consideration consumer protection in the drafting of the proposed implementing rules. At the public consultation on February 17, 2003, the distribution utilities and consumer groups appeared with their respective representatives. The consumer groups requested for a separate consultation exclusively for them and the same was granted by the ERC. Another public consultation was set on February 21, 2003 for the consumer groups. At the said consultation, representatives of NASECORE and other consumer groups were present. The ERC explained to these groups the DCOR and DICER. On the other hand, MERALCO explained the PPA and the computation thereof. The consumer groups manifested their concerns and these were noted by the ERC. After taking into consideration the positions of the distribution utilities and the consumer groups, the ERC promulgated the Order dated February 24, 2003 in ERC Case No. 2003-44. In the said order, the ERC adopted the Implementing Rules for the Recovery of Fuel and Independent Power Producer Costs: Generation Rate Adjustment Mechanism (GRAM) and the Implementing Rules for the Recovery of the Incremental Currency Exchange Rate Adjustment (ICERA). These implementing rules were all contained or incorporated in the aforesaid order. The GRAM replaced the PPA and the basic differences between these two recovery mechanisms were outlined by the ERC thus:11

ELEMENTS 1. Review by the regulatory body

PPA 1. After the cost had been passed on to the consumers.

GRAM 1. Before may be the cost

passed on to the consumers. 2. Quarterly

2. Change rates 3. Change recovery of fixed costs generation

in

2. Monthly

in of

3. Automatic subject to confirmation the ERC.

but by

3. Only petition

through

to adjust generation rate subject to approval by the ERC within maximum a

period of forty five (45) days. 4. Transmission 5. System and franchise tax 6. Carrying cost 6. Without carrying cost 6. With carrying cost loss 4. Included 5. Included 4. Excluded 5. Excluded

On the other hand, the ICERA replaced the CERA and the basic differences between these two recovery mechanisms were outlined by the ERC thus:12 ELEMENTS 1. Review by the regulatory body CERA 1. After the cost had been passed on to the consumers. 2. Change rates 3. Carrying cost in 2. Monthly 2. Quarterly ICERA 1. Before the cost may be passed on to the consumers.

a. Computed Deferred Accounting Adjustment (DAA) of P0.0028 per kWh inclusive of the remaining balance in the DAA under the first GRAM; b. Deferred PPA of P0.1248 per kWh, increasing by P0.0022 from the P0.1226 previously authorized under ERC Case 2004-20. The increase is to account for the remaining 2 months (December 2003 and January 2004) IPP VAT savings passed on as part of the Mandated Rate Reduction (MRR).14 Among others, respondent MERALCO averred that the proposed generation charge of P3.4664 per kWh was computed in conformity with the generation rate formula in Section 615 of the Implementing Rules for the Recovery of Fuel and Independent Power Producer Costs or the Generation Rate Adjustment Mechanism (GRAM), hereinafter referred to as the GRAM Implementing Rules. It thus prayed that the said proposed generation charge be approved for its implementation. In the assailed Order dated June 2, 2004, the ERC approved the increase of respondent MERALCOs generation charge albeit only from P3.1886 to P3.3213 per kWh, the same to take effect immediately. The Petitioners Case Petitioners NASECORE, et al. forthwith filed with this Court the present petition for certiorari seeking to nullify the said June 2, 2004 ERC Order for lack of requisite publication of respondent MERALCOs amended application, thereby depriving the petitioners of procedural due process. In addition, they invoke Section 4(e), Rule 3 of the Implementing Rules and Regulations (IRR) of the EPIRA which provides: (e) Any application or petition for rate adjustment or for any relief affecting the consumers must be verified, and accompanied with an acknowledgement of receipt of a copy thereof by the LGU Legislative Body of the locality where the applicant or petitioner principally operates together with the certification of the notice of publication thereof in a newspaper of general circulation in the same locality. The ERC may grant provisionally or deny the relief prayed for not later than seventy-five (75) calendar days from the filing of the application or petition, based on the same and the supporting documents attached thereto and such comments or pleadings the consumers or the LGU

3. Without carrying cost

3. With carrying cost

The respective effectivity clauses of the implementing rules of the GRAM and the ICERA provided that they shall take effect immediately.13 Thereafter, in consonance with the Decision dated March 20, 2003 in ERC Cases Nos. 2001-646 and 2001-900 and the Order dated February 24, 2003 in ERC Case No. 2003-44, respondent MERALCO filed with the ERC an amended application entitled "In the Matter of the Application for the Recovery of the Independent Power Producer Costs under the Generation Rate Adjustment Mechanism (GRAM)," docketed as ERC Case No. 2004112. Earlier, acting on respondent MERALCOs 1st application under the GRAM, the ERC, in the Order dated January 21, 2004 in ERC Case No. 2004-20, approved the generation charge of P3.1886 per kWh, inclusive of the deferred PPA. In the amended application, respondent MERALCO averred that it had recalculated its proposed generation charge aimed at updating the generation charge of P3.1886 per kWh allowed in the January 21, 2004 Order toP3.4664 per kWh inclusive of the following:

