G.R. No. L-49705-09 February 8, 1979 G.R. Nos.

L49717-21, for certiorari with restraining order and

preliminary injunction filed by Linang Mandangan, abo a candidate for
TOMATIC ARATUC, SERGIO TOCAO, CISCOLARIO DIAZ, FRED representative in the same election in that region, to review the
TAMULA, MANGONTAWAR GURO and BONIFACIO decision of the Comelec declaring respondent Ernesto Roldan as
LEGASPI, petitioners, entitled to be proclaimed as one of the eight winners in said election.
vs.
The COMMISSION ON ELECTIONS, REGIONAL BOARD OF The instant proceedings are sequels of Our decision in G.R. No. L-
CANVASSERS for Region XII (Central Mindanao), ABDULLAH 48097, wherein Tomatic Aratuc et al. sought the suspension of the
DIMAPORO, JESUS AMPARO, ANACLETO BADOY, et canvass then being undertaken by respondent dent Board in Cotabato
al., respondents. city and in which canvass, the returns in 1966 out of a total of 4,107
voting centers in the whole region had already been canvassed
Nos. L-49717-21 February 8,1979. showing partial results as follows:
LINANG MANDANGAN, petitioner,
vs. NAMES OF CANDIDATES NO. OF
THE COMMISSION ON ELECTIONS, THE REGIONAL BOARD OF VOTES
CANVASSERS for Region XII, and ERNESTO
ROLDAN, respondents. 1. Roldan, Ernesto (KB) 225,674

L-49705-09 — Lino M. Patajo for petitioners.

2. Valdez, Estanislao (KBL) 217,789
Estanislao A. Fernandez for private respondents.

L-49717-21 — Estanislao A. Fernandez for petitioner. 3. Dimporo, Abdullah (KBL) 199,244

Lino M. Patajo for private respondent.

4. Tocao, Sergio (KB) 199,062
Office of the Solicitor General, for Public respondents.
5. Badoy, Anacleto (KBL) 198,966

BARREDO, J.:
6. Amparo, Jesus (KBL) 184,764
Petition in G. R. Nos. L-49705-09 for certiorari with restraining order and
preliminary injunction filed by six (6) independent candidates for 7. Pangandaman, Sambolayan 183,646
representatives to tile Interim Batasang Pambansa who had joined (KBL)
together under the banner of the Kunsensiya ng Bayan which,
however, was not registered as a political party or group under the
1976 Election Code, P.D. No. 1296, namely Tomatic Aratuc, Sorgio 8. Sinsuat, Datu Blah (KBL) 182,457
Tocao, Ciscolario Diaz, Fred Tamula, Mangontawar Guro and Bonifacio
Legaspi her referred to as petitioners, to review the decision of the 9. Baga, Tomas (KBL) 171,656
respondent Commission on Election (Comelec) resolving their appeal
from the Of the respondent Regional Board of Canvasses for Region XII
10. Aratuc, Tomatic (KB) 165,795
regarding the canvass of the results of the election in said region for
representatives to the I.B.P. held on April 7, 1978. Similar petition in
 11. Mandangan, Linang(KB) 165,032 1. That the resumption of said canvass shall be held in the Comelec
main office in Manila starting not later than June 1, 1978;

12. Diaz, Ciscolario (KB) 159,977 2. That in preparation therefor, respondent Commission on Elections
shall see to it that all the material election paragraph corresponding to
all the voting center involved in Election Nos. 78-8, 78-9, 78-10, 78-11
13. Tamalu, Fred (KB) 153,734
and 78-12 are taken to its main office in Manila, more particularly, the
ballot boxes, with the contents, used during the said elections, the
14. Legaspi Bonifacio (KB) 148,200 books of voters or records of voting and the lists or records of
registered voters, on or before May 31, 1978;
15. Guro, Mangontawar (KB) 139,386 3. That as soon as the corresponding records are available, petitioners
and their counsel shall be allowed to examine the same under such
16. Loma, Nemesio (KB) 107,455 security measures as the respondent Board may determine, except the
contents of the ballot boxes which shall be opened only upon orders of
either the respondent Board or respondent Commission, after the need
17. Macapeges, Malamama 101,350 therefor has become evident, the purpose of such examination being
(Independent) to enable petitioners, and their counsel to expeditiously determine
which of them they would wish to be scrutinized and passed upon by
(Votes Of the independent candidates who actually were not in the Board as supporting their charges of election frauds and anomalies,
contention omitted)" (Page 6, Record, L-49705-09.) petitioners and their counsel being admonished in this connection, that
no dilatory tactics should be in by them and that only such records
A supervening panel headed by Commissioner of Elections, Hon-
substantial objections should be offered by them for the scrutiny by the
Venancio S. Duque, had conducted of the complaints of the petitioners
Board;
therein of alleged irregularities in the election records in all the voting
centers in the whole province of Lanao del Sur, the whole City of 4. That none of the election returns reffered to in the petition herein
Marawi, eight (8) towns of Lanao del Norte, namely, Baloi, Karomatan, shall be canvassed without first giving the herein petitioners ample
Matungao, Munai, Nunungan, Pantao Ragat, Tagoloan and Tangcal, opportunity to make their specific objections thereto, if they have any,
seven (7) towns in Maguindanao, namely, Barrira, Datu Piang, Dinaig, and to show sufficient basis for the rejection of any of the returns, and,
Matanog Parang, South Upi and Upi, ten (10) towns in North Cotabato, in this connection, the respondent Regional Board of Canvassers
namely, Carmen, Kabacan, Kidapwan, Magpet, Matalam Midsayap, should give due consideration to the points raised in the memorandum
Pigcawayan, Pikit, Pres. Roxas and Tulonan, and eleven (11) towns in filed by said petitioners with the Commission on Election in the above
Sultan Kudarat, namely, Bagumbayan, Columbia Don Mariano Marcos, cases dated April 26, 1978;
Esperanza, Isulan, Kalamansig, Lebak, Lutayan, Palimbang, President
Quirino and Tacurong, by reason for which, petitioners had asked that 5. That should it appear to the board upon summary scrutiny of the
the returns from said voting centers be excluded from the canvass. records to be offered by petitioners indication that in the voting center
Before the start of the hearings, the canvass was suspended but after actually held and/or that election returns were prepared either before
the supervisory panel presented its report, on May 15, 1978, the the day of the election returns or at any other time, without regard
Comelec lifted its order of suspension and directed the resumption of thereto or that there has been massive substitution of voters, or that
the canvass to be done in Manila. This order was the one assailed in ballots and/or returns were prepared by the same groups of persons or
this Court. We issued a restraining order. individuals or outside of the voting centers, the Board should exclude
the corresponding returns from the canvass;
After hearing the parties, the Court allowed the resumption of the
canvass but issued the following guidelines to be observed thereat:
6. That appeals to the commission on Election of the Board may be voting records were not available- and could not be brought to Manila,
made only after all the returns in question in all the above, the above petitions asked that the results therein be completely excluded from
five cases shall have been passed upon by the Board and, accordingly, the canvass. On July 11, 1978, respondent Board terminated its
no proclamation made until after the Commission shall have finally canvass and declared the result of the voting to be as follows:
resolved the appeal without prejudice to recourse to this court, if
warranted as provided by the Code and the Constitution, giving the NAME OF CANDIDATE VOTES OBTAIN
parties reasonable time therefor;

7. That the copies of the election returns found in the corresponding VALDEZ, Estanislao 436,069
ballot boxes shall be the one used in the canvass;
DIMAPORO, Abdullah 429,351
8. That the canvass shall be conducted with utmost dispatch, to the
end that a proclamation, if feasible, may be made not later than June
10, 1978; thus, the canvass may be terminated as soon as it is evident PANGANDAMAN, 406,106
that the possible number of votes in the still uncanvassed returns with Sambolayan
no longer affect the general results of the elections here in controversy;

9. That respondent Commission shall promulgate such other directive SINSUAT, Blah 403,445
not inconsistent with this resolution y necessary to expedite the
proceedings herein contemplated and to accomplish the purposes AMPARO, Jesus 399,997
herein intended. (Pp. 8-9, Record.

On June 1, 1978, upon proper motion, said guidelines were modified: MANDANGAN, Linang 387,025

... in the sense that the ballot boxes for the voting centers just referred
to need not be taken to Manila, EXCEPT those of the particular voting BAGA, Tomas 386,393
centers as to which the petitioners have the right to demand that the
corresponding ballot boxes be opened in order that the votes therein BADOY,Anacleto 374,933
may be counted because said ballots unlike the election returns, have
not been tampered with or substituted, which instances the results of
ROLDAN, Ernesto 275,141
the counting shall be specified and made known by petitioners to the
Regional Board of Canvassers not later than June 3, 1978; it being
understood, that for the purposes of the canvass, the petitioners shall TOCAO, Sergio 239,914
not be allowed to invoke any objection not already alleged in or
comprehend within the allegations in their complaint in the election
ARATUC, Tomatic 205,829
cases above- mentioned. (Page 8, Id.)

Thus respondent Board proceeded with the canvass, with the herein GURO, Mangontawar 190,489
petitioners presenting objections, most of them supported by the
report of handwriting and finger print experts who had examined the
voting records and lists of voters in 878 voting centers, out of 2,700 DIAZ, Ciscolario 190,077
which they specified in their complaints or petitions in Election Cases
78-8, 78-9, 78-10, 78-11 and 7812 in the Comelec. In regard to 501 TAMULA, Fred 180,280
voting centers, the records cf. which, consisting of the voters lists and
 LEGASPI, Bonifacio 174,396 For his part, counsel for petitioner M in G.R. No. L-49717-21 filed with
Comelec on December 19,1978 a Memorandum. To quote from the
petition:
MACAPEGES, Malamana 160,271
On December 19, 1978, the KBL, through counsel, filed a
Memorandum for the Kilusang Bagong Lipunan (KBL) Candidates on
(Pp. 11-12, Record.)
the Comelec's Resolution of December 11, 1978, a xerox copy of which
is attached hereto and made a part hereof as Annex 2, wherein they
Without loss of time, the petitioners brought the resolution of discussed the following topics: (I) Brief History of the President Case; (II)
respondent Board to the Comelec. Hearing was held on April 25, 1978, Summary of Our Position and Submission Before the Honorable
after which , the case was declared submitted for decision. However, commission; and (III) KBL's Appeal Ad Cautelam. And the fourth topic,
on August 30,1978, the Comelec issued a resolution stating inter because of its relevance to the case now before this Honorable Court,
alia that : we hereby quote for ready reference:
In order to enable the Commission to decide the appeal properly : IV
a. It will have to go deeper into the examination of the voting records OUR POSITION WITH RESPECT TO THE
and registration records and in the case of voting centers whose voting
and registration records which have not yet been submitted for the ESOLUTION OF THE HONORABLE
Commission to decide to open the ballot boxes; and
COMMISSION OF DECEMBER 11, 1978
b. To interview and get statements under oath of impartial and
disinterested persons from the area to determine whether actual We respectfully submit that the Resolution of this case by this
voting took place on April 7, 1978, as well as those of the military Honorable Commission should be limited to the precincts and
authorities in the areas affects (Page 12). Record, L-49705-09 .) municipalities involved in the KB'S Petitions in Cases Nos. 78-8 to 78-
12, on which evidence had been submitted by the parties, and on
On December 11, 1978, the Comelec required the parties "to file their which the KB submitted the reports of their handwriting-print.
respective written comments on the reports they shall periodically Furthermore, it should be limited by the appeal of the KB. For under
receive from the NBI-Comelec team of finger-print and signature the Supreme Court Resolution of May 23, 1978, original jurisdiction was
experts within the inextendible period of seven (7) days from their given to the Board, with appeal to this Honorable Commission-
receipt thereof". According to counsel for Aratuc, et al., "Petitioners Considerations of other matters beyond these would be, in our humble
submitted their various comments on the report 4, the principal gist of opinion, without jurisdiction.
which was that it would appear uniformly in all the reports submitted
by the Comelec-NBI experts that the registered voters were not the For the present, we beg to inform this Honorable Commission that we
ones who voted as shown by the fact that the thumbprints appearing stand by the reports and findings of the COMELEC/NBI experts as
in Form 1 were different from the thumbprints of the voters in Form 5. " submitted by them to the Regional Board of Canvassers and as
But the Comelec denied a motion of petitioners asking that the ballot confirmed by the said Regional Board of Canvassers in its Resolution of
boxes corresponding to the voting centers the record of which are not July 11, 1978, giving the 8 KBL candidates the majorities we have
available be opened and that a date be set when the statements of already above mentioned. The Board did more than make a summary
witnesses referred to in the August 30, 1978 resolution would be taken, scrutiny of the records' required by the Supreme Court Resolution,
on the ground that in its opinion, it was no longer necessary to proceed Guideline No. 5, of May 23, 1978. Hence, if for lack of material time we
with such opening of ballot boxes and taking of statements. cannot file any Memorandum within the non-extendible period of seven
(7) days, we would just stand by said COMELEC/NBI experts' reports to
the Regional Board, as confirmed by the Board (subject to our DIAZ, Ciscolario 187,986
appeal ad cautelam).

The COMELEC sent to the parties copies of the reports of the NBI- ARATUC, Tomatic 183,316
COMELEC experts. For lack of material time due to the voluminous
reports and number of voting centers involved, the Christmas holidays,
LEGASPI, Bonifacio 178,564
and our impression that the COMELEC will exercise only its appellate
jurisdiction, specially as per resolution of this Honorable Court of May
23, 1978 (in G.R. No. L-48097), we, the KBL, did not comment any TAMULA, Fred 177,270
more on said reports. (Pp. 5-6, Record, L-49717-21.)

On January 13, 1979, the Comelec rendered its resolution being GURO, Mangontawar 163,449
assailed in these cases, declaring the final result of the canvass to be
as follows: LOMA, Nemesio 129,450

CANDIDATES VOTES
(Page 14, Record, L-49705-
09.)
VALDEZ, Estanislao 319,514
It is alleged in the Aratuc petition that:
DIMAPORO, Abdullah 289.751
The Comelec committee grave abuse of dicretion, amounting to lack of
jurisdiction:
AMPARO, Jesus 286,180
1. In not pursuing further the examination of the registration records
and voting records from the other voting centers questioned by
BADOY, Anacleto 285,985 petitioners after it found proof of massive substitute voting in all of the
voting records and registration records examined by Comelec and NBI
BAGA, Tomas 271,473 experts;

2. In including in the canvass returns from the voting centers whose

PANGANDAMAN, Sambolayan 271,393 book of voters and voting records could not be recovered by the
Commission in spite of its repeated efforts to retrieve said records;
SINSUAT, Blah 269,905 3. In not excluding from the canvass returns from voting centers
showing a very high percentage of voting and in not considering that
ROLDAN, Ernesto 268,287 high percentage of voting, coupled with massive substitution of voters
is proof of manufacturing of election returns;
MANDANGAN, Linang 251,226 4. In denying petitioners' petition for the opening of the ballot boxes
from voting centers whose records are not available for examination to
TACAO, Sergio 229,124 determine whether or not there had been voting in said voting centers;

5. In not Identifying the ballot boxes that had no padlocks and

especially those that were found to be empty while they were shipped
to Manila pursuant to the directive of the Commission in compliance definitely Identified as not registered therein or still more than 40 % of
with the guidelines of this Honorable Court; substitute voting which was the rule followed in the later case of
Bashier/Basman (Diaz Case, November 19,1971,42 SCRA 426,432).
6. In not excluding from the canvass returns where the results of
examination of the voting records and registration records show that 3. In not applying the rule and formula in the later case of Bashier and
the thumbprints of the voters in CE Form 5 did not correspond to those Basman vs. Commission on Election (February 24, 1972, 43 SCRA 238)
of the registered voters as shown in CE Form 1; which was the one followed by the Regional Board of Canvassers, to
wit:
7. In giving more credence to the affidavits of chairmen and members
of the voting centers, municipal treasurers and other election officials in In Basman vs Comelec (L-33728, Feb. 24, 1972) the Supreme Court
the voting centers where irregularities had been committed and not upheld the Supreme Court upheld the ruling of the Commission setting
giving credence to the affidavits of watchers of petitioners; the standard of 40 % excess votes to justify the exclusion of election
returns. In line with the above ruling, the Board of Canvassers may
8. In not including among those questioned before the Board by likewise set aside election returns with 40 % substitute votes. Likewise,
petitioners those included among the returns questioned by them in where excess voting occured and the excess was such as to destroy
their Memorandum filed with the Commission on April 26, 1978, which the presumption of innocent mistake, the returns was excluded.
Memorandum was attached as Annex 'I' to their petition filed with this
Honorable Court G.R. No. L-48097 and which the Supreme Court said in (COMELEC'S Resolution, Annex I hereof, p. 22), which this Honorable
its Guidelines should be considered by the Board in the course of the Court must have meant when its Resolution of May 23, 1978 (G.R. No.
canvass (Guidelines No. 4). (Pp. 15-16, Record, Id.) 7), it referred to "massive substitution of voters.

On the other hand, the Mandangan petition submits that the Comelec 4. In examining, through the NBI/COMELEC experts, the records in
comitted the following errors: more than 878 voting centers examined by the KB experts and passed
upon by the Regional Board of Canvassers which was all that was
1. In erroneously applying the earlier case of Diaz vs. Commission on within its appellate jurisdiction is examination of more election records
Elections (November 29, 1971; 42 SCRA 426), and particularly the to make a total of 1,085 voting centers (COMELEC'S Resolution, Annex
highly restrictive criterion that when the votes obtained by the 1 hereof, p. 100), being beyond its jurisdiction and a denial of due
candidates with the highest number of votes exceed the total number process as far as the KBL, particularly the petitioner Mandangan, were
of highest possible valid votes, the COMELEC ruled to exclude from the concerned because they were informed of it only on December, 1978,
canvass the election return reflecting such rests, under which the long after the case has been submitted for decision in September,
COMELEC excluded 1,004 election returns, involving around 100,000 1978; and the statement that the KBL acquiesced to the same is
votes, 95 % of which are for KBL candidates, particularly the petitioner absolutely without foundation.
Linang Mandangan, and which rule is so patently unfair, unjust and
oppressive. 5. In excluding election returns from areas where the conditions of
peace and order were allegedly unsettled or where there was a military
2. In not holding that the real doctrine in the Diaz Case is not the total operation going on immediately before and during election and where
exclusion of election returns simply because the total number of votes the voter turn out was high (90 % to 100 %), and where the people had
exceed the total number of highest possible valid votes, but 'even if all been asked to evacuate, as a ruling without jurisdiction and in violation
the votes cast by persons Identified as registered voters were added to of due process because no evidence was at all submitted by the parties
the votes cast by persons who can not be definitely ascertained as before the Regional Board of Canvasssers. (Pp. 23-25, Record, L-47917-
registered or not, and granting, ad arguendo, that all of them voted for 21.)
respondent Daoas, still the resulting total is much below the number of
votes credited to the latter in returns for Sagada, 'and that 'of the 2,188 Now before discussing the merits of the foregoing contentions, it is
ballots cast in Sagada, nearly one-half (1,012) were cast by persons necessary to clarify first the nature and extent of the Supreme Court's
power of review in the premises. The Aratuc petition is expressly that the limited scope of certiorari, compared to a review, is well
predicated on the ground that respondent Comelec "committed grave known in remedial law.
abuse of discretion, amounting to lack of jurisdiction" in eight
specifications. On the other hand, the Mandangan petition raises pure Withal, as already stated, the legislative construction of the modified
questions of law and jurisdiction. In other words, both petitions invoked peritinent constitutional provision is to the effect that the actuations of
the Court's certiorari jurisdiction, not its appellate authority of review. the Commission are final, executory and even inappealable. While such
construction does not exclude the general certiorari jurisdiction of the
This is as it should be. While under the Constitution of 1935, "the Supreme Court which inheres in it as the final guardian of the
decisions, orders and rulings of the Commission shall be subject to Constitution, particularly, of its imperious due process mandate, it
review by the Supreme Court" (Sec. 2, first paragraph, Article X) and correspondingly narrows down the scope and extent of the inquiry the
pursuant to the Rules of Court, the petition for "certiorari or review" Court is supposed to undertake to what is strictly the office of certiorari
shall be on the ground that the Commission "has decided a question of as distinguished from review. We are of the considered opinion that the
substance not theretofore determined by the Supreme Court, or has statutory modifications are consistent with the apparent new
decided it in a way not in accord with law or the applicable decisions of constitional intent. Indeed, it is obvious that to say that actuations of
the Supreme Court" (Sec. 3. Rule 43), and such provisions refer not the Commission may be brought to the Supreme Court on certiorari
only to election contests but even to pre-proclamation proceedings, the technically connotes something less than saying that the same "shall
1973 Constitution provides somewhat differently thus: "Any decision, be subject to review by the Supreme Court", when it comes to the
order or ruling of the Commission may be brought to the Supreme measure of the Court's reviewing authority or prerogative in the
Court on certiorari by the aggrieved party within thirty days from his premises.
receipt of a copy thereof" (Section 11, Article XII c), even as it ordains
that the Commission shall "be the sole judge of all contests relating to A review includes digging into the merits and unearthing errors of
the elections, returns and qualifications of all members of the National judgment, while certiorari deals exclusively with grave abuse of
Assembly and elective provincial and city official" (Section 2(2).) discretion, which may not exist even when the decision is otherwise
erroneous. certiorari implies an indifferent disregard of the law,
Correspondingly, the ElectionCode of 1978, which is the first legislative arbitrariness and caprice, an omission to weight pertinent
constructionof the pertinent constitutional provisions, makes the considerations, a decision arrived at without rational deliberation. While
Commission also the "sole judge of all pre-proclamation controversies" the effecdts of an error of judgment may not differ from that of an
and further provides that "any of its decisions, orders or rulings (in such indiscretion, as a matter of policy, there are matters taht by their
contoversies) shall be final and executory", just as in election contests, nature ought to be left for final determination to the sound discretion of
"the decision of the Commission shall be final, and executory and certain officers or entities, reserving it to the Supreme Court to insure
inappealable." (Section 193) the faithful observance of due process only in cases of patent
arbitrariness.
It is at once evident from these constitutional and statutory
modifications that there is a definite tendency to enhance and Such, to Our mind, is the constitutional scheme relative to the
invigorate the role of the Commission on Elections as the independent Commission on Elections. Conceived by the charter as the effective
constitutinal body charged with the safeguarding of free, peaceful and instrument to preserve the sanctity of popular suffrage, endowed with
honest elections. The framers of the new Constitution must be independence and all the needed concommittant powers, it is but
presumed ot have definite knowledge of what it means to make the proper that the Court should accord the greatest measure of
decisions, orders and rulings of the Commission "subject to review by presumption of regularity to its course of action and choice of means in
the Supreme Court". And since instead of maintaining that provision performing its duties, to the end that it may achieve its designed place
intact, it ordained that the Commission's actuations be instead in the democratic fabric of our government. Ideally, its members should
"brought to the Supreme Court on certiorari", We cannot insist that be free from all suspicions of partisan inclinations, but the fact that
there was no intent to change the nature of the remedy, considering actually some of them have had stints in the arena of politics should
not, unless the contrary is shown, serve as basis for denying to its obtaining the highest number of votes exceeds the highest possible
actuations the respect and consideration that the Constitution number of valid votes cast therein should not be deemed as spurious
contemplates should be accorded to it, in the same manner that the and manufactured just because the total number of excess votes in
Supreme Court itself which from time to time may have members said voting centers were not more than 40 %. Surely, this is not the
drawn from the political ranks or even from military is at all times occasion, consider the historical antecedents relative to the highly
deemed insulated from every degree or form of external pressure and questionable manner in which elections have been bad in the past in
influence as well as improper internal motivations that could arise from the provinces herein involved, of which the Court has judicial notice as
such background or orientation. attested by its numerous decisions in cases involving practically every
such election, of the Court to move a whit back from the standards it
We hold, therefore that under the existing constitution and statutory has enunciated in those decisions.
provisions, the certiorari jurisdiction of the Court over orders, and
decisions of the Comelec is not as broad as it used to be and should be In regard to the jurisdictional and due process points raised by herein
confined to instances of grave abuse of discretion amounting to patent petitioner, it is of decisive importance to bear in mind that under
and substantial denial of due process. Accordingly, it is in this light that Section 168 of the Revised Election Code of 1978, "the Commission (on
We the opposing contentions of the parties in this cases. Elections) shall have direct control and supervision on over the board of
canvassers" and that relatedly, Section 175 of the same Code provides
THE MANDANGAN CASE that it "shall be the sole judge of all pre-proclamation controversies."
While nominally, the procedure of bringing to the Commission
Being more simple in Our view, We shall deal with the petition in G.R.
objections to the actuations of boards of canvassers has been quite
No. L-49717-21 first.
loosely referred to in certain quarters, even by the Commission and by
The errors assigned in this petition boil down to two main propositions, this Court, such as in the guidelines of May 23,1978 quoted earlier in
namely, (1) that it was an error of law on the part of respondent this opinion, as an appeal, the fact of the matter is that the authority of
Comelec to have applied to the extant circumstances hereof the ruling the Commission in reviewing such actuations does not spring from any
of this Court in Diaz vs. Comelec 42 SCRA 426 instead of that of Bashier appellate jurisdiction conferred by any specific provision of law, for
vs. Comelec 43 SCRA 238; and (2) that respondent Comelec exceeded there is none such provision anywhere in the Election Code, but from
its jurisdiction and denied due process to petitioner Mandangan in the plenary prerogative of direct control and supervision endowed to it
extending its inquiry beyond the election records of "the 878 voting by the above-quoted provisions of Section 168. And in administrative
centers examined by the KB experts and passed upon by the Regional law, it is a too well settled postulate to need any supporting citation
Board of Canvassers" and in excluding from the canvass the returns here, that a superior body or office having supervision and control over
showing 90 to 100 % voting, from voting centers where military another may do directly what the latter is supposed to do or ought to
operations were by the Army to be going on, to the extent that said have done.
voting centers had to be transferred to the poblaciones the same being
Consequently, anything said in Lucman vs. Dimaporo, 33 SCRA 387,
by evidence.
cited by petitioner, to the contrary notwithstanding, We cannot fault
Anent the first proposition, it must be made clear that the Diaz and respondent Comelec for its having extended its inquiry beyond that
Bashier rulings are not mutually exclusive of each other, each being an undertaken by the Board of Canvass On the contrary, it must be stated
outgrowth of the basic rationale of statistical improbability laid down in that Comelec correctly and commendably asserted its statutory
Lagumbay vs. Comelec and , 16 SCRA 175. Whether they be apply authority born of its envisaged constitutional duties vis-a-vis the
together or separately or which of them be applied depends on the preservation of the purity of elections and electoral processes and p in
situation on hand. In the factual milieu of the instant case as found by doing what petitioner it should not have done. Incidentally, it cannot be
the Comelec, We see no cogent reason, and petitioner has not shown said that Comelec went further than even what Aratuc et al. have
any, why returns in voting centers showing that the votes of the asked, since said complaints had impugned from the outset not only
candidate obtaining highest number of votes of the candidate the returns from the 878 voting centers examined by their experts but
all those mentioned in their complaints in the election cases filed which the seventh alleged error is addressed, We note that apparently
originally with the Comelec enumerated in the opening statements petitioners are not seriously pressing on it anymore, as evidenced by
hereof, hence respondent Comelec had that much field to work on. the complete absence of any reference thereto during the oral
argument of their counsel and the practically cavalier discussion
The same principle should apply in respect to the ruling of the thereof in the petition. In any event, We are satisfied from a careful
Commission regarding the voting centers affected by military review of the analysis by the Comelec in its resolution now before Us
operations. It took cognizance of the fact, not considered by the board that it took pains to consider as meticulously as the nature of the
of canvass, that said voting centers had been transferred to the evidence presented by both parties would permit all the contentions of
poblaciones. And, if only for purposes of pre-proclamation proceedings, petitioners relative to the weight that should be given to such evidence.
We are persuaded it did not constitute a denial of due process for the The detailed discussion of said evidence is contained in not less than
Commission to have taken into account, without the need or nineteen pages (pp. 70-89) of the resolution. In these premises, We are
presentation of evidence by the parties, a matter so publicly notorious not prepared to hold that Comelec acted wantonly and arbitrarily in
as the unsettled situation of peace and order in localities in the drawing its conclusions adverse to petitioners' position. If errors there
provinces herein involved that their may perhaps be taken judicial are in any of those conclusions, they are errors of judgment which are
notice of, the same being capable of unquestionable demonstration. not reviewable in certiorari, so long as they are founded on substantial
(See 1, Rule 129) evidence.
In this connection, We may as well perhaps, say here as later that As to eighth assigned error. the thrust of respondents, comment is that
regrettably We cannot, however, go along with the view, expressed in the results in the voting centers mentioned in this assignment of error
the dissent of our respected Chief Justice, that from the fact that some had already been canvassed at the regional canvass center in
of the voting centers had been transferred to the poblaciones there is Cotabato City. Again, We cannot say that in sustaining the board of
already sufficient basis for Us to rule that the Commission should have canvassers in this regard, Comelec gravely abused its discretion, if only
also subjected all the returns from the other voting centers of the some because in the guidelines set by this Court, what appears to have been
municipalities, if not provinces, to the same degree of scrutiny as in the referred to is, rightly or wrongly, the resumption only of the canvass,
former. The majority of the Court feels that had the Commission done which does not necessarily include the setting aside and repetition of
so, it would have fallen into the error by petitioner Mandangan about the canvass already made in Cotabato City.
denial of due process, for it is relatively unsafe to draw adverse
conclusions as to the exact conditions of peace and order in those The second and fourth assignments of error concern the voting centers
other voting centers without at list some prima facie evidence to rely the corresponding voters' record (C.E. Form 1) and record of voting,
on considering that there is no allegation, much less any showing at all (C.E. Form 5) of which have never been brought to Manila because
that the voting centers in question are so close to those excluded by they, were not available The is not clear as to how many are these
the Comelec on as to warrant the inescapable conclusion that the voting centers. According to petitioners they are 501, but in the
relevant circumstances by the Comelec as obtaining in the latter were Comelec resolution in question, the number mentioned is only 408, and
Identical to those in the former. this number is directly challenged in the petition. Under the second
assignment, it is contended that the Comelec gravely abused its
Premises considered the petition in G.R. Nos. L-49717-21 is hereby discretion in including in the canvass the election returns from these
dismiss for lack of merit. voting centers and, somewhat alternatively, it is alleged as fourth
assignment that the petitioners motion for the opening of the ballot
THE ARATUC ET AL. PETITION
boxes pertaining to said voting centers was arbitraly denied by
Of the eight errors assigned by herein petitioners earlier adverted to, respondent Comelec.
the seventh and the sight do not require any extended disquisition. As
The resolution under scrutiny explains the situation that confronted the
to the issue of whether the elections in the voting centers concerned
Commission in regard to the 408 voting centers reffered to as follows :
were held on April 7, 1978, the date designated by law, or earlier, to
The Commission had the option of excluding from the canvass the
election returns under category. By deciding to exclude, the
Commission would be summarily disenfranchising the voters
(Page 301, Record.)
registered in the voting centers affected without any basis. The
Commission could also order the inclusion in the canvass of these This assertion has not been denied by petitioners.
elections returns under the injunction of the Supreme Court that
extremes caution must be exercised in rejecting returns unless these Thus, it appears that precisely use of the absence or unavailability of
are palpably irregular. The Commission chose to give prima the CE Forms 1 and 5 corresponding to the more than 400 voting
facie validity to the election returns mentioned and uphold the votes centers concerned in our present discussion the Comelec examined
cast by the voters in those areas. The Commission held the view that the returns from said voting centers to determine their trustworthiness
the failure of some election officials to comply with Commission by scrutinizing the purported relevant data appearing on their faces,
orders(to submit the records) should not parties to such official believing that such was the next best thing that could be done to avoid
disobedience. In the case of Lino Luna vs. Rodriguez, 39 Phil. 208, the total disenfranchisement of the voters in all of them On the Other hand,
Supreme Court ruled that when voters have honestly cast their ballots, Petitioners' insist that the right thing to do was to order the opening of
the same should not be nullified because the officers appointed under the ballot boxes involved.
the law to direct the election and guard the purity of the ballot have not
In connection with such opposing contentions, Comelec's explanation
complied with their duty. (cited in Laurel on Elections, p. 24)
in its resolution is:
On page 14 of the comment of the Solicitor General, however, it is
... The commission had it seen fit to so order, could have directed the
stated that:
opening of the ballot boxes. But the Commission did not see the
At all events, the returns corresponding to these voting centers were necessity of going to such length in a that was in nature and decided
examined by the Comelec and 141 of such returns were excluded, as that there was sufficient bases for the revolution of the appeal. That the
follows: Commission has discretion to determine when the ballot boxes should
be opened is implicit in the guidelines set by the Supreme Court which
SUMMARY states that '. . . the ballot bones [which] shall be opened only upon
orders of either the respondent Board or respondent Commission, after
PROVINCE TOTAL EXCLUDED INCLUDED the need therefor has become evident ... ' (guideline No. 3;
emphasissupplied). Furthermore, the Court on June 1, 1978, amended
Lanao del Norte 30 — 30 the guidelines that the "ballot boxes for the voting centers ... need not
be taken to Manila EXCEPT those of the centers as to which the
petitioners have the right to demand that the corresponding ballot
Lanao del Sur 342 137 205 boxes be opened ... provided that the voting centers concerned shall
be specified and made known by petitioners to the Regional Board of
Maguindanao 21 1 20 Canvassers not later than June 3,1978 ... ' (Emphasis supplied). The KB,
candidates did not take advantage of the option granted them under
these guidelines.( Pp 106-107, Record.)
North Cotabato 7 1 6
Considering that Comelec, if it had wished to do so, had the facilities to
Identify on its own the voting centers without CE Forms I and 5, thereby
Sultan Kudarat 12 2 10
precluding the need for the petitioners having to specify them, and
under the circumstances the need for opening the ballot boxes in
totals ----- 412 141 271 question should have appeared to it to be quite apparent, it may be
contended that Comelec would have done greater service to the public Petitioners would give the impression by their third assignment of error
interest had it proceeded to order such opening, as it had announced it that Comelec refused to consider high percentage of voting, coupled
had thoughts of doing in its resolution of August 30, 1978. On the other with mass substitute voting, as proof that the pertinent returns had
hand, We cannot really blame the Commission too much, since the been manufactured. That such was not the case is already shown in
exacting tenor of the guidelines issued by Us left it with very little elbow the above specifications. To add more, it can be gleaned from the
room, so to speak, to use its own discretion independently of what We resolution that in t to the 1,065 voting centers in Lanao del Sur and
had ordered. What could have saved matters altogether would have Marawi City where a high percentage of voting appeared, the returns
been a timely move on the part of petitioners on or before June 3, from the 867 voting centers were excluded by the Comelec and only
1978, as contemplated in Our resolution. After all come to think of it, 198 were included a ratio of roughly 78 % to 22 %. The following
that the possible outcome of the opening of the ballot boxes would tabulation drawn from the figures in the resolution shows how the
favor the petitioners was not a certainty — the contents them could Comelec went over those returns center by center and acted on them
conceivably boomerang against them, such as, for example, if the individually:
ballots therein had been found to be regular and preponderantly for
their opponents. Having in mind that significantly, petitioners filed their 90% — 100% VOTING
motion for only on January 9, 1979, practically on the eve of the
MARAWI CITY AND LANAO DEL SUR
promulgation of the resolution, We hold that by having adhered to Our
guidelines of June 1, 1978, Comelec certainly cannot be held to be NO. OF V/C THAT V/C WITH 90% to 100%
guilty of having gravely abused its discretion, in examining and passing MUNICIPALITIES FUNCTIONED VOTING
on the returns from the voting centers reffered to in the second and
fourth assignments of error in the canvass or in denying petitioners' No. of Exclude Include
motion for the of the ballot boxes concerned. V/C d d
The first, third and sixth assignment of involve related matters and
maybe discussed together. They all deal with the inclusion in or Marawi City 151 112 107 5
exclusion from the canvass of returns on the basis of the percentage of
voting in specified voting centers and the corresponding findings of the Bacolod Grande 28 28 27 1
Comelec on the extent of substitute voting therein as indicated by the
result of either the technical examination by experts of the signatures
and thumb-prints of the voters threat. Balabagan 53 53 49 4