concerned may have filed within thirty (30) calendar days from receipt of a copy of the application or petition or from the publication thereof as the case may be. Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving proper notices to all parties concerned, with at least one public hearing in the affected locality, and shall decide the matter on the merits not later than twelve (12) months from the issuance of the aforementioned provisional order. This Section 4(e) shall not apply to those applications or petitions already filed as of 26 December 2001 in compliance with Section 36 of the Act. According to the petitioners, the June 2, 2004 ERC Order is devoid of any basis as respondent MERALCO did not comply with the requisite publication, i.e., its amended application was not published in a newspaper of general circulation. As a result of the omission, petitioners were not able to file their comments on respondent MERALCOs amended application for the increase of its generation charge. Invoking the Courts pronouncements in Freedom from Debt Coalition v. ERC and MERALCO,16 petitioners conclude that failure to comply with the publication requirement renders the June 2, 2004 ERC Order null and void. Respondent MERALCOs Counter-arguments Respondent MERALCO, for its part, urges the Court to uphold the validity of the assailed ERC Order approving the increase of its generation charge. In essence, it contends that its amended application for the increase of its generation charge is excluded and/or exempted from the application of the publication requirement, among others, in Sec. 4(e), Rule 3 of the IRR of the EPIRA. The applicable rules are the GRAM Implementing Rules embodied in the ERC Order dated February 24, 2003. These rules govern any petition for the recovery of fuel and purchased power costs. In support of this contention, respondent MERALCO explains the nature and history of the PPA, later replaced by the GRAM, in this wise: In 1974, respondent MERALCO owned and operated all the power plants it was using. At the time, it charged the basic power rates based on the cost of fuel and exchange rate at the time of the application for approval of the adjusted rates. Some time in 1975, it sold to NAPOCOR its five base load generating power plants.17

As a result of the sale, respondent MERALCO entered into an agreement with NAPOCOR for the latter to supply all the electric power needed by the former to service its customers within its franchise areas. Under the agreement, the electric power and energy purchased by respondent MERALCO from NAPOCOR would be priced at thermal generating cost, subject to fuel cost adjustment by NAPOCOR. The fuel cost adjustment allows the latter to recover the increases in fuel oil over and above a base price. In 1978, respondent MERALCO applied with the Board of Power and Waterworks (BPW) for the approval of Purchased Power Cost Adjustment to cover the increase in the cost of electric power and energy being purchased from NAPOCOR. It (respondent MERALCO) also applied for the approval of a fuel adjustment clause for the three peakload plants over which it retained ownership. In 1980, the Board of Energy (BOE), which took over the functions of the BPW, authorized the PPA clause stating that it was "strictly for the purpose of cost recovery only." In other words, every increase in the cost of fuel oil to NAPOCOR above a base price is reflected in its fuel cost adjustment. NAPOCOR thus increases correspondingly the price of the power sold to respondent MERALCO, which then passes the same to the customers under the authority of the PPA clause. In 1987, under EO No. 172, the Energy Regulatory Board (ERB) was created. It was granted regulatory and adjudicatory powers and functions covering the energy sector. Also enacted was EO No. 215 opening the business of electric power generation to the private sector and allowed private corporations, cooperatives and similar associations, or the independent power producers (IPPs), to operate electric generating plants within the country. In addition to its various powers and functions, the ERB was mandated to enforce the pertinent provisions of RA No. 7832, otherwise known as the "Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994." To ensure the viability of private electric utilities, RA No. 7832 allows distribution utilities to pass on to its consumers system losses equivalent to either the actual kilowatt energy lost due to technical and non-technical/pilferage causes, or the cap imposed by law, whichever is lower. Said law provides that in no case shall the system loss cap be lower than 9%.18

Pursuant to RA No. 7832, the ERB adopted a formula to be used in computing the PPA to be charged by respondent MERALCO to its customers. The new PPA formula included among its components the system loss, franchise tax, the automatic cost adjustments and other adjustments of NAPOCOR and other IPPs and the generation cost of electricity. The said PPA formula subsequently underwent several modifications. Each revision was approved by the ERB after service of the notices of public hearing on the respective mayors of the cities and municipalities within respondent MERALCOs franchise area, posting thereof on the respective bulletin boards of the said local government units, and publication in two newspapers of general circulation. Thereafter, the EPIRA was enacted on June 8, 2001. As stated earlier, among other reforms in the electric power industry, the said law created the ERC. Section 36 of the EPIRA directed all distribution utilities to file with the ERC an application for the approval of their unbundled rates. Respondent MERALCO complied therewith and acting on its application, the ERC, in the Decision dated March 20, 2003 approved its unbundled rates. However, respondent MERALCO was directed to discontinue charging the PPA upon effectivity of the approved unbundled rates. The said order provided that any change in the cost of power purchased shall be reflected as deferred charges or credits which shall be recovered through the GRAM approved by the ERC for implementation per ERC Order dated February 24, 2003 in ERC Case No. 2003-44. According to respondent MERALCO, the GRAM is an adjustment recovery mechanism which replaces the automatic recovery adjustment mechanisms (Fuel and Purchased Power Cost Adjustments) of NAPOCOR and the PPA of the distribution utilities. The GRAM would allow the periodic (quarterly) adjustment of the generation charge to reflect changes in fuel and purchased power costs after review by the ERC and before the costs are passed on to the customers. The authority of the ERC to promulgate the GRAM Implementing Rules is found in Section 43 of the EPIRA which requires the said regulatory body to, among others, "establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency or inefficiency of the regulated

entities. The rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably..." Respondent MERALCO asserts that Section 4(e), Rule 3 of the IRR of the EPIRA requiring the publication of its application in a newspaper of general circulation and the service of a copy thereof to the concerned local government units is inapplicable. Rather, its amended application for the increase of its generation charge is governed by the GRAM Implementing Rules adopted by ERC in the Order dated February 24, 2003 in ERC Case No. 2003-44. The pertinent portion of the latter rules reads: Sec. 5. Generation Cost Accounting Application 1. A utility shall file a deferred generation cost accounting application setting forth its calculations of the generation rate. For NPC, said filing shall be for a particular grid. The filing shall be made every three (3) months. 2. Applications by NPC shall be grid specific and are not required to be filed concurrently. 3. An application must be filed not later than thirty (30) days after the adjustment date. 4. The proposed generation rate must be based on the volumes and allowable costs for the test period designated by the Commission and calculated in accordance with Section 6 hereof. 5. The Commission shall issue a decision no later than forty-five (45) days from the date the petition is accepted for filing. Should the Commission fail to act within forty-five (45) days the petition is deemed approved in full. Respondent MERALCO opines that to require it to comply with the requirements of Section 4(e), Rule 3 of the IRR of the EPIRA would defeat the reason behind the implementation of the adjustment mechanism which, quoting the ERC, is "to balance the need for timely recoveries of costs by the Utilities with the Commissions need to review the reasonableness and prudence of such costs."