To begin with, petitioners' complaint that the Comelec did not examine
Balindong 22 22 15 7
and study 1,694 of the records in an the 2,775 voting centers
questioned by them is hardly accurate. To be more exact, the
Commission excluded a total of 1,267 returns coming under four Bayang 29 20 13 7
categories namely: 1,001 under the Diaz, supra, ruling, 79 because of
90-100 % turnout of voters despite military operations, 105 palpably
Binidayan 37 33 29 4
manufactured owe and 82 returns excluded by the board of canvass
on other grounds. Thus, 45.45 % of the of the petitioners were
sustained by the Comelec. In contrast, in the board of canvassers, only Buadiposo 41 10 10 0
453 returns were excluded. The board was reversed as to 6 of these, Bunton
and 821 returns were excluded by Comelec over and above those
excluded by the board. In other words, the Comelec almost doubled Bubong 24 23 21 2
the exclusions by the board.
Bumbaran 21 (All Piagapo 39 39 36 3
excluded)
Poona-Bayabao 44 44 42 2
Butig 35 33 32 1
Pualas 23 20 20 0
Calanogas 23 21 21 0
Saguiaran 36 32 21 11
Ditsaan-Ramain 42 39 38 1
Sultan 35 31 31 0
Ganassi 39 38 23 15 Gumander

Lumba Bayabao 64 63 47 16 Tamparan 24 21 15 6

Lumbatan 30 28 17 11 Taraka 31 31 31 0

Lumbayanague 37 33 28 5 Tubaran 23 19 19 0

Madalum 14 13 6 7 TOTALS: Marawi

&
Madamba 20 20 5 15
Lanao del Sur 1,218 1,065 867 198
Maguing 57 55 53 2
We are convinced, apart from presuming regularity in the performance
of its duties, that there is enough showing in the record that it did
Malabang 59 47 5 42 examine and study the returns and pertinent records corresponding to
all the 2775 voting centers subject of petitioners' complaints below. In
Marantao 79 63 41 22 one part of its resolution the Comelec states:

The Commission as earlier stated examined on its own the Books of

Marugong 37 35 32 3 Voters (Comelec Form No. 1) and the Voters Rewards Comelec Form
No. 5) to determine for itself which of these elections form needed
further examination by the COMELEC-NBI experts. The Commission,
Masiu 27 26 24 2
aware of the nature of this pre-proclamation controversy, believes that
it can decide, using common sense and perception, whether the
Pagayawan 15 13 9 4 election forms in controversy needed further examination by the
experts based on the presence or absence of patent signs of the propriety of yielding to the conclusions of respondent Commission
irregularity. (Pp. 137-138, Record.) because in his view there are strong considerations warranting farther
meticulous inquiry of what he deems to be earmarks of seemingly
In the face of this categorical assertion of fact of the Commission, the traditional faults in the manner elections are held in the municipalities
bare charge of petitioners that the records pertaining to the 1,694 and provinces herein involved, and he is joined in this pose by two
voting centers assailed by them should not create any ripple of serious other distinguished colleagues of Ours, the majority opted to ask for
doubt. As We view this point under discussion, what is more factually more time to put down at least some of the important considerations
accurate is that those records complained of were not examined with that impelled Us to see the matters in dispute the other way, just as the
the aid of experts and that Comelec passed upon the returns minority bidded for the opportunity to record their points of view. In this
concerned "using common sense and perception only." And there is manner, all concerned will perhaps have ample basis to place their
nothing basically objectionable in this. The defunct Presidential Senate respective reactions in proper perspective.
and House Electoral Tribunals examine passed upon and voided
millions of votes in several national elections without the assistance of In this connection, the majority feels it is but meet to advert to the
experts and "using" only common sense and perception". No one ever following portion of the ratiocination of respondent Board of Canvassers
raised any eyebrows about such procedure. Withal, what we discern adopted by respondent Commission with approval in its resolution
from the resolution is that Comelec preliminary screened the records under question:
and whatever it could not properly pass upon by "using common sense
and perception" it left to the experts to work on. We might disagree First of all this Board was guided by the legal doctrine that canvassing
with he Comelec as to which voting center should be excluded or boards must exercise "extreme caution" in rejecting returns and they
included, were We to go over the same records Ourselves, but still a may do so only when the returns are palpably irregular. A conclusion
case of grave abuse of discretion would not come out, considering that that an election return is obviously manufactured or false and
Comelec cannot be said to have acted whimsically or capriciously or consequently should be disregarded in the canvass must be
without any rational basis, particularly if it is considered that in many approached with extreme caution, and only upon the most convincing
respects and from the very nature of our respective functions, proof. Any plausible explanation one which is acceptable to a
becoming candor would dictate to Us to concede that the Commission reasonable man in the light of experience and of the probabilities of the
is in a better position to appreciate and assess the vital circumstances situation, should suffice to avoid outright nullification, with the resulting
closely and accurately. By and large, therefore, the first, third and sixth t of those who exercised their right of suffrage. (Anni vs. Isquierdo et at
assignments of error of the petitioners are not well taken. L-35918, Jude 28,1974; Villavon v. Comelec L-32008, August 31,1970;
Tagoranao v. Comelec 22 SCRA 978). In the absence of strong
The fifth assignment of error is in Our view moot and academic. The evidence establishing the spuriousness of the return, the basis rule of
Identification of the ballot boxes in defective condition, in some their being accorded prima facie status as bona fide reports of the
instances open and allegedly empty, is at best of secondary import results of the count of the votes for canvassing and proclamation
because, as already discussed, the records related thereto were after purposes must be applied, without prejudice to the question being tried
all examined, studied and passed upon. If at all, deeper inquiry into this on the merits with the presentation of evidence, testimonial and real in
point would be of real value in an electoral protest. the corresponding electoral protest. (Bashier vs. Comelec L-33692,
33699, 33728, 43 SCRA 238, February 24, 1972). The decisive factor is
CONCLUSION that where it has been duly de ed after investigation and examination
of the voting and registration records hat actual voting and election by
Before closing, it may not be amiss to state here that the Court had
the registered voters had taken place in the questioned voting centers,
initially agreed to dispose of the cases in a minute resolution, without
the election returns cannot be disregarded and excluded with the
prejudice to an extended or reasoned out opinion later, so that the
resting disenfranchisement of the voters, but must be accorded prima
Court's decision may be known earlier. Considering, however, that no
facie status as bona fide reports of the results of the voting for
less than the Honorable Chief Justice has expressed misgivings as to
canvassing and registration purposes. Where the grievances relied
upon is the commission of irregularities and violation of the Election
Law the proper remedy is election protest. (Anni vs. Isquierdo et al.
Supra). (P. 69, Record, L-49705-09).

The writer of this opinion has taken care to personally check on the
citations to be doubly sure they were not taken out of context,
considering that most, if not all of them arose from similar situations in
the very venues of the actual milieu of the instant cases, and We are
satisfied they do fit our chosen posture. More importantly, they actually
came from the pens of different members of the Court, already retired
or still with Us, distinguished by their perspicacity and their perceptive
prowess. In the context of the constitutional and legislative intent
expounded at the outset of this opinion and evident in the
modifications of the duties and responsibilities of the Commission on
Elections vis-a-vis the matters that have concerned Us herein,
particularly the elevation of the Commission as the "sole judge of pre-
proclamation controversies" as well as of all electoral contests, We find
the afore-quoted doctrines compelling as they reveal through the
clouds of existing jurisprudence the pole star by which the future
should be guided in delineating and circumscribing separate spheres of
action of the Commission as it functions in its equally important dual
role just indicated bearing as they do on the purity and sanctity of
elections in this country.

In conclusion, the Court finds insufficient merit in the petition to warrant

its being given due course. Petition dismissed, without pronouncement
as to costs. Justices Fernando, Antonio and Guerrero who are presently
on official missions abroad voted for such dismissal.

Fernando, Antonio, Concepcion Jr., Santos Fernandez, and Guerrero, JJ.,

concur.

Teehankee, J. took no part.

Aquino and Abad Santos, Jr., took no part.

 [ G.R. Nos. 95203-05, December 18, 1990 ] Premium Gasoline 1.7700

SENATOR ERNESTO MACEDA, PETITIONER, VS. ENERGY Regular Gasoline 1.7700

REGULATORY BOARD (ERB); MARCELO N. FERNANDO,
ALEJANDRO B. AFURONG; REX V. TANTIONGCO; AND OSCAR E. Avturbo 1.8664
ALA, IN THEIR COLLECTIVE OFFICIAL CAPACITIES AS
Kerosene 1.2400
CHAIRMAN AND MEMBERS OF THE BOARD (ERB),
RESPECTIVELY; CATALINO MACARAIG, IN HIS QUADRUPLE Diesel Oil 1.2400
OFFICIAL CAPACITIES AS EXECUTIVE SECRETARY, CHAIRMAN
OF PHILIPPINE NATIONAL OIL COMPANY, OFFICE OF ENERGY Fuel Oil 1.4900
AFFAIRS, AND WITH MANUEL ESTRELLA, IN THEIR RESPECTIVE
Feedstock 1.4900
OFFICIAL CAPACITIES AS CHAIRMAN AND PRESIDENT OF THE
PETRON CORPORATION; PILIPINAS SHELL PETROLEUM LPG 0.8487
CORPORATION, WITH CESAR BUENAVENTURA AND REY
GAMBOA AS CHAIRMAN AND PRESIDENT, RESPECTIVELY; Asphalts 2.7160
CALTEX PHILIPPINES WITH FRANCIS ABLAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER; AND THE PRESIDENTS OF Thinners 1.7121[1]
PHILIPPINE PETROLEUM DEALER'S ASSOCIATION, CALTEX It appears that on September 10, 1990, Caltex (Philippines)
DEALER'S CO., PETRON DEALER'S ASSO., SHELL DEALER'S Inc., Pilipinas Shell Petroleum Corporation,
ASSO. OF THE PHIL., LIQUEFIED PETROLEUM GAS INSTITUTE and Petron Corporation proferred separate applications with the Board
OF THE PHILS., ANY AND ALL CONCERNED GASOLINE AND for permission to increase the wholesale posted prices of petroleum
PETROL DEALERS OR STATIONS; AND SUCH OTHER PERSONS, products, as follows:
OFFICIALS, AND PARTIES, ACTING FOR AND ON THEIR
BEHALF; OR IN REPRESENTATION OF AND/OR UNDER THEIR Caltex P3.2697 per liter
AUTHORITY, RESPONDENTS.
Shell 2.0338 per liter
[G.R. NOS. 95119-21. DECEMBER 18, 1990]
Petron 2.00 per liter[2]
OLIVER O. LOZANO, PETITIONER, VS. ENERGY REGULATORY and meanwhile, for provisional authority to increase temporarily such
BOARD (ERB), PILIPINAS SHELL PETROLEUM CORPORATION, wholesale posted prices pending further proceedings.
CALTEX (PHIL.), INC., AND PETRON CORPORATION,
RESPONDENTS. On September 21, 1990, the Board, in a joint (on three applications)
Order granted provisional relief as follows:

WHEREFORE, considering the foregoing, and pursuant to Section 8 of

SARMIENTO, J.: Executive Order No. 172; this Board hereby grants herein applicants'
prayer for provisional relief and, accordingly, authorizes said applicants
The petitioners pray for injunctive relief, to stop the Energy Regulatory
a weighted average provisional increase of ONE PESO AND FORTY-
Board (Board hereinafter) from implementing its Order, dated
TWO CENTAVOS (P1.42) per liter in the wholesale posted prices of their
September 21, 1990, mandating a provisional increase in the prices of
various petroleum products enumerated below, refined and/or
petroleum and petroleum products, as follows:
marketed by them locally.[3]
PRODUCTS IN PESOS PER LITER OPSF
The petitioners submit that the above Order had been issued with SECTION 8. Authority to Grant Provisional Relief. The Board may,
grave abuse of discretion, tantamount to lack of jurisdiction, and upon the filing of an application, petition or complaint or at any stage
correctible by certiorari. thereafter and without prior hearing, on the basis or supporting papers
duly verified or authenticated, grant provional relief on motion of a
The petitioner, Senator Ernesto Maceda,[4] also submits that the same party in the case or on its own initiative, without prejudice to a final
was issued without proper notice and hearing, in violation of Section 3, decision after hearing, should the Board find that the pleadings,
paragraph (e), of Executive Order No. 172; that the Board, in decreeing together with such affidavits, documents and other evidence which
an increase, had created a new source for the Oil Price Stabilization may be submitted in support of the motion, substantially support the
Fund (OPSF), or otherwise that it had levied a tax, a power vested in provisional order: Provided, That the Board shall immediately schedule
the legislature, and/or that it had "re-collected", by an act of taxation, and conduct a hearing thereon within thirty (30) days thereafter, upon
ad valorem taxes on oil which Republic Act No. 6965 had abolished. publication and notice to all affected parties.
The petitioner, Atty. Oliver Lozano,[5] likewise argues that the Board's As the Order itself indicates, the authority for provisional increase falls
Order was issued without notice and hearing, and hence, without due within the above provision.
process of law.
There is no merit in the Senator's contention that the "applicable"
The intervenor, the Trade Union of the Philippines and Allied Services provision is Section 3, paragraph (e) of the Executive Order, which we
(TUPAS/FSM)-W.F.T.U.,[6] argues on the other hand, that the increase quote:
can not be allowed since the respondents oil companies had not
exhausted their existing oil stock which they had bought at old prices (e) Whenever the Board has determined that there is a shortage of any
and that they can not be allowed to charge new rates for stock petroleum product, or when public interest so requires, it may take
purchased at such lower rates. such steps as it may consider necessary, including the temporary
adjustment of the levels of prices of petroleum products and the
The Court set the cases (in G.R. Nos. 95203-05) for hearing on October payment to the Oil Price Stabilization Fund created under Presidential
25, 1990, in which Senator Maceda and his counsel, Atty. Alexander Decree No. 1956 by persons or entities engaged in the petroleum
Padilla, argued. The Solicitor General, on behalf of the Board, also industry of such amounts as may be determined by the Board, which
presented his arguments, together with Board Commissioner will enable the importer to recover its cost of importation.
Rex Tantiangco. Attys. Federico Alikpala, Jr.
and Joselia Poblador represented the oil firms (Petron and Caltex, What must be stressed is that while under Executive Order No. 172, a
respectively). hearing is indispensable, it does not preclude the Board from
ordering, ex parte, a provisional increase, as it did here, subject to its
The parties were thereafter required to submit their memorandums final disposition of whether or not: (1) to make it permanent; (2) to
after which, the Court considered the cases submitted for resolution. reduce or increase it further; or (3) to deny the application. Section 3,
paragraph (e) is akin to a temporary restraining order or a writ of
On November 20, 1990, the Court ordered these cases consolidated.
preliminary attachment issued by the courts, which are
On November 27, 1990, we gave due course to both petitions. given ex parte, and which are subject to the resolution of the main
case.
The Court finds no merit in these petitions.
Section 3, paragraph (e) and Section 8 do not negate each other, or
Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, otherwise, operate exclusively of the other, in that the Board may
have overlooked the provisions of Section 8 of Executive Order No. resort to one but not to both at the same time. Section 3(e) outlines
172, which we quote: the jurisdiction of the Board and the grounds for which it may decree a
price adjustment, subject to the requirements of notice and
hearing. Pending that, however, it may order, under Section 8, an
authority to increase provisionally, without need of a hearing, subject to changes brought about by exchange rate adjustments and/or changes
the final outcome of the proceeding. The Board, of course, is not in world market prices of crude oil and imported petroleum
prevented from conducting a hearing on the grant of provisional products. The Oil Price Stabilization Fund (OPSF) may be sourced from
authority--which is of course, the better procedure--however, it can not any of the following:
be stigmatized later if it failed to conduct one. As we held in Citizens'
Alliance for Consumer Protection v. Energy Regulatory Board. a) Any increase in the tax collection from ad valorem tax or customs
[7] duty imposed on petroleum products subject to tax under this Decree
arising form exchange rate adjustment, as may be determined by the
In the light of Section 8 quoted above, public respondent Board need Minister of Finance in consultation with the Board of Energy;
not even have conducted formal hearings in these cases prior to
issuance of its Order of 14 August 1987 granting a provisional increase b) Any increase in the tax collection as a result of the lifting of tax
of prices. The Board, upon its own discretion and on the basis of exemptions of government corporations, as may be determined by the
documents and evidence submitted by private respondents, could Minister of Finance in consultation with the Board of Energy;
have issued an order granting provisional relief immediately upon filing
c) Any additional amount to be imposed on petroleum products to
by private respondents of their respective applications. In this respect,
augment the resources of the Fund through an appropriate Order that
the court considers the evidence presented by private respondents in
may be issued by the Board of Energy requiring payment by persons
support of their applications--i.e., evidence showing that importation
or companies engaged in the business of importing, manufacturing
costs of petroleum products had gone up; that the peso had
and/or marketing petroleum products;
depreciated in value; and that the Oil Price Stabilization Fund (OPSF)
had by then been depleted--as substantial and hence constitutive of at d) Any resulting peso cost differentials in case the actual peso costs
least prima facie basis for issuance by the Board of a provisional relief paid by oil companies in the importation of crude oil and petroleum
order granting an increase in the prices of petroleum products.[8] products is less than the peso costs computed using the reference
foreign exchange rates as fixed by the Board of Energy.
We do not therefore find the challenged action of the Board to have
been done in violation of the due process clause. The petitioners may Anent claims that oil companies can not charge new prices for oil
contest however, the applications at the hearings proper. purchased at old rates, suffice it to say that the increase in question
was not prompted alone by the increase in world oil prices arising from
Senator Maceda's attack on the Order in question on premises that it
tension in the Persian Gulf. What the Court gathers from the pleadings
constitutes an act of taxation or that it negates the effects of Republic
as well as events of which it takes judicial notice, is that: (1) as of June
Act No. 6965, can not prosper. Republic Act No. 6965 operated to
30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the
lower taxes on petroleum and petroleum products by imposing specific
exchange rate has fallen to P28.00 to $1.00; (3) the country's balance
taxes rather than ad valorem taxes thereon; it is, not, however, an
of payments is expected to reach $1 Billion; (4) our trade deficit is at
insurance against an "oil hike", whenever warranted, or is it a price
$2.855 Billion as of the first nine months of the year.
control mechanism on petroleum and petroleum products. The statute
had possibly forestalled a larger hike, but it operated no more. Evidently, authorities have been unable to collect enough taxes
necessary to replenish the OPSF as provided by Presidential Decree No.
The Board Order authorizing the proceeds generated by the increase to
1956, and hence, there was no available alternative but to hike existing
be deposited to the OPSF is not an act of taxation. It is authorized by
prices.
Presidential Decree No. 1956, as amended by Executive Order No. 137,
as follows: The OPSF, as the Court held in the aforecited CACP cases, must not be
understood to be a funding designed to guarantee oil firms profits
SECTION 8. There is hereby created a Trust Account in the books of
although as a subsidy, or a trust account, the Court has no doubt that
accounts of the Ministry of Energy to be designated as Oil Price
oil firms make money from it. As we held there, however, the OPSF
Stabilization Fund (OPSF) for the purpose of minimizing frequent price
was established precisely to protect the consuming public from the Melencio-Herrera, no part; related by affinity to the Chairman, ERB.
erratic movement of oil prices and to preclude oil companies from Padilla, JJ., no part.
taking advantage of fluctuations occurring every so often. As a buffer Paras, J., I dissent (separate op.)
mechanism, it stabilizes domestic prices by bringing about a uniform Feliciano, J., on leave.
rate rather than leaving pricing to the caprices of the market.

In all likelihood, therefore, an oil hike would have probably been

imminent, with or without trouble in the Gulf, although trouble would
have probably aggravated it.

The Court is not to be understood as having prejudged the justness of

an oil price increase amid the above premises. What the Court is
saying is that it thinks that based thereon, the Government has made
out a prima facie case to justify the provisional increase in
question. Let the Court therefore make clear that these findings are
not final; the burden, however, is on the petitioners' shoulders to
demonstrate the fact that the present economic picture does not
warrant a permanent increase.

There is no doubt that the increase in oil prices in question (not to

mention another one impending, which the Court undertands has
been under consideration by policy-makers) spells hard(er) times for
the Filipino people. The Court can not, however, debate the wisdom of
policy or the logic behind it (unless it is otherwise arbitrary), not
because the Court agrees with policy, but because the Court is not the
suitable forum for debate. It is a question best judged by the political
leadership which after all, determines policy, and ultimately, by the
electorate, that stands to be better for it or worse off, either in the short
or long run.

At this point, the Court shares the indignation of the people over the
conspiracy of events and regrets its own powerlessness, if by this
Decision it has been powerless. The constitutional scheme of things
has simply left it with no choice.

In fine, we find no grave abuse of discretion committed by the

respondent Board in issuing its questioned Order.

WHEREFORE, these petitions are DISMISSED. No costs.

SO ORDERED.

Narvasa, Gutirrez, Jr., Cruz, Gancayco, Bidin, Griño-

Aquino, Medialdea, and Regalado, JJ., concur.
Fernan, C.J., no parrt, formerly counsel for Cebu Shell Corp.
 G.R. No. 135945 March 7, 2001 On October 18, 1988, the PMS received an application from petitioner
UNITED RESIDENTS OF DOMINICAN HILL, INC. (UNITED, for brevity), a
THE UNITED RESIDENTS OF DOMINICAN HILL, INC., community housing association composed of non-real property owning
represented by its President RODRIGO S. MACARIO, residents of Baguio City, to acquire a portion of the Dominican Hills
SR., petitioner, property. On February 2, 1990, PMS Secretary Elfren Cruz referred the
vs. application to the HOME INSURANCE GUARANTY CORPORATION
COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, (HIGC). HIGC consented to act as originator for UNITED. 3 Accordingly,
represented by its Commissioner, RUFINO V. MIJARES; MARIO on May 9, 1990, a Memorandum of Agreement was signed by and
PADILAN, PONCIANO BASILAN, HIPOLITO ESLAVA, WILLIAM among the PMS, the HIGC, and UNITED. The Memorandum of
LUMPISA, PACITO MOISES, DIONISIO ANAS, NOLI DANGLA, Agreement called for the PMS to sell the Dominican Hills property to
NAPOLEON BALESTEROS, ELSIE MOISES, SEBIO LACWASAN, HIGC which would, in turn, sell the same to UNITED. The parties agreed
BEN FLORES, DOMINGO CANUTAB, MARCELINO GABRIANO, on a selling price of P75.00 per square meter.
TINA TARNATE, ANDREW ABRAZADO, DANNY LEDDA,
FERNANDO DAYAO, JONATHAN DE LA PENA, JERRY PASSION, Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to
PETER AGUINSOD, and LOLITA DURAN, respondents. UNITED. The deed of conditional sale provided that ten (10) per cent of
the purchase price would be paid upon signing, with the balance to be
DE LEON, JR., J.: amortized within one year from its date of execution. After UNITED
made its final payment on January 31, 1992, HIGC executed a Deed of
Before us is a petition for prohibition and declaratory relief seeking the
Absolute Sale dated July 1, 1992.
annulment of a status quo order1 dated September 29, 1998 issued by
the public respondent Commission on the Settlement of Land Problems Petitioner alleges that sometime in 1993, private respondents entered
(COSLAP, for brevity) in COSLAP Case No. 98-253. the Dominican Hills property allocated to UNITED and constructed
houses thereon. Petitioner was able to secure a demolition order from
The facts are:
the city mayor.4
The property being fought over by the parties is a 10.36-hectare
Unable to stop the razing of their houses, private respondents, under
property in Baguio City called Dominican Hills, formerly registered in
the name DOMINICAN HILL BAGUIO RESIDENTS HOMELESS
the name of Diplomat Hills, Inc. It appeared that the property was
ASSOCIATION (ASSOCIATION, for brevity) filed an action5 for injunction
mortgaged to the United Coconut Planters Bank (UCPB) which
docketed as Civil Case No. 3316-R, in the Regional Trial Court of Baguio
eventually foreclosed the mortgage thereon and acquired the same as
City, Branch 4. Private respondents were able to obtain a temporary
highest bidder. On April 11, 1983, it was donated to the Republic of the
restraining order but their prayer for a writ of preliminary injunction was
Philippines by UCPB through its President, Eduardo Cojuangco. The
later denied in an Order dated March 18, 1996.6
deed of donation stipulated that Dominican Hills would be utilized for
the "priority programs, projects, activities in human settlements and While Civil Case No. 3316-R was pending, the ASSOCIATION, this time
economic development and governmental purposes" of the Ministry of represented by the Land Reform Beneficiaries Association, Inc.
Human Settlements. (BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before Branch
61 of the same court. The complaint 7 prayed for damages, injunction
On December 12, 1986, the then President Corazon C. Aquino issued
and annulment of the said Memorandum of Agreement between
Executive Order No. 85 abolishing the Office of Media Affairs and the
UNITED and HIGC. Upon motion of UNITED, the trial court in an Order
Ministry of Human Settlements. All agencies under the latter's
dated May 27, 1996 dismissed Civil Case No. 3382-R. 8 The said Order
supervision as well as all its assets, programs and projects, were
of dismissal is currently on appeal with the Court of Appeals.9
transferred to the Presidential Management Staff (PMS).2
Demolition Order No. 1-96 was subsequently implemented by the
Office of the City Mayor and the City Engineer's Office of Baguio City.
However, petitioner avers that private respondents returned and The COSLAP was created by virtue of Executive Order No. 561 dated
reconstructed the demolished structures. September 21, 1979. Its forerunner was the Presidential Action
Committee on Land Problems (PACLAP) founded on July 31, 1970 by
To forestall the re-implementation of the demolition order, private virtue of Executive Order No. 251. As originally conceived, the
respondents filed on September 29, 1998 a petition10 for annulment of committee was tasked "to expedite and coordinate the investigation
contracts with prayer for a temporary restraining order, docketed as and resolution of land disputes, streamline and shorten administrative
COSLAP Case No. 98-253, in the Commission on the Settlement of procedures, adopt bold and decisive measures to solve land problems,
Land Problems (COSLAP) against petitioner, HIGC, PMS, the City and/or recommend other solutions." It was given the power to issue
Engineer's Office, the City Mayor, as well as the Register of Deeds of subpoenas duces tecum and ad testificandum and to call upon any
Baguio City. On the very same day, public respondent COSLAP issued department, office, agency or instrumentality of the government,
the contested order requiring the parties to maintain the status quo. including government owned or controlled corporations and local
government units, for assistance in the performance of its functions. At
Without filing a motion for reconsideration from the aforesaid status
the time, the PACLAP did not exercise quasi-judicial functions.
quo order, petitioner filed the instant petition questioning the
jurisdiction of the COSLAP. On March 19, 1971, Executive Order No. 305 was issued reconstituting
the PACLAP.13 The committee was given exclusive jurisdiction over all
The issues we are called upon to resolve are:
cases involving public lands and other lands of the public domain and
1 accordingly was tasked:

IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS 1. To investigate, coordinate, and resolve expeditiously land disputes,
[COSLAP] CREATED UNDER EXECUTIVE ORDER NO. 561 BY THE streamline administrative procedures, and in general, to adopt bold
OFFICE OF THE PHILIPPINES [sic] EMPOWERED TO HEAR AND TRY A and decisive measures to solve problems involving public lands and
PETITION FOR ANNULMENT OF CONTRACTS WITH PRAYER FOR A lands of the public domain;
TEMPORARY RESTRAINING ORDER AND THUS, ARROGATE UNTO
2. To coordinate and integrate the activities of all government agencies
ITSELF THE POWER TO ISSUE STATUS QUO ORDER AND CONDUCT A
having to do with public lands or lands of the public domain;
HEARING THEREOF [sic]?
3. To study and review present policies as embodied in land laws and
2
administrative rules and regulations, in relation to the needs for land of
ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND the agro-industrial sector and small farmers, with the end in view to
PROBLEMS [COSLAP] HAS JURISDICTION ON THE MATTER, IS IT evolving and recommending new laws and policies and establishing
EXEMPTED FROM OBSERVING A CLEAR CASE OF FORUM SHOPPING priorities in the grant of public land, and the simplification of processing
ON THE PART OF THE PRIVATE RESPONDENTS? of land applications in order to relieve the small man from the
complexities of existing laws, rules and regulations;
To the extent that the instant case is denominated as one for
declaratory relief, we initially clarify that we do not possess original 4. To evolve and implement a system for the speedy investigation and
jurisdiction to entertain such petitions.11 Such is vested in the Regional resolution of land disputes;
Trial Courts.12 Accordingly, we shall limit our review to ascertaining if
5. To receive all complaints of settlers and small farmers, involving
the proceedings before public respondent COSLAP are without or in
public lands or other lands of the public domain;
excess, of its jurisdiction. In this wise, a recounting of the history of the
COSLAP may provide useful insights into the extent of its powers and 6. To look into the conflicts between Christians and non-Christians,
functions. between corporations and small settlers and farmers; cause the
speedy settlement of such conflicts in accordance with priorities or 2. Refer and follow-up for immediate action by the agency having
policies established by the Committee; and appropriate jurisdiction any land problem or dispute referred to the
Commission: Provided, that the Commission may, in the following
7. To perform such other functions as may be assigned to it by the cases, assume jurisdiction and resolve land problems or disputes which
President. are critical and explosive in nature considering, for instance, the large
number of the parties involved, the presence or emergence of social
Thereafter, the PACLAP was reorganized pursuant to Presidential
tension or unrest, or other similar critical situations requiring immediate
Decree No. 832 dated November 27, 1975. 14 Its jurisdiction was
action:
revised thus:
(a) Between occupants/squatters and pasture lease agreement holders
xxx xxx xxx
or timber concessionaires;
2. Refer for immediate action any land problem or dispute brought to
(b) Between occupants/squatters and government reservation
the attention of the PACLAP, to any member agency having jurisdiction
grantees;
thereof: Provided, that when the Executive Committee decides to act
on a case, its resolution, order or decision thereon, shall have the force (c) Between occupants/squatters and public land claimants or
and effect of a regular administrative resolution, order or decision, and applicants;
shall be binding upon the parties therein involved and upon the
member agency having jurisdiction thereof; (d) Petitions for classification, release and/or subdivision of lands of the
public domain; and
xxx xxx xxx
(e) Other similar land problems of grave urgency and magnitude.
Notably, the said Presidential Decree No. 832 did not contain any
provision for judicial review of the resolutions, orders or decisions of the The Commission shall promulgate such rules of procedure as will insure
PACLAP. expeditious resolution and action on the above cases. The resolution,
order or decision of the Commission on any of the foregoing cases shall
On September 21, 1979, the PACLAP was abolished and its functions have the force and effect of a regular administrative resolution, order
transferred to the present Commission on the Settlement of Land or decision and shall be binding upon the parties therein and upon the
Problems by virtue of Executive Order No. 561. This reorganization, agency having jurisdiction over the same. Said resolution, order or
effected in line with Presidential Decree No. 1416, brought the COSLAP decision shall become final and executory within thirty (30) days from
directly under the Office of the President.15 It was only at this time that its promulgation and shall be appealable by certiorari only to the
a provision for judicial review was made from resolutions, orders or Supreme Court.
decisions of the said agency, as embodied in section 3(2) thereof, to
wit: xxx xxx xxx