Respondent MERALCO points out that Section 4(e), Rule 3 of the IRR of the EPIRA is inconsistent with the GRAM Implementing Rules specifically with respect to the period within which the ERC is mandated to render its decision on the application. Under the former, the ERC may issue a provisional authority within seventy-five (75) days from the filing of the application or petition and shall decide the matter on the merits not later than twelve (12) months from the issuance of said provisional order. On the other hand, the GRAM Implementing Rules allows the distribution utilities to apply for adjustment quarterly and the ERC must decide the application within forty-five (45) days from receipt thereof, before the costs may be passed on to the consumers. Otherwise, the application shall be deemed approved. Respondent MERALCO notes that the cost recovery mechanism is dictated by the situation whereby the cost of purchased power is unstable due principally to escalating fuel oil prices and fluctuations in the foreign exchange rates. The GRAM Implementing Rules was so promulgated to address this situation and answer the need for timely recoveries of costs by utilities, by allowing them to file every three (3) months an application for the recovery of the fuel and purchased power costs. Respondent MERALCO posits that in formulating the GRAM Implementing Rules, the ERCs primary objective was the protection of the consumers by ensuring that any application for the fuel and purchased power costs is subject to its review to determine the reasonableness and prudence of such cost, before they are passed on to the consumers. Further, unlike the PPA which is an automatic adjustment and subject to confirmation by the regulatory body only after the costs had been passed on to the consumers, the GRAM Implementing Rules provides for a regulatory lag of six (6) months within which the distribution utilities are authorized to recover their fuel and purchased power costs. The latter is therefore beneficial to the consumers. Respondent MERALCO maintains that the GRAM is a revenue-neutral recovery process, which means that it (respondent MERALCO) pays for the fuel and purchased power costs to its suppliers even before it could fully collect from its customers. And that out of these collections from its customers, not a single centavo is retained by respondent MERALCO, except for the carrying cost, but turned over to NAPOCOR and the other IPPs.

It would be allegedly violative of due process to require respondent MERALCO to comply with Section 4(e), Rule 3 of the IRR of the EPIRA and subject it to a long and tedious process of recovering its fuel and purchased power costs. Such would be contrary to the intent and purpose of the GRAM Implementing Rules. On the other hand, respondent MERALCO refutes the petitioners claim of denial of due process. It alleges that the petitioners were given every opportunity to be heard in a public consultation and submit their written comments. Respondent MERALCO quotes the ERC Order dated February 24, 2003 containing the GRAM Implementing Rules which states that the same was issued only after the ERC "has taken into consideration all the documents, data, comments and concerns raised by all the parties concerned who have submitted their respective positions thereon." Respondent MERALCO contends that the petitioners cannot deny any knowledge of the GRAM Implementing Rules particularly on the manner and timeline for filing an application for GRAM and the period within which the ERC must act and decide thereon. Accordingly, even without need of publication, posting and service to the local government units concerned, the petitioners should have allegedly filed their opposition to respondent MERALCOs amended application to increase its generation charge. Further, they should have filed their comment or opposition thereon within the forty-five (45) day-period within which the ERC was required to render its decision. The petitioners omission is allegedly fatal to their present cause of action. Respondent MERALCO observes that the petitioners did not appeal the Order dated February 24, 2003 of the ERC adopting the GRAM Implementing Rules. Neither have they allegedly shown that they were deprived of their right to be heard when the said rules were promulgated. For this lapse, respondent MERALCO stresses that the petitioners have no personality to claim denial of due process and prays that the Court dismiss the present petition. ERCs Counter-arguments The ERC, through the Office of the Solicitor General (OSG), defends the validity of its June 2, 2004 Order approving the increase of respondent MERALCOs generation charge from P3.1886 to P3.3213 per kWh effective immediately. According to the ERC, the said order was issued in

accordance with the GRAM Implementing Rules it promulgated in the Order dated February 24, 2003 in ERC Case No 2003-44. Prior to the EPIRA, the ERB adopted the Rules and Regulations Implementing RA No. 7832. A provision of the said implementing rules provided for the "automatic cost adjustment formula" applicable to private distribution utilities and electric cooperatives, which became known as the PPA. Under this provision, the distribution utilities were authorized to adopt a restructured rate schedule including its PPA formula, subject to the approval of the ERB. Respondent MERALCOs rate schedule and PPA, and the subsequent revisions thereon, were approved by the ERB. The ERC now anchors its authority to promulgate the GRAM Implementing Rules on Section 43(f)19 of the EPIRA which, among others, expressly authorizes it to establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility. In relation thereto, Section 25 of the same law also provides that "the retail rates charged by distribution utilities for the supply of electricity in their captive market shall be subject to regulation by the ERC based on the principle of full recovery of prudent and reasonable economic costs incurred, or such other principles that will promote efficiency." Section 43(u) thereof is also cited which vests the ERC with "the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector." Section 36 thereof directed the distribution utilities to file their revised rates for the approval by the ERC and that the distribution wheeling charges shall be unbundled from the retail rate and the rate shall reflect the respective costs of providing each service. The ERC explains that it adopted the GRAM Implementing Rules as it noted certain problems with the then existing PPA mechanism. Among these problems were the non-uniform implementation due to the use of different formulas by the distribution utilities; the confirmation process was conducted long after the costs had been recovered from the consumers and; the rates were changed without the order of the ERC.

Among others, the GRAM Implementing Rules provides for a uniform formula to arrive at the generation rate of a distribution utility.20 The said implementing rules also provide for a formula for deferred accounting adjustment (DAA) which must be established in an application for deferred generation cost accounting relief. The distribution utilities are allowed to adjust their respective generation rates quarterly upon filing of a petition with the ERC, which shall decide thereon within a maximum period of forty-five (45) days. According to the ERC, respondent MERALCO filed its 1st GRAM application on January 16, 2004 docketed as ERC Case No. 2004-20. In the said application, respondent MERALCO proposed a generation charge of P3.2041 per kWh. The ERC, in its Order dated January 21, 2004, approved the generation charge of P3.1886 per kWh effective immediately. Consistent with the GRAM being an adjustment mechanism which had to be filed every quarter, respondent MERALCO filed on April 19, 2004 its amended application under the GRAM for the increase of its generation charge from P3.1886 to P3.4664 per kWh. The case was docketed as ERC Case No. 2004-112. Resolving the same, the ERC rendered the assailed Order dated June 2, 2004 approving the increase of respondent MERALCOs generation charge to P3.3212 per kWh effective immediately. The ERC denies having committed any grave abuse of discretion in issuing the assailed order. Like respondent MERALCO, the ERC asserts that the procedure prescribed under the GRAM Implementing Rules, particularly Section 221 and 522 thereof, radically differs from that provided for in Section 4(e), Rule 3 of the IRR of the EPIRA. Specifically, the GRAM Implementing Rules do not require that the application of a distribution utility like respondent MERALCO under the said rules be published or that comments of local government units and the consumers thereon be solicited. The procedure prescribed by the GRAM Implementing Rules is markedly different from that of the IRR of the EPIRA because the GRAM was intended to be an adjustment mechanism and not an independent rate application by itself. Only the latter falls within the contemplation of the IRR of the EPIRA. Explaining the nature and purpose of an adjustment mechanism, the ERC quotes the following disquisition:

The fuel and purchased power adjustment clause is a widely used regulatory tool which can avoid the necessity of repeated general rate proceedings, and which can allow for an intense and specialized review of fuel and purchased power costs (Re Arizona Pub. Service Co., 76 PUR 4th 399, 1986). Although the authority to approve automatic fuel adjustment clauses was not granted expressly in the District of Columbia Code, the commission held that the code, under its broad grant of authority to the commission, impliedly permitted the clause (Re Potomac Electric Power Co., 2 DC PSC 391, Formal Case No. 725, Order No. 7428, Dec. 23, 1981). Automatic adjustment clauses have been adopted for the recovery of certain utility costs only under the following limited and well-recognized circumstances: (1) when such costs are extremely volatile, changing rapidly over short periods of time, e.g, the cost of coal or other fuel burned to generate electricity or the cost of natural gas; (2) when such volatile cost changes represent significant portions of total utility operating expenses, and (3) when such volatile cost changes are beyond the ability of the utility to control, e.g., a utility must purchase coal or gas at whatever prices that procedures or pipelines are willing to sell (Re Mountain States Teleph. & Teleg. Co., 78 PUR 4th 287, 1986). The Oregon Public Utility Commission recently described the purpose of an "escalator" clause , which it euphemistically called a "tracker" as follows: "It purports to track a particular cost, increasing or decreasing revenues just enough to offset the alleged change in cost. The isolated cost is ordinarily one over which the utility has no influence and about which there is little likelihood of dispute" (Re Portland General Electric Co., 104 PUR 4th 266, 268, Or. P.U.C., 1989). It is clear from the foregoing that "escalator" or "tracker" or any other similar automatic adjustment clauses are merely cost recovery or cost "flow-through" mechanisms; that what they purport to cover are operating costs only which are very volatile and unstable in nature and over which the utility has no control; and that the use of the said clauses is deemed necessary to enable the utility to make the consequent adjustments on the billings to its customers so that ultimately its rate of return would not be quickly eroded by the escalations in said costs of operation. The total of all rate adjustments should not operate to increase overall rate of return for a particular utility company above the basic rates approved in the last previous rate case (Re Adjustment Clause in Telephone Rate Schedules, 3 PUR 4th 298, N.J. Bd. of Pub. Util.Commrs., 1973. Affirmed 66 N.J. 476, 33 A.2d 4, 8 PUR 4th 36, N.J.,1975).23

The ERC stresses that the GRAM Implementing Rules set forth in its Order dated February 24, 2003 was duly published and submitted for exhaustive public consultation. The ERC points out that, as recounted in the said order, the following procedural steps were taken leading to the adoption of the GRAM and ICERA Implementing Rules: On January 29, 2003, the Commission issued an Order setting for public consultation its proposed Implementing Rules for the Recovery of Deferred Fuel and Independent Power Producer Costs (DCOR) and the Deferred Incremental Currency Exchange Recovery (DICER) on February 17, 2003. Likewise, a Notice of the same tenor as the above mentioned Order was published by the Commission in the Philippine Star on February 3, 2003. In the aforesaid Order and Notice, interested parties were directed to submit their written comments on the said proposed implementing rules on or before February 12, 2003. In compliance therewith, the following parties filed their respective comments on various dates: 1. Manila Electric Company (MERALCO); 2. Dagupan Electric Corporation (DECORP); 3. National Power Corporation (NPC); 4. First Gas Holdings Corporation (FGHC); 5. Angeles Electric Corporation (AEC); 6. National Power Corporation (NPC); 7. Small Power Utilities Group NPC (NPC-SPUG); 8. Cotabato Light Company (COLIGHT); 9. Iligan Light Power Incorporated (ILPI); 10. Visayan Electric Company (VECO);