Powers and functions. — The Commission shall have the following In the performance of its functions and discharge of its duties, the
powers and functions: Commission is authorized, through the Commission, to
issue subpoena and subpoena duces tecum for the appearance of
1. Coordinate the activities, particularly the investigation work, of the witnesses and the production of records, books and documents before
various government offices and agencies involved in the settlement of it. It may also call upon any ministry, office, agency or instrumentality
land problems or disputes, and streamline administrative procedures to of the National Government, including government-owned or controlled
relieve small settlers and landholders and members of cultural corporations, and local governments for assistance. This authority is
minorities of the expense and time-consuming delay attendant to the likewise, conferred upon the provincial offices as may be established
solution of such problems or disputes; pursuant to Section 5 of this Executive Order.
In Bañaga v. Commission on the Settlement of Land Problems,16 we and effect of a regular administrative resolution, order or decision."
characterized the COSLAP's jurisdiction as being general in nature, as The qualification places an unmistakable emphasis on
follows: the administrative character of the COSLAP's determination, amplified
by the statement that such resolutions, orders or decisions "shall be
Petitioners also contend in their petition that the COSLAP itself has no binding upon the parties therein and upon the agency having
jurisdiction to resolve the protest and counter-protest of the parties jurisdiction over the same." An agency is defined by statute as "any of
because its power to resolve land problems is confined to those cases the various units of the Government, including a department, bureau,
"which are critical and explosive in nature." office, instrumentality, or government-owned or controlled corporation,
or a local government or a distinct unit therein." 18 A department, on the
This contention is devoid of merit. It is true that Executive Order No.
other hand, "refers to an executive department created by
561 provides that the COSLAP may take cognizance of cases which are
law."19 Whereas, a bureau is understood to refer "to any principal
"critical and explosive in nature considering, for instance, the large
subdivision of any department."20 In turn, an office "refers, within the
number of parties involved, the presence or emergence of social
framework of governmental organization, to any major functional unit
tension or unrest, or other similar critical situations requiring immediate
of a department or bureau including regional offices. It may also refer
action." However, the use of the word "may" does not mean that the
to any position held or occupied by individual persons, whose functions
COSLAP's jurisdiction is merely confined to the above mentioned cases.
are defined by law or regulation."21 An instrumentality is deemed to
The provisions of the said Executive Order are clear that the COSLAP
refer "to any agency of the National Government, not integrated within
was created as a means of providing a more effective mechanism for
the department framework, vested with special functions or jurisdiction
the expeditious settlement of land problems in general, which are
by law, endowed with some if not all corporate powers, administering
frequently the source of conflicts among settlers, landowners and
special funds and enjoying operational autonomy, usually through a
cultural minorities. Besides, the COSLAP merely took over from the
charter. This term includes regulatory agencies, chartered institutions
abolished PACLAP whose functions, including its jurisdiction, power and
and government-owned or controlled corporations."22 Applying the
authority to act on, decide and resolve land disputes (Sec. 2, P.D. No.
principle in statutory construction of ejusdem generis, i.e., "where
832) were all assumed by it. The said Executive Order No. 561
general words follow an enumeration or persons or things, by words of
containing said provision, being enacted only on September 21, 1979,
a particular and specific meaning, such general words are not to be
cannot affect the exercise of jurisdiction of the PACLAP Provincial
construed in their widest extent, but are to be held as applying only to
Committee of Koronadal on September 29, 1978. Neither can it affect
persons or things of the same kind or class as those specifically
the decision of the COSLAP which merely affirmed said exercise of
mentioned,"23 section 3(2) of Executive Order 561 patently indicates
jurisdiction.
that the COSLAP's dispositions are binding
Given the facts of the case, it is our view that the COSLAP is not on administrative or executive agencies. The history of the COSLAP
justified in assuming jurisdiction over the controversy. As matters itself bolsters this view. Prior enactments enumerated its member
stand, it is not the judiciary's place to question the wisdom behind a agencies among which it was to exercise a coordinating function.
law;17 our task is to interpret the law. We feel compelled to observe,
The COSLAP discharges quasi-judicial functions:
though, that by reason of the ambiguous terminology employed in
Executive Order No. 561, the power to assume jurisdiction granted to "Quasi-judicial function" is a term which applies to the actions,
the COSLAP provides an ideal breeding ground for forum shopping, as discretion, etc. of public administrative officers or bodies, who are
we shall explain subsequently. Suffice it to state at this stage that the required to investigate facts, or ascertain the existence of facts, hold
COSLAP may not assume jurisdiction over cases which are already hearings, and draw conclusions from them, as a basis for their official
pending in the regular courts. action and to exercise discretion of a judicial nature."24
The reason is simple. Section 3(2) of Executive Order 561 speaks of However, it does not depart from its basic nature as an administrative
any resolution, order or decision of the COSLAP as having the "force agency, albeit one that exercises quasi-judicial functions. Still,
administrative agencies are not considered courts; they are neither in the Supreme Court, the Court of Appeals, or any other tribunal or
part of the judicial system nor are they deemed judicial tribunals.25 The agency; (b) to the best of his knowledge, no such action or proceedings
doctrine of separation of powers observed in our system of is pending in the Supreme Court, the Court of Appeals, or any other
government reposes the three (3) great powers into its three (3) tribunal or agency; (c) if there is any such action or proceeding which is
branches — the legislative, the executive, and the judiciary — each either pending or may have been terminated, he must state the status
department being co-equal and coordinate, and supreme in its own thereof; and (d) if he should thereafter learn that a similar action or
sphere. Accordingly, the executive department may not, by its own fiat, proceeding has been filed or is pending before the Supreme Court, the
impose the judgment of one of its own agencies, upon the judiciary. Court of Appeals or any other tribunal or agency, he undertakes to
Indeed, under the expanded jurisdiction of the Supreme Court, it is report that fact within five (5) days therefrom to the court or agency
empowered "to determine whether or not there has been grave abuse wherein the original pleading and sworn certification contemplated
of discretion amounting to lack of or excess of jurisdiction on the part of herein have been filed.
any branch or instrumentality of the Government."26
The complaint and other initiatory pleadings referred to and subject of
There is an equally persuasive reason to grant the petition. As an this Circular are the original civil complaint, counterclaim, cross-claim,
additional ground for the annulment of the assailed status quo order of third (fourth, etc.) party complaint, or complaint-in-intervention,
COSLAP, UNITED accuses private respondents of engaging in forum petition, or application wherein a party asserts his claim for relief.
shopping. Forum shopping exists when a party "repetitively avail[s] of
several judicial remedies in different courts, simultaneously or 2. Any violation of this Circular shall be a cause for the dismissal of the
successively, all substantially founded on the same transactions and complaint, petition, application or other initiatory pleading, upon
the same essential facts and circumstances, and all raising motion and after hearing. However, any clearly willful and deliberate
substantially the same issues either pending in, or already resolved forum shopping by any other party and his counsel through the filing of
adversely by some other court."27 In this connection, Supreme Court multiple complaints or other initiatory pleadings to obtain favorable
Administrative Circular No. 04-94 dated February 8, 1994 provides: action shall be a ground for the summary dismissal thereof and shall
constitute contempt of court. Furthermore, the submission of a false
Revised Circular No. 28-91, dated February 8, 1994, applies to and certification or non-compliance with the undertakings therein, as
governs the filing of petitions in the Supreme Court and the Court of provided in Paragraph 1 hereof, shall constitute indirect contempt of
Appeals and is intended to prevent the multiple filing of petitions or court, without prejudice to disciplinary proceedings against the counsel
complaints involving the same issues in other tribunals or agencies as a and the filing of a criminal action against the part. [emphasis supplied]
form of forum shopping.
xxx xxx xxx
Complementary thereto and for the same purpose, the following
requirements, in addition to those in pertinent provisions of the Rules of The said Administrative Circular's use of the auxiliary verb "shall"
Court and existing circulars, shall be strictly complied with in the filing imports "an imperative obligation . . . inconsistent with the idea of
of complaints, petitions, applications or other initiatory pleadings in all discretion."28 Hence, compliance therewith is mandatory.29
courts and agencies other than the Supreme Court and the Court of
It bears stressing that there is a material distinction between the
Appeals and shall be subject to the sanctions provided hereunder.
requirement of submission of the certification against forum shopping
1. The plaintiff, petitioner, applicant or principal part seeking relief in from the undertakings stated therein. Accordingly,
the complaint, petition, application or other initiatory
x x x [f]ailure to comply with this requirement cannot be excused by
pleading shall certify under oath in such original pleading, or in a sworn
the fact that plaintiff is not guilty of forum shopping. The Court of
certification annexed thereto and simultaneously filed therewith, to the
Appeals, therefore, erred in concluding that Administrative Circular No.
truth of the following facts and undertakings: (a) he has not theretofore
04-94 did not apply to private respondent's case merely because her
commenced any other action or proceeding involving the same issues
complaint was not based on petitioner's cause of action. The Circular
applies to any complaint, petition, application, or other initiatory 3316-R. In fact, the opposite assurance was given, that there was no
pleading, regardless of whether the party filing it has actually action pending before any other tribunal. Another transgression is that
committed forum shopping. Every party filing a complaint or any other both branches of the trial court do not appear to have been notified of
initiatory pleading is required to swear under oath that he has not the filing of the subject COSLAP Case No. 98-253.
committed nor will he commit forum shopping. Otherwise, we would
have an absurd situation where the parties themselves would be the It is evident from the foregoing facts that private respondents, in filing
judge of whether their actions constitute a violation of said Circular, and multiple petitions, have mocked our attempts to eradicate forum
compliance therewith would depend on their belief that they might or shopping and have thereby upset the orderly administration of justice.
might not have violated the requirement. Such interpretation of the They sought recourse from three (3) different tribunals in order to
requirement would defeat the very purpose of Circular 04-94. obtain the writ of injunction they so desperately desired. "The willful
attempt by private respondents to obtain a preliminary injunction in
Indeed, compliance with the certification against forum shopping is another court after it failed to acquire the same from the original court
separate from, and independent of, the avoidance of forum shopping constitutes grave abuse of the judicial process."32
itself. Thus, there is a difference in the treatment — in terms of
imposable sanctions — between failure to comply with the certification In this connection, we expounded on forum shopping in Viva
requirement and violation of the prohibition against forum shopping. Productions, Inc. v. Court of Appeals33 that:
The former is merely a cause for the dismissal, without prejudice, of the
Private respondent's intention to engage in forum shopping becomes
complaint or initiatory pleading, while the latter is a ground for
manifest with undoubted clarity upon the following considerations.
summary dismissal thereof and constitutes direct contempt.30
Notably, if not only to ensure the issuance of an injunctive relief, the
A scrutiny of the pleadings filed before the trial courts and the COSLAP significance of the action for damages before the Makati court would
sufficiently establishes private respondents' propensity for forum be nil. What damages against private respondent would there be to
shopping. We lay the premise that the certification against forum speak about if the Parañaque court already enjoins the performance of
shopping must be executed by the plaintiff or principal party, and not the very same act complained of in the Makati court? Evidently, the
by his counsel.31 Hence, one can deduce that the certification is a action for damages is premature if not for the preliminary injunctive
peculiar personal representation on the part of the principal party, an relief sought. Thus, we find grave abuse of discretion on the part of
assurance given to the court or other tribunal that there are no other the Makati court, being a mere co-equal of the Parañaque court, in not
pending cases involving basically the same parties, issues and causes giving due deference to the latter before which the issue of the alleged
of action. In the case at bar, private respondents' litany of omissions violation of the sub-judice rule had already been raised and submitted.
range from failing to submit the required certification against forum In such instance, the Makati court, if it was wary of dismissing the
shopping to filing a false certification, and then to forum shopping itself. action outrightly under Administrative Circular No. 04-94, should have,
First, the petition filed before the COSLAP conspicuously lacked a at least, ordered the consolidation of its case with that of
certification against forum shopping. Second, it does not appear from the Parañaque court, which had first acquired jurisdiction over the
the record that the ASSOCIATION informed Branch 4 of the Regional related case x x x, or it should have suspended the proceedings until
Trial Court of Baguio City before which Civil Case No. 3316-R was the Parañaque court may have ruled on the issue x x x.
pending, that another action, Civil Case No. 3382-R, was filed before
xxx xxx xxx
Branch 61 of the same court. Another group of homeless residents of
Dominican Hill, the LAND REFORM BENEFICIARIES ASSOCIATION, INC. Thus, while we might admit that the causes of action before the Makati
initiated the latter case. The aforesaid plaintiff, however, does not court and the Parañaque court are distinct, and that private
hesitate to admit that it filed the second case in representation of respondent cannot seek civil indemnity in the contempt proceedings,
private respondent, as one of its affiliates. In the same manner, the the same being in the nature of criminal contempt, we nonetheless
certification against forum shopping accompanying the complaint in cannot ignore private respondent's intention of seeking exactly
Civil Case No. 3382-R does not mention the pendency of Civil Case No. identical reliefs when it sought the preliminary relief of injunction in
the Makati court. As earlier indicated, had private respondent been Agreement executed by and among UNITED, the PMS, and HIGC as
completely in good faith there would have been no hindrance in filing well as the transfer certificates of title accordingly issued to petitioner.
the action for damages with the regional trial court of Parañaque and All three (3) cases sought to enjoin the demolition of private
having it consolidated with the contempt proceedings before Branch respondents' houses.
274, so that the same issue on the alleged violation of the sub
judice rule will not have to be passed upon twice, and there would be It has been held that forum shopping is evident where the elements
no possibility of having two courts of concurrent jurisdiction making two of litis pendentia or res judicata are present. Private respondents'
conflicting resolutions. subterfuge comes to naught, for the effects of res judicata or litis
pendentia may not be avoided by varying the designation of the
Yet from another angle, it may be said that when the Parañaque parties or changing the form of the action or adopting a different mode
court acquired jurisdiction over the said issue, it excluded all other of presenting one's case.35
courts of concurrent jurisdiction from acquiring jurisdiction over the
same. To hold otherwise would be to risk instances where courts of In view of the foregoing, all that remains to be done is the imposition of
concurrent jurisdiction might have conflicting orders. This will create the proper penalty. A party's willful and deliberate act of forum
havoc and result in an extremely disordered administration of justice. shopping is punishable by summary dismissal of the actions filed. 36 The
Therefore, even on the assumption that the Makati court may acquire summary dismissal of both COSLAP Case No. 98-253 and Civil Case No.
jurisdiction over the subject matter of the action for damages, without 3316-R is therefore warranted under the premises. We shall refrain
prejudice to the application of Administrative Circular No. 04-94, it from making any pronouncement on Civil Case No. 3382-R, the
cannot nonetheless acquire jurisdiction over the issue of whether or not dismissal of which was elevated on appeal to the Court of Appeals
petitioner has violated the sub judice rule. At best, the Makati where it is still pending.
court may hear the case only with respect to the alleged injury suffered
WHEREFORE, the petition is hereby GRANTED. The status quo order
by private respondent after the Parañaque court shall have ruled
dated September 29, 1998 issued in COSLAP Case No. 98-253 by
favorably on the said issue.
respondent Commission On The Settlement Of Land Problems
We also noted several indications of private respondents' bad faith. The (COSLAP) is hereby SET ASIDE; and the petition filed in COSLAP Case
complaint filed in Civil Case No. 3316-R was prepared by the No. 98-253 and the complaint in Civil Case No. 3316-R are hereby
ASSOCIATION's counsel, Atty. Conrado Villamor Catral, Jr. whereas the DISMISSED for lack of jurisdiction and forum shopping. Costs against
complaint filed in Civil Case No. 3382-R was signed by a different private respondents.
lawyer, Atty. Thomas S. Tayengco. With regard to the petition filed with
SO ORDERED.
the COSLAP, the same was signed by private respondents individually.
As to the latter case, we noted that the petition itself could not have Bellosillo, Mendoza, Quisumbing, and Buena, JJ ., concur.
been prepared by ordinary laymen, inasmuch as it exhibits familiarity
with statutory provisions and legal concepts, and is written in a
lawyerly style.

In the same manner, the plaintiffs in the three (3) different cases were
made to appear as dissimilar: in Civil Case No. 3316-R, the plaintiff was
ASSOCIATION of which private respondent Mario Padilan was head,
while the plaintiff in Civil Case No. 3382-R was the BENEFICIARIES.
Before the COSLAP, private respondents themselves were the
petitioners, led again by Padilan.34 Private respondents also attempted
to vary their causes of action: in Civil Case No. 3382-R and COSLAP
Case No. 98-253, they seek the annulment of the Memorandum of
 G.R. No. 166052 August 29, 2007 WHEREAS, one of the Good Government reforms of the Arroyo
administration is rationalizing the bureaucracy by consolidating related
ANAK MINDANAO PARTY-LIST GROUP, as represented by Rep. functions into one department;
Mujiv S. Hataman, and MAMALO DESCENDANTS
ORGANIZATION, INC., as represented by its Chairman Romy WHEREAS, under law and jurisprudence, the President of the
Pardi, Petitioners, Philippines has broad powers to reorganize the offices under her
vs. supervision and control;
THE EXECUTIVE SECRETARY, THE HON. EDUARDO R. ERMITA,
and THE SECRETARY OF AGRARIAN/LAND REFORM, THE HON. NOW[,] THEREFORE[,] I, Gloria Macapagal-Arroyo, by the powers
RENE C. VILLA, Respondents. vested in me as President of the Republic of the Philippines, do hereby
order:
DECISION
SECTION 1. The Department of Agrarian Reform is hereby transformed
CARPIO MORALES, J.: into the Department of Land Reform. It shall be responsible for all land
reform in the country, including agrarian reform, urban land reform,
Petitioners Anak Mindanao Party-List Group (AMIN) and Mamalo and ancestral domain reform.
Descendants Organization, Inc. (MDOI) assail the constitutionality of
Executive Order (E.O.) Nos. 364 and 379, both issued in 2004, via the SECTION 2. The PCUP is hereby placed under the supervision and
present Petition for Certiorari and Prohibition with prayer for injunctive control of the Department of Land Reform. The Chairman of the PCUP
relief. shall be ex-officio Undersecretary of the Department of Land Reform
for Urban Land Reform.
E.O. No. 364, which President Gloria Macapagal-Arroyo issued on
September 27, 2004, reads: SECTION 3. The NCIP is hereby placed under the supervision and
control of the Department of Land Reform. The Chairman of the NCIP
EXECUTIVE ORDER NO. 364 shall be ex-officio Undersecretary of the Department of Land Reform
for Ancestral Domain Reform.
TRANSFORMING THE DEPARTMENT OF AGRARIAN REFORM INTO THE
DEPARTMENT OF LAND REFORM SECTION 4. The PCUP and the NCIP shall have access to the services
provided by the Department’s Finance, Management and
WHEREAS, one of the five reform packages of the Arroyo
Administrative Office; Policy, Planning and Legal Affairs Office, Field
administration is Social Justice and Basic [N]eeds;
Operations and Support Services Office, and all other offices of the
WHEREAS, one of the five anti-poverty measures for social justice is Department of Land Reform.
asset reform;
SECTION 5. All previous issuances that conflict with this Executive
WHEREAS, asset reforms covers [sic] agrarian reform, urban land Order are hereby repealed or modified accordingly.
reform, and ancestral domain reform;
SECTION 6. This Executive Order takes effect immediately. (Emphasis
WHEREAS, urban land reform is a concern of the Presidential and underscoring supplied)
Commission [for] the Urban Poor (PCUP) and ancestral domain reform
E.O. No. 379, which amended E.O. No. 364 a month later or on October
is a concern of the National Commission on Indigenous Peoples (NCIP);
26, 2004, reads:
WHEREAS, another of the five reform packages of the Arroyo
EXECUTIVE ORDER NO. 379
administration is Anti-Corruption and Good Government;
AMENDING EXECUTIVE ORDER NO. 364 ENTITLED TRANSFORMING By Resolution of December 6, 2005, this Court gave due course to the
THE DEPARTMENT OF AGRARIAN REFORM INTO THE DEPARTMENT OF Petition and required the submission of memoranda, with which
LAND REFORM petitioners and respondents complied on March 24, 2006 and April 11,
2006, respectively.
WHEREAS, Republic Act No. 8371 created the National Commission on
Indigenous Peoples; The issue on the transformation of the Department of Agrarian Reform
(DAR) into the Department of Land Reform (DLR) became moot and
WHEREAS, pursuant to the Administrative Code of 1987, the President academic, however, the department having reverted to its former
has the continuing authority to reorganize the administrative structure name by virtue of E.O. No. 4562 which was issued on August 23, 2005.
of the National Government.
The Court is thus left with the sole issue of the legality of placing the
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Presidential Commission3 for the Urban Poor (PCUP) under the
Republic of the Philippines, by virtue of the powers vested in me by the supervision and control of the DAR, and the National Commission on
Constitution and existing laws, do hereby order: Indigenous Peoples (NCIP) under the DAR as an attached agency.
Section 1. Amending Section 3 of Executive Order No. 364. Section 3 of Before inquiring into the validity of the reorganization, petitioners’ locus
Executive Order No. 364, dated September 27, 2004 shall now read as standi or legal standing, inter alia,4 becomes a preliminary question.
follows:
The Office of the Solicitor General (OSG), on behalf of respondents,
"Section 3. The National Commission on Indigenous Peoples (NCIP) concedes that AMIN5 has the requisite legal standing to file this suit as
shall be an attached agency of the Department of Land Reform." member6 of Congress.
Section 2. Compensation. The Chairperson shall suffer no diminution in Petitioners find it impermissible for the Executive to intrude into the
rank and salary. domain of the Legislature. They posit that an act of the Executive which
injures the institution of Congress causes a derivative but nonetheless
Section 3. Repealing Clause. All executive issuances, rules and
substantial injury, which can be questioned by a member of
regulations or parts thereof which are inconsistent with this Executive
Congress.7 They add that to the extent that the powers of Congress
Order are hereby revoked, amended or modified accordingly.
are impaired, so is the power of each member thereof, since his office
Section 4. Effectivity. This Executive Order shall take effect confers a right to participate in the exercise of the powers of that
immediately. (Emphasis and underscoring in the original) institution.8

Petitioners contend that the two presidential issuances are Indeed, a member of the House of Representatives has standing to
unconstitutional for violating: maintain inviolate the prerogatives, powers and privileges vested by
the Constitution in his office.9
- THE CONSTITUTIONAL PRINCIPLES OF SEPARATION OF POWERS AND
OF THE RULE OF LAW[;] The OSG questions, however, the standing of MDOI, a registered
people’s organization of Teduray and Lambangian tribesfolk of (North)
- THE CONSTITUTIONAL SCHEME AND POLICIES FOR AGRARIAN Upi and South Upi in the province of Maguindanao.
REFORM, URBAN LAND REFORM, INDIGENOUS PEOPLES’ RIGHTS AND
ANCESTRAL DOMAIN[; AND] As co-petitioner, MDOI alleges that it is concerned with the negative
impact of NCIP’s becoming an attached agency of the DAR on the
- THE CONSTITUTIONAL RIGHT OF THE PEOPLE AND THEIR processing of ancestral domain claims. It fears that transferring the
ORGANIZATIONS TO EFFECTIVE AND REASONABLE PARTICIPATION IN NCIP to the DAR would affect the processing of ancestral domain
DECISION-MAKING, INCLUDING THROUGH ADEQUATE claims filed by its members.
CONSULTATION[.]1
Locus standi or legal standing has been defined as a personal and and were allowed to be impleaded, not to assail but to defend the
substantial interest in a case such that the party has sustained or will constitutionality of the statute.
sustain direct injury as a result of the governmental act that is being
challenged. The gist of the question of standing is whether a party Moreover, MDOI raises no issue of transcendental importance to justify
alleges such personal stake in the outcome of the controversy as to a relaxation of the rule on legal standing. To be accorded standing on
assure that concrete adverseness which sharpens the presentation of the ground of transcendental importance, Senate of the Philippines v.
issues upon which the court depends for illumination of difficult Ermita17 requires that the following elements must be established: (1)
constitutional questions.10 the public character of the funds or other assets involved in the case,
(2) the presence of a clear case of disregard of a constitutional or
It has been held that a party who assails the constitutionality of a statutory prohibition by the public respondent agency or
statute must have a direct and personal interest. It must show not only instrumentality of government, and (3) the lack of any other party with
that the law or any governmental act is invalid, but also that it a more direct and specific interest in raising the questions being raised.
sustained or is in immediate danger of sustaining some direct injury as The presence of these elements MDOI failed to establish, much less
a result of its enforcement, and not merely that it suffers thereby in allege.
some indefinite way. It must show that it has been or is about to be
denied some right or privilege to which it is lawfully entitled or that it is Francisco, Jr. v. Fernando18 more specifically declares that the
about to be subjected to some burdens or penalties by reason of the transcendental importance of the issues raised must relate to the
statute or act complained of.11 merits of the petition.

For a concerned party to be allowed to raise a constitutional question, it This Court, not being a venue for the ventilation of generalized
must show that (1) it has personally suffered some actual or grievances, must thus deny adjudication of the matters raised by
threatened injury as a result of the allegedly illegal conduct of the MDOI.
government, (2) the injury is fairly traceable to the challenged action,
Now, on AMIN’s position. AMIN charges the Executive Department with
and (3) the injury is likely to be redressed by a favorable action.12
transgression of the principle of separation of powers.
An examination of MDOI’s nebulous claims of "negative impact" and
Under the principle of separation of powers, Congress, the President,
"probable setbacks"13 shows that they are too abstract to be
and the Judiciary may not encroach on fields allocated to each of them.
considered judicially cognizable. And the line of causation it proffers
The legislature is generally limited to the enactment of laws, the
between the challenged action and alleged injury is too attenuated.
executive to the enforcement of laws, and the judiciary to their
Vague propositions that the implementation of the assailed orders will interpretation and application to cases and controversies. The principle
work injustice and violate the rights of its members cannot clothe MDOI presupposes mutual respect by and between the executive, legislative
with the requisite standing. Neither would its status as a "people’s and judicial departments of the government and calls for them to be
organization" vest it with the legal standing to assail the validity of the left alone to discharge their duties as they see fit.19
executive orders.14
AMIN contends that since the DAR, PCUP and NCIP were created by
La Bugal-B’laan Tribal Association, Inc. v. Ramos,15 which MDOI cites in statutes,20 they can only be transformed, merged or attached by
support of its claim to legal standing, is inapplicable as it is not similarly statutes, not by mere executive orders.
situated with the therein petitioners who alleged personal and
While AMIN concedes that the executive power is vested in the
substantial injury resulting from the mining activities permitted by the
President21 who, as Chief Executive, holds the power of control of all
assailed statute. And so is Cruz v. Secretary of Environment and
the executive departments, bureaus, and offices,22 it posits that this
Natural Resources,16 for the indigenous peoples’ leaders and
broad power of control including the power to reorganize is qualified
organizations were not the petitioners therein, who necessarily had to
and limited, for it cannot be exercised in a manner contrary to law,
satisfy the locus standi requirement, but were intervenors who sought
citing the constitutional duty23 of the President to ensure that the laws, interfere with the discretion of its officials. Corollary to the power of
including those creating the agencies, be faithfully executed. control, the President also has the duty of supervising and enforcement
of laws for the maintenance of general peace and public order. Thus,
AMIN cites the naming of the PCUP as a presidential commission to be he is granted administrative power over bureaus and offices under his
clearly an extension of the President, and the creation of the NCIP as an control to enable him to discharge his duties effectively. 25 (Italics
"independent agency under the Office of the President."24 It thus omitted, underscoring supplied)
argues that since the legislature had seen fit to create these agencies
at separate times and with distinct mandates, the President should The Constitution’s express grant of the power of control in the
respect that legislative disposition. President justifies an executive action to carry out reorganization
measures under a broad authority of law.26
In fine, AMIN contends that any reorganization of these administrative
agencies should be the subject of a statute. In enacting a statute, the legislature is presumed to have deliberated
with full knowledge of all existing laws and jurisprudence on the
AMIN’s position fails to impress. subject.27 It is thus reasonable to conclude that in passing a statute
which places an agency under the Office of the President, it was in
The Constitution confers, by express provision, the power of control
accordance with existing laws and jurisprudence on the President’s
over executive departments, bureaus and offices in the President
power to reorganize.
alone. And it lays down a limitation on the legislative power.
In establishing an executive department, bureau or office, the
The line that delineates the Legislative and Executive power is not
legislature necessarily ordains an executive agency’s position in the
indistinct. Legislative power is "the authority, under the Constitution, to
scheme of administrative structure. Such determination is
make laws, and to alter and repeal them." The Constitution, as the will
primary,28 but subject to the President’s continuing authority to
of the people in their original, sovereign and unlimited capacity, has
reorganize the administrative structure. As far as bureaus, agencies or
vested this power in the Congress of the Philippines. The grant of
offices in the executive department are concerned, the power of
legislative power to Congress is broad, general and comprehensive.
control may justify the President to deactivate the functions of a
The legislative body possesses plenary power for all purposes of civil
particular office. Or a law may expressly grant the President the broad
government. Any power, deemed to be legislative by usage and
authority to carry out reorganization measures. 29 The Administrative
tradition, is necessarily possessed by Congress, unless the Constitution
Code of 1987 is one such law:30
has lodged it elsewhere. In fine, except as limited by the Constitution,
either expressly or impliedly, legislative power embraces all subjects SEC. 30. Functions of Agencies under the Office of the President.–
and extends to matters of general concern or common interest. Agencies under the Office of the President shall continue to operate
and function in accordance with their respective charters or laws
While Congress is vested with the power to enact laws, the President
creating them, except as otherwise provided in this Code or by
executes the laws. The executive power is vested in the President. It is
law.
generally defined as the power to enforce and administer the laws. It is
the power of carrying the laws into practical operation and enforcing SEC. 31. Continuing Authority of the President to Reorganize his
their due observance. Office.– The President, subject to the policy in the Executive
Office and in order to achieve simplicity, economy and
As head of the Executive Department, the President is the Chief
efficiency, shall have continuing authority to reorganize the
Executive. He represents the government as a whole and sees to it
administrative structure of the Office of the President. For this purpose,
that all laws are enforced by the officials and employees of his
he may take any of the following actions:
department. He has control over the executive department, bureaus
and offices. This means that he has the authority to assume directly (1) Restructure the internal organization of the Office of the President
the functions of the executive department, bureau and office, or Proper, including the immediate Offices, the Presidential Special
Assistants/Advisers System and the Common Staff Support System, by As thus provided by law, the President may transfer any agency under
abolishing, consolidating, or merging units thereof or transferring the Office of the President to any other department or agency, subject
functions from one unit to another; to the policy in the Executive Office and in order to achieve simplicity,
economy and efficiency. Gauged against these guidelines, 36 the
(2) Transfer any function under the Office of the President to any other challenged executive orders may not be said to have been issued with
Department or Agency as well as transfer functions to the Office of the grave abuse of discretion or in violation of the rule of law.
President from other Departments and Agencies; and
The references in E.O. 364 to asset reform as an anti-poverty measure
(3) Transfer any agency under the Office of the President to any other for social justice and to rationalization of the bureaucracy in furtherance
department or agency as well as transfer agencies to the Office of the of good government37 encapsulate a portion of the existing "policy in
President from other departments or agencies.31 (Italics in the original; the Executive Office." As averred by the OSG, the President saw it fit to
emphasis and underscoring supplied) streamline the agencies so as not to hinder the delivery of crucial social
reforms.38
In carrying out the laws into practical operation, the President is best
equipped to assess whether an executive agency ought to continue The consolidation of functions in E.O. 364 aims to attain the objectives
operating in accordance with its charter or the law creating it. This is of "simplicity, economy and efficiency" as gathered from the provision
not to say that the legislature is incapable of making a similar granting PCUP and NCIP access to the range of services provided by
assessment and appropriate action within its plenary power. The the DAR’s technical offices and support systems.39
Administrative Code of 1987 merely underscores the need to provide
the President with suitable solutions to situations on hand to meet the The characterization of the NCIP as an independent agency under the
exigencies of the service that may call for the exercise of the power of Office of the President does not remove said body from the President’s
control. control and supervision with respect to its performance of
administrative functions. So it has been opined:
x x x The law grants the President this power in recognition of the
recurring need of every President to reorganize his office "to achieve That Congress did not intend to place the NCIP under the control of the
simplicity, economy and efficiency." The Office of the President is the President in all instances is evident in the IPRA itself, which provides
nerve center of the Executive Branch. To remain effective and efficient, that the decisions of the NCIP in the exercise of its quasi-judicial
the Office of the President must be capable of being shaped and functions shall be appealable to the Court of Appeals, like those of the
reshaped by the President in the manner he deems fit to carry out his National Labor Relations Commission (NLRC) and the Securities and
directives and policies. After all, the Office of the President is the Exchange Commission (SEC). Nevertheless, the NCIP, although
command post of the President. This is the rationale behind the independent to a certain degree, was placed by Congress "under the
President’s continuing authority to reorganize the administrative office of the President" and, as such, is still subject to the President’s
structure of the Office of the President.32 power of control and supervision granted under Section 17, Article VII
of the Constitution with respect to its performance of administrative
The Office of the President consists of the Office of the President proper functions[.]40 (Underscoring supplied)
and the agencies under it.33 It is not disputed that PCUP and NCIP were
formed as agencies under the Office of the President.34 The "Agencies In transferring the NCIP to the DAR as an attached agency, the
under the Office of the President" refer to those offices placed under President effectively tempered the exercise of presidential authority
the chairmanship of the President, those under the supervision and and considerably recognized that degree of independence.
control of the President, those under the administrative supervision of
the Office of the President, those attached to the Office for policy and The Administrative Code of 1987 categorizes administrative
program coordination, and those that are not placed by law or order relationships into (1) supervision and control, (2) administrative
creating them under any special department.35 supervision, and (3) attachment.41 With respect to the third category, it
has been held that an attached agency has a larger measure of
independence from the Department to which it is attached than one Secondary aids may be consulted to remove, not to create
which is under departmental supervision and control or administrative doubt.51 AMIN’s thesis unsettles, more than settles the order of things
supervision. This is borne out by the "lateral relationship" between the in construing the Constitution. Its interpretation fails to clearly establish
Department and the attached agency. The attachment is merely for that the so-called "ordering" or arrangement of provisions in the
"policy and program coordination."42 Indeed, the essential autonomous Constitution was consciously adopted to imply a signification in terms
character of a board is not negated by its attachment to a of government hierarchy from where a constitutional mandate can per
commission.43 se be derived or asserted. It fails to demonstrate that the "ordering" or
layout was not simply a matter of style in constitutional drafting but
AMIN argues, however, that there is an anachronism of sorts because one of intention in government structuring. With its inherent ambiguity,
there can be no policy and program coordination between conceptually the proposed interpretation cannot be made a basis for declaring a law
different areas of reform. It claims that the new framework subsuming or governmental act unconstitutional.
agrarian reform, urban land reform and ancestral domain reform is
fundamentally incoherent in view of the widely different A law has in its favor the presumption of constitutionality. For it to be
contexts.44 And it posits that it is a substantive transformation or nullified, it must be shown that there is a clear and unequivocal breach
reorientation that runs contrary to the constitutional scheme and of the Constitution. The ground for nullity must be clear and beyond
policies. reasonable doubt.52 Any reasonable doubt should, following the
universal rule of legal hermeneutics, be resolved in favor of the
AMIN goes on to proffer the concept of "ordering the law"45 which, so it constitutionality of a law.53
alleges, can be said of the Constitution’s distinct treatment of these
three areas, as reflected in separate provisions in different parts of the Ople v. Torres54 on which AMIN relies is unavailing. In that case, an
Constitution.46 It argues that the Constitution did not intend an over- administrative order involved a system of identification that required a
arching concept of agrarian reform to encompass the two other areas, "delicate adjustment of various contending state policies" properly
and that how the law is ordered in a certain way should not be lodged in the legislative arena. It was declared unconstitutional for
undermined by mere executive orders in the guise of administrative dealing with a subject that should be covered by law and for violating
efficiency. the right to privacy.