11. Tarlac Electric Incorporated (TEI); 12.Cagayan Electric Power and Light Company, Inc. (CEPALCO); 13. Davao Light and Power Company, Inc. (DLPC); 14. People Opposed Against Warrantless Electricity Rates (POWER); 15. National Association of Electricity Consumers for Reforms (NASECORE); and 16. Mr. Genaro Lualhati. As culled from their comments, most of the Utilities manifested their strong objections to the adoption of the DCOR and DICER. In general, they alleged that the adoption of said mechanisms would defeat the purpose of escalator clauses such as the Purchased Power Adjustment (PPA) and Currency Exchange Rate Adjustment (CERA) clauses. More particularly, their common primary concerns, among others, were: a) the regulatory lag; b) the carrying charge; and c) the recovery period. At the scheduled public consultation on February 17, 2003, representatives of the various distribution utilities appeared and were given opportunities to present their submitted written comments. They were, likewise, allowed to manifest their additional comments. On the other hand, the consumer sector was represented in the said public consultation by the following: 1) Mr. Pete Ilagan from NASECORE; 2) Mr. Mike Ocampo, from the Consumers Union of the Philippines (CUP); 3) Atty. Jose T. Baldonado; 4) Mr. Genaro Lualhati; and 5) Mr. Renato Reyes from POWER. The primary concerns of the consumer sector were: a) the Commission should have involved the public as early as in the drafting of the proposed implementing rules; b) the Commission should have taken into consideration consumer protection in the drafting of the proposed implementing rules; c) the Commission should not change the term

Purchase Power Adjustment (PPA) into DCOR as it may confuse the consumers into assuming that the PPA will no longer be a part of their electric bill, when in fact, it still is; d) the Commission should first decide whether the electric power that is going to be recovered is actually used by the consumers; e) the Recovery of IPP contract costs through the PPA, and now through the DCOR, had been consistently objected to by the consumers as these are the result of private commercial contracts between distribution utilities and their IPPs, thus, should not bind the consumers; and f) the PPA for the "undelivered" power should be reflected separately from the PPA for the delivered ones. During the same public consultation, representatives from the consumer sector requested that a separate consultation be conducted exclusively for the consumers to enable them to fully understand the nature and effects of the DCOR and the DICER. Said request was granted by the Commission. Accordingly, another consultation for the consumers was set on February 21, 2003. At the February 21, 2003 consultation, representatives from various consumer groups headed by NASECORE, CUP and POWER appeared. In the same consultation, the Commission presented and explained the DCOR and the DICER. Moreover, MERALCO representatives likewise presented their explanation of the PPA and the computation thereof. Consumer representatives then manifested their various concerns, which were noted by the Commission.24 As can be gleaned, the DCOR and the DICER were eventually discarded and, instead, the GRAM and ICERA Implementing Rules were adopted. It is underscored by the ERC that a number of distribution utilities and consumer groups were present at the public consultation and submitted their comments on the said implementing rules. In fact, petitioner NASECOREs representative, Mr. Ilagan, was present at the public consultation, participated therein and submitted petitioner NASECOREs comment. If they had any objections to the GRAM Implementing Rules, they should have appealed the ERC Order dated February 24, 2003. Petitioners did not do so. Neither did they complain when respondent MERALCOs 1st GRAM application resulted in the reduction of the generation charge per ERC Order dated in January 21, 2004 in ERC Case No. 2004-20.

Hence, petitioners cannot now claim denial of due process due to the nonpublication of respondent MERALCOs amended application. The ERC contends that it resolved the same in accordance with the GRAM Implementing Rules which, unlike the PPA, allowed the ERC to validate the costs associated in generating electricity before they are passed on to the consumers. Consequently, respondent ERC did not commit grave abuse of discretion when it issued the Order dated June 2, 2004 in ERC Case No. 2004-112 approving respondent MERALCOs revised generation charge at P3.3213 per kWh in accordance with the GRAM Implementing Rules set forth in its February 24, 2003 Order in ERC Case No. 2003-44. Finally, the ERC informs the Court that the GRAM Implementing Rules have been superseded with the promulgation by the ERC on October 13, 2004 of the Guidelines for the Automatic Adjustment of Generation Rates and System Loss Rates by Distribution Utilities (AGRA). 25 The AGRA allows distribution utilities to calculate their monthly generation rates by summing up the net generation costs from the previous month over total kilowatt-hours purchased for the previous month to automatically implement, subject to a post verification audit by the ERC, the corresponding adjustment in generation charges. Issue The issue raised by the parties is whether the ERC committed grave abuse of discretion in issuing the Order dated June 2, 2004 in ERC Case No. 2004-112 which approved the increase of respondent MERALCOs generation charge from P3.1886 to P3.3213 per kWh effective immediately without publication of the latters amended application. The Courts Ruling

of the locality where the applicant or petitioner principally operates together with the certification of the notice of publication thereof in a newspaper of general circulation in the same locality. The ERC may grant provisionally or deny the relief prayed for not later than seventy-five (75) calendar days from the filing of the application or petition, based on the same and the supporting documents attached thereto and such comments or pleadings the consumers or the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy of the application or petition or from the publication thereof as the case may be. Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving proper notices to all parties concerned, with at least one public hearing in the affected locality, and shall decide the matter on the merits not later than twelve (12) months from the issuance of the aforementioned provisional order. This Section 4(e) shall not apply to those applications or petitions already filed as of 26 December 2001 in compliance with Section 36 of the Act. The respondents contend that this provision applies only to independent rate applications and not to adjustment mechanisms like the GRAM; hence, respondent MERALCOs amended application for the increase of its generation charge is excluded and/or exempted from the application of the requirements of the above-quoted provision. This contention is erroneous. Section 4(e), Rule 3 of the IRR of the EPIRA could not be any clearer with respect to its coverage as it refers to "any application or petition for rate adjustment or for any relief affecting the consumers." In this connection, the EPIRAs definition of "retail rate" is instructive:

The petition is granted. Contrary to the stance taken by the respondents, the amended application of respondent MERALCO for the increase of its generation charge is covered by Section 4(e), Rule 3 of the IRR of the EPIRA. For clarity, the said provision is quoted anew: (e) Any application or petition for rate adjustment or for any relief affecting the consumers must be verified, and accompanied with an acknowledgement of receipt of a copy thereof by the LGU Legislative Body (ss) "Retail Rate" refers to the total price paid by the end-users consisting of the charges for generation, transmission and related ancillary services, distribution, supply and other related charges for electric service.26 Section 4(e), Rule 3 of the IRR of the EPIRA speaks of "any application or petition for rate adjustment" without making any distinctions. Hence, any application or petition that would result in the adjustment or change in the total price (retail rate) paid by the end-users, whether this change or adjustment is occasioned by the adjustment or change in the charges for

generation, transmission, contemplation.

distribution,

supply,

etc.,

falls

within

its

of the provisional order. Effectively, this provision limits the lifetime of the provisional order to only 12 months.28 Among the important requirements introduced under the foregoing process are: first, the publication of the application itself, not merely the notice of hearing issued by the ERC, in a newspaper of general circulation in the locality where the applicant operates and; second, the need for the ERC to consider the comments or pleadings of the customers and LGU concerned in its action on the application or motion for provisional rate adjustment.29 The Court reasoned that the publication and comment requirements are in keeping with the avowed policies of the EPIRA, to wit: [T]o protect the public interest vis--vis the rates and services of electric utilities and other providers of electric power, to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability for greater operational and economic efficiency, to enhance the competitiveness of Philippine products in the global market, and to balance the interests of the consumers and the public utilities providing electric power through the fair and nondiscriminatory treatment of the two sectors. Clearly, therefore, although the new requirements are procedural in character, they represent significant reforms in public utility regulation as they engender substantial benefits to the consumers. It is in this light that the new requirements should be appreciated and their observance enforced.30 The lack of publication of respondent MERALCOs amended application for the increase of its generation charge is thus fatal. By this omission, the consumers were deprived of the right to file their comments thereon. Consequently, the assailed Order dated June 2, 2004 issued by the ERC, approving the increase of respondent MERALCOs generation charge from P3.1886 to P3.3213 per kWh effective immediately, was made without giving the consumers any opportunity to file their comments thereon in violation of Section 4(e), Rule 3 of the IRR of the EPIRA. Indeed, the basic postulate of due process ordains that the consumers be notified of any application, and be apprised of its contents, that would result in compounding their economic burden. In this case, the consumers

In any case, that respondent MERALCOs amended application is covered by the said provision is mandated by the fact that the relief prayed for therein clearly affects the consumers as it results in the increase of the costs of their electricity consumption. In Freedom from Debt Coalition v. ERC,27 the Court outlined the requirements of Section 4(e), Rule 3 of the IRR of the EPIRA as follows: (1) The applicant must file with the ERC a verified application/petition for rate adjustment. It must indicate that a copy thereof was received by the legislative body of the LGU concerned. It must also include a certification of the notice of publication thereof in a newspaper of general circulation in the same locality. (2) Within 30 days from receipt of the application/petition or the publication thereof, any consumer affected by the proposed rate adjustment or the LGU concerned may file its comment on the application/petition, as well as on the motion for provisional rate adjustment. (3) If such comment is filed, the ERC must consider it in its action on the motion for provisional rate adjustment, together with the documents submitted by the applicant in support of its application/petition. If no such comment is filed within the 30-day period, then and only then may the ERC resolve the provisional rate adjustment on the basis of the documents submitted by the applicant. (4) However, the ERC need not conduct a hearing on the motion for provisional rate adjustment. It is sufficient that it consider the written comment, if there is any. (5) The ERC must resolve the motion for provisional rate adjustment within 75 days from the filing of the application/petition. (6) Thereafter, the ERC must conduct a full-blown hearing on the application/petition not later than 30 days from the date of issuance

have the right to be informed of the bases of respondent MERALCOs amended application for the increase of its generation charge in order to, if they so desire, effectively contest the same. The following pronouncements are quite apropos: Obviously, the new requirements are aimed at protecting the consumers and diminishing the disparity or imbalance between the utility and the consumers. The publication requirement gives them enhanced opportunity to consciously weigh the application in terms of the additional financial burden which the proposed rate increase entails and the basis for the application. With the publication of the application itself, the consumers would right from the start be equipped with the needed information to determine for themselves whether to contest the application or not and if they so decide, to take the needed further steps to repulse the application. On the other hand, the imposition on the ERC to consider the comments of the customers and the LGUs concerned extends the comforting assurance that their interest will be taken into account. Indeed, the requirements address the right of the consuming public to due process at the same time advance the cause of people empowerment which is also a policy goal of the EPIRA along with consumer protection.31 It has also been stated that: The requirement of due process is not some favor or grace that the ERC may dole out on a bout of whim or on occasion of charity. Rather, it is a statutory right to which the consuming public is entitled. The requirement of publication in applications for rate adjustment is not without reason or purpose. It is ancillary to the due process requirement of notice and hearing. Its purpose is not merely to inform the consumers that an application for rate adjustment has been filed by the public utility. It is to adequately inform them that an application has been made for the adjustment of the rates being implemented by the public utility in order to afford them the opportunity to be heard and submit their stand as to the propriety and reasonableness of the of the rates within the period allowed by the Rule. Without the publication of the application, the consumers are left to second-guess the substance and merits of the application.32