The Court is not persuaded. In the present case, AMIN glaringly failed to show how the
reorganization by executive fiat would hamper the exercise of citizen’s
The interplay of various areas of reform in the promotion of social rights and privileges. It rested on the ambiguous conclusion that the
justice is not something implausible or unlikely.47 Their interlocking reorganization jeopardizes economic, social and cultural rights. It
nature cuts across labels and works against a rigid pigeonholing of intimated, without expounding, that the agendum behind the
executive tasks among the members of the President’s official family. issuances is to weaken the indigenous peoples’ rights in favor of the
Notably, the Constitution inhibited from identifying and mining industry. And it raised concerns about the possible
compartmentalizing the composition of the Cabinet. In vesting retrogression in DAR’s performance as the added workload may
executive power in one person rather than in a plural executive, the impede the implementation of the comprehensive agrarian reform
evident intention was to invest the power holder with energy.48 program.lavvphil
AMIN takes premium on the severed treatment of these reform areas AMIN has not shown, however, that by placing the NCIP as an attached
in marked provisions of the Constitution. It is a precept, however, that agency of the DAR, the President altered the nature and dynamics of
inferences drawn from title, chapter or section headings are entitled to the jurisdiction and adjudicatory functions of the NCIP concerning all
very little weight.49 And so must reliance on sub-headings,50 or the lack claims and disputes involving rights of indigenous cultural communities
thereof, to support a strained deduction be given the weight of helium. and
indigenous peoples. Nor has it been shown, nay alleged, that the
reorganization was made in bad faith.55

As for the other arguments raised by AMIN which pertain to the wisdom
or soundness of the executive decision, the Court finds it unnecessary
to pass upon them. The raging debate on the most fitting framework in
the delivery of social services is endless in the political arena. It is not
the business of this Court to join in the fray. Courts have no judicial
power to review cases involving political questions and, as a rule, will
desist from taking cognizance of speculative or hypothetical cases,
advisory opinions and cases that have become moot.56

Finally, a word on the last ground proffered for declaring the

unconstitutionality of the assailed issuances ─ that they violate Section
16, Article XIII of the Constitution57 on the people’s right to participate
in decision-making through adequate consultation mechanisms.

The framers of the Constitution recognized that the consultation

mechanisms were already operating without the State’s action by law,
such that the role of the State would be mere facilitation, not
necessarily creation of these consultation mechanisms. The State
provides the support, but eventually it is the people, properly organized
in their associations, who can assert the right and pursue the objective.
Penalty for failure on the part of the government to consult could only
be reflected in the ballot box and would not nullify government
action.58

WHEREFORE, the petition is DISMISSED. Executive Order Nos. 364 and

379 issued on September 27, 2004 and October 26, 2004, respectively,
are declared not unconstitutional.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice
 G.R. Nos. 147706-07 February 16, 2005 jurisdiction only over public officers unless private persons are charged
with them in the commission of the offenses.
PEOPLE OF THE PHILIPPINES, petitioner,
vs. The records disclosed that while Philippine Postal Savings Bank is a
THE HONORABLE SANDIGANBAYAN (Fifth Division) and EFREN subsidiary of the Philippine Postal Corporation which is a government
L. ALAS, respondents. owned corporation, the same is not created by a special law. It was
organized and incorporated under the Corporation Code which is Batas
DECISION Pambansa Blg. 68. It was registered with the Securities and Exchange
Commission under SEC No. AS094-005593 on June 22, 1994 with a
CORONA, J.:
lifetime of fifty (50) years. Under its Articles of Incorporation the
Does the Sandiganbayan have jurisdiction over presidents, directors or purpose for which said entity is formed was primarily for business, xxx
trustees, or managers of government-owned or controlled corporations
Likewise, a scrutiny of the seven (7) secondary purposes of the
organized and incorporated under the Corporation Code for purposes
corporation points to the conclusion that it exists for
of the provisions of RA 3019, otherwise known as the Anti-Graft and
business.l^vvphi1.net Obviously, it is not involved in the performance
Corrupt Practices Act? The petitioner, represented by the Office of the
of a particular function in the exercise of government power. Thus, its
Special Prosecutor (OSP), takes the affirmative position in this petition
officers and employees are not covered by the GSIS and are under the
for certiorari under Rule 65 of the Rules of Court. Respondent Efren L.
SSS law, and actions for reinstatement and backwages are not within
Alas contends otherwise, together with the respondent court.
the jurisdiction of the Civil Service Commission but by the National
Pursuant to a resolution dated September 30, 1999 of the Office of the Labor Relations Commission (NLRC).
Ombudsman, two separate informations1 for violation of Section 3(e) of
The Supreme Court, in the case of Trade Unions of the Philippines and
RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act,
Allied Services vs. National Housing Corp., 173 SCRA 33, held that the
were filed with the Sandiganbayan on November 17, 1999 against
Civil Service now covers only government owned or controlled
Efren L. Alas. The charges emanated from the alleged anomalous
corporations with original or legislative charters, those created by an
advertising contracts entered into by Alas, in his capacity as President
act of Congress or by special law, and not those incorporated under
and Chief Operating Officer of the Philippine Postal Savings Bank
and pursuant to a general legislation. The Highest Court categorically
(PPSB), with Bagong Buhay Publishing Company which purportedly
ruled that the Civil Service does not include government-owned or
caused damage and prejudice to the government.
controlled corporation which are organized as subsidiaries of
On October 30, 2002, Alas filed a motion to quash the informations for government-owned or controlled corporation under the general
lack of jurisdiction, which motion was vehemently opposed by the corporation law.
prosecution. After considering the arguments of both parties, the
In Philippine National Oil Company – Energy Development Corporation
respondent court ruled that PPSB was a private corporation and that its
vs. Leogardo, 175 SCRA 26, the Supreme Court emphasized that:
officers, particularly herein respondent Alas, did not fall under
Sandiganbayan jurisdiction. According to the Sandiganbayan: The test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law is the manner of its
After a careful consideration of the arguments of the accused-movant
creation such that government corporation created by special charter
as well as of that of the prosecution, we are of the considered opinion
are subject to its provision while those incorporated under the general
that the instant motion of the accused is well taken. Indeed, it is the
corporation law are not within its coverage.
basic thrust of Republic Act as well as (sic) Presidential Decree No.
1606 as amended by President Decree No. 1486 and Republic Act No. Likewise in Davao City Water District vs. Civil Service Commission, 201
7975 and Republic Act No. 8249 that the Sandiganbayan has SCRA 601 it was held that "by government-owned or controlled
corporation with original charter we mean government-owned or
controlled corporation created by a special law and not under the further categorized by the department of the budget, the civil service
Corporation Code of the Philippines" while in Llenes vs. Dicdican, et al., commission and the commission on audit for the purpose of the
260 SCRA 207, a public officer has been ruled, as a person whose exercise and discharge of their respective powers, functions and
duties involve the exercise of discretion in the performance of the responsibilities with respect to such corporations.
function of government.
From the foregoing, PPSB fits the bill as a government-owned or
Clearly, on the basis of the foregoing pronouncements of the Supreme controlled corporation, and organized and incorporated under the
Court, the accused herein cannot be considered a public officer. Thus, Corporation Code as a subsidiary of the Philippine Postal Corporation
this Court may not exercise jurisdiction over his act.2 (PHILPOST). More than 99% of the authorized capital stock of PPSB
belongs to the government while the rest is nominally held by its
Dissatisfied, the People, through the Office of the Special Prosecutor incorporators who are/were themselves officers of PHILPOST. The
(OSP), filed this petition3 arguing, in essence, that the PPSB was a creation of PPSB was expressly sanctioned by Section 32 of RA 7354,
government-owned or controlled corporation as the term was defined otherwise known as the Postal Service Act of 1992, for purposes of,
under Section 2(13) of the Administrative Code of 1987. 4 Likewise, in among others, "to encourage and promote the virtue of thrift and the
further defining the jurisdiction of the Sandiganbayan, RA 8249 did not habit of savings among the general public, especially the youth and the
make a distinction as to the manner of creation of the government- marginalized sector in the countryside xxx" and to facilitate postal
owned or controlled corporations for their officers to fall under its service by "receiving collections and making payments, including
jurisdiction. Hence, being President and Chief Operating Officer of the postal money orders."7
PPSB at the time of commission of the crimes charged, respondent Alas
came under the jurisdiction of the Sandiganbayan.1awphi1.nét It is not disputed that the Sandiganbayan has jurisdiction over
presidents, directors or trustees, or managers of government-owned or
Quoting at length from the assailed resolution dated February 15, controlled corporations with original charters whenever charges of graft
2001, respondent Alas, on the other hand, practically reiterated the and corruption are involved. However, a question arises whether the
pronouncements made by the respondent court in support of his Sandiganbayan has jurisdiction over the same officers in government-
conclusion that the PPSB was not created by special law, hence, its owned or controlled corporations organized and incorporated under the
officers did not fall within the jurisdiction of the Sandiganbayan.5 Corporation Code in view of the delimitation provided for in Article IX-B
Section 2(1) of the 1987 Constitution which states that:
We find merit in the petition.
SEC. 2. (1) The Civil Service embraces all branches, subdivisions,
Section 2(13) of EO 2926 defines government-owned or controlled
instrumentalities, and agencies of the government, including
corporations as follows:
government-owned or controlled corporations with original charters.
Sec. 2. General Terms Defined – Unless the specific words of the text or
It should be pointed out however, that the jurisdiction of the
the context as a whole or a particular statute, shall require a different
Sandiganbayan is separate and distinct from the Civil Service
meaning:
Commission. The same is governed by Article XI, Section 4 of the 1987
xxx xxx xxx Constitution which provides that "the present anti-graft court known as
the Sandiganbayan shall continue to function and exercise its
(13) government owned or controlled corporations refer to any agency jurisdiction as now or hereafter may be provided by law." This
organized as a stock or non-stock corporation vested with functions provision, in effect, retained the jurisdiction of the anti-graft court as
relating to public needs whether governmental or proprietary in nature, defined under Article XIII, Section 5 of the 1973 Constitution which
and owned by the government directly or indirectly or through its mandated its creation, thus:
instrumentalities either wholly, or where applicable as in the case of
stock corporations to the extent of at least 51% of its capital stock: Sec. 5. The Batasang Pambansa shall create a special court, to be
provided, that government owned or controlled corporations maybe known as Sandiganbayan, which shall have jurisdiction over criminal
and civil cases involving graft and corrupt practices and such other It is a basic principle of statutory construction that when the law does
offense committed by public officers and employees, including those in not distinguish, we should not distinguish. Ubi lex non distinguit nec
government-owned or controlled corporations, in relation to their office nos distinguere debemos. Corollarily, Article XI Section 12 of the 1987
as may be determined by law. (Italics ours) Constitution, on the jurisdiction of the Ombudsman (the government’s
prosecutory arm against persons charged with graft and corruption),
On March 30, 1995, Congress, pursuant to its authority vested under includes officers and employees of government-owned or controlled
the 1987 Constitution, enacted RA 79758 maintaining the jurisdiction of corporations, likewise without any distinction.1awphi1.nét
the Sandiganbayan over presidents, directors or trustees, or managers
of government-owned or controlled corporations without any In Quimpo v. Tanodbayan,10 this Court, already mindful of the pertinent
distinction whatsoever. Thereafter, on February 5, 1997, Congress provisions of the 1987 Constitution, ruled that the concerned officers of
enacted RA 82499 which preserved the subject provision: government-owned or controlled corporations, whether created by
special law or formed under the Corporation Code, come under the
Section 4, Jurisdiction. The Sandiganbayan shall exercise exclusive jurisdiction of the Sandiganbayan for purposes of the provisions of the
original jurisdiction in all cases involving: Anti-Graft and Corrupt Practices Act. Otherwise, as we emphasized
therein, a major policy of Government, which is to eradicate, or at the
a. Violations of Republic Act No. 3019, as amended, otherwise known
very least minimize, the graft and corruption that has permeated the
as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and
fabric of the public service like a malignant social cancer, would be
Chapter II, Section, Title VII, Book II of the Revised Penal Code, where
seriously undermined. In fact, Section 1 of the Anti-Graft and Corrupt
one or more of the accused are officials occupying the following
Practices Act embodies this policy of the government, that is, to repress
positions in the government, whether in a permanent, acting or interim
certain acts not only of public officers but also of private persons
capacity, at the time of the commission of the offense,
constituting graft or corrupt practices or which may lead thereto.
(1) Officials of the executive branch occupying the positions of regional
The foregoing pronouncement has not outlived its usefulness. On the
director, and higher, otherwise classified as grade "27" and higher, of
contrary, it has become even more relevant today due to the rampant
the Compensation and Position Classification Act of 1989 (Republic Act
cases of graft and corruption that erode the people’s faith in
No. 6758) specifically including:
government. For indeed, a government-owned or controlled
xxx xxx xxx corporation can conceivably create as many subsidiary corporations
under the Corporation Code as it might wish, use public funds, disclaim
(g) Presidents, directors or trustees, or managers of government- public accountability and escape the liabilities and responsibilities
owned or controlled corporations, state universities or educational provided by law. By including the concerned officers of government-
institutions or foundations. (Italics ours) owned or controlled corporations organized and incorporated under the
Corporation Code within the jurisdiction of the Sandiganbayan, the
The legislature, in mandating the inclusion of "presidents, directors or
legislature evidently seeks to avoid just that.
trustees, or managers of government-owned or controlled
corporations" within the jurisdiction of the Sandiganbayan, has WHEREFORE, in view of the foregoing, the petition is hereby
consistently refrained from making any distinction with respect to the GRANTED and the assailed resolution dated February 15, 2001 of the
manner of their creation. respondent court is hereby REVERSED and SET ASIDE.
The deliberate omission, in our view, clearly reveals the intention of the SO ORDERED.
legislature to include the presidents, directors or trustees, or managers
of both types of corporations within the jurisdiction of the
Sandiganbayan whenever they are involved in graft and corruption.
G.R. No. 155650 July 20, 2006
Had it been otherwise, it could have simply made the necessary
distinction. But it did not.
 MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG
PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
TREASURER OF PARAÑAQUE, respondents.
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
DECISION
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
CARPIO, J.:
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
The Antecedents

Petitioner Manila International Airport Authority (MIAA) operates the E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
Ninoy Aquino International Airport (NAIA) Complex in Parañaque City
under Executive Order No. 903, otherwise known as the Revised E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
Charter of the Manila International Airport Authority ("MIAA Charter").
Executive Order No. 903 was issued on 21 July 1983 by then President *E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
2982 amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, *E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
improvements and equipment within the NAIA Complex. The MIAA
Charter transferred to MIAA approximately 600 hectares of GRAND TOTAL P392,435,861.9 P232,070,863.4 P 624,506,725.4
land,3 including the runways and buildings ("Airport Lands and 5 7 2
Buildings") then under the Bureau of Air Transportation.4 The MIAA
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for
Charter further provides that no portion of the land transferred to MIAA
P4,207,028.75
shall be disposed of through sale or any other mode unless specifically
approved by the President of the Philippines.5 #9476101 for P28,676,480.00
On 21 March 1997, the Office of the Government Corporate Counsel #9476103 for P49,115.006
(OGCC) issued Opinion No. 061. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate On 17 July 2001, the City of Parañaque, through its City Treasurer,
tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA issued notices of levy and warrants of levy on the Airport Lands and
negotiated with respondent City of Parañaque to pay the real estate Buildings. The Mayor of the City of Parañaque threatened to sell at
tax imposed by the City. MIAA then paid some of the real estate tax public auction the Airport Lands and Buildings should MIAA fail to pay
already due. the real estate tax delinquency. MIAA thus sought a clarification of
OGCC Opinion No. 061.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Parañaque for the taxable years 1992 to On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC
2001. MIAA's real estate tax delinquency is broken down as follows: Opinion No. 061. The OGCC pointed out that Section 206 of the Local
Government Code requires persons exempt from real estate tax to
TAX TAXABLE show proof of exemption. The OGCC opined that Section 21 of the
TAX DUE PENALTY
DECLARATION YEAR MIAA Charter is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original respondent City of Parañaque, and the Solicitor General subsequently
petition for prohibition and injunction, with prayer for preliminary submitted their respective Memoranda.
injunction or temporary restraining order. The petition sought to
restrain the City of Parañaque from imposing real estate tax on, levying MIAA admits that the MIAA Charter has placed the title to the Airport
against, and auctioning for public sale the Airport Lands and Buildings. Lands and Buildings in the name of MIAA. However, MIAA points out
The petition was docketed as CA-G.R. SP No. 66878. that it cannot claim ownership over these properties since the real
owner of the Airport Lands and Buildings is the Republic of the
On 5 October 2001, the Court of Appeals dismissed the petition Philippines. The MIAA Charter mandates MIAA to devote the Airport
because MIAA filed it beyond the 60-day reglementary period. The Lands and Buildings for the benefit of the general public. Since the
Court of Appeals also denied on 27 September 2002 MIAA's motion for Airport Lands and Buildings are devoted to public use and public
reconsideration and supplemental motion for reconsideration. Hence, service, the ownership of these properties remains with the State. The
MIAA filed on 5 December 2002 the present petition for review.7 Airport Lands and Buildings are thus inalienable and are not subject to
real estate tax by local governments.
Meanwhile, in January 2003, the City of Parañaque posted notices of
auction sale at the Barangay Halls of Barangays Vitalez, Sto. Niño, and MIAA also points out that Section 21 of the MIAA Charter specifically
Tambo, Parañaque City; in the public market of Barangay La Huerta; exempts MIAA from the payment of real estate tax. MIAA insists that it
and in the main lobby of the Parañaque City Hall. The City of is also exempt from real estate tax under Section 234 of the Local
Parañaque published the notices in the 3 and 10 January 2003 issues of Government Code because the Airport Lands and Buildings are owned
the Philippine Daily Inquirer, a newspaper of general circulation in the by the Republic. To justify the exemption, MIAA invokes the principle
Philippines. The notices announced the public auction sale of the that the government cannot tax itself. MIAA points out that the reason
Airport Lands and Buildings to the highest bidder on 7 February 2003, for tax exemption of public property is that its taxation would not inure
10:00 a.m., at the Legislative Session Hall Building of Parañaque City. to any public advantage, since in such a case the tax debtor is also the
tax creditor.
A day before the public auction, or on 6 February 2003, at 5:10 p.m.,
MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion Respondents invoke Section 193 of the Local Government Code,
for the Issuance of a Temporary Restraining Order. The motion sought which expressly withdrew the tax exemption privileges of
to restrain respondents — the City of Parañaque, City Mayor of "government-owned and-controlled corporations" upon the
Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer effectivity of the Local Government Code. Respondents also argue that
of Parañaque, and the City Assessor of Parañaque ("respondents") — a basic rule of statutory construction is that the express mention of one
from auctioning the Airport Lands and Buildings. person, thing, or act excludes all others. An international airport is not
among the exceptions mentioned in Section 193 of the Local
On 7 February 2003, this Court issued a temporary restraining order Government Code. Thus, respondents assert that MIAA cannot claim
(TRO) effective immediately. The Court ordered respondents to cease that the Airport Lands and Buildings are exempt from real estate tax.
and desist from selling at public auction the Airport Lands and
Buildings. Respondents received the TRO on the same day that the Respondents also cite the ruling of this Court in Mactan
Court issued it. However, respondents received the TRO only at 1:25 International Airport v. Marcos8 where we held that the Local
p.m. or three hours after the conclusion of the public auction. Government Code has withdrawn the exemption from real estate tax
granted to international airports. Respondents further argue that since
On 10 February 2003, this Court issued a Resolution confirming nunc MIAA has already paid some of the real estate tax assessments, it is
pro tunc the TRO. now estopped from claiming that the Airport Lands and Buildings are
exempt from real estate tax.
On 29 March 2005, the Court heard the parties in oral arguments. In
compliance with the directive issued during the hearing, MIAA, The Issue
This petition raises the threshold issue of whether the Airport Lands A government-owned or controlled corporation must be "organized
and Buildings of MIAA are exempt from real estate tax under existing as a stock or non-stock corporation." MIAA is not organized as a
laws. If so exempt, then the real estate tax assessments issued by the stock or non-stock corporation. MIAA is not a stock corporation because
City of Parañaque, and all proceedings taken pursuant to such it has no capital stock divided into shares. MIAA has no
assessments, are void. In such event, the other issues raised in this stockholders or voting shares. Section 10 of the MIAA
petition become moot. Charter9 provides:

The Court's Ruling SECTION 10. Capital. — The capital of the Authority to be contributed
by the National Government shall be increased from Two and One-half
We rule that MIAA's Airport Lands and Buildings are exempt from real Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00)
estate tax imposed by local governments. Pesos to consist of:
First, MIAA is not a government-owned or controlled corporation but (a) The value of fixed assets including airport facilities, runways and
an instrumentality of the National Government and thus exempt equipment and such other properties, movable and immovable[,]
from local taxation. Second, the real properties of MIAA are owned by which may be contributed by the National Government or transferred
the Republic of the Philippines and thus exempt from real estate tax. by it from any of its agencies, the valuation of which shall be
determined jointly with the Department of Budget and Management
1. MIAA is Not a Government-Owned or Controlled Corporation
and the Commission on Audit on the date of such contribution or
Respondents argue that MIAA, being a government-owned or transfer after making due allowances for depreciation and other
controlled corporation, is not exempt from real estate tax. Respondents deductions taking into account the loans and other liabilities of the
claim that the deletion of the phrase "any government-owned or Authority at the time of the takeover of the assets and other properties;
controlled so exempt by its charter" in Section 234(e) of the Local
(b) That the amount of P605 million as of December 31, 1986
Government Code withdrew the real estate tax exemption of
representing about seventy percentum (70%) of the unremitted share
government-owned or controlled corporations. The deleted phrase
of the National Government from 1983 to 1986 to be remitted to the
appeared in Section 40(a) of the 1974 Real Property Tax Code
National Treasury as provided for in Section 11 of E. O. No. 903 as
enumerating the entities exempt from real estate tax.
amended, shall be converted into the equity of the National
There is no dispute that a government-owned or controlled corporation Government in the Authority. Thereafter, the Government contribution
is not exempt from real estate tax. However, MIAA is not a to the capital of the Authority shall be provided in the General
government-owned or controlled corporation. Section 2(13) of the Appropriations Act.
Introductory Provisions of the Administrative Code of 1987 defines a
Clearly, under its Charter, MIAA does not have capital stock that is
government-owned or controlled corporation as follows:
divided into shares.
SEC. 2. General Terms Defined. – x x x x
Section 3 of the Corporation Code10 defines a stock corporation as one
(13) Government-owned or controlled corporation refers to any whose "capital stock is divided into shares and x x x authorized
agency organized as a stock or non-stock corporation, vested to distribute to the holders of such shares dividends x x x."
with functions relating to public needs whether governmental or MIAA has capital but it is not divided into shares of stock. MIAA has no
proprietary in nature, and owned by the Government directly or stockholders or voting shares. Hence, MIAA is not a stock corporation.
through its instrumentalities either wholly, or, where applicable as in
MIAA is also not a non-stock corporation because it has no members.
the case of stock corporations, to the extent of at least fifty-one (51)
Section 87 of the Corporation Code defines a non-stock corporation as
percent of its capital stock: x x x. (Emphasis supplied)
"one where no part of its income is distributable as dividends to its
members, trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is considered as these powers are not inconsistent with the provisions of this Executive
the sole member of MIAA, this will not make MIAA a non-stock Order."15
corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates Likewise, when the law makes a government
MIAA to remit 20% of its annual gross operating income to the National instrumentality operationally autonomous, the instrumentality
Treasury.11 This prevents MIAA from qualifying as a non-stock remains part of the National Government machinery although not
corporation. integrated with the department framework. The MIAA Charter
expressly states that transforming MIAA into a "separate and
Section 88 of the Corporation Code provides that non-stock autonomous body"16 will make its operation more "financially viable."17
corporations are "organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary, scientific, social, Many government instrumentalities are vested with corporate powers
civil service, or similar purposes, like trade, industry, agriculture and but they do not become stock or non-stock corporations, which is a
like chambers." MIAA is not organized for any of these purposes. MIAA, necessary condition before an agency or instrumentality is deemed a
a public utility, is organized to operate an international and domestic government-owned or controlled corporation. Examples are the
airport for public use. Mactan International Airport Authority, the Philippine Ports Authority,
the University of the Philippines and Bangko Sentral ng Pilipinas. All
Since MIAA is neither a stock nor a non-stock corporation, MIAA does these government instrumentalities exercise corporate powers but
not qualify as a government-owned or controlled corporation. What they are not organized as stock or non-stock corporations as required
then is the legal status of MIAA within the National Government? by Section 2(13) of the Introductory Provisions of the Administrative
Code. These government instrumentalities are sometimes loosely
MIAA is a government instrumentality vested with corporate called government corporate entities. However, they are not
powers to perform efficiently its governmental functions. MIAA is like government-owned or controlled corporations in the strict sense as
any other government instrumentality, the only difference is that MIAA understood under the Administrative Code, which is the governing law
is vested with corporate powers. Section 2(10) of the Introductory defining the legal relationship and status of government entities.
Provisions of the Administrative Code defines a government
"instrumentality" as follows: A government instrumentality like MIAA falls under Section 133(o) of
the Local Government Code, which states:
SEC. 2. General Terms Defined. –– x x x x
SEC. 133. Common Limitations on the Taxing Powers of Local
(10) Instrumentality refers to any agency of the National Government, Government Units. – Unless otherwise provided herein, the
not integrated within the department framework, vested with special exercise of the taxing powers of provinces, cities,
functions or jurisdiction by law, endowed with some if not all municipalities, and barangays shall not extend to the levy of
corporate powers, administering special funds, and enjoying the following:
operational autonomy, usually through a charter. x x x (Emphasis
supplied) xxxx

When the law vests in a government instrumentality corporate powers, (o) Taxes, fees or charges of any kind on the National
the instrumentality does not become a corporation. Unless the Government, its agencies and instrumentalities and local
government instrumentality is organized as a stock or non-stock government units.(Emphasis and underscoring supplied)
corporation, it remains a government instrumentality exercising not
only governmental but also corporate powers. Thus, MIAA exercises Section 133(o) recognizes the basic principle that local governments
the governmental powers of eminent domain,12 police authority13 and cannot tax the national government, which historically merely
the levying of fees and charges.14 At the same time, MIAA exercises "all delegated to local governments the power to tax. While the 1987
the powers of a corporation under the Corporation Law, insofar as Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power national government instrumentalities. As this Court held in Basco v.
"subject to such guidelines and limitations as the Congress may Philippine Amusements and Gaming Corporation:
provide."18
The states have no power by taxation or otherwise, to retard, impede,
When local governments invoke the power to tax on national burden or in any manner control the operation of constitutional laws
government instrumentalities, such power is construed strictly against enacted by Congress to carry into execution the powers vested in the
local governments. The rule is that a tax is never presumed and there federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed.
must be clear language in the law imposing the tax. Any doubt 579)
whether a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local governments This doctrine emanates from the "supremacy" of the National
seek to tax national government instrumentalities. Government over local governments.

Another rule is that a tax exemption is strictly construed against the "Justice Holmes, speaking for the Supreme Court, made reference to
taxpayer claiming the exemption. However, when Congress grants an the entire absence of power on the part of the States to touch, in that
exemption to a national government instrumentality from local way (taxation) at least, the instrumentalities of the United States
taxation, such exemption is construed liberally in favor of the national (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
government instrumentality. As this Court declared in Maceda v. political subdivision can regulate a federal instrumentality in such a
Macaraig, Jr.: way as to prevent it from consummating its federal responsibilities, or
even to seriously burden it in the accomplishment of them." (Antieau,
The reason for the rule does not apply in the case of exemptions Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
running to the benefit of the government itself or its agencies. In such
case the practical effect of an exemption is merely to reduce the Otherwise, mere creatures of the State can defeat National policies
amount of money that has to be handled by government in the course thru extermination of what local authorities may perceive to be
of its operations. For these reasons, provisions granting exemptions to undesirable activities or enterprise using the power to tax as "a tool for
government agencies may be construed liberally, in favor of non tax- regulation" (U.S. v. Sanchez, 340 US 42).
liability of such agencies.19
The power to tax which was called by Justice Marshall as the "power to
There is, moreover, no point in national and local governments taxing destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat
each other, unless a sound and compelling policy requires such an instrumentality or creation of the very entity which has the inherent
transfer of public funds from one government pocket to another. power to wield it. 20

There is also no reason for local governments to tax national 2. Airport Lands and Buildings of MIAA are Owned by the
government instrumentalities for rendering essential public services to Republic
inhabitants of local governments. The only exception is when the
a. Airport Lands and Buildings are of Public Dominion
legislature clearly intended to tax government
instrumentalities for the delivery of essential public services The Airport Lands and Buildings of MIAA are property of public
for sound and compelling policy considerations. There must be dominion and therefore owned by the State or the Republic of
express language in the law empowering local governments to tax the Philippines. The Civil Code provides:
national government instrumentalities. Any doubt whether such power
exists is resolved against local governments. ARTICLE 419. Property is either of public dominion or of private
ownership.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax ARTICLE 420. The following things are property of public
dominion:
(1) Those intended for public use, such as roads, canals, restrictions and other conditions for the use of the road do not affect
rivers, torrents, ports and bridges constructed by the State, the public character of the road.
banks, shores, roadsteads, and others of similar character;
The terminal fees MIAA charges to passengers, as well as the landing
(2) Those which belong to the State, without being for public use, and fees MIAA charges to airlines, constitute the bulk of the income that
are intended for some public service or for the development of the maintains the operations of MIAA. The collection of such fees does not
national wealth. (Emphasis supplied) change the character of MIAA as an airport for public use. Such fees are
often termed user's tax. This means taxing those among the public
ARTICLE 421. All other property of the State, which is not of the who actually use a public facility instead of taxing all the public
character stated in the preceding article, is patrimonial property. including those who never use the particular public facility. A user's tax
is more equitable — a principle of taxation mandated in the 1987
ARTICLE 422. Property of public dominion, when no longer intended for
Constitution.21
public use or for public service, shall form part of the patrimonial
property of the State. The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic
No one can dispute that properties of public dominion mentioned in
air traffic,"22 are properties of public dominion because they are
Article 420 of the Civil Code, like "roads, canals, rivers, torrents,
intended for public use. As properties of public dominion, they
ports and bridges constructed by the State," are owned by the
indisputably belong to the State or the Republic of the
State. The term "ports" includes seaports and airports. The
Philippines.
MIAA Airport Lands and Buildings constitute a "port" constructed by
the State. Under Article 420 of the Civil Code, the MIAA Airport Lands b. Airport Lands and Buildings are Outside the Commerce of
and Buildings are properties of public dominion and thus owned by the Man
State or the Republic of the Philippines.
The Airport Lands and Buildings of MIAA are devoted to public use and
The Airport Lands and Buildings are devoted to public use because thus are properties of public dominion. As properties of public
they are used by the public for international and domestic dominion, the Airport Lands and Buildings are outside the
travel and transportation. The fact that the MIAA collects terminal commerce of man. The Court has ruled repeatedly that properties of
fees and other charges from the public does not remove the character public dominion are outside the commerce of man. As early as 1915,
of the Airport Lands and Buildings as properties for public use. The this Court already ruled in Municipality of Cavite v. Rojas that
operation by the government of a tollway does not change the properties devoted to public use are outside the commerce of man,
character of the road as one for public use. Someone must pay for the thus:
maintenance of the road, either the public indirectly through the taxes
they pay the government, or only those among the public who actually According to article 344 of the Civil Code: "Property for public use in
use the road through the toll fees they pay upon using the road. The provinces and in towns comprises the provincial and town roads, the
tollway system is even a more efficient and equitable manner of taxing squares, streets, fountains, and public waters, the promenades, and
the public for the maintenance of public roads. public works of general service supported by said towns or provinces."