At this point, it should be stated that the Court is not convinced by respondent MERALCOs argument that to require it to comply with Section 4(e), Rule 3 of the IRR of the EPIRA would be a violation of its right to due process because it would be subjected to a long and tedious process of recovering its fuel and purchased power costs. In Freedom from Debt Coalition, the Court categorically upheld the ERCs power to grant provisional adjustments or power of interim rate-regulation. Such power is intended precisely for the ERC to, as Mr. Justice Reynato S. Puno in his Concurring and Dissenting Opinion succinctly put it, "be able to swiftly and flexibly respond to the exigencies of the times." 33 He elucidated further on the raison detre of the power of interim rate-regulation particularly in the context of our countrys economic history: Our economic history teaches us that the Philippines is vulnerable to the rapid fluctuations in the exchange rate. In recent years, we saw how numerous industries failed to survive the Asian financial crises fueled by the uncertainties of exchange rates. All these have had adverse financial impact on public utilities such as Meralco in terms of skyrocketing costs of debt servicing, and maintenance and operating expenses. A regulator such as the ERC should have sufficient power to respond in real time to changes wrought by multifarious factors affecting public utilities.34 Thus, respondent MERALCOs apprehension of being subjected to a long and tedious process with respect to the recovery of its fuel and purchased power costs is, in fact, addressed by the power of the ERC to grant provisional rate adjustments. The ERC is not, of course, precluded from promulgating rules, guidelines or methodology, such as the GRAM, for the recovery by the distribution utilities of their fuel and purchased power costs. However, these rules, guidelines or methodology so adopted should conform to the requirements of pertinent laws, including Section 4(e), Rule 3 of the IRR of the EPIRA.35 There is another compelling reason why reliance by respondent MERALCO and the ERC on the GRAM Implementing Rules is unavailing. To recall, they advance the view that the June 2, 2004 ERC Order is valid, notwithstanding the fact that respondent MERALCOs amended application was not published in a newspaper of general circulation, because the same was issued in accordance with the GRAM Implementing Rules which does not require such publication.

It does not appear from the records, however, that the GRAM Implementing Rules, as set forth in the ERC Order dated February 24, 2003 in ERC Case No. 2003-44, has been published in the Official Gazette or in a newspaper of general circulation. Executive Order No. 200, which repealed Article 2 of the Civil Code, provides that "laws shall take after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided." The basic requirement of publication of statutes was explained in Taada v. Tuvera36 as follows: We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature, or at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the socalled letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.37 A careful review of the procedural steps undertaken by the ERC leading to its issuance of the Order dated February 24, 2003 in ERC Case No. 200344, which set forth the GRAM Implementing Rules, as well as the Order dated June 2, 2004 in ERC Case No. 2004-112, which approved the increase of respondent MERALCOs generation charge purportedly in accordance with the GRAM Implementing Rules, shows that there was no publication of the same in the Official Gazette or in a newspaper of general circulation.

The procedural antecedents leading to the adoption of the GRAM Implementing Rules and the approval of respondent MERALCOs generation charge are outlined below based on the ERCs own account thereof: q On January 29, 2003, the ERC issued an Order setting for public consultation its proposed Implementing Rules for the Recovery of Deferred Fuel and Independent Power Producer Costs (DCOR) and Deferred Incremental Currency Exchange Recovery (DICER) on February 17, 2003; q Notice of the said public consultation was published in the Philippine Star on February 3, 2003; q In the said notice and order, interested parties were directed to submit their written comments on the proposed Implementing Rules for the Recovery of the DCOR and DICER on or before February 12, 2003; q In compliance therewith, several distribution utilities like respondent MERALCO and consumer groups like petitioner NASECORE submitted their written comments. The distribution utilities manifested their objections to the adoption of the DCOR and DICER while the consumer groups expressed that the ERC should have taken into consideration consumer protection when it drafted the proposed rules; q On February 17, 2003, the public consultation took place where representatives of various distribution utilities and consumer groups were present; q Upon the request of the consumer groups, another public consultation was held for them on February 21, 2003; q On February 24, 2003, the ERC promulgated the Order setting forth the GRAM and ICERA Implementing Rules. The said implementing rules provide that they shall take effect immediately; q On January 16, 2004 respondent MERALCO filed an application entitled In the Matter of the Application for the Recovery of the Independent Power Producer Costs under the Generation Rate