The charging of fees to the public does not determine the character of The said Plaza Soledad being a promenade for public use, the
the property whether it is of public dominion or not. Article 420 of the municipal council of Cavite could not in 1907 withdraw or exclude from
Civil Code defines property of public dominion as one "intended for public use a portion thereof in order to lease it for the sole benefit of the
public use." Even if the government collects toll fees, the road is still defendant Hilaria Rojas. In leasing a portion of said plaza or public place
"intended for public use" if anyone can use the road under the same to the defendant for private use the plaintiff municipality exceeded its
terms and conditions as the rest of the public. The charging of fees, the authority in the exercise of its powers by executing a contract over a
limitation on the kind of vehicles that can use the road, the speed thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not SECTION 83. Upon the recommendation of the Secretary of Agriculture
outside the commerce of man may be the object of a contract, and and Natural Resources, the President may designate by proclamation
plazas and streets are outside of this commerce, as was decided by any tract or tracts of land of the public domain as reservations for the
the supreme court of Spain in its decision of February 12, 1895, which use of the Republic of the Philippines or of any of its branches, or of the
says: "Communal things that cannot be sold because they are inhabitants thereof, in accordance with regulations prescribed for this
by their very nature outside of commerce are those for public purposes, or for quasi-public uses or purposes when the public interest
use, such as the plazas, streets, common lands, rivers, requires it, including reservations for highways, rights of way for
fountains, etc." (Emphasis supplied) 23 railroads, hydraulic power sites, irrigation systems, communal pastures
or lequas communales, public parks, public quarries, public fishponds,
Again in Espiritu v. Municipal Council, the Court declared that working men's village and other improvements for the public benefit.
properties of public dominion are outside the commerce of man:
SECTION 88. The tract or tracts of land reserved under the
xxx Town plazas are properties of public dominion, to be devoted provisions of Section eighty-three shall be non-alienable and
to public use and to be made available to the public in general. They shall not be subject to occupation, entry, sale, lease, or other
are outside the commerce of man and cannot be disposed of or disposition until again declared alienable under the provisions
even leased by the municipality to private parties. While in case of war of this Act or by proclamation of the President. (Emphasis and
or during an emergency, town plazas may be occupied temporarily by underscoring supplied)
private individuals, as was done and as was tolerated by the
Municipality of Pozorrubio, when the emergency has ceased, said Thus, unless the President issues a proclamation withdrawing the
temporary occupation or use must also cease, and the town officials Airport Lands and Buildings from public use, these properties remain
should see to it that the town plazas should ever be kept open to the properties of public dominion and are inalienable. Since the Airport
public and free from encumbrances or illegal private Lands and Buildings are inalienable in their present status as properties
constructions.24 (Emphasis supplied) of public dominion, they are not subject to levy on execution or
foreclosure sale. As long as the Airport Lands and Buildings are
The Court has also ruled that property of public dominion, being reserved for public use, their ownership remains with the State or the
outside the commerce of man, cannot be the subject of an auction Republic of the Philippines.
sale.25
The authority of the President to reserve lands of the public domain for
Properties of public dominion, being for public use, are not subject to public use, and to withdraw such public use, is reiterated in Section 14,
levy, encumbrance or disposition through public or private sale. Any Chapter 4, Title I, Book III of the Administrative Code of 1987, which
encumbrance, levy on execution or auction sale of any property of states:
public dominion is void for being contrary to public policy. Essential
public services will stop if properties of public dominion are subject to SEC. 14. Power to Reserve Lands of the Public and Private Domain of
encumbrances, foreclosures and auction sale. This will happen if the the Government. — (1) The President shall have the power to
City of Parañaque can foreclose and compel the auction sale of the reserve for settlement or public use, and for specific public
600-hectare runway of the MIAA for non-payment of real estate tax. purposes, any of the lands of the public domain, the use of
which is not otherwise directed by law. The reserved land
Before MIAA can encumber26 the Airport Lands and Buildings, the shall thereafter remain subject to the specific public purpose
President must first withdraw from public use the Airport Lands indicated until otherwise provided by law or proclamation;
and Buildings. Sections 83 and 88 of the Public Land Law or
Commonwealth Act No. 141, which "remains to this day the existing x x x x. (Emphasis supplied)
general law governing the classification and disposition of lands of the
public domain other than timber and mineral lands,"27 provide: There is no question, therefore, that unless the Airport Lands and
Buildings are withdrawn by law or presidential proclamation from
public use, they are properties of public dominion, owned by the transferred within one year from the promulgation of this Executive
Republic and outside the commerce of man. Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through
c. MIAA is a Mere Trustee of the Republic sale or through any other mode unless specifically approved
by the President of the Philippines. (Emphasis supplied)
MIAA is merely holding title to the Airport Lands and Buildings in trust
for the Republic. Section 48, Chapter 12, Book I of the SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All
Administrative Code allows instrumentalities like MIAA to hold existing public airport facilities, runways, lands, buildings and
title to real properties owned by the Republic, thus: other property, movable or immovable, belonging to the Airport, and
all assets, powers, rights, interests and privileges belonging to the
SEC. 48. Official Authorized to Convey Real Property. — Whenever real
Bureau of Air Transportation relating to airport works or air
property of the Government is authorized by law to be conveyed, the
operations, including all equipment which are necessary for the
deed of conveyance shall be executed in behalf of the government by
operation of crash fire and rescue facilities, are hereby transferred to
the following:
the Authority. (Emphasis supplied)
(1) For property belonging to and titled in the name of the Republic of
SECTION 25. Abolition of the Manila International Airport as a Division
the Philippines, by the President, unless the authority therefor is
in the Bureau of Air Transportation and Transitory Provisions. — The
expressly vested by law in another officer.
Manila International Airport including the Manila Domestic Airport as a
(2) For property belonging to the Republic of the Philippines division under the Bureau of Air Transportation is hereby abolished.
but titled in the name of any political subdivision or of any
x x x x.
corporate agency or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied) The MIAA Charter transferred the Airport Lands and Buildings to MIAA
without the Republic receiving cash, promissory notes or even stock
In MIAA's case, its status as a mere trustee of the Airport Lands and
since MIAA is not a stock corporation.
Buildings is clearer because even its executive head cannot sign the
deed of conveyance on behalf of the Republic. Only the President of The whereas clauses of the MIAA Charter explain the rationale for the
the Republic can sign such deed of conveyance.28 transfer of the Airport Lands and Buildings to MIAA, thus:
d. Transfer to MIAA was Meant to Implement a Reorganization WHEREAS, the Manila International Airport as the principal airport of
the Philippines for both international and domestic air traffic, is required
The MIAA Charter, which is a law, transferred to MIAA the title to the
to provide standards of airport accommodation and service
Airport Lands and Buildings from the Bureau of Air Transportation of
comparable with the best airports in the world;
the Department of Transportation and Communications. The MIAA
Charter provides: WHEREAS, domestic and other terminals, general aviation and other
facilities, have to be upgraded to meet the current and future air traffic
SECTION 3. Creation of the Manila International Airport Authority. — x x
and other demands of aviation in Metro Manila;
xx
WHEREAS, a management and organization study has indicated
The land where the Airport is presently located as well as the
that the objectives of providing high standards of
surrounding land area of approximately six hundred hectares,
accommodation and service within the context of a financially
are hereby transferred, conveyed and assigned to the
viable operation, will best be achieved by a separate and
ownership and administration of the Authority, subject to
autonomous body; and
existing rights, if any. The Bureau of Lands and other appropriate
government agencies shall undertake an actual survey of the area
WHEREAS, under Presidential Decree No. 1416, as amended by x x x. (Emphasis supplied)
Presidential Decree No. 1772, the President of the Philippines is given
continuing authority to reorganize the National Government, This exemption should be read in relation with Section 133(o) of the
which authority includes the creation of new entities, agencies same Code, which prohibits local governments from imposing "[t]axes,
and instrumentalities of the Government[.] (Emphasis supplied) fees or charges of any kind on the National Government, its agencies
and instrumentalities x x x." The real properties owned by the
The transfer of the Airport Lands and Buildings from the Bureau of Air Republic are titled either in the name of the Republic itself or in the
Transportation to MIAA was not meant to transfer beneficial ownership name of agencies or instrumentalities of the National Government. The
of these assets from the Republic to MIAA. The purpose was merely Administrative Code allows real property owned by the Republic to be
to reorganize a division in the Bureau of Air Transportation titled in the name of agencies or instrumentalities of the national
into a separate and autonomous body. The Republic remains the government. Such real properties remain owned by the Republic and
beneficial owner of the Airport Lands and Buildings. MIAA itself is continue to be exempt from real estate tax.
owned solely by the Republic. No party claims any ownership rights
over MIAA's assets adverse to the Republic. The Republic may grant the beneficial use of its real property to an
agency or instrumentality of the national government. This happens
The MIAA Charter expressly provides that the Airport Lands and when title of the real property is transferred to an agency or
Buildings "shall not be disposed through sale or through any instrumentality even as the Republic remains the owner of the real
other mode unless specifically approved by the President of property. Such arrangement does not result in the loss of the tax
the Philippines." This only means that the Republic retained the exemption. Section 234(a) of the Local Government Code states that
beneficial ownership of the Airport Lands and Buildings because under real property owned by the Republic loses its tax exemption only if the
Article 428 of the Civil Code, only the "owner has the right to x x x "beneficial use thereof has been granted, for consideration or
dispose of a thing." Since MIAA cannot dispose of the Airport Lands and otherwise, to a taxable person." MIAA, as a government
Buildings, MIAA does not own the Airport Lands and Buildings. instrumentality, is not a taxable person under Section 133(o) of the
Local Government Code. Thus, even if we assume that the Republic
At any time, the President can transfer back to the Republic title to the has granted to MIAA the beneficial use of the Airport Lands and
Airport Lands and Buildings without the Republic paying MIAA any Buildings, such fact does not make these real properties subject to real
consideration. Under Section 3 of the MIAA Charter, the President is the estate tax.
only one who can authorize the sale or disposition of the Airport Lands
and Buildings. This only confirms that the Airport Lands and Buildings However, portions of the Airport Lands and Buildings that MIAA leases
belong to the Republic. to private entities are not exempt from real estate tax. For example,
the land area occupied by hangars that MIAA leases to private
e. Real Property Owned by the Republic is Not Taxable corporations is subject to real estate tax. In such a case, MIAA has
granted the beneficial use of such land area for a consideration to
Section 234(a) of the Local Government Code exempts from real
a taxable person and therefore such land area is subject to real
estate tax any "[r]eal property owned by the Republic of the
estate tax. In Lung Center of the Philippines v. Quezon City, the
Philippines." Section 234(a) provides:
Court ruled:
SEC. 234. Exemptions from Real Property Tax. — The following are
Accordingly, we hold that the portions of the land leased to private
exempted from payment of the real property tax:
entities as well as those parts of the hospital leased to private
(a) Real property owned by the Republic of the Philippines or individuals are not exempt from such taxes. On the other hand, the
any of its political subdivisions except when the beneficial use portions of the land occupied by the hospital and portions of the
thereof has been granted, for consideration or otherwise, to a hospital used for its patients, whether paying or non-paying, are
taxable person; exempt from real property taxes.29
3. Refutation of Arguments of Minority persons "[u]nless otherwise provided in this Code." Now, Section
133(o) of the Local Government Code expressly provides
The minority asserts that the MIAA is not exempt from real estate tax otherwise, specifically prohibiting local governments from imposing
because Section 193 of the Local Government Code of 1991 withdrew any kind of tax on national government instrumentalities. Section
the tax exemption of "all persons, whether natural or juridical" 133(o) states:
upon the effectivity of the Code. Section 193 provides:
SEC. 133. Common Limitations on the Taxing Powers of Local
SEC. 193. Withdrawal of Tax Exemption Privileges – Unless Government Units. – Unless otherwise provided herein, the exercise of
otherwise provided in this Code, tax exemptions or incentives the taxing powers of provinces, cities, municipalities, and barangays
granted to, or presently enjoyed by all persons, whether natural shall not extend to the levy of the following:
or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A. No. xxxx
6938, non-stock and non-profit hospitals and educational institutions
are hereby withdrawn upon effectivity of this Code. (Emphasis (o) Taxes, fees or charges of any kinds on the National Government, its
supplied) agencies and instrumentalities, and local government units. (Emphasis
and underscoring supplied)
The minority states that MIAA is indisputably a juridical person. The
minority argues that since the Local Government Code withdrew the By express mandate of the Local Government Code, local governments
tax exemption of all juridical persons, then MIAA is not exempt from cannot impose any kind of tax on national government
real estate tax. Thus, the minority declares: instrumentalities like the MIAA. Local governments are devoid of power
to tax the national government, its agencies and instrumentalities. The
It is evident from the quoted provisions of the Local taxing powers of local governments do not extend to the national
Government Code that the withdrawn exemptions from realty government, its agencies and instrumentalities, "[u]nless otherwise
tax cover not just GOCCs, but all persons. To repeat, the provided in this Code" as stated in the saving clause of Section 133.
provisions lay down the explicit proposition that the withdrawal of The saving clause refers to Section 234(a) on the exception to the
realty tax exemption applies to all persons. The reference to or the exemption from real estate tax of real property owned by the Republic.
inclusion of GOCCs is only clarificatory or illustrative of the explicit
provision. The minority, however, theorizes that unless exempted in Section 193
itself, all juridical persons are subject to tax by local governments. The
The term "All persons" encompasses the two classes of minority insists that the juridical persons exempt from local taxation
persons recognized under our laws, natural and juridical are limited to the three classes of entities specifically enumerated as
persons. Obviously, MIAA is not a natural person. Thus, the exempt in Section 193. Thus, the minority states:
determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all. (Emphasis and x x x Under Section 193, the exemption is limited to (a) local water
underscoring in the original) districts; (b) cooperatives duly registered under Republic Act No. 6938;
and (c) non-stock and non-profit hospitals and educational institutions.
The minority posits that the "determinative test" whether MIAA is It would be belaboring the obvious why the MIAA does not fall within
exempt from local taxation is its status — whether MIAA is a juridical any of the exempt entities under Section 193. (Emphasis supplied)
person or not. The minority also insists that "Sections 193 and 234 may
be examined in isolation from Section 133(o) to ascertain MIAA's claim The minority's theory directly contradicts and completely negates
of exemption." Section 133(o) of the Local Government Code. This theory will result in
gross absurdities. It will make the national government, which itself is a
The argument of the minority is fatally flawed. Section 193 of the Local juridical person, subject to tax by local governments since the national
Government Code expressly withdrew the tax exemption of all juridical government is not included in the enumeration of exempt entities in
Section 193. Under this theory, local governments can impose any kind SEC. 234. Exemptions from Real Property Tax – The following are
of local tax, and not only real estate tax, on the national government. exempted from payment of the real property tax:

Under the minority's theory, many national government (a) Real property owned by the Republic of the Philippines or any of its
instrumentalities with juridical personalities will also be subject to any political subdivisions except when the beneficial use thereof has been
kind of local tax, and not only real estate tax. Some of the national granted, for consideration or otherwise, to a taxable person.
government instrumentalities vested by law with juridical personalities
are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research x x x. (Emphasis supplied)
Institute,31 Laguna Lake
Under Section 234(a), real property owned by the Republic is exempt
Development Authority,32 Fisheries Development Authority,33 Bases from real estate tax. The exception to this exemption is when the
Conversion Development Authority,34 Philippine Ports government gives the beneficial use of the real property to a taxable
Authority, Cagayan de Oro Port Authority,36 San Fernando Port
35 entity.
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39
The exception to the exemption in Section 234(a) is the only instance
The minority's theory violates Section 133(o) of the Local Government when the national government, its agencies and instrumentalities are
Code which expressly prohibits local governments from imposing any subject to any kind of tax by local governments. The exception to the
kind of tax on national government instrumentalities. Section 133(o) exemption applies only to real estate tax and not to any other tax. The
does not distinguish between national government instrumentalities justification for the exception to the exemption is that the real property,
with or without juridical personalities. Where the law does not although owned by the Republic, is not devoted to public use or public
distinguish, courts should not distinguish. Thus, Section 133(o) applies service but devoted to the private gain of a taxable person.
to all national government instrumentalities, with or without juridical
The minority also argues that since Section 133 precedes Section 193
personalities. The determinative test whether MIAA is exempt from
and 234 of the Local Government Code, the later provisions prevail
local taxation is not whether MIAA is a juridical person, but whether it is
over Section 133. Thus, the minority asserts:
a national government instrumentality under Section 133(o) of the
Local Government Code. Section 133(o) is the specific provision of law x x x Moreover, sequentially Section 133 antecedes Section 193 and
prohibiting local governments from imposing any kind of tax on the 234. Following an accepted rule of construction, in case of conflict the
national government, its agencies and instrumentalities. subsequent provisions should prevail. Therefore, MIAA, as a juridical
person, is subject to real property taxes, the general exemptions
Section 133 of the Local Government Code starts with the saving
attaching to instrumentalities under Section 133(o) of the Local
clause "[u]nless otherwise provided in this Code." This means that
Government Code being qualified by Sections 193 and 234 of the
unless the Local Government Code grants an express authorization,
same law. (Emphasis supplied)
local governments have no power to tax the national government, its
agencies and instrumentalities. Clearly, the rule is local governments The minority assumes that there is an irreconcilable conflict between
have no power to tax the national government, its agencies and Section 133 on one hand, and Sections 193 and 234 on the other. No
instrumentalities. As an exception to this rule, local governments may one has urged that there is such a conflict, much less has any one
tax the national government, its agencies and instrumentalities only if presenteda persuasive argument that there is such a conflict. The
the Local Government Code expressly so provides. minority's assumption of an irreconcilable conflict in the statutory
provisions is an egregious error for two reasons.
The saving clause in Section 133 refers to the exception to the
exemption in Section 234(a) of the Code, which makes the national First, there is no conflict whatsoever between Sections 133 and 193
government subject to real estate tax when it gives the beneficial use because Section 193 expressly admits its subordination to other
of its real properties to a taxable entity. Section 234(a) of the Local provisions of the Code when Section 193 states "[u]nless otherwise
Government Code provides: provided in this Code." By its own words, Section 193 admits the
superiority of other provisions of the Local Government Code that limit SEC. 2. General Terms Defined. — Unless the specific words of the text,
the exercise of the taxing power in Section 193. When a provision of or the context as a whole, or a particular statute, shall require a
law grants a power but withholds such power on certain matters, there different meaning:
is no conflict between the grant of power and the withholding of power.
The grantee of the power simply cannot exercise the power on matters xxxx
withheld from its power.
The minority then concludes that reliance on the Administrative Code
Second, Section 133 is entitled "Common Limitations on the Taxing definition is "flawed."
Powers of Local Government Units." Section 133 limits the grant to
The minority's argument is a non sequitur. True, Section 2 of the
local governments of the power to tax, and not merely the exercise of
Administrative Code recognizes that a statute may require a different
a delegated power to tax. Section 133 states that the taxing powers of
meaning than that defined in the Administrative Code. However, this
local governments "shall not extend to the levy" of any kind of tax on
does not automatically mean that the definition in the Administrative
the national government, its agencies and instrumentalities. There is
Code does not apply to the Local Government Code. Section 2 of the
no clearer limitation on the taxing power than this.
Administrative Code clearly states that "unless the specific words x x x
Since Section 133 prescribes the "common limitations" on the taxing of a particular statute shall require a different meaning," the definition
powers of local governments, Section 133 logically prevails over in Section 2 of the Administrative Code shall apply. Thus, unless there
Section 193 which grants local governments such taxing powers. By is specific language in the Local Government Code defining the phrase
their very meaning and purpose, the "common limitations" on the "government-owned or controlled corporation" differently from the
taxing power prevail over the grant or exercise of the taxing power. If definition in the Administrative Code, the definition in the
the taxing power of local governments in Section 193 prevails over the Administrative Code prevails.
limitations on such taxing power in Section 133, then local
The minority does not point to any provision in the Local Government
governments can impose any kind of tax on the national government,
Code defining the phrase "government-owned or controlled
its agencies and instrumentalities — a gross absurdity.
corporation" differently from the definition in the Administrative Code.
Local governments have no power to tax the national government, its Indeed, there is none. The Local Government Code is silent on the
agencies and instrumentalities, except as otherwise provided in the definition of the phrase "government-owned or controlled corporation."
Local Government Code pursuant to the saving clause in Section 133 The Administrative Code, however, expressly defines the phrase
stating "[u]nless otherwise provided in this Code." This exception — "government-owned or controlled corporation." The inescapable
which is an exception to the exemption of the Republic from real estate conclusion is that the Administrative Code definition of the phrase
tax imposed by local governments — refers to Section 234(a) of the "government-owned or controlled corporation" applies to the Local
Code. The exception to the exemption in Section 234(a) subjects real Government Code.
property owned by the Republic, whether titled in the name of the
The third whereas clause of the Administrative Code states that the
national government, its agencies or instrumentalities, to real estate
Code "incorporates in a unified document the major structural,
tax if the beneficial use of such property is given to a taxable entity.
functional and procedural principles and rules of governance." Thus,
The minority also claims that the definition in the Administrative Code the Administrative Code is the governing law defining the status and
of the phrase "government-owned or controlled corporation" is not relationship of government departments, bureaus, offices, agencies
controlling. The minority points out that Section 2 of the Introductory and instrumentalities. Unless a statute expressly provides for a
Provisions of the Administrative Code admits that its definitions are not different status and relationship for a specific government unit or
controlling when it provides: entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or

controlled corporation" should apply only to corporations organized
under the Corporation Code, the general incorporation law, and not to SECTION 7. Authorized Capital Stock – Par value. — The capital stock of
corporations created by special charters. The minority sees no reason the Bank shall be Five Billion Pesos to be divided into Fifty Million
why government corporations with special charters should have a common shares with par value of P100 per share. These shares are
capital stock. Thus, the minority declares: available for subscription by the National Government. Upon the
effectivity of this Charter, the National Government shall subscribe to
I submit that the definition of "government-owned or controlled Twenty-Five Million common shares of stock worth Two Billion Five
corporations" under the Administrative Code refer to those Hundred Million which shall be deemed paid for by the Government
corporations owned by the government or its instrumentalities which with the net asset values of the Bank remaining after the transfer of
are created not by legislative enactment, but formed and organized assets and liabilities as provided in Section 30 hereof. (Emphasis
under the Corporation Code through registration with the Securities supplied)
and Exchange Commission. In short, these are GOCCs without original
charters. Other government-owned corporations organized as stock corporations
under their special charters are the Philippine Crop Insurance
xxxx Corporation,42 Philippine International Trading Corporation,43 and the
Philippine National Bank44 before it was reorganized as a stock
It might as well be worth pointing out that there is no point in requiring
corporation under the Corporation Code. All these government-owned
a capital structure for GOCCs whose full ownership is limited by its
corporations organized under special charters as stock corporations are
charter to the State or Republic. Such GOCCs are not empowered to
subject to real estate tax on real properties owned by them. To rule
declare dividends or alienate their capital shares.
that they are not government-owned or controlled corporations
The contention of the minority is seriously flawed. It is not in accord because they are not registered with the Securities and Exchange
with the Constitution and existing legislations. It will also result in gross Commission would remove them from the reach of Section 234 of the
absurdities. Local Government Code, thus exempting them from real estate tax.

First, the Administrative Code definition of the phrase "government- Third, the government-owned or controlled corporations created
owned or controlled corporation" does not distinguish between one through special charters are those that meet the two conditions
incorporated under the Corporation Code or under a special charter. prescribed in Section 16, Article XII of the Constitution. The first
Where the law does not distinguish, courts should not distinguish. condition is that the government-owned or controlled corporation must
be established for the common good. The second condition is that the
Second, Congress has created through special charters several government-owned or controlled corporation must meet the test of
government-owned corporations organized as stock corporations. economic viability. Section 16, Article XII of the 1987 Constitution
Prime examples are the Land Bank of the Philippines and the provides:
Development Bank of the Philippines. The special charter40 of the Land
Bank of the Philippines provides: SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations.
SECTION 81. Capital. — The authorized capital stock of the Bank shall Government-owned or controlled corporations may be created or
be nine billion pesos, divided into seven hundred and eighty million established by special charters in the interest of the common good and
common shares with a par value of ten pesos each, which shall be fully subject to the test of economic viability. (Emphasis and underscoring
subscribed by the Government, and one hundred and twenty million supplied)
preferred shares with a par value of ten pesos each, which shall be
issued in accordance with the provisions of Sections seventy-seven and The Constitution expressly authorizes the legislature to create
eighty-three of this Code. (Emphasis supplied) "government-owned or controlled corporations" through special
charters only if these entities are required to meet the twin conditions
Likewise, the special charter41 of the Development Bank of the of common good and economic viability. In other words, Congress has
Philippines provides:
no power to create government-owned or controlled corporations with MR. OPLE: Madam President, the reason for this concern is really that
special charters unless they are made to comply with the two when the government creates a corporation, there is a sense in which
conditions of common good and economic viability. The test of this corporation becomes exempt from the test of economic
economic viability applies only to government-owned or controlled performance. We know what happened in the past. If a government
corporations that perform economic or commercial activities and need corporation loses, then it makes its claim upon the taxpayers' money
to compete in the market place. Being essentially economic vehicles of through new equity infusions from the government and what is always
the State for the common good — meaning for economic development invoked is the common good. That is the reason why this year, out of a
purposes — these government-owned or controlled corporations with budget of P115 billion for the entire government, about P28 billion of
special charters are usually organized as stock corporations just like this will go into equity infusions to support a few government financial
ordinary private corporations. institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and
In contrast, government instrumentalities vested with corporate education, to augment the salaries of grossly underpaid public
powers and performing governmental or public functions need not employees. And yet this is all going down the drain.
meet the test of economic viability. These instrumentalities perform
essential public services for the common good, services that every Therefore, when we insert the phrase "ECONOMIC VIABILITY" together
modern State must provide its citizens. These instrumentalities need with the "common good," this becomes a restraint on future
not be economically viable since the government may even subsidize enthusiasts for state capitalism to excuse themselves from the
their entire operations. These instrumentalities are not the responsibility of meeting the market test so that they become viable.
"government-owned or controlled corporations" referred to in Section And so, Madam President, I reiterate, for the committee's consideration
16, Article XII of the 1987 Constitution. and I am glad that I am joined in this proposal by Commissioner Foz,
the insertion of the standard of "ECONOMIC VIABILITY OR THE
Thus, the Constitution imposes no limitation when the legislature ECONOMIC TEST," together with the common good.45
creates government instrumentalities vested with corporate powers
but performing essential governmental or public functions. Congress Father Joaquin G. Bernas, a leading member of the Constitutional
has plenary authority to create government instrumentalities vested Commission, explains in his textbook The 1987 Constitution of the
with corporate powers provided these instrumentalities perform Republic of the Philippines: A Commentary:
essential government functions or public services. However, when the
legislature creates through special charters corporations that perform The second sentence was added by the 1986 Constitutional
economic or commercial activities, such entities — known as Commission. The significant addition, however, is the phrase "in the
"government-owned or controlled corporations" — must meet the test interest of the common good and subject to the test of economic
of economic viability because they compete in the market place. viability." The addition includes the ideas that they must show capacity
to function efficiently in business and that they should not go into
This is the situation of the Land Bank of the Philippines and the activities which the private sector can do better. Moreover, economic
Development Bank of the Philippines and similar government-owned or viability is more than financial viability but also includes capability to
controlled corporations, which derive their income to meet operating make profit and generate benefits not quantifiable in financial
expenses solely from commercial transactions in competition with the terms.46 (Emphasis supplied)
private sector. The intent of the Constitution is to prevent the creation
of government-owned or controlled corporations that cannot survive on Clearly, the test of economic viability does not apply to government
their own in the market place and thus merely drain the public coffers. entities vested with corporate powers and performing essential public
services. The State is obligated to render essential public services
Commissioner Blas F. Ople, proponent of the test of economic viability, regardless of the economic viability of providing such service. The non-
explained to the Constitutional Commission the purpose of this test, as economic viability of rendering such essential public service does not
follows:
excuse the State from withholding such essential services from the 7. The MIAA, to provide the proper premises — such as runway and
public. buildings — for the government personnel, passengers, and airlines,
and to manage the airport operations.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives, All these agencies of government perform government functions
must meet the test of economic viability. These are the government- essential to the operation of an international airport.
owned or controlled corporations that are usually organized under their
special charters as stock corporations, like the Land Bank of the MIAA performs an essential public service that every modern State
Philippines and the Development Bank of the Philippines. These are the must provide its citizens. MIAA derives its revenues principally from the
government-owned or controlled corporations, along with government- mandatory fees and charges MIAA imposes on passengers and airlines.
owned or controlled corporations organized under the Corporation The terminal fees that MIAA charges every passenger are regulatory or
Code, that fall under the definition of "government-owned or controlled administrative fees47 and not income from commercial transactions.
corporations" in Section 2(10) of the Administrative Code.
MIAA falls under the definition of a government instrumentality under
The MIAA need not meet the test of economic viability because the Section 2(10) of the Introductory Provisions of the Administrative Code,
legislature did not create MIAA to compete in the market place. MIAA which provides:
does not compete in the market place because there is no competing
SEC. 2. General Terms Defined. – x x x x
international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international (10) Instrumentality refers to any agency of the National Government,
airport of the Philippines. The operation of an international airport not integrated within the department framework, vested with special
requires the presence of personnel from the following government functions or jurisdiction by law, endowed with some if not all corporate
agencies: powers, administering special funds, and enjoying operational
autonomy, usually through a charter. x x x (Emphasis supplied)
1. The Bureau of Immigration and Deportation, to document the arrival
and departure of passengers, screening out those without visas or The fact alone that MIAA is endowed with corporate powers does not
travel documents, or those with hold departure orders; make MIAA a government-owned or controlled corporation. Without a
change in its capital structure, MIAA remains a government
2. The Bureau of Customs, to collect import duties or enforce the ban
instrumentality under Section 2(10) of the Introductory Provisions of
on prohibited importations;
the Administrative Code. More importantly, as long as MIAA renders
3. The quarantine office of the Department of Health, to enforce health essential public services, it need not comply with the test of economic
measures against the spread of infectious diseases into the country; viability. Thus, MIAA is outside the scope of the phrase "government-
owned or controlled corporations" under Section 16, Article XII of the
4. The Department of Agriculture, to enforce measures against the 1987 Constitution.
spread of plant and animal diseases into the country;
The minority belittles the use in the Local Government Code of the
5. The Aviation Security Command of the Philippine National Police, to phrase "government-owned or controlled corporation" as merely
prevent the entry of terrorists and the escape of criminals, as well as to "clarificatory or illustrative." This is fatal. The 1987 Constitution
secure the airport premises from terrorist attack or seizure; prescribes explicit conditions for the creation of "government-owned or
controlled corporations." The Administrative Code defines what
6. The Air Traffic Office of the Department of Transportation and constitutes a "government-owned or controlled corporation." To belittle
Communications, to authorize aircraft to enter or leave Philippine this phrase as "clarificatory or illustrative" is grave error.
airspace, as well as to land on, or take off from, the airport; and
To summarize, MIAA is not a government-owned or controlled
corporation under Section 2(13) of the Introductory Provisions of the
Administrative Code because it is not organized as a stock or non-stock government-owned or controlled corporation. Under Section 133(o) of
corporation. Neither is MIAA a government-owned or controlled the Local Government Code, MIAA as a government instrumentality is
corporation under Section 16, Article XII of the 1987 Constitution not a taxable person because it is not subject to "[t]axes, fees or
because MIAA is not required to meet the test of economic viability. charges of any kind" by local governments. The only exception is when
MIAA is a government instrumentality vested with corporate powers MIAA leases its real property to a "taxable person" as provided in
and performing essential public services pursuant to Section 2(10) of Section 234(a) of the Local Government Code, in which case the
the Introductory Provisions of the Administrative Code. As a specific real property leased becomes subject to real estate tax. Thus,
government instrumentality, MIAA is not subject to any kind of tax by only portions of the Airport Lands and Buildings leased to taxable
local governments under Section 133(o) of the Local Government persons like private parties are subject to real estate tax by the City of
Code. The exception to the exemption in Section 234(a) does not apply Parañaque.
to MIAA because MIAA is not a taxable entity under the Local
Government Code. Such exception applies only if the beneficial use of Under Article 420 of the Civil Code, the Airport Lands and Buildings of
real property owned by the Republic is given to a taxable entity. MIAA, being devoted to public use, are properties of public dominion
and thus owned by the State or the Republic of the Philippines. Article
Finally, the Airport Lands and Buildings of MIAA are properties devoted 420 specifically mentions "ports x x x constructed by the State," which
to public use and thus are properties of public dominion. Properties of includes public airports and seaports, as properties of public dominion
public dominion are owned by the State or the Republic. Article 420 of and owned by the Republic. As properties of public dominion owned by
the Civil Code provides: the Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section
Art. 420. The following things are property of public dominion: 234(a) of the Local Government Code. This Court has also repeatedly
ruled that properties of public dominion are not subject to execution or
(1) Those intended for public use, such as roads, canals, rivers,
foreclosure sale.
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character; WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
Resolutions of the Court of Appeals of 5 October 2001 and 27
(2) Those which belong to the State, without being for public use, and
September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport
are intended for some public service or for the development of the
Lands and Buildings of the Manila International Airport
national wealth. (Emphasis supplied)
Authority EXEMPT from the real estate tax imposed by the City of
The term "ports x x x constructed by the State" includes airports and Parañaque. We declare VOID all the real estate tax assessments,
seaports. The Airport Lands and Buildings of MIAA are intended for including the final notices of real estate tax delinquencies, issued by
public use, and at the very least intended for public service. Whether the City of Parañaque on the Airport Lands and Buildings of the Manila
intended for public use or public service, the Airport Lands and International Airport Authority, except for the portions that the Manila
Buildings are properties of public dominion. As properties of public International Airport Authority has leased to private parties. We also
dominion, the Airport Lands and Buildings are owned by the Republic declare VOID the assailed auction sale, and all its effects, of the Airport
and thus exempt from real estate tax under Section 234(a) of the Local Lands and Buildings of the Manila International Airport Authority.
Government Code.
No costs.
4. Conclusion
SO ORDERED.
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a
 G.R. No. 163072 April 2, 2009 6
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner,
vs. A7-
CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, 183- 1992- 113,582,466. 71,159,414.9 184,741,880.9
CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY 0522 2001 00 8 8
ASSESSOR OF PASAY, Respondents. 4

DECISION A7-
CARPIO, J.: 191- 1992- 54,454,800.0 34,115,932.2
88,570,732.20
0084 2001 0 0
This is a petition for review on certiorari 1 of the Decision2 dated 30 3
October 2002 and the Resolution dated 19 March 2004 of the Court of
Appeals in CA-G.R. SP No. 67416. A7-
191- 1992-
The Facts 1,632,960.00 1,023,049.44 2,656,009.44
0014 2001
Petitioner Manila International Airport Authority (MIAA) operates and 0
administers the Ninoy Aquino International Airport (NAIA) Complex
under Executive Order No. 903 (EO 903),3 otherwise known as the A7-
Revised Charter of the Manila International Airport Authority. EO 903 191- 1992-
6,068,448.00 3,801,882.85 9,870,330.85
was issued on 21 July 1983 by then President Ferdinand E. Marcos. 0013 2001
Under Sections 34 and 225 of EO 903, approximately 600 hectares of 9
land, including the runways, the airport tower, and other airport
buildings, were transferred to MIAA. The NAIA Complex is located along A7-
the border between Pasay City and Parañaque City. 183- 1992- 59,129,520.0 37,044,644.2
96,174,164.28
0540 2001 0 8
On 28 August 2001, MIAA received Final Notices of Real Property Tax
9
Delinquency from the City of Pasay for the taxable years 1992 to 2001.
MIAA’s real property tax delinquency for its real properties located in
NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay A7-
properties) is tabulated as follows: 183- 1992- 20,619,720.0 12,918,254.5
33,537,974.58
0541 2001 0 8
TAX 0
DECL TAXAB
A- LE TAX DUE PENALTY TOTAL A7-
RATIO YEAR 183- 1992-
7,908,240.00 4,954,512.36 12,862,752.36
N 0541 2001
3
A7- 1997- 243,522,855. 123,351,728. 366,874,583.1
183- 2001 00 18 8 A7- 1992- 18,441,981.2 11,553,901.1 29,995,882.33
0834 183- 2001 0 3
0541
 2 and non-profit hospitals and educational institutions. Since MIAA is a
government-owned corporation, it follows that its tax exemption under
Section 21 of EO 903 has been withdrawn upon the effectivity of the
A7-
Local Government Code.
183- 1992- 109,946,736. 68,881,630.1 178,828,366.1
0541 2001 00 3 3 The Issue
1
The issue raised in this petition is whether the NAIA Pasay properties of
A7- MIAA are exempt from real property tax.
183- 1992- The Court’s Ruling
7,440,000.00 4,661,160.00 12,101,160.00
0524 2001
5 The petition is meritorious.

In ruling that MIAA is not exempt from paying real property tax, the
₱642,747,72 ₱373,466,11 ₱1,016,213,83
GRAND TOTAL Court of Appeals cited Sections 193 and 234 of the Local Government
6.20 0.13 6.33
Code which read:
On 24 August 2001, the City of Pasay, through its City Treasurer, issued SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless
notices of levy and warrants of levy for the NAIA Pasay properties. MIAA otherwise provided in this Code, tax exemptions or incentives granted
received the notices and warrants of levy on 28 August 2001. to, or presently enjoyed by all persons, whether natural or juridical,
Thereafter, the City Mayor of Pasay threatened to sell at public auction including government-owned or controlled corporations, except local
the NAIA Pasay properties if the delinquent real property taxes remain water districts, cooperatives duly registered under R.A. No. 6938, non-
unpaid. stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
On 29 October 2001, MIAA filed with the Court of Appeals a petition for
prohibition and injunction with prayer for preliminary injunction or SECTION 234. Exemptions from Real Property Tax. – The following are
temporary restraining order. The petition sought to enjoin the City of exempted from payment of the real property tax:
Pasay from imposing real property taxes on, levying against, and
auctioning for public sale the NAIA Pasay properties. (a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
On 30 October 2002, the Court of Appeals dismissed the petition and granted, for consideration or otherwise to a taxable person;
upheld the power of the City of Pasay to impose and collect realty
taxes on the NAIA Pasay properties. MIAA filed a motion for (b) Charitable institutions, churches, parsonages or convents
reconsideration, which the Court of Appeals denied. Hence, this appurtenant thereto, mosques, non-profit or religious cemeteries and
petition. all lands, buildings and improvements actually, directly, and exclusively
used for religious, charitable or educational purposes;
The Court of Appeals’ Ruling
(c) All machineries and equipment that are actually, directly and
The Court of Appeals held that Sections 193 and 234 of Republic Act exclusively used by local water districts and government owned or
No. 7160 or the Local Government Code, which took effect on 1 controlled corporations engaged in the supply and distribution of water
January 1992, withdrew the exemption from payment of real property and/or generation and transmission of electric power;
taxes granted to natural or juridical persons, including government-
owned or controlled corporations, except local water districts, (d) All real property owned by duly registered cooperatives as provided
cooperatives duly registered under Republic Act No. 6938, non-stock for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and Government Code. Such exception applies only if the beneficial use of
environment protection. real property owned by the Republic is given to a taxable entity.

Except as provided herein, any exemption from payment of real Finally, the Airport Lands and Buildings of MIAA are properties devoted
property tax previously granted to, or presently enjoyed by, all persons, to public use and thus are properties of public dominion. Properties of
whether natural or juridical, including all government-owned or public dominion are owned by the State or the Republic. Article 420 of
controlled corporations are hereby withdrawn upon the effectivity of the Civil Code provides:
this Code.
Art. 420. The following things are property of public dominion:
The Court of Appeals held that as a government-owned corporation,
MIAA’s tax exemption under Section 21 of EO 903 has already been (1) Those intended for public use, such as roads, canals, rivers,
withdrawn upon the effectivity of the Local Government Code in 1992. torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
In Manila International Airport Authority v. Court of Appeals6 (2006
MIAA case), this Court already resolved the issue of whether the airport (2) Those which belong to the State, without being for public use, and
lands and buildings of MIAA are exempt from tax under existing laws. are intended for some public service or for the development of
The 2006 MIAA case originated from a petition for prohibition and the national wealth.
injunction which MIAA filed with the Court of Appeals, seeking to
The term "ports x x x constructed by the State" includes airports and
restrain the City of Parañaque from imposing real property tax on,
seaports. The Airport Lands and Buildings of MIAA are intended for
levying against, and auctioning for public sale the airport lands and
public use, and at the very least intended for public service. Whether
buildings located in Parañaque City. The only difference between the
intended for public use or public service, the Airport Lands and
2006 MIAA case and this case is that the 2006 MIAA case involved
Buildings are properties of public dominion. As properties of public
airport lands and buildings located in Parañaque City while this case
dominion, the Airport Lands and Buildings are owned by the Republic
involved airport lands and buildings located in Pasay City. The 2006
and thus exempt from real estate tax under Section 234(a) of the Local
MIAA case and this case raised the same threshold issue: whether the
Government Code.7 (Emphasis in the original)
local government can impose real property tax on the airport lands,
consisting mostly of the runways, as well as the airport buildings, of The definition of "instrumentality" under Section 2(10) of the
MIAA. In the 2006 MIAA case, this Court held: Introductory Provisions of the Administrative Code of 1987 uses the
phrase "includes x x x government-owned or controlled corporations"
To summarize, MIAA is not a government-owned or controlled
which means that a government "instrumentality" may or may not be
corporation under Section 2(13) of the Introductory Provisions of the
a "government-owned or controlled corporation." Obviously, the term
Administrative Code because it is not organized as a stock or non-stock
government "instrumentality" is broader than the term "government-
corporation. Neither is MIAA a government-owned or controlled
owned or controlled corporation." Section 2(10) provides:
corporation under Section 16, Article XII of the 1987 Constitution
because MIAA is not required to meet the test of economic viability. SEC. 2. General Terms Defined.– x x x
MIAA is a government instrumentality vested with corporate powers
and performing essential public services pursuant to Section 2(10) of (10) Instrumentality refers to any agency of the national Government,
the Introductory Provisions of the Administrative Code. As a not integrated within the department framework, vested with special
government instrumentality, MIAA is not subject to any kind of tax by functions or jurisdiction by law, endowed with some if not all corporate
local governments under Section 133(o) of the Local Government powers, administering special funds, and enjoying operational
Code. The exception to the exemption in Section 234(a) does not apply autonomy, usually through a charter. This term includes regulatory
to MIAA because MIAA is not a taxable entity under the Local agencies, chartered institutions and government-owned or controlled
corporations.
The term "government-owned or controlled corporation" has a "one where no part of its income is distributable as dividends to its
separate definition under Section 2(13)8 of the Introductory Provisions members, trustees or officers." A non-stock corporation must have
of the Administrative Code of 1987: members. Even if we assume that the Government is considered as
the sole member of MIAA, this will not make MIAA a non-stock
SEC. 2. General Terms Defined.– x x x corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates
(13) Government-owned or controlled corporation refers to any agency
MIAA to remit 20% of its annual gross operating income to the National
organized as a stock or non-stock corporation, vested with functions
Treasury. This prevents MIAA from qualifying as a non-stock
relating to public needs whether governmental or proprietary in nature,
corporation.
and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, Section 88 of the Corporation Code provides that non-stock
to the extent of at least fifty-one (51) percent of its capital corporations are "organized for charitable, religious, educational,
stock: Provided, That government-owned or controlled corporations professional, cultural, recreational, fraternal, literary, scientific, social,
may further be categorized by the department of Budget, the Civil civil service, or similar purposes, like trade, industry, agriculture and
Service Commission, and the Commission on Audit for the purpose of like chambers." MIAA is not organized for any of these purposes. MIAA,
the exercise and discharge of their respective powers, functions and a public utility, is organized to operate an international and domestic
responsibilities with respect to such corporations. airport for public use.
The fact that two terms have separate definitions means that while a Since MIAA is neither a stock nor a non-stock corporation, MIAA does
government "instrumentality" may include a "government-owned or not qualify as a government-owned or controlled corporation. What
controlled corporation," there may be a government "instrumentality" then is the legal status of MIAA within the National Government?
that will not qualify as a "government-owned or controlled corporation."
MIAA is a government instrumentality vested with corporate powers to
A close scrutiny of the definition of "government-owned or controlled perform efficiently its governmental functions. MIAA is like any other
corporation" in Section 2(13) will show that MIAA would not fall under government instrumentality, the only difference is that MIAA is vested
such definition. MIAA is a government "instrumentality" that with corporate powers. x x x
does not qualify as a "government-owned or controlled
corporation." As explained in the 2006 MIAA case: When the law vests in a government instrumentality corporate powers,
the instrumentality does not become a corporation. Unless the
A government-owned or controlled corporation must be "organized as government instrumentality is organized as a stock or non-stock
a stock or non-stock corporation." MIAA is not organized as a stock or corporation, it remains a government instrumentality exercising not
non-stock corporation. MIAA is not a stock corporation because it has only governmental but also corporate powers. Thus, MIAA exercises
no capital stock divided into shares. MIAA has no stockholders or voting the governmental powers of eminent domain, police authority and the
shares. x x x levying of fees and charges. At the same time, MIAA exercises "all the
powers of a corporation under the Corporation Law, insofar as these
Section 3 of the Corporation Code defines a stock corporation as one
powers are not inconsistent with the provisions of this Executive
whose "capital stock is divided into shares and x x x authorized to
Order."9
distribute to the holders of such shares dividends x x x." MIAA has
capital but it is not divided into shares of stock. MIAA has no Thus, MIAA is not a government-owned or controlled corporation but a
stockholders or voting shares. Hence, MIAA is not a stock corporation. government instrumentality which is exempt from any kind of tax from
the local governments. Indeed, the exercise of the taxing power of local
xxx
government units is subject to the limitations enumerated in Section
MIAA is also not a non-stock corporation because it has no members. 133 of the Local Government Code.10 Under Section 133(o)11 of the
Section 87 of the Corporation Code defines a non-stock corporation as Local Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence,
MIAA is not liable to pay real property tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of

public dominion intended for public use, and as such are exempt from
real property tax under Section 234(a) of the Local Government Code.
However, under the same provision, if MIAA leases its real property to a
taxable person, the specific property leased becomes subject to real
property tax.12 In this case, only those portions of the NAIA Pasay
properties which are leased to taxable persons like private parties are
subject to real property tax by the City of Pasay.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision

dated 30 October 2002 and the Resolution dated 19 March 2004 of the
Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA
Pasay properties of the Manila International Airport
Authority EXEMPT from real property tax imposed by the City of
Pasay. We declare VOID all the real property tax assessments,
including the final notices of real property tax delinquencies, issued by
the City of Pasay on the NAIA Pasay properties of the Manila
International Airport Authority, except for the portions that the Manila
International Airport Authority has leased to private parties.

No costs.

SO ORDERED.
 G.R. No. 171182 August 23, 2012 In the course of the implementation of the contract, Stern Builders
submitted three progress billings corresponding to the work
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. accomplished, but the UP paid only two of the billings. The third billing
DE GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO, worth ₱ 273,729.47 was not paid due to its disallowance by the
WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA R. Commission on Audit (COA). Despite the lifting of the disallowance, the
LICUANAN, Petitioners, UP failed to pay the billing, prompting Stern Builders and dela Cruz to
vs. sue the UP and its co-respondent officials to collect the unpaid billing
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of and to recover various damages. The suit, entitled Stern Builders
the Regional Trial Court of Quezon City, Branch 80, STERN Corporation and Servillano R. Dela Cruz v. University of the Philippines
BUILDERS, INC., and SERVILLANO DELA CRUZ, Respondents. Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P. Aspiras,
Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R.
DECISION
Licuanan, was docketed as Civil Case No. Q-93-14971 of the Regional
BERSAMIN, J.: Trial Court in Quezon City (RTC).4

Trial judges should not immediately issue writs of execution or After trial, on November 28, 2001, the RTC rendered its decision in
garnishment against the Government or any of its subdivisions, favor of the plaintiffs,5 viz:
agencies and instrumentalities to enforce money judgments.1 They
Wherefore, in the light of the foregoing, judgment is hereby rendered in
should bear in mind that the primary jurisdiction to examine, audit and
favor of the plaintiff and against the defendants ordering the latter to
settle all claims of any sort due from the Government or any of its
pay plaintiff, jointly and severally, the following, to wit:
subdivisions, agencies and instrumentalities pertains to the
Commission on Audit (COA) pursuant to Presidential Decree No. 1445 1. ₱ 503,462.74 amount of the third billing, additional accomplished
(Government Auditing Code of the Philippines). work and retention money
The Case 2. ₱ 5,716,729.00 in actual damages
On appeal by the University of the Philippines and its then incumbent 3. ₱ 10,000,000.00 in moral damages
officials (collectively, the UP) is the decision promulgated on September
16, 2005,2 whereby the Court of Appeals (CA) upheld the order of the 4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s fees; and
Regional Trial Court (RTC), Branch 80, in Quezon City that directed the
garnishment of public funds amounting to ₱ 16,370,191.74 belonging 5. Costs of suit.
to the UP to satisfy the writ of execution issued to enforce the already
SO ORDERED.
final and executory judgment against the UP.
Following the RTC’s denial of its motion for reconsideration on May 7,
Antecedents
2002,6 the UP filed a notice of appeal on June 3, 2002.7 Stern Builders
On August 30, 1990, the UP, through its then President Jose V. Abueva, and dela Cruz opposed the notice of appeal on the ground of its filing
entered into a General Construction Agreement with respondent Stern being belated, and moved for the execution of the decision. The UP
Builders Corporation (Stern Builders), represented by its President and countered that the notice of appeal was filed within the reglementary
General Manager Servillano dela Cruz, for the construction of the period because the UP’s Office of Legal Affairs (OLS) in Diliman, Quezon
extension building and the renovation of the College of Arts and City received the order of denial only on May 31, 2002. On September
Sciences Building in the campus of the University of the Philippines in 26, 2002, the RTC denied due course to the notice of appeal for having
Los Baños (UPLB).3 been filed out of time and granted the private respondents’ motion for
execution.8
The RTC issued the writ of execution on October 4, 2002,9 and the court ipso facto became final when no appeal was perfected after the
sheriff of the RTC served the writ of execution and notice of demand lapse of the reglementary period. This procedural caveat cannot be
upon the UP, through its counsel, on October 9, 2002. 10 The UP filed an trifled with, not even by the High Court.15
urgent motion to reconsider the order dated September 26, 2002, to
quash the writ of execution dated October 4, 2002, and to restrain the The UP sought a reconsideration, but the CA denied the UP’s motion for
proceedings.11 However, the RTC denied the urgent motion on April 1, reconsideration on April 19, 2004.16
2003.12
On May 11, 2004, the UP appealed to the Court by petition for review
On June 24, 2003, the UP assailed the denial of due course to its appeal on certiorari (G.R. No. 163501).
through a petition for certiorari in the Court of Appeals (CA), docketed
On June 23, 2004, the Court denied the petition for review. 17 The UP
as CA-G.R. No. 77395.13
moved for the reconsideration of the denial of its petition for review on
On February 24, 2004, the CA dismissed the petition for certiorari upon August 29, 2004,18 but the Court denied the motion on October 6,
finding that the UP’s notice of appeal had been filed late,14 stating: 2004.19 The denial became final and executory on November 12,
2004.20
Records clearly show that petitioners received a copy of the Decision
dated November 28, 2001 and January 7, 2002, thus, they had until In the meanwhile that the UP was exhausting the available remedies to
January 22, 2002 within which to file their appeal. On January 16, 2002 overturn the denial of due course to the appeal and the issuance of the
or after the lapse of nine (9) days, petitioners through their counsel writ of execution, Stern Builders and dela Cruz filed in the RTC their
Atty. Nolasco filed a Motion for Reconsideration of the aforesaid motions for execution despite their previous motion having already
decision, hence, pursuant to the rules, petitioners still had six (6) been granted and despite the writ of execution having already issued.
remaining days to file their appeal. As admitted by the petitioners in On June 11, 2003, the RTC granted another motion for execution filed
their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Order on May 9, 2003 (although the RTC had already issued the writ of
denying their motion for reconsideration on May 17, 2002, thus, execution on October 4, 2002).21
petitioners still has until May 23, 2002 (the remaining six (6) days)
On June 23, 2003 and July 25, 2003, respectively, the sheriff served
within which to file their appeal. Obviously, petitioners were not able to
notices of garnishment on the UP’s depository banks, namely: Land
file their Notice of Appeal on May 23, 2002 as it was only filed on June
Bank of the Philippines (Buendia Branch) and the Development Bank of
3, 2002.
the Philippines (DBP), Commonwealth Branch.22 The UP assailed the
In view of the said circumstances, We are of the belief and so holds garnishment through an urgent motion to quash the notices of
that the Notice of Appeal filed by the petitioners was really filed out of garnishment;23 and a motion to quash the writ of execution dated May
time, the same having been filed seventeen (17) days late of the 9, 2003.24
reglementary period. By reason of which, the decision dated November
On their part, Stern Builders and dela Cruz filed their ex parte motion
28, 2001 had already become final and executory. "Settled is the rule
for issuance of a release order.25
that the perfection of an appeal in the manner and within the period
permitted by law is not only mandatory but jurisdictional, and failure to On October 14, 2003, the RTC denied the UP’s urgent motion to quash,
perfect that appeal renders the challenged judgment final and and granted Stern Builders and dela Cruz’s ex parte motion for
executory. This is not an empty procedural rule but is grounded on issuance of a release order.26
fundamental considerations of public policy and sound practice."
(Ram’s Studio and Photographic Equipment, Inc. vs. Court of Appeals, The UP moved for the reconsideration of the order of October 14, 2003,
346 SCRA 691, 696). Indeed, Atty. Nolasco received the order of denial but the RTC denied the motion on November 7, 2003.27
of the Motion for Reconsideration on May 17, 2002 but filed a Notice of
On January 12, 2004, Stern Builders and dela Cruz again sought the
Appeal only on June 3, 3003. As such, the decision of the lower
release of the garnished funds.28 Despite the UP’s opposition,29 the RTC
granted the motion to release the garnished funds on March 16, On January 19, 2005, the CA issued a temporary restraining order
2004.30 On April 20, 2004, however, the RTC held in abeyance the (TRO) upon application by the UP.38
enforcement of the writs of execution issued on October 4, 2002 and
June 3, 2003 and all the ensuing notices of garnishment, citing Section On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their
4, Rule 52, Rules of Court, which provided that the pendency of a amended motion for sheriff’s assistance to implement the release
timely motion for reconsideration stayed the execution of the order dated December 21, 2004, stating that the 60-day period of the
judgment.31 TRO of the CA had already lapsed. 39 The UP opposed the amended
motion and countered that the implementation of the release order be
On December 21, 2004, the RTC, through respondent Judge Agustin S. suspended.40
Dizon, authorized the release of the garnished funds of the UP,32 to wit:
On May 3, 2005, the RTC granted the amended motion for sheriff’s
WHEREFORE, premises considered, there being no more legal assistance and directed the sheriff to proceed to the DBP to receive the
impediment for the release of the garnished amount in satisfaction of check in satisfaction of the judgment.41
the judgment award in the instant case, let the amount garnished be
immediately released by the Development Bank of the Philippines, The UP sought the reconsideration of the order of May 3, 2005.42
Commonwealth Branch, Quezon City in favor of the plaintiff.
On May 16, 2005, DBP filed a motion to consign the check representing
SO ORDERED. the judgment award and to dismiss the motion to cite its officials in
contempt of court.43
The UP was served on January 3, 2005 with the order of December 21,
2004 directing DBP to release the garnished funds.33 On May 23, 2005, the UP presented a motion to withhold the release of
the payment of the judgment award.44
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in
direct contempt of court for its non-compliance with the order of On July 8, 2005, the RTC resolved all the pending matters,45 noting that
release.34 the DBP had already delivered to the sheriff Manager’s Check No.
811941 for ₱ 16,370,191.74 representing the garnished funds payable
Thereupon, on January 10, 2005, the UP brought a petition to the order of Stern Builders and dela Cruz as its compliance with the
for certiorari in the CA to challenge the jurisdiction of the RTC in issuing RTC’s order dated December 21, 2004.46 However, the RTC directed in
the order of December 21, 2004 (CA-G.R. CV No. 88125). 35 Aside from the same order that Stern Builders and dela Cruz should not encash
raising the denial of due process, the UP averred that the RTC the check or withdraw its amount pending the final resolution of the
committed grave abuse of discretion amounting to lack or excess of UP’s petition for certiorari, to wit:47
jurisdiction in ruling that there was no longer any legal impediment to
the release of the garnished funds. The UP argued that government To enable the money represented in the check in question (No.
funds and properties could not be seized by virtue of writs of execution 00008119411) to earn interest during the pendency of the defendant
or garnishment, as held in Department of Agriculture v. National Labor University of the Philippines application for a writ of injunction with the
Relations Commission,36 and citing Section 84 of Presidential Decree Court of Appeals the same may now be deposited by the plaintiff at the
No. 1445 to the effect that "revenue funds shall not be paid out of any garnishee Bank (Development Bank of the Philippines), the disposition
public treasury or depository except in pursuance of an appropriation of the amount represented therein being subject to the final outcome
law or other specific statutory authority;" and that the order of of the case of the University of the Philippines et al., vs. Hon. Agustin S.
garnishment clashed with the ruling in University of the Philippines Dizon et al., (CA G.R. 88125) before the Court of Appeals.
Board of Regents v. Ligot-Telan37 to the effect that the funds belonging
Let it be stated herein that the plaintiff is not authorized to encash and
to the UP were public funds.
withdraw the amount represented in the check in question and enjoy
the same in the fashion of an owner during the pendency of the case
between the parties before the Court of Appeals which may or may not fiduciary funds, as long as the purpose for which the funds were
be resolved in plaintiff’s favor. created have not been accomplished and accounts payable under
foreign assisted projects for the duration of the said project. In this
With the end in view of seeing to it that the check in question is regard, the Department of Budget and Management issued Joint-
deposited by the plaintiff at the Development Bank of the Philippines Circular No. 99-6 4.0 (4.3) Procedural Guidelines which provides that all
(garnishee bank), Branch Sheriff Herlan Velasco is directed to accounts payable that reverted to the CROU may be considered for
accompany and/or escort the plaintiff in making the deposit of the payment upon determination thru administrative process, of the
check in question. existence, validity and legality of the claim. Thus, the allegation of the
defendants that considering no appropriation for the payment of any
SO ORDERED.
amount awarded to plaintiffs appellee the funds of defendant-
On September 16, 2005, the CA promulgated its assailed decision appellants may not be seized pursuant to a writ of execution issued by
dismissing the UP’s petition for certiorari, ruling that the UP had been the regular court is misplaced. Surely when the defendants and the
given ample opportunity to contest the motion to direct the DBP to plaintiff entered into the General Construction of Agreement there is an
deposit the check in the name of Stern Builders and dela Cruz; and that amount already allocated by the latter for the said project which is no
the garnished funds could be the proper subject of garnishment longer subject of future appropriation."49
because they had been already earmarked for the project, with the UP
After the CA denied their motion for reconsideration on December 23,
holding the funds only in a fiduciary capacity,48 viz:
2005, the petitioners appealed by petition for review.
Petitioners next argue that the UP funds may not be seized for
Matters Arising During the Pendency of the Petition
execution or garnishment to satisfy the judgment award. Citing
Department of Agriculture vs. NLRC, University of the Philippines Board On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern
of Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at Builders and dela Cruz’s motion to withdraw the deposit, in
Land Bank and the Development Bank of the Philippines, being consideration of the UP’s intention to appeal to the CA,50 stating:
government funds, may not be released absent an appropriations bill
from Congress. Since it appears that the defendants are intending to file a petition for
review of the Court of Appeals resolution in CA-G.R. No. 88125 within
The argument is specious. UP entered into a contract with private the reglementary period of fifteen (15) days from receipt of resolution,
respondents for the expansion and renovation of the Arts and Sciences the Court agrees with the defendants stand that the granting of
Building of its campus in Los Baños, Laguna. Decidedly, there was plaintiffs’ subject motion is premature.
already an appropriations earmarked for the said project. The said
funds are retained by UP, in a fiduciary capacity, pending completion of Let it be stated that what the Court meant by its Order dated July 8,
the construction project. 2005 which states in part that the "disposition of the amount
represented therein being subject to the final outcome of the case of
We agree with the trial Court [sic] observation on this score: the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al.,
(CA G.R. No. 88125 before the Court of Appeals) is that the judgment or
"4. Executive Order No. 109 (Directing all National Government
resolution of said court has to be final and executory, for if the same
Agencies to Revert Certain Accounts Payable to the Cumulative Result
will still be elevated to the Supreme Court, it will not attain finality yet
of Operations of the National Government and for Other Purposes)
until the highest court has rendered its own final judgment or
Section 9. Reversion of Accounts Payable, provides that, all 1995 and
resolution.51
prior years documented accounts payable and all undocumented
accounts regardless of the year they were incurred shall be reverted to However, on January 22, 2007, the UP filed an Urgent Application for A
the Cumulative Result of Operations of the National Government Temporary Restraining Order and/or A Writ of Preliminary
(CROU). This shall apply to accounts payable of all funds, except Injunction,52 averring that on January 3, 2007, Judge Maria Theresa dela
Torre-Yadao (who had meanwhile replaced Judge Dizon upon the issuance of a writ of preliminary injunction. Thus, the Court doubts
latter’s appointment to the CA) had issued another order allowing Stern whether such writ is forthcoming.
Builders and dela Cruz to withdraw the deposit,53 to wit:
The Court honestly believes that if defendants’ petition assailing the
It bears stressing that defendants’ liability for the payment of the Order of this Court dated December 31, 2004 granting the motion for
judgment obligation has become indubitable due to the final and the release of the garnished amount was meritorious, the Court of
executory nature of the Decision dated November 28, 2001. Insofar as Appeals would have issued a writ of injunction enjoining the same.
the payment of the [sic] judgment obligation is concerned, the Court Instead, said appellate court not only refused to issue a wit of
believes that there is nothing more the defendant can do to escape preliminary injunction prayed for by U.P. System but denied the
liability. It is observed that there is nothing more the defendant can do petition, as well.54
to escape liability. It is observed that defendant U.P. System had
already exhausted all its legal remedies to overturn, set aside or modify The UP contended that Judge Yadao thereby effectively reversed the
the decision (dated November 28, 2001( rendered against it. The way January 30, 2006 order of Judge Dizon disallowing the withdrawal of the
the Court sees it, defendant U.P. System’s petition before the Supreme garnished amount until after the decision in the case would have
Court concerns only with the manner by which said judgment award become final and executory.
should be satisfied. It has nothing to do with the legality or propriety
Although the Court issued a TRO on January 24, 2007 to enjoin Judge
thereof, although it prays for the deletion of [sic] reduction of the award
Yadao and all persons acting pursuant to her authority from enforcing
of moral damages.
her order of January 3, 2007,55 it appears that on January 16, 2007, or
It must be emphasized that this Court’s finding, i.e., that there was prior to the issuance of the TRO, she had already directed the DBP to
sufficient appropriation earmarked for the project, was upheld by the forthwith release the garnished amount to Stern Builders and dela
Court of Appeals in its decision dated September 16, 2005. Being a Cruz; 56 and that DBP had forthwith complied with the order on January
finding of fact, the Supreme Court will, ordinarily, not disturb the same 17, 2007 upon the sheriff’s service of the order of Judge Yadao.57
was said Court is not a trier of fact. Such being the case, defendants’
These intervening developments impelled the UP to file in this Court a
arguments that there was no sufficient appropriation for the payment
supplemental petition on January 26, 2007,58 alleging that the RTC
of the judgment obligation must fail.
(Judge Yadao) gravely erred in ordering the immediate release of the
While it is true that the former Presiding Judge of this Court in its Order garnished amount despite the pendency of the petition for review in
dated January 30, 2006 had stated that: this Court.

Let it be stated that what the Court meant by its Order dated July 8, The UP filed a second supplemental petition 59 after the RTC (Judge
2005 which states in part that the "disposition of the amount Yadao) denied the UP’s motion for the redeposit of the withdrawn
represented therein being subject to the final outcome of the case of amount on April 10, 2007,60 to wit:
the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al.,
This resolves defendant U.P. System’s Urgent Motion to Redeposit
(CA G.R. No. 88125 before the Court of Appeals) is that the judgment or
Judgment Award praying that plaintiffs be directed to redeposit the
resolution of said court has to be final and executory, for if the same
judgment award to DBP pursuant to the Temporary Restraining Order
will still be elevated to the Supreme Court, it will not attain finality yet
issued by the Supreme Court. Plaintiffs opposed the motion and
until the highest court has rendered its own final judgment or
countered that the Temporary Restraining Order issued by the
resolution.
Supreme Court has become moot and academic considering that the
it should be noted that neither the Court of Appeals nor the Supreme act sought to be restrained by it has already been performed. They
Court issued a preliminary injunction enjoining the release or also alleged that the redeposit of the judgment award was no longer
withdrawal of the garnished amount. In fact, in its present petition for feasible as they have already spent the same.
review before the Supreme Court, U.P. System has not prayed for the
It bears stressing, if only to set the record straight, that this Court did After a careful and thorough study of the arguments advanced by the
not – in its Order dated January 3, 2007 (the implementation of which parties, the Court is of the considered opinion that there is no legal
was restrained by the Supreme Court in its Resolution dated January basis to grant defendant U.P. System’s motion to redeposit the
24, 2002) – direct that that garnished amount "be deposited with the judgment amount. Granting said motion is not only contrary to law, but
garnishee bank (Development Bank of the Philippines)". In the first it will also render this Court’s final executory judgment nugatory.
place, there was no need to order DBP to make such deposit, as the Litigation must end and terminate sometime and somewhere, and it is
garnished amount was already deposited in the account of plaintiffs essential to an effective administration of justice that once a judgment
with the DBP as early as May 13, 2005. What the Court granted in its has become final the issue or cause involved therein should be laid to
Order dated January 3, 2007 was plaintiff’s motion to allow the release rest. This doctrine of finality of judgment is grounded on fundamental
of said deposit. It must be recalled that the Court found plaintiff’s considerations of public policy and sound practice. In fact, nothing is
motion meritorious and, at that time, there was no restraining order or more settled in law than that once a judgment attains finality it thereby
preliminary injunction from either the Court of Appeals or the Supreme becomes immutable and unalterable. It may no longer be modified in
Court which could have enjoined the release of plaintiffs’ deposit. The any respect, even if the modification is meant to correct what is
Court also took into account the following factors: perceived to be an erroneous conclusion of fact or law, and regardless
of whether the modification is attempted to be made by the court
a) the Decision in this case had long been final and executory after it rendering it or by the highest court of the land.
was rendered on November 28, 2001;
WHEREFORE, premises considered, finding defendant U.P. System’s
b) the propriety of the dismissal of U.P. System’s appeal was upheld by Urgent Motion to Redeposit Judgment Award devoid of merit, the same
the Supreme Court; is hereby DENIED.
c) a writ of execution had been issued; SO ORDERED.
d) defendant U.P. System’s deposit with DBP was garnished pursuant Issues
to a lawful writ of execution issued by the Court; and
The UP now submits that:
e) the garnished amount had already been turned over to the plaintiffs
and deposited in their account with DBP. I