Adjustment Mechanism (GRAM), docketed as ERC Case No. 200420. In the said application, respondent MERALCO proposed that a generation charge of P3.2041 per kWh be approved; q On January 21, 2004, the ERC approved respondent MERALCOs generation charge of P3.1886 per kWh effective immediately; q On April 19, 2004, respondent MERALCO filed an amended application under the GRAM for the approval of its proposed generation charge of P3.4664 per kWh, docketed as ERC Case No. 2004-12. q On June 2, 2004, the ERC promulgated the assailed Order approving respondent MERALCOs generation charge of P3.213 per kWh effective immediately. Nowhere from the above narration does it show that the GRAM Implementing Rules was published in the Official Gazette or in a newspaper of general circulation. Significantly, the effectivity clauses of both the GRAM and ICERA Implementing Rules uniformly provide that they "shall take effect immediately." These clauses made no mention of their publication in either the Official Gazette or in a newspaper of general circulation. Moreover, per the Certification dated January 11, 2006 of the Office of the National Administrative Register (ONAR), the said implementing rules and regulations were not likewise filed with the said office in contravention of the Administrative Code of 1987.38 Applying the doctrine enunciated in Taada, the Court has previously declared as having no force and effect the following administrative issuances: (1) Rules and Regulations issued by the Joint Ministry of HealthMinistry of Labor and Employment Accreditation Committee regarding the accreditation of hospitals, medical clinics and laboratories;39 (2) Letter of Instruction No. 1416 ordering the suspension of payments due and payable by distressed copper mining companies to the national government;40 (3) Memorandum Circulars issued by the Philippine Overseas Employment Administration regulating the recruitment of domestic helpers to Hong Kong;41(4) Administrative Order No. SOCPEC 8908-01 issued by the Philippine International Trading Corporation regulating applications for importation from the Peoples Republic of China;42 (5) Corporation Compensation Circular No. 10 issued by the Department of Budget and Management discontinuing the payment of

other allowances and fringe benefits to government officials and employees;43 and (6) POEA Memorandum Circular No. 2 Series of 1983 which provided for the schedule of placement and documentation fees for private employment agencies or authority holders.44 In all these cited cases, the administrative issuances questioned therein were uniformly struck down as they were not published or filed with the National Administrative Register. On the other hand, in Republic v. Express Telecommunications Co., Inc.,45 the Court declared that the 1993 Revised Rules of the National Telecommunications Commission had not become effective despite the fact that it was filed with the National Administrative Register because the same had not been published at the time. The Court emphasized therein that "publication in the Official Gazette or a newspaper of general circulation is a condition sine qua non before statutes, rules or regulations can take effect."46 In this case, the GRAM Implementing Rules must be declared ineffective as the same was never published or filed with the National Administrative Register. To show that there was compliance with the publication requirement, respondents MERALCO and the ERC dwell lengthily on the fact that the parties, particularly the distribution utilities and consumer groups, were duly notified of the public consultation on the ERCs proposed implementing rules. These parties participated in the said public consultation and even submitted their comments thereon. However, the fact that the parties participated in the public consultation and submitted their respective comments is not compliance with the fundamental rule that the GRAM Implementing Rules, or any administrative rules whose purpose is to enforce or implement existing law, must be published in the Official Gazette or in a newspaper of general circulation. The requirement of publication of implementing rules of statutes is mandatory and may not be dispensed with altogether even if, as in this case, there was public consultation and submission by the parties of their comments. The public consultation and submission by the parties of their comments were procedures prior to the adoption of the GRAM Implementing Rules. In fact, at the time, the ERCs proposed implementing rules were denominated Implementing Rules for the Recovery of DCOR and DICER. These procedural steps (public consultation and submission of comments)

are entirely different from the publication of statutes mandated by law, which occurs after their promulgation or adoption. The obvious purpose of the preliminary procedures of public consultation and submission of comments is to give the parties the opportunity to air their views and express their concerns on particular subject matters before legislative measures or implementing rules and regulations addressing these matters are promulgated. On the other hand, the avowed rationale for the requirement of publication of statutes is to apprise the public of the contents of the laws or rules and regulations that have already been promulgated or adopted. As the Court ratiocinated in Taada: It is not correct to say that under the disputed clause publication may be dispensed with altogether. The reason is that such omission would offend due process insofar as it would deny the public knowledge of the laws that are supposed to govern it. Surely, if the legislature could validly provide that a law shall become effective immediately upon its approval notwithstanding the lack of publication (or after an unreasonably short period after publication), it is not unlikely that persons not aware of it would be prejudiced as a result; and they would be so not because of a failure to comply with it simply because they did not know of its existence. Significantly, this is not true only of penal laws as is commonly supposed. One can think of many non-penal measures, like a law on prescription, which must also be communicated to the persons they may affect before they began to operate.47 The Court likewise emphasized therein that the Bill of Rights recognizes "the right of the people to information on matters of public concern."48 With respect to the GRAM Implementing Rules, its publication in the Official Gazette or in a newspaper of general circulation is mandated by the fact that these rules seek to implement key provisions of the EPIRA. More importantly, the GRAM Implementing Rules, insofar as it lays down the procedure by which generation costs of distribution utilities are recovered, affect ultimately the public as consumers of electricity and who pay the charges therefor. Clearly, the GRAM Implementing Rules affects the public inasmuch as it determines the costs of electricity consumption. The public, not only the parties to the cases before the ERC, has the right to be apprised of the

contents of the GRAM Implementing Rules by publication of the same in the Official Gazette or in a newspaper of general circulation in the Philippines to the end that it be given amplest opportunity to voice out whatever opposition it may have, and to ventilate its stance on the matter.49 In light of the foregoing disquisition, the assailed ERC Order dated June 2, 2004 in ERC Case No. 2004-112 approving the increase of respondent MERALCOs generation charge from P3.1886 to P3.3213 per kWh effective immediately is nullified for having been issued with grave abuse of discretion. WHEREFORE, premises considered, the petition is GRANTED. The assailed ERC Order dated June 2, 2004 in ERC Case No. 2004-112 is DECLARED VOID and accordingly SET ASIDE. SO ORDERED.