The garnished amount, as discussed in the Order dated January 16, THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING
2007, was already owned by the plaintiffs, having been delivered to THE PETITION, ALLOWING IN EFFECT THE GARNISHMENT OF UP
them by the Deputy Sheriff of this Court pursuant to par. (c), Section 9, FUNDS, WHEN IT RULED THAT FUNDS HAVE ALREADY BEEN
Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment EARMARKED FOR THE CONSTRUCTION PROJECT; AND THUS, THERE IS
obligation has already been fully satisfied as per Report of the Deputy NO NEED FOR FURTHER APPROPRIATIONS.
Sheriff.
II
Anent the Temporary Restraining Order issued by the Supreme Court,
the same has become functus oficio, having been issued after the THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING
garnished amount had been released to the plaintiffs. The judgment GARNISHMENT OF A STATE UNIVERSITY’S FUNDS IN VIOLATION OF
debt was released to the plaintiffs on January 17, 2007, while the ARTICLE XIV, SECTION 5(5) OF THE CONSTITUTION.
Temporary Restraining Order issued by the Supreme Court was
III
received by this Court on February 2, 2007. At the time of the issuance
of the Restraining Order, the act sought to be restrained had already IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE
been done, thereby rendering the said Order ineffectual. REVIEW POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT
TOTALLY DELETE THE AWARD OF ₱ 10 MILLION AS MORAL DAMAGES the UP’s petition for review; and that she should have also desisted
TO RESPONDENTS. from declaring that the TRO issued by this Court had become functus
officio.
IV
Lastly, the UP states that the awards of actual damages of ₱
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE 5,716,729.00 and moral damages of ₱ 10 million should be reduced, if
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED not entirely deleted, due to its being unconscionable, inequitable and
3 JANUARY 2007 ON THE GROUND OF EQUITY AND JUDICIAL detrimental to public service.
COURTESY.
In contrast, Stern Builders and dela Cruz aver that the petition for
V review was fatally defective for its failure to mention the other cases
upon the same issues pending between the parties (i.e., CA-G.R. No.
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
77395 and G.R No. 163501); that the UP was evidently resorting to
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED
forum shopping, and to delaying the satisfaction of the final judgment
16 JANUARY 2007 ON THE GROUND THAT PETITIONER UNIVERSITY
by the filing of its petition for review; that the ruling in Commissioner of
STILL HAS A PENDING MOTION FOR RECONSIDERATION OF THE
Public Works v. San Diego had no application because there was an
ORDER DATED 3 JANUARY 2007.
appropriation for the project; that the UP retained the funds allotted for
VI the project only in a fiduciary capacity; that the contract price had been
meanwhile adjusted to ₱ 22,338,553.25, an amount already more than
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING sufficient to cover the judgment award; that the UP’s prayer to reduce
THE REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN or delete the award of damages had no factual basis, because they
VIOLATION OF THE CLEAR LANGUAGE OF THE SUPREME COURT had been gravely wronged, had been deprived of their source of
RESOLUTION DATED 24 JANUARY 2007. income, and had suffered untold miseries, discomfort, humiliation and
sleepless years; that dela Cruz had even been constrained to sell his
The UP argues that the amount earmarked for the construction project
house, his equipment and the implements of his trade, and together
had been purposely set aside only for the aborted project and did not
with his family had been forced to live miserably because of the
include incidental matters like the awards of actual damages, moral
wrongful actuations of the UP; and that the RTC correctly declared the
damages and attorney’s fees. In support of its argument, the UP cited
Court’s TRO to be already functus officio by reason of the withdrawal of
Article 12.2 of the General Construction Agreement, which stipulated
the garnished amount from the DBP.
that no deductions would be allowed for the payment of claims,
damages, losses and expenses, including attorney’s fees, in case of The decisive issues to be considered and passed upon are, therefore:
any litigation arising out of the performance of the work. The UP insists
that the CA decision was inconsistent with the rulings in Commissioner (a) whether the funds of the UP were the proper subject of garnishment
of Public Highways v. San Diego 61 and Department of Agriculture v. in order to satisfy the judgment award; and (b) whether the UP’s prayer
NLRC62 to the effect that government funds and properties could not be for the deletion of the awards of actual damages of ₱ 5,716,729.00,
seized under writs of execution or garnishment to satisfy judgment moral damages of ₱ 10,000,000.00 and attorney’s fees of ₱
awards. 150,000.00 plus ₱ 1,500.00 per appearance could be granted despite
the finality of the judgment of the RTC.
Furthermore, the UP contends that the CA contravened Section 5,
Article XIV of the Constitution by allowing the garnishment of UP funds, Ruling
because the garnishment resulted in a substantial reduction of the UP’s
limited budget allocated for the remuneration, job satisfaction and The petition for review is meritorious.
fulfillment of the best available teachers; that Judge Yadao should have
exhibited judicial courtesy towards the Court due to the pendency of
 I. against the UP,78 because suability of the State did not necessarily
UP’s funds, being government funds, mean its liability.79
are not subject to garnishment
A marked distinction exists between suability of the State and its
The UP was founded on June 18, 1908 through Act 1870 to provide liability. As the Court succinctly stated in Municipality of San Fernando,
advanced instruction in literature, philosophy, the sciences, and arts, La Union v. Firme:80
and to give professional and technical training to deserving
students.63 Despite its establishment as a body corporate, 64 the UP A distinction should first be made between suability and liability.
remains to be a "chartered institution" 65 performing a legitimate "Suability depends on the consent of the state to be sued, liability on
government function. It is an institution of higher learning, not a the applicable law and the established facts. The circumstance that a
corporation established for profit and declaring any dividends.66 In state is suable does not necessarily mean that it is liable; on the other
enacting Republic Act No. 9500 (The University of the Philippines hand, it can never be held liable if it does not first consent to be sued.
Charter of 2008), Congress has declared the UP as the national Liability is not conceded by the mere fact that the state has allowed
university67 "dedicated to the search for truth and knowledge as well as itself to be sued. When the state does waive its sovereign immunity, it
the development of future leaders."68 is only giving the plaintiff the chance to prove, if it can, that the
defendant is liable.
Irrefragably, the UP is a government instrumentality,69 performing the
State’s constitutional mandate of promoting quality and accessible Also, in Republic v. Villasor,81 where the issuance of an alias writ of
education.70 As a government instrumentality, the UP administers execution directed against the funds of the Armed Forces of the
special funds sourced from the fees and income enumerated under Act Philippines to satisfy a final and executory judgment was nullified, the
No. 1870 and Section 1 of Executive Order No. 714,71 and from the Court said:
yearly appropriations, to achieve the purposes laid down by Section 2
xxx The universal rule that where the State gives its consent to be sued
of Act 1870, as expanded in Republic Act No. 9500. 72 All the funds
by private parties either by general or special law, it may limit
going into the possession of the UP, including any interest accruing
claimant’s action "only up to the completion of proceedings anterior to
from the deposit of such funds in any banking institution, constitute a
the stage of execution" and that the power of the Courts ends when
"special trust fund," the disbursement of which should always be
the judgment is rendered, since government funds and properties may
aligned with the UP’s mission and purpose,73 and should always be
not be seized under writs of execution or garnishment to satisfy such
subject to auditing by the COA.74
judgments, is based on obvious considerations of public policy.
Presidential Decree No. 1445 defines a "trust fund" as a fund that Disbursements of public funds must be covered by the corresponding
officially comes in the possession of an agency of the government or of appropriation as required by law. The functions and public services
a public officer as trustee, agent or administrator, or that is received for rendered by the State cannot be allowed to be paralyzed or disrupted
the fulfillment of some obligation.75 A trust fund may be utilized only for by the diversion of public funds from their legitimate and specific
the "specific purpose for which the trust was created or the funds objects, as appropriated by law.
received."76
The UP correctly submits here that the garnishment of its funds to
The funds of the UP are government funds that are public in character. satisfy the judgment awards of actual and moral damages (including
They include the income accruing from the use of real property ceded attorney’s fees) was not validly made if there was no special
to the UP that may be spent only for the attainment of its institutional appropriation by Congress to cover the liability. It was, therefore, legally
objectives.77 Hence, the funds subject of this action could not be validly unwarranted for the CA to agree with the RTC’s holding in the order
made the subject of the RTC’s writ of execution or garnishment. The issued on April 1, 2003 that no appropriation by Congress to allocate
adverse judgment rendered against the UP in a suit to which it had and set aside the payment of the judgment awards was necessary
impliedly consented was not immediately enforceable by execution because "there (were) already an appropriations (sic) earmarked for
the said project."82 The CA and the RTC thereby unjustifiably ignored
the legal restriction imposed on the trust funds of the Government and claim was still subject to the primary jurisdiction of the COA despite the
its agencies and instrumentalities to be used exclusively to fulfill the final decision of the RTC having already validated the claim.85 As such,
purposes for which the trusts were created or for which the funds were Stern Builders and dela Cruz as the claimants had no alternative except
received except upon express authorization by Congress or by the to first seek the approval of the COA of their monetary claim.
head of a government agency in control of the funds, and subject to
pertinent budgetary laws, rules and regulations.83 On its part, the RTC should have exercised utmost caution, prudence
and judiciousness in dealing with the motions for execution against the
Indeed, an appropriation by Congress was required before the UP and the garnishment of the UP’s funds. The RTC had no authority to
judgment that rendered the UP liable for moral and actual damages direct the immediate withdrawal of any portion of the garnished funds
(including attorney’s fees) would be satisfied considering that such from the depository banks of the UP. By eschewing utmost caution,
monetary liabilities were not covered by the "appropriations earmarked prudence and judiciousness in dealing with the execution and
for the said project." The Constitution strictly mandated that "(n)o garnishment, and by authorizing the withdrawal of the garnished funds
money shall be paid out of the Treasury except in pursuance of an of the UP, the RTC acted beyond its jurisdiction, and all its orders and
appropriation made by law."84 issuances thereon were void and of no legal effect, specifically: (a) the
order Judge Yadao issued on January 3, 2007 allowing Stern Builders
II and dela Cruz to withdraw the deposited garnished amount; (b) the
COA must adjudicate private respondents’ claim order Judge Yadao issued on January 16, 2007 directing DBP to
before execution should proceed forthwith release the garnish amount to Stern Builders and dela Cruz;
(c) the sheriff’s report of January 17, 2007 manifesting the full
The execution of the monetary judgment against the UP was within the
satisfaction of the writ of execution; and (d) the order of April 10, 2007
primary jurisdiction of the COA. This was expressly provided in Section
deying the UP’s motion for the redeposit of the withdrawn amount.
26 of Presidential Decree No. 1445, to wit:
Hence, such orders and issuances should be struck down without
Section 26. General jurisdiction. - The authority and powers of the exception.
Commission shall extend to and comprehend all matters relating to
Nothing extenuated Judge Yadao’s successive violations of Presidential
auditing procedures, systems and controls, the keeping of the general
Decree No. 1445. She was aware of Presidential Decree No. 1445,
accounts of the Government, the preservation of vouchers pertaining
considering that the Court circulated to all judges its Administrative
thereto for a period of ten years, the examination and inspection of the
Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to
books, records, and papers relating to those accounts; and the audit
observe utmost caution, prudence and judiciousness in the issuance of
and settlement of the accounts of all persons respecting funds or
writs of execution to satisfy money judgments against government
property received or held by them in an accountable capacity, as well
agencies and local government units" precisely in order to prevent the
as the examination, audit, and settlement of all debts and claims of any
circumvention of Presidential Decree No. 1445, as well as of the rules
sort due from or owing to the Government or any of its subdivisions,
and procedures of the COA, to wit:
agencies and instrumentalities. The said jurisdiction extends to all
government-owned or controlled corporations, including their In order to prevent possible circumvention of the rules and
subsidiaries, and other self-governing boards, commissions, or procedures of the Commission on Audit, judges are hereby
agencies of the Government, and as herein prescribed, including non enjoined to observe utmost caution, prudence and
governmental entities subsidized by the government, those funded by judiciousness in the issuance of writs of execution to satisfy
donations through the government, those required to pay levies or money judgments against government agencies and local
government share, and those for which the government has put up a government units.
counterpart fund or those partly funded by the government.
Judges should bear in mind that in Commissioner of Public Highways v.
It was of no moment that a final and executory decision already San Diego (31 SCRA 617, 625 1970), this Court explicitly stated:
validated the claim against the UP. The settlement of the monetary
"The universal rule that where the State gives its consent to be sued by sale under execution against such corporation. The same rule
private parties either by general or special law, it may limit claimant’s applies to funds in the hands of a public officer and taxes due
action ‘only up to the completion of proceedings anterior to the stage to a municipal corporation.
of execution’ and that the power of the Court ends when the judgment
is rendered, since government funds and properties may not be seized 2. Where a municipal corporation owns in its proprietary capacity, as
under writs of execution or garnishment to satisfy such judgments, is distinguished from its public or government capacity, property not used
based on obvious considerations of public policy. Disbursements of or used for a public purpose but for quasi-private purposes, it is the
public funds must be covered by the corresponding appropriation as general rule that such property may be seized and sold under
required by law. The functions and public services rendered by the execution against the corporation.
State cannot be allowed to be paralyzed or disrupted by the diversion
3. Property held for public purposes is not subject to execution merely
of public funds from their legitimate and specific objects, as
because it is temporarily used for private purposes. If the public use is
appropriated by law.
wholly abandoned, such property becomes subject to execution.
Moreover, it is settled jurisprudence that upon determination
This Administrative Circular shall take effect immediately and the Court
of State liability, the prosecution, enforcement or satisfaction
Administrator shall see to it that it is faithfully implemented.
thereof must still be pursued in accordance with the rules and
procedures laid down in P.D. No. 1445, otherwise known as Although Judge Yadao pointed out that neither the CA nor the Court
the Government Auditing Code of the Philippines (Department had issued as of then any writ of preliminary injunction to enjoin the
of Agriculture v. NLRC, 227 SCRA 693, 701-02 1993 citing release or withdrawal of the garnished amount, she did not need any
Republic vs. Villasor, 54 SCRA 84 1973). All money claims writ of injunction from a superior court to compel her obedience to the
against the Government must first be filed with the law. The Court is disturbed that an experienced judge like her should
Commission on Audit which must act upon it within sixty days. look at public laws like Presidential Decree No. 1445 dismissively
Rejection of the claim will authorize the claimant to elevate instead of loyally following and unquestioningly implementing them.
the matter to the Supreme Court on certiorari and in effect, That she did so turned her court into an oppressive bastion of mindless
sue the State thereby (P.D. 1445, Sections 49-50). tyranny instead of having it as a true haven for the seekers of justice
like the UP.
However, notwithstanding the rule that government properties are not
subject to levy and execution unless otherwise provided for by statute III
(Republic v. Palacio, 23 SCRA 899 1968; Commissioner of Public Period of appeal did not start without effective
Highways v. San Diego, supra) or municipal ordinance (Municipality of service of decision upon counsel of record;
Makati v. Court of Appeals, 190 SCRA 206 1990), the Court has, in Fresh-period rule announced in
various instances, distinguished between government funds and Neypes v. Court of Appeals
properties for public use and those not held for public use. Thus, in can be given retroactive application
Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the
Court ruled that "where property of a municipal or other public The UP next pleads that the Court gives due course to its petition for
corporation is sought to be subjected to execution to satisfy judgments review in the name of equity in order to reverse or modify the adverse
recovered against such corporation, the question as to whether such judgment against it despite its finality. At stake in the UP’s plea for
property is leviable or not is to be determined by the usage and equity was the return of the amount of ₱ 16,370,191.74 illegally
purposes for which it is held." The following can be culled from Viuda garnished from its trust funds. Obstructing the plea is the finality of the
de Tan Toco v. Municipal Council of Iloilo: judgment based on the supposed tardiness of UP’s appeal, which the
RTC declared on September 26, 2002. The CA upheld the declaration
1. Properties held for public uses – and generally everything of finality on February 24, 2004, and the Court itself denied the UP’s
held for governmental purposes – are not subject to levy and
petition for review on that issue on May 11, 2004 (G.R. No. 163501). The UP counters that the service of the denial of the motion for
The denial became final on November 12, 2004. reconsideration upon Atty. Nolasco was defective considering that its
counsel of record was not Atty. Nolasco of the UPLB Legal Office but
It is true that a decision that has attained finality becomes immutable the OLS in Diliman, Quezon City; and that the period of appeal should
and unalterable, and cannot be modified in any respect, 87 even if the be reckoned from May 31, 2002, the date when the OLS received the
modification is meant to correct erroneous conclusions of fact and law, order. The UP submits that the filing of the notice of appeal on June 3,
and whether the modification is made by the court that rendered it or 2002 was well within the reglementary period to appeal.
by this Court as the highest court of the land.88 Public policy dictates
that once a judgment becomes final, executory and unappealable, the We agree with the submission of the UP.
prevailing party should not be deprived of the fruits of victory by some
subterfuge devised by the losing party. Unjustified delay in the Firstly, the service of the denial of the motion for reconsideration upon
enforcement of such judgment sets at naught the role and purpose of Atty. Nolasco of the UPLB Legal Office was invalid and ineffectual
the courts to resolve justiciable controversies with finality.89 Indeed, all because he was admittedly not the counsel of record of the UP. The
litigations must at some time end, even at the risk of occasional errors. rule is that it is on the counsel and not the client that the service should
be made.93
But the doctrine of immutability of a final judgment has not been
absolute, and has admitted several exceptions, among them: (a) the That counsel was the OLS in Diliman, Quezon City, which was served
correction of clerical errors; (b) the so-called nunc pro tunc entries that with the denial only on May 31, 2002. As such, the running of the
cause no prejudice to any party; (c) void judgments; and (d) whenever remaining period of six days resumed only on June 1, 2002, 94 rendering
circumstances transpire after the finality of the decision that render its the filing of the UP’s notice of appeal on June 3, 2002 timely and well
execution unjust and inequitable.90 Moreover, in Heirs of Maura So v. within the remaining days of the UP’s period to appeal.
Obliosca,91 we stated that despite the absence of the preceding
Verily, the service of the denial of the motion for reconsideration could
circumstances, the Court is not precluded from brushing aside
only be validly made upon the OLS in Diliman, and no other. The fact
procedural norms if only to serve the higher interests of justice and
that Atty. Nolasco was in the employ of the UP at the UPLB Legal Office
equity. Also, in Gumaru v. Quirino State College,92 the Court nullified the
did not render the service upon him effective. It is settled that where a
proceedings and the writ of execution issued by the RTC for the reason
party has appeared by counsel, service must be made upon such
that respondent state college had not been represented in the litigation
counsel.95 Service on the party or the party’s employee is not effective
by the Office of the Solicitor General.
because such notice is not notice in law.96 This is clear enough from
We rule that the UP’s plea for equity warrants the Court’s exercise of Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly
the exceptional power to disregard the declaration of finality of the states that: "If any party has appeared by counsel, service upon him
judgment of the RTC for being in clear violation of the UP’s right to due shall be made upon his counsel or one of them, unless service upon the
process. party himself is ordered by the court. Where one counsel appears for
several parties, he shall only be entitled to one copy of any paper
Both the CA and the RTC found the filing on June 3, 2002 by the UP of served upon him by the opposite side." As such, the period to appeal
the notice of appeal to be tardy. They based their finding on the fact resumed only on June 1, 2002, the date following the service on May
that only six days remained of the UP’s reglementary 15-day period 31, 2002 upon the OLS in Diliman of the copy of the decision of the
within which to file the notice of appeal because the UP had filed a RTC, not from the date when the UP was notified.97
motion for reconsideration on January 16, 2002 vis-à-vis the RTC’s
decision the UP received on January 7, 2002; and that because the Accordingly, the declaration of finality of the judgment of the RTC,
denial of the motion for reconsideration had been served upon Atty. being devoid of factual and legal bases, is set aside.
Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP
Secondly, even assuming that the service upon Atty. Nolasco was valid
had only until May 23, 2002 within which to file the notice of appeal.
and effective, such that the remaining period for the UP to take a
timely appeal would end by May 23, 2002, it would still not be correct cases where a court of law is unable to adapt its judgments to the
to find that the judgment of the RTC became final and immutable special circumstances of a case because of the inflexibility of its
thereafter due to the notice of appeal being filed too late on June 3, statutory or legal jurisdiction.104
2002.
It is cogent to add in this regard that to deny the benefit of the fresh-
In so declaring the judgment of the RTC as final against the UP, the CA period rule to the UP would amount to injustice and absurdity –
and the RTC applied the rule contained in the second paragraph of injustice, because the judgment in question was issued on November
Section 3, Rule 41 of the Rules of Court to the effect that the filing of a 28, 2001 as compared to the judgment in Neypes that was rendered in
motion for reconsideration interrupted the running of the period for 1998; absurdity, because parties receiving notices of judgment and
filing the appeal; and that the period resumed upon notice of the denial final orders issued in the year 1998 would enjoy the benefit of the
of the motion for reconsideration. For that reason, the CA and the RTC fresh-period rule but the later rulings of the lower courts like that herein
might not be taken to task for strictly adhering to the rule then would not.105
prevailing.
Consequently, even if the reckoning started from May 17, 2002, when
However, equity calls for the retroactive application in the UP’s favor of Atty. Nolasco received the denial, the UP’s filing on June 3, 2002 of the
the fresh-period rule that the Court first announced in mid-September notice of appeal was not tardy within the context of the fresh-period
of 2005 through its ruling in Neypes v. Court of Appeals,98 viz: rule. For the UP, the fresh period of 15-days counted from service of the
denial of the motion for reconsideration would end on June 1, 2002,
To standardize the appeal periods provided in the Rules and to afford which was a Saturday. Hence, the UP had until the next working day, or
litigants fair opportunity to appeal their cases, the Court deems it June 3, 2002, a Monday, within which to appeal, conformably with
practical to allow a fresh period of 15 days within which to file the Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of
notice of appeal in the Regional Trial Court, counted from receipt of the the period, as thus computed, falls on a Saturday, a Sunday, or a legal
order dismissing a motion for a new trial or motion for reconsideration. holiday in the place where the court sits, the time shall not run until the
next working day."
The retroactive application of the fresh-period rule, a procedural law
that aims "to regiment or make the appeal period uniform, to be IV
counted from receipt of the order denying the motion for new trial, Awards of monetary damages,
motion for reconsideration (whether full or partial) or any final order or being devoid of factual and legal bases,
resolution,"99 is impervious to any serious challenge. This is because did not attain finality and should be deleted
there are no vested rights in rules of procedure.100 A law or regulation is
procedural when it prescribes rules and forms of procedure in order Section 14 of Article VIII of the Constitution prescribes that express
that courts may be able to administer justice.101 It does not come within findings of fact and of law should be made in the decision rendered by
the legal conception of a retroactive law, or is not subject of the general any court, to wit:
rule prohibiting the retroactive operation of statues, but is given
retroactive effect in actions pending and undetermined at the time of Section 14. No decision shall be rendered by any court without
its passage without violating any right of a person who may feel that he expressing therein clearly and distinctly the facts and the law on which
is adversely affected. it is based.

We have further said that a procedural rule that is amended for the No petition for review or motion for reconsideration of a decision of the
benefit of litigants in furtherance of the administration of justice shall be court shall be refused due course or denied without stating the legal
retroactively applied to likewise favor actions then pending, as equity basis therefor.
delights in equality.102 We may even relax stringent procedural rules in
Implementing the constitutional provision in civil actions is Section 1 of
order to serve substantial justice and in the exercise of this Court’s
Rule 36, Rules of Court, viz:
equity jurisdiction.103 Equity jurisdiction aims to do complete justice in
Section 1. Rendition of judgments and final orders. — A judgment or Here, the decision of the RTC justified the grant of actual and moral
final order determining the merits of the case shall be in writing damages, and attorney’s fees in the following terse manner, viz:
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him, and xxx The Court is not unmindful that due to defendants’ unjustified
filed with the clerk of the court. (1a) refusal to pay their outstanding obligation to plaintiff, the same suffered
losses and incurred expenses as he was forced to re-mortgage his
The Constitution and the Rules of Court apparently delineate two main house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI
essential parts of a judgment, namely: the body and the decretal Bank just to pay its monetary obligations in the form of interest and
portion. Although the latter is the controlling part,106 the importance of penalties incurred in the course of the construction of the subject
the former is not to be lightly regarded because it is there where the project.109
court clearly and distinctly states its findings of fact and of law on which
the decision is based. To state it differently, one without the other is The statement that "due to defendants’ unjustified refusal to pay their
ineffectual and useless. The omission of either inevitably results in a outstanding obligation to plaintiff, the same suffered losses and
judgment that violates the letter and the spirit of the Constitution and incurred expenses as he was forced to re-mortgage his house and lot
the Rules of Court. located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to
pay its monetary obligations in the form of interest and penalties
The term findings of fact that must be found in the body of the decision incurred in the course of the construction of the subject project" was
refers to statements of fact, not to conclusions of law.107 Unlike in only a conclusion of fact and law that did not comply with the
pleadings where ultimate facts alone need to be stated, the constitutional and statutory prescription. The statement specified no
Constitution and the Rules of Court require not only that a decision detailed expenses or losses constituting the ₱ 5,716,729.00 actual
should state the ultimate facts but also that it should specify the damages sustained by Stern Builders in relation to the construction
supporting evidentiary facts, for they are what are called the findings of project or to other pecuniary hardships. The omission of such expenses
fact. or losses directly indicated that Stern Builders did not prove them at all,
which then contravened Article 2199, Civil Code, the statutory basis for
The importance of the findings of fact and of law cannot be overstated. the award of actual damages, which entitled a person to an adequate
The reason and purpose of the Constitution and the Rules of Court in compensation only for such pecuniary loss suffered by him as he has
that regard are obviously to inform the parties why they win or lose, duly proved. As such, the actual damages allowed by the RTC, being
and what their rights and obligations are. Only thereby is the demand bereft of factual support, were speculative and whimsical. Without the
of due process met as to the parties. As Justice Isagani A. Cruz clear and distinct findings of fact and law, the award amounted only to
explained in Nicos Industrial Corporation v. Court of Appeals:108 an ipse dixit on the part of the RTC,110 and did not attain finality.
It is a requirement of due process that the parties to a litigation be There was also no clear and distinct statement of the factual and legal
informed of how it was decided, with an explanation of the factual and support for the award of moral damages in the substantial amount of ₱
legal reasons that led to the conclusions of the court. The court cannot 10,000,000.00. The award was thus also speculative and whimsical.
simply say that judgment is rendered in favor of X and against Y and Like the actual damages, the moral damages constituted another
just leave it at that without any justification whatsoever for its action. judicial ipse dixit, the inevitable consequence of which was to render
The losing party is entitled to know why he lost, so he may appeal to a the award of moral damages incapable of attaining finality. In addition,
higher court, if permitted, should he believe that the decision should be the grant of moral damages in that manner contravened the law that
reversed. A decision that does not clearly and distinctly state the facts permitted the recovery of moral damages as the means to assuage
and the law on which it is based leaves the parties in the dark as to "physical suffering, mental anguish, fright, serious anxiety, besmirched
how it was reached and is especially prejudicial to the losing party, who reputation, wounded feelings, moral shock, social humiliation, and
is unable to pinpoint the possible errors of the court for review by a similar injury."111 The contravention of the law was manifest considering
higher tribunal. that Stern Builders, as an artificial person, was incapable of
experiencing pain and moral sufferings.112 Assuming that in granting Nonetheless, the absence of findings of fact and of any statement of
the substantial amount of ₱ 10,000,000.00 as moral damages, the RTC the law and jurisprudence on which the awards of actual and moral
might have had in mind that dela Cruz had himself suffered mental damages, as well as of attorney’s fees, were based was a fatal flaw that
anguish and anxiety. If that was the case, then the RTC obviously invalidated the decision of the RTC only as to such awards. As the Court
disregarded his separate and distinct personality from that of Stern declared in Velarde v. Social Justice Society, 123 the failure to comply
Builders.113 Moreover, his moral and emotional sufferings as the with the constitutional requirement for a clear and distinct statement of
President of Stern Builders were not the sufferings of Stern Builders. the supporting facts and law "is a grave abuse of discretion amounting
Lastly, the RTC violated the basic principle that moral damages were to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in
not intended to enrich the plaintiff at the expense of the defendant, but careless disregard of the constitutional mandate are a patent nullity
to restore the plaintiff to his status quo ante as much as possible. and must be struck down as void."124 The other item granted by the
Taken together, therefore, all these considerations exposed the RTC (i.e., ₱ 503,462.74) shall stand, subject to the action of the COA as
substantial amount of ₱ 10,000,000.00 allowed as moral damages not stated herein.
only to be factually baseless and legally indefensible, but also to be
unconscionable, inequitable and unreasonable. WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the decision of the Court of
Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 Appeals under review; ANNULS the orders for the garnishment of the
per appearance, granted as attorney’s fees were factually unwarranted funds of the University of the Philippines and for the release of the
and devoid of legal basis. The general rule is that a successful litigant garnished amount to Stern Builders Corporation and Servillano dela
cannot recover attorney’s fees as part of the damages to be assessed Cruz; and DELETES from the decision of the Regional Trial Court
against the losing party because of the policy that no premium should dated November 28, 2001 for being void only the awards of actual
be placed on the right to litigate.114 Prior to the effectivity of the present damages of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00, and
Civil Code, indeed, such fees could be recovered only when there was a attorney's fees of ₱ 150,000.00, plus ₱ 1,500.00 per appearance, in
stipulation to that effect. It was only under the present Civil Code that favor of Stern Builders Corporation and Servillano dela Cruz.
the right to collect attorney’s fees in the cases mentioned in Article
2208115 of the Civil Code came to be recognized. 116 Nonetheless, with The Court ORDERS Stem Builders Corporation and Servillano dela
attorney’s fees being allowed in the concept of actual damages, 117 their Cruz to redeposit the amount of ₱ 16,370,191.74 within 10 days from
amounts must be factually and legally justified in the body of the receipt of this decision.
decision and not stated for the first time in the decretal
Costs of suit to be paid by the private respondents.
portion.118 Stating the amounts only in the dispositive portion of the
judgment is not enough;119 a rendition of the factual and legal SO ORDERED.
justifications for them must also be laid out in the body of the
decision.120 LUCAS P. BERSAMIN
Associate Justice
That the attorney’s fees granted to the private respondents did not
satisfy the foregoing requirement suffices for the Court to undo
them.121 The grant was ineffectual for being contrary to law and public
policy, it being clear that the express findings of fact and law were
intended to bring the case within the exception and thereby justify the
award of the attorney’s fees. Devoid of such express findings, the
award was a conclusion without a premise, its basis being improperly
left to speculation and conjecture.122
 G.R. No. 191109 July 18, 2012 On October 26, 2004, then President Gloria Macapagal-Arroyo issued
E.O. No. 380 transforming PEA into PRA, which shall perform all the
REPUBLIC OF THE PHILIPPINES, represented by the powers and functions of the PEA relating to reclamation activities.
PHILIPPINE RECLAMATION AUTHORITY (PRA), Petitioner,
vs. By virtue of its mandate, PRA reclaimed several portions of the
CITY OF PARANAQUE, Respondent. foreshore and offshore areas of Manila Bay, including those located in
Parañaque City, and was issued Original Certificates of Title (OCT Nos.
DECISION 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of
Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the
MENDOZA, J.:
reclaimed lands.
This is a petition for review on certiorari under Rule 45 of the 1997
On February 19, 2003, then Parañaque City Treasurer Liberato M.
Rules of Civil Procedure, on pure questions of law, assailing the January
Carabeo (Carabeo) issued Warrants of Levy on PRA’s reclaimed
8, 2010 Order1 of the Regional Trial Court, Branch 195, Parafiaque City
properties (Central Business Park and Barangay San Dionisio) located
(RTC), which ruled that petitioner Philippine Reclamation Authority
in Parañaque City based on the assessment for delinquent real
(PRA) is a government-owned and controlled corporation (GOCC), a
property taxes made by then Parañaque City Assessor Soledad Medina
taxable entity, and, therefore, . not exempt from payment of real
Cue for tax years 2001 and 2002.
property taxes. The pertinent portion of the said order reads:
On March 26, 2003, PRA filed a petition for prohibition with prayer for
In view of the finding of this court that petitioner is not exempt from
temporary restraining order (TRO) and/or writ of preliminary injunction
payment of real property taxes, respondent Parañaque City Treasurer
against Carabeo before the RTC.
Liberato M. Carabeo did not act xxx without or in excess of jurisdiction,
or with grave abuse of discretion amounting to lack or in excess of On April 3, 2003, after due hearing, the RTC issued an order denying
jurisdiction in issuing the warrants of levy on the subject properties. PRA’s petition for the issuance of a temporary restraining order.
WHEREFORE, the instant petition is dismissed. The Motion for Leave to On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not
File and Admit Attached Supplemental Petition is denied and the to proceed with the public auction of the subject reclaimed properties
supplemental petition attached thereto is not admitted. on April 7, 2003. In response, Carabeo sent a letter stating that the
public auction could not be deferred because the RTC had already
The Public Estates Authority (PEA) is a government corporation created
denied PRA’s TRO application.
by virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public
Estates Authority, Defining its Powers and Functions, Providing Funds On April 25, 2003, the RTC denied PRA’s prayer for the issuance of a
Therefor and For Other Purposes) which took effect on February 4, writ of preliminary injunction for being moot and academic considering
that the auction sale of the subject properties on April 7, 2003 had
1977 to provide a coordinated, economical and efficient reclamation of
already been consummated.
lands, and the administration and operation of lands belonging to,
managed and/or operated by, the government with the object of On August 3, 2009, after an exchange of several pleadings and the
maximizing their utilization and hastening their development failure of both parties to arrive at a compromise agreement, PRA filed a
consistent with public interest. Motion for Leave to File and Admit Attached Supplemental Petition
which sought to declare as null and void the assessment for real
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525
property taxes, the levy based on the said assessment, the public
issued by then President Ferdinand Marcos, PEA was designated as the
auction sale conducted on April 7, 2003, and the Certificates of Sale
agency primarily responsible for integrating, directing and coordinating
issued pursuant to the auction sale.
all reclamation projects for and on behalf of the National Government.
On January 8, 2010, the RTC rendered its decision dismissing PRA’s capital stock divided into shares, it is not authorized to distribute
petition. In ruling that PRA was not exempt from payment of real dividends and allotment of surplus and profits to its stockholders.
property taxes, the RTC reasoned out that it was a GOCC under Section Therefore, it may not be classified as a stock corporation because it
3 of P.D. No. 1084. It was organized as a stock corporation because it lacks the second requisite of a stock corporation which is the
had an authorized capital stock divided into no par value shares. In distribution of dividends and allotment of surplus and profits to the
fact, PRA admitted its corporate personality and that said properties stockholders.
were registered in its name as shown by the certificates of title.
Therefore, as a GOCC, local tax exemption is withdrawn by virtue of It insists that it may not be classified as a non-stock corporation
Section 193 of Republic Act (R.A.) No. 7160 Local Government Code because it has no members and it is not organized for charitable,
(LGC) which was the prevailing law in 2001 and 2002 with respect to religious, educational, professional, cultural, recreational, fraternal,
real property taxation. The RTC also ruled that the tax exemption literary, scientific, social, civil service, or similar purposes, like trade,
claimed by PRA under E.O. No. 654 had already been expressly industry, agriculture and like chambers as provided in Section 88 of the
repealed by R.A. No. 7160 and that PRA failed to comply with the Corporation Code.
procedural requirements in Section 206 thereof.
Moreover, PRA points out that it was not created to compete in the
Not in conformity, PRA filed this petition for certiorari assailing the market place as there was no competing reclamation company
January 8, 2010 RTC Order based on the following GROUNDS operated by the private sector. Also, while PRA is vested with corporate
powers under P.D. No. 1084, such circumstance does not make it a
I corporation but merely an incorporated instrumentality and that the
mere fact that an incorporated instrumentality of the National
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS Government holds title to real property does not make said
LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED instrumentality a GOCC. Section 48, Chapter 12, Book I of the
LANDS CONSIDERING Administrative Code of 1987 recognizes a scenario where a piece of
land owned by the Republic is titled in the name of a department,
THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE
agency or instrumentality.
NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM
PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND Thus, PRA insists that, as an incorporated instrumentality of the
133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE National Government, it is exempt from payment of real property tax
VIS-À-VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT OF except when the beneficial use of the real property is granted to a
APPEALS. taxable person. PRA claims that based on Section 133(o) of the LGC,
local governments cannot tax the national government which delegate
II
to local governments the power to tax.
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT
It explains that reclaimed lands are part of the public domain, owned
RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE,
by the State, thus, exempt from the payment of real estate taxes.
EXEMPT FROM REAL PROPERTY TAX.
Reclaimed lands retain their inherent potential as areas for public use
PRA asserts that it is not a GOCC under Section 2(13) of the or public service. While the subject reclaimed lands are still in its hands,
Introductory Provisions of the Administrative Code. Neither is it a GOCC these lands remain public lands and form part of the public domain.
under Section 16, Article XII of the 1987 Constitution because it is not Hence, the assessment of real property taxes made on said lands, as
required to meet the test of economic viability. Instead, PRA is a well as the levy thereon, and the public sale thereof on April 7, 2003,
government instrumentality vested with corporate powers and including the issuance of the certificates of sale in favor of the
performing an essential public service pursuant to Section 2(10) of the respondent Parañaque City, are invalid and of no force and effect.
Introductory Provisions of the Administrative Code. Although it has a
On the other hand, the City of Parañaque (respondent) argues that PRA powers, administering special funds, and enjoying operational
since its creation consistently represented itself to be a GOCC. PRA’s autonomy, usually through a charter. x x x
very own charter (P.D. No. 1084) declared it to be a GOCC and that it
has entered into several thousands of contracts where it represented From the above definitions, it is clear that a GOCC must be "organized
itself to be a GOCC. In fact, PRA admitted in its original and amended as a stock or non-stock corporation" while an instrumentality is vested
petitions and pre-trial brief filed with the RTC of Parañaque City that it by law with corporate powers. Likewise, when the law makes a
was a GOCC. government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery
Respondent further argues that PRA is a stock corporation with an although not integrated with the department framework.
authorized capital stock divided into 3 million no par value shares, out
of which 2 million shares have been subscribed and fully paid up. When the law vests in a government instrumentality corporate powers,
Section 193 of the LGC of 1991 has withdrawn tax exemption the instrumentality does not necessarily become a corporation. Unless
privileges granted to or presently enjoyed by all persons, whether the government instrumentality is organized as a stock or non-stock
natural or juridical, including GOCCs. corporation, it remains a government instrumentality exercising not
only governmental but also corporate powers.
Hence, since PRA is a GOCC, it is not exempt from the payment of real
property tax. Many government instrumentalities are vested with corporate powers
but they do not become stock or non-stock corporations, which is a
THE COURT’S RULING necessary condition before an agency or instrumentality is deemed a
GOCC. Examples are the Mactan International Airport Authority, the
The Court finds merit in the petition. Philippine Ports Authority, the University of the Philippines, and Bangko
Sentral ng Pilipinas. All these government instrumentalities exercise
Section 2(13) of the Introductory Provisions of the Administrative Code
corporate powers but they are not organized as stock or non-stock
of 1987 defines a GOCC as follows:
corporations as required by Section 2(13) of the Introductory Provisions
SEC. 2. General Terms Defined. – x x x x of the Administrative Code. These government instrumentalities are
sometimes loosely called government corporate entities. They are not,
(13) Government-owned or controlled corporation refers to any agency however, GOCCs in the strict sense as understood under the
organized as a stock or non-stock corporation, vested with functions Administrative Code, which is the governing law defining the legal
relating to public needs whether governmental or proprietary in nature, relationship and status of government entities.2
and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, Correlatively, Section 3 of the Corporation Code defines a stock
to the extent of at least fifty-one corporation as one whose "capital stock is divided into shares and x x x
authorized to distribute to the holders of such shares dividends x x x."
(51) percent of its capital stock: x x x. Section 87 thereof defines a non-stock corporation as "one where no
part of its income is distributable as dividends to its members, trustees
On the other hand, Section 2(10) of the Introductory Provisions of the
or officers." Further, Section 88 provides that non-stock corporations
Administrative Code defines a government "instrumentality" as follows:
are "organized for charitable, religious, educational, professional,
SEC. 2. General Terms Defined. –– x x x x cultural, recreational, fraternal, literary, scientific, social, civil service, or
similar purposes, like trade, industry, agriculture and like chambers."
(10) Instrumentality refers to any agency of the National Government,
not integrated within the department framework, vested with special Two requisites must concur before one may be classified as a stock
functions or jurisdiction by law, endowed with some if not all corporate corporation, namely: (1) that it has capital stock divided into shares;
and (2) that it is authorized to distribute dividends and allotments of
surplus and profits to its stockholders. If only one requisite is present, it
cannot be properly classified as a stock corporation. As for non-stock maximizing their utilization and hastening their development
corporations, they must have members and must not distribute any consistent with the public interest. Sections 2 and 4 of P.D. No. 1084
part of their income to said members.3 reads, as follows:

In the case at bench, PRA is not a GOCC because it is neither a stock Section 2. Declaration of policy. It is the declared policy of the State to
nor a non-stock corporation. It cannot be considered as a stock provide for a coordinated, economical and efficient reclamation of
corporation because although it has a capital stock divided into no par lands, and the administration and operation of lands belonging to,
value shares as provided in Section 7 4 of P.D. No. 1084, it is not managed and/or operated by the government, with the object of
authorized to distribute dividends, surplus allotments or profits to maximizing their utilization and hastening their development
stockholders. There is no provision whatsoever in P.D. No. 1084 or in consistent with the public interest.
any of the subsequent executive issuances pertaining to PRA,
particularly, E.O. No. 525,5 E.O. No. 6546 and EO No. 7987 that Section 4. Purposes. The Authority is hereby created for the following
authorizes PRA to distribute dividends, surplus allotments or profits to purposes:
its stockholders.
(a) To reclaim land, including foreshore and submerged areas, by
PRA cannot be considered a non-stock corporation either because it dredging, filling or other means, or to acquire reclaimed land;
does not have members. A non-stock corporation must have
(b) To develop, improve, acquire, administer, deal in, subdivide,
members.8 Moreover, it was not organized for any of the purposes
dispose, lease and sell any and all kinds of lands, buildings, estates and
mentioned in Section 88 of the Corporation Code. Specifically, it was
other forms of real property, owned, managed, controlled and/or
created to manage all government reclamation projects.
operated by the government.
Furthermore, there is another reason why the PRA cannot be classified
(c) To provide for, operate or administer such services as may be
as a GOCC. Section 16, Article XII of the 1987 Constitution provides as
necessary for the efficient, economical and beneficial utilization of the
follows:
above properties.
Section 16. The Congress shall not, except by general law, provide for
The twin requirement of common good and economic viability was
the formation, organization, or regulation of private corporations.
lengthily discussed in the case of Manila International Airport Authority
Government-owned or controlled corporations may be created or
v. Court of Appeals,9 the pertinent portion of which reads:
established by special charters in the interest of the common good and
subject to the test of economic viability. Third, the government-owned or controlled corporations created
through special charters are those that meet the two conditions
The fundamental provision above authorizes Congress to create
prescribed in Section 16, Article XII of the Constitution.
GOCCs through special charters on two conditions: 1) the GOCC must
be established for the common good; and 2) the GOCC must meet the The first condition is that the government-owned or controlled
test of economic viability. In this case, PRA may have passed the first corporation must be established for the common good. The second
condition of common good but failed the second one - economic condition is that the government-owned or controlled corporation must
viability. Undoubtedly, the purpose behind the creation of PRA was not meet the test of economic viability. Section 16, Article XII of the 1987
for economic or commercial activities. Neither was it created to Constitution provides:
compete in the market place considering that there were no other
competing reclamation companies being operated by the private SEC. 16. The Congress shall not, except by general law, provide for the
sector. As mentioned earlier, PRA was created essentially to perform a formation, organization, or regulation of private corporations.
public service considering that it was primarily responsible for a Government-owned or controlled corporations may be created or
coordinated, economical and efficient reclamation, administration and established by special charters in the interest of the common good and
operation of lands belonging to the government with the object of subject to the test of economic viability.
The Constitution expressly authorizes the legislature to create Commissioner Blas F. Ople, proponent of the test of economic viability,
"government-owned or controlled corporations" through special explained to the Constitutional Commission the purpose of this test, as
charters only if these entities are required to meet the twin conditions follows:
of common good and economic viability. In other words, Congress has
no power to create government-owned or controlled corporations with MR. OPLE: Madam President, the reason for this concern is really that
special charters unless they are made to comply with the two when the government creates a corporation, there is a sense in which
conditions of common good and economic viability. The test of this corporation becomes exempt from the test of economic
economic viability applies only to government-owned or controlled performance. We know what happened in the past. If a government
corporations that perform economic or commercial activities and need corporation loses, then it makes its claim upon the taxpayers' money
to compete in the market place. Being essentially economic vehicles of through new equity infusions from the government and what is always
the State for the common good — meaning for economic development invoked is the common good. That is the reason why this year, out of a
purposes — these government-owned or controlled corporations with budget of P115 billion for the entire government, about P28 billion of
special charters are usually organized as stock corporations just like this will go into equity infusions to support a few government financial
ordinary private corporations. institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and
In contrast, government instrumentalities vested with corporate education, to augment the salaries of grossly underpaid public
powers and performing governmental or public functions need not employees. And yet this is all going down the drain.
meet the test of economic viability. These instrumentalities perform
essential public services for the common good, services that every Therefore, when we insert the phrase "ECONOMIC VIABILITY" together
modern State must provide its citizens. These instrumentalities need with the "common good," this becomes a restraint on future
not be economically viable since the government may even subsidize enthusiasts for state capitalism to excuse themselves from the
their entire operations. These instrumentalities are not the responsibility of meeting the market test so that they become viable.
"government-owned or controlled corporations" referred to in Section And so, Madam President, I reiterate, for the committee's consideration
16, Article XII of the 1987 Constitution. and I am glad that I am joined in this proposal by Commissioner Foz,
the insertion of the standard of "ECONOMIC VIABILITY OR THE
Thus, the Constitution imposes no limitation when the legislature ECONOMIC TEST," together with the common good.1âwphi1
creates government instrumentalities vested with corporate powers
but performing essential governmental or public functions. Congress Father Joaquin G. Bernas, a leading member of the Constitutional
has plenary authority to create government instrumentalities vested Commission, explains in his textbook The 1987 Constitution of the
with corporate powers provided these instrumentalities perform Republic of the Philippines: A Commentary:
essential government functions or public services. However, when the
The second sentence was added by the 1986 Constitutional
legislature creates through special charters corporations that perform
Commission. The significant addition, however, is the phrase "in the
economic or commercial activities, such entities — known as
interest of the common good and subject to the test of economic
"government-owned or controlled corporations" — must meet the test
viability." The addition includes the ideas that they must show capacity
of economic viability because they compete in the market place.
to function efficiently in business and that they should not go into
This is the situation of the Land Bank of the Philippines and the activities which the private sector can do better. Moreover, economic
Development Bank of the Philippines and similar government-owned or viability is more than financial viability but also includes capability to
controlled corporations, which derive their incometo meet operating make profit and generate benefits not quantifiable in financial terms.
expenses solely from commercial transactions in competition with the
Clearly, the test of economic viability does not apply to government
private sector. The intent of the Constitution is to prevent the creation
entities vested with corporate powers and performing essential public
of government-owned or controlled corporations that cannot survive on
services. The State is obligated to render essential public services
their own in the market place and thus merely drain the public coffers.
regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not SEC. 133. Common Limitations on the Taxing Powers of Local
excuse the State from withholding such essential services from the Government Units. – Unless otherwise provided herein, the exercise of
public. the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives, xxxx
must meet the test of economic viability. These are the government-
owned or controlled corporations that are usually organized under their (o) Taxes, fees or charges of any kinds on the National Government, its
special charters as stock corporations, like the Land Bank of the agencies and instrumentalities, and local government units. [Emphasis
Philippines and the Development Bank of the Philippines. These are the supplied]
government-owned or controlled corporations, along with government-
It is clear from Section 234 that real property owned by the Republic of
owned or controlled corporations organized under the Corporation
the Philippines (the Republic) is exempt from real property tax unless
Code, that fall under the definition of "government-owned or controlled
the beneficial use thereof has been granted to a taxable person. In this
corporations" in Section 2(10) of the Administrative Code. [Emphases
case, there is no proof that PRA granted the beneficial use of the
supplied]
subject reclaimed lands to a taxable entity. There is no showing on
This Court is convinced that PRA is not a GOCC either under Section record either that PRA leased the subject reclaimed properties to a
2(3) of the Introductory Provisions of the Administrative Code or under private taxable entity.
Section 16, Article XII of the 1987 Constitution. The facts, the evidence
This exemption should be read in relation to Section 133(o) of the
on record and jurisprudence on the issue support the position that PRA
same Code, which prohibits local governments from imposing "taxes,
was not organized either as a stock or a non-stock corporation. Neither
fees or charges of any kind on the National Government, its agencies
was it created by Congress to operate commercially and compete in
and instrumentalities x x x." The Administrative Code allows real
the private market. Instead, PRA is a government instrumentality
property owned by the Republic to be titled in the name of agencies or
vested with corporate powers and performing an essential public
instrumentalities of the national government. Such real properties
service pursuant to Section 2(10) of the Introductory Provisions of the
remain owned by the Republic and continue to be exempt from real
Administrative Code. Being an incorporated government
estate tax.
instrumentality, it is exempt from payment of real property tax.
Indeed, the Republic grants the beneficial use of its real property to an
Clearly, respondent has no valid or legal basis in taxing the subject
agency or instrumentality of the national government. This happens
reclaimed lands managed by PRA. On the other hand, Section 234(a) of
when the title of the real property is transferred to an agency or
the LGC, in relation to its Section 133(o), exempts PRA from paying
instrumentality even as the Republic remains the owner of the real
realty taxes and protects it from the taxing powers of local government
property. Such arrangement does not result in the loss of the tax
units.
exemption, unless "the beneficial use thereof has been granted, for
Sections 234(a) and 133(o) of the LGC provide, as follows: consideration or otherwise, to a taxable person."10

SEC. 234. Exemptions from Real Property Tax – The following are The rationale behind Section 133(o) has also been explained in the
exempted from payment of the real property tax: case of the Manila International Airport Authority,11 to wit:

(a) Real property owned by the Republic of the Philippines or any of its Section 133(o) recognizes the basic principle that local governments
political subdivisions except when the beneficial use thereof has been cannot tax the national government, which historically merely
granted, for consideration or otherwise, to a taxable person. delegated to local governments the power to tax. While the 1987
Constitution now includes taxation as one of the powers of local
xxxx governments, local governments may only exercise such power
"subject to such guidelines and limitations as the Congress may The states have no power by taxation or otherwise, to retard, impede,
provide." burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
When local governments invoke the power to tax on national federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed.
government instrumentalities, such power is construed strictly against 579)
local governments. The rule is that a tax is never presumed and there
must be clear language in the law imposing the tax. Any doubt This doctrine emanates from the "supremacy" of the National
whether a person, article or activity is taxable is resolved against Government over local governments.
taxation. This rule applies with greater force when local governments
seek to tax national government instrumentalities. "Justice Holmes, speaking for the Supreme Court, made reference to
the entire absence of power on the part of the States to touch, in that
Another rule is that a tax exemption is strictly construed against the way (taxation) at least, the instrumentalities of the United States
taxpayer claiming the exemption. However, when Congress grants an (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
exemption to a national government instrumentality from local political subdivision can regulate a federal instrumentality in such a
taxation, such exemption is construed liberally in favor of the national way as to prevent it from consummating its federal responsibilities, or
government instrumentality. As this Court declared in Maceda v. even to seriously burden it in the accomplishment of them." (Antieau,
Macaraig, Jr.: Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

The reason for the rule does not apply in the case of exemptions Otherwise, mere creatures of the State can defeat National policies
running to the benefit of the government itself or its agencies. In such thru extermination of what local authorities may perceive to be
case the practical effect of an exemption is merely to reduce the undesirable activities or enterprise using the power to tax as "a tool for
amount of money that has to be handled by government in the course regulation." (U.S. v. Sanchez, 340 US 42)
of its operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non tax- The power to tax which was called by Justice Marshall as the "power to
liability of such agencies. destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent
There is, moreover, no point in national and local governments taxing power to wield it. [Emphases supplied]
each other, unless a sound and compelling policy requires such
transfer of public funds from one government pocket to another. The Court agrees with PRA that the subject reclaimed lands are still
part of the public domain, owned by the State and, therefore, exempt
There is also no reason for local governments to tax national from payment of real estate taxes.
government instrumentalities for rendering essential public services to
inhabitants of local governments. The only exception is when the Section 2, Article XII of the 1987 Constitution reads in part, as follows:
legislature clearly intended to tax government instrumentalities for the
Section 2. All lands of the public domain, waters, minerals, coal,
delivery of essential public services for sound and compelling policy
petroleum, and other mineral oils, all forces of potential energy,
considerations. There must be express language in the law
fisheries, forests or timber, wildlife, flora and fauna, and other natural
empowering local governments to tax national government
resources are owned by the State. With the exception of agricultural
instrumentalities. Any doubt whether such power exists is resolved
lands, all other natural resources shall not be alienated. The
against local governments.
exploration, development, and utilization of natural resources shall be
Thus, Section 133 of the Local Government Code states that "unless under the full control and supervision of the State. The State may
otherwise provided" in the Code, local governments cannot tax directly undertake such activities, or it may enter into co-production,
national government instrumentalities. As this Court held in Basco v. joint venture, or production-sharing agreements with Filipino citizens, or
Philippine Amusements and Gaming Corporation: corporations or associations at least 60 per centum of whose capital is
owned by such citizens. Such agreements may be for a period not authorized to dispose of alienable of disposable lands of the public
exceeding twenty-five years, renewable for not more than twenty-five domain, these lands are still public, not private lands.
years, and under such terms and conditions as may provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial Furthermore, PEA's charter expressly states that PEA "shall hold lands
uses other than the development of waterpower, beneficial use may be of the public domain" as well as "any and all kinds of lands." PEA can
the measure and limit of the grant. hold both lands of the public domain and private lands. Thus, the mere
fact that alienable lands of the public domain like the Freedom Islands
Similarly, Article 420 of the Civil Code enumerates properties belonging are transferred to PEA and issued land patents or certificates of title in
to the State: PEA's name does not automatically make such lands private.13

Art. 420. The following things are property of public dominion: Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III
of the Administrative Code of 1987, thus:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores, SEC 14. Power to Reserve Lands of the Public and Private Dominion of
roadsteads, and others of similar character; the Government.-

(2) Those which belong to the State, without being for public use, and (1)The President shall have the power to reserve for settlement or
are intended for some public service or for the development of the public use, and for specific public purposes, any of the lands of the
national wealth. [Emphases supplied] public domain, the use of which is not otherwise directed by law. The
reserved land shall thereafter remain subject to the specific public
Here, the subject lands are reclaimed lands, specifically portions of the purpose indicated until otherwise provided by law or proclamation.
foreshore and offshore areas of Manila Bay. As such, these lands
remain public lands and form part of the public domain. In the case of Reclaimed lands such as the subject lands in issue are reserved lands
Chavez v. Public Estates Authority and AMARI Coastal Development for public use. They are properties of public dominion. The ownership of
Corporation,12 the Court held that foreshore and submerged areas such lands remains with the State unless they are withdrawn by law or
irrefutably belonged to the public domain and were inalienable unless presidential proclamation from public use.
reclaimed, classified as alienable lands open to disposition and further
declared no longer needed for public service. The fact that alienable Under Section 2, Article XII of the 1987 Constitution, the foreshore and
lands of the public domain were transferred to the PEA (now PRA) and submerged areas of Manila Bay are part of the "lands of the public
issued land patents or certificates of title in PEA’s name did not domain, waters x x x and other natural resources" and consequently
automatically make such lands private. This Court also held therein "owned by the State." As such, foreshore and submerged areas "shall
that reclaimed lands retained their inherent potential as areas for not be alienated," unless they are classified as "agricultural lands" of
public use or public service. the public domain. The mere reclamation of these areas by PEA does
not convert these inalienable natural resources of the State into
As the central implementing agency tasked to undertake reclamation alienable or disposable lands of the public domain. There must be a law
projects nationwide, with authority to sell reclaimed lands, PEA took the or presidential proclamation officially classifying these reclaimed lands
place of DENR as the government agency charged with leasing or as alienable or disposable and open to disposition or concession.
selling reclaimed lands of the public domain. The reclaimed lands being Moreover, these reclaimed lands cannot be classified as alienable or
leased or sold by PEA are not private lands, in the same manner that disposable if the law has reserved them for some public or quasi-public
DENR, when it disposes of other alienable lands, does not dispose of use.
private lands but alienable lands of the public domain. Only when
qualified private parties acquire these lands will the lands become As the Court has repeatedly ruled, properties of public dominion are not
private lands. In the hands of the government agency tasked and subject to execution or foreclosure sale.14 Thus, the assessment, levy
and foreclosure made on the subject reclaimed lands by respondent,
as well as the issuances of certificates of title in favor of respondent,
are without basis.

WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of

the Regional Trial Court, Branch 195, Parañaque City, is REVERSED and
SET ASIDE. All reclaimed properties owned by the Philippine
Reclamation Authority are hereby declared EXEMPT from real estate
taxes. All real estate tax assessments, including the final notices of real
estate tax delinquencies, issued by the City of Parañaque on the
subject reclaimed properties; the assailed auction sale, dated April 7,
2003; and the Certificates of Sale subsequently issued by the
Parañaque City Treasurer in favor of the City of Parañaque, are all
declared VOID.

SO ORDERED.

JOSE CATRLA MENDOZA

Associate justice
G.R. No. 167807 December 6, 2011 ALFREDO CABRERA, MARY LYNN E. GELLOR, JOHN JOSEPH M.
MAGTULOY, MICHELLE MONTEMAYOR, RHINA ANGUE,
MANOLITO AGRA, EDMUNDO P. AGUILAR, IMELDA I. AMERICA, NORBERTO BAYAGA, JR., JUSTINO CALVEZ, EDWIN
EVELYN R. CONCEPCION, DIOSDADO A. CORSIGA, PERCIVAL G. CONCEPCION, ALAN JOSEPH IBE, CESAR JACINTO, JOSERITA
CRISOSTOMO, CESAR E. FAELDON, MA. REGINA C. FILOTEO, MADRID, IRENE MARTIN, GINA T. QUINDO, RENATO SUBIJANO,
ZARINA O. HIPOLITO, JANICE F. MABILOG, ROBERTO NIELMA E. VERZOSA, ALL NATIONAL ELECTRIFICATION
MARTINEZ, JONATHAN MENDROS, NORMAN MIRASOL, EDRICK ADMINISTRATION EMPLOYEES, REPRESENTED BY REGINA
V. MOZO, LORENZO A. PENOLIAR, LOURDES QUINTERO, FILOTEO, Petitioners,
GLORIA GUDELIA SAMBO, DEMOSTHENES V. ERENO, RHONEIL vs.
LIBUNAO, ILUGEN P. MABANSAG, JOSEPHINE MAGBOO, COMMISSION ON AUDIT, Respondent.
MADELEINE ANN B. BAUTISTA, ULYSSES C. BIBON, ANGELINA
RAMOS, EDUARDO M. SUMAYOD, DOMINGO TAMAYO, DECISION
HERACLEA M. AFABLE, ANNA LISSA CREENCIA, CHONA O.
DELA CRUZ, MERCY NANETTE C. IBOY, JEAN A. LUPANGO, LEONARDO-DE CASTRO, J.:
MARIE DELA O. NA-OBRE, PERLA LUZ OCAMPO,
This is a special civil action via certiorari under Rule 65 in relation to
ROUCHELLEJANE PAYURAN, ABIGAIL E. PORMENTO,
Rule 64 of the 1997 Revised Rules of Civil Procedure from the
THERESITA A. RIVERA, MILAGROS ROBLES, JOSEPHINE
Decision1 of the Commission on Audit (COA) No. 2003-134 dated
ROSILLO, ARSENIA M. SACDALAN, PRECILA TUBIO, IRENE H.
October 9, 2003, which denied the grant of rice allowance to
VIRAY, WILFREDO O. BUCSIT, BONIFACIO DAVID, ROSARIO P.
employees of the National Electrification Administration (NEA) who
DIZON, EXEQUIEL EVALE, JR., RONALD M. MANALO,
were hired after June 30, 1989 (petitioners) and COA’s Resolution 2 No.
HENRIETTA A. MARAMOT, FELICISIMO U. PULA, JONAS F.
2005-010 dated February 24, 2005, which likewise denied petitioners’
SALVADOR, ERNESTO SILVANO, JR., ENRICO G. VELGADO,
Motion for Reconsideration.
FEDERICO VILLAR, JR., ARNEL C. ABEN, ABDULMALIK
BACARAMAN, VIRGINIA BORJA, ANTONIO CARANDANG, JR., On July 1, 1989, Republic Act No. 6758 (the Compensation and Position
RINA RIEL DOLINA, MANOLITO FAJARDO, ARVIN B. GARDUQUE, Classification Act of 1989) took effect, Section 12 of which provides:
CAYETANO JUAREZ, MA. SHERYL LABONETE, HERCONIDA T.
LAZARO, MARITESS MARTINEZ, AURELIO L. MENDOZA, ARNEL Sec. 12. Consolidation of Allowances and Compensation. — All
M. NOGOT, GERARDO G. POMOY, DENCIO RAMOS, CORAZON allowances, except for representation and transportation allowances;
TAGUDIN, ANAFEL B. TIO, AGATONA S. ZALATAR, MARGIE clothing and laundry allowances; subsistence allowance of marine
EULALIA CALMA, RENEE D. MELLA, ARLIQUIN AMERICA, officers and crew on board government vessels and hospital personnel;
DEANNA B. AYSON, GERALDINE J. CALICA, CHESTER hazard pay; allowances of foreign service personnel stationed abroad;
FERNANDEZ, LUISA I. HERNANDEZ, CYNTHIA E. LISONDRA, and such other additional compensation not otherwise specified herein
ALONA S. LLVATA, CLAIRE P. QUETUA, ROSEMARIE S. as may be determined by the DBM, shall be deemed included in the
QUINTOS, RUTH S. RAMIREZ, LINO VERMUDO, JR., ROLANDO standardized salary rates herein prescribed. Such other additional
R. APOLONIO, CELIA I. ACCAD, MA. ALMA AYOS, PAMELA compensation, whether in cash or in kind, being received by
CASTILLO, ARNOLD DUPA, LAURENCE FELICIANO, LEANDRO P. incumbents only as of July 1, 1989 not integrated into the standardized
LIBRANDO, MARILOU B. LOPEZ, AMELITA P. LUCERO, salary rates shall continue to be authorized.
ESTERBELLE T. SIBALA, JONA ANDAL, ANDRES RATIO, MA.
Existing additional compensation of any national government official or
THERESA Q. MALLANO, DANILO P. LIGUA, JOY ABOGADO,
employee paid from local funds of a local government unit shall be
VIRGINIA C. STA. ANA, ALBERNARD BAUTISTA, JUBANE DE
absorbed into the basic salary of said official or employee and shall be
PEDRO, PAUL DINDO C. DELA CRUZ, ALEJO B. INCISO,
paid by the National Government. (Emphasis ours.)
SHERWIN MAÑADA, JESUS T. OBIDOS, JOEL B. ARELLANO,
Pursuant to its authority to implement Republic Act No. 6758 under are entitled but which until now they have been deprived of as
Section 23 thereof, the Department of Budget and Management (DBM) enumerated under Section 5 of DBM CCC No. 10 and their inclusion in
on October 2, 1989 issued Corporate Compensation Circular No. 10 the Provident Funds Membership, retroactive from the date of their
(DBM-CCC No. 10), otherwise known as the "Implementing Rules and appointments up to the present or until their separation from the
Regulations of R.A. No. 6758." Paragraph 5.5 of DBM-CCC No. 10 reads: service.5

5.5 The following allowances/fringe benefits authorized to GOCCs/GFIs At the instance of the complainants, the Branch Clerk of Court of RTC
pursuant to the aforementioned issuances are not likewise to be Branch 88, Quezon City, Lily D. Labarda, issued a
integrated into the basic salary and allowed to be continued only for CERTIFICATION6 dated January 24, 2000, which states:
incumbents of positions as of June 30, 1989 who are authorized and
actually receiving said allowances/benefits as of said date, at the same This is to certify that the Decision dated December 16, 19997 of the
terms and conditions prescribed in said issuances[:] above-entitled case which reads the dispositive portion:

5.5.1 Rice Subsidy; xxxx

5.5.2 Sugar Subsidy; is now final and executory.

5.5.3 Death Benefits other than those granted by the GSIS; This certification [is] issued upon the request of Ms. Blesilda B. Aguilar
for whatever legal purpose/s it may serve.8
5.5.4 Medical/dental/optical allowances/benefits;
Afterwards, the Presiding Judge of RTC Branch 88, Quezon City issued a
5.5.5 Children’s Allowance; Writ of Execution9 in SP. Civil Action No. Q-99-38275 on February 22,
2000.10 Thereafter, the RTC issued a Notice of Garnishment against the
5.5.6 Special Duty Pay/Allowance; funds of NEA with Development Bank of the Philippines (DBP) to the
extent of ₱16,581,429.00.11
5.5.7 Meal Subsidy;
NEA questioned before the Court of Appeals the Orders of the lower
5.5.8 Longevity Pay; and
court, and the case was docketed as CA-G.R. SP No. 62919. On July 4,
5.5.9 Teller’s Allowance. (Emphasis added.) 2002, the Court of Appeals rendered a Decision 12 declaring null and
void the December 11, 2000 Resolution as well as the January 8, 2001
A group of NEA employees who were hired after October 31, Order of the RTC, and ordering the implementation of a writ of
19893 claimed that they did not receive meal, rice, and children’s execution against the funds of NEA. Thus, NEA filed a Petition for
allowances. Thus, on July 23, 1999, they filed a special civil action for Review on Certiorari with this Court, docketed as G.R. No. 154200.
mandamus against NEA and its Board of Administrators before the Meanwhile, the RTC held in abeyance the execution of its December
Regional Trial Court (RTC), Branch 88, Quezon City, docketed as SP. 15, 1999 Decision pending resolution of this Court of the review on
Civil Action No. Q-99-38275, alleging violation of their right to the equal certiorari in National Electrification Administration v. Morales.13
protection clause under the Constitution.
On July 24, 2007, this Court reversed and set aside the Court of
On December 15, 1999, the RTC rendered its Decision4 in their favor, Appeals decision and described the subsequent events relating to the
disposing of the case in the following manner: case in this manner14 :
WHEREFORE, foregoing considered, the petition is hereby GRANTED Meanwhile, in a letter dated June 28, 2000, former DBM Secretary
directing the respondent NEA, its Board of Administrators to forthwith Benjamin E. Diokno informed NEA Administrator Conrado M. Estrella III
settle the claims of the petitioners and other employees similarly of the denial of the NEA request for a supplemental budget on the
situated and extend to them the benefits and allowances to which they ground that the claims under R.A. No. 6758 which the RTC had ordered
to be settled cannot be paid because Morales, et al. are not Parenthetically, the records at hand do not indicate when Morales, et
"incumbents of positions as of July 1, 1989 who are actually receiving al. were appointed. Even the December [15], 1999 RTC Decision is
and enjoying such benefits." vague for it merely states that they were appointed after June 30,
1989, which could mean that they were appointed either before the
Moreover, in an Indorsement dated March 23, 2000, the Commission cut-off date of October 31, 1989 or after. Thus, there is not enough
on Audit (COA) advised NEA against making further payments in basis for this Court to determine that the foregoing COA Decision No.
settlement of the claims of Morales, et al. Apparently, COA had 95-074 adversely affects Morales, et al.. Moreover, the records do not
already passed upon claims similar to those of Morales, et al. in its show whether COA actually questioned the December 16, 1999 RTC
earlier "Decision No. 95-074" dated January 25, 1995. Portions of the Decision before this Court.15
Indorsement read as follows:
The Court ruled that respondents therein could not proceed against the
This Office concurs with the above view. The court may have funds of NEA "because the December [15], 1999 RTC Decision sought
exceeded its jurisdiction when it entertained the petition for to be satisfied is not a judgment for a specific sum of money
the entitlement of the after-hired employees which had susceptible of execution by garnishment; it is a special judgment
already been passed upon by this Commission in COA Decision requiring petitioners to settle the claims of respondents in accordance
No. 95-074 dated January 25, 1995. There, it was held that: "the with existing regulations of the COA." 16 The Court further held as
adverse action of this Commission sustaining the disallowance made follows:
by the Auditor, NEA, on the payment of fringe benefits granted to NEA
employees hired from July 1, 1989 to October 31, 1989 is hereby In its plain text, the December [15], 1999 RTC Decision merely directs
reconsidered. Accordingly, subject disallowance is lifted." petitioners to "settle the claims of [respondents] and other employees
similarly situated." It does not require petitioners to pay a certain sum
Thus, employees hired after the extended date of October 31, of money to respondents. The judgment is only for the performance of
1989, pursuant to the above COA decision cannot defy that an act other than the payment of money, implementation of which is
decision by filing a petition for mandamus in the lower court. governed by Section 11, Rule 39 of the Rules of Court, which provides:
Presidential Decree No. 1445 and the 1987 Constitution
prescribe that the only mode for appeal from decisions of this Section 11. Execution of special judgments. - When a judgment
Commission is on certiorari to the Supreme Court in the requires the performance of any act other than those mentioned in the
manner provided by law and the Rules of Court. Clearly, the two preceding sections, a certified copy of the judgment shall be
lower court had no jurisdiction when it entertained the subject attached to the writ of execution and shall be served by the officer
case of mandamus. And void decisions of the lower court can upon the party against whom the same is rendered, or upon any other
never attain finality, much less be executed. Moreover, COA person required thereby, or by law, to obey the same, and such party
was not made a party thereto, hence, it cannot be compelled or person may be punished for contempt if he disobeys such judgment.
to allow the payment of claims on the basis of the questioned
decision. xxxx

PREMISES CONSIDERED, the auditor of NEA should post-audit the Garnishment is proper only when the judgment to be enforced is one
disbursement vouchers on the bases of this Commission's decision for payment of a sum of money.
particularly the above-cited COA Decision No. 94-074 [sic] and existing
The RTC exceeded the scope of its judgment when, in its February 22,
rules and regulations, as if there is no decision of the court in the
2000 Writ of Execution, it directed petitioners to "extend to
subject special civil action for mandamus. At the same time,
[respondents] the benefits and allowances to which they are entitled
management should be informed of the intention of this Office to
but which until now they have been deprived of as enumerated under
question the validity of the court decision before the Supreme Court
Sec. 5 of DBM CCC No. 10 and x x x to cause their inclusion in the
through the Office of the Solicitor General.
Provident Fund Membership." Worse, it countenanced the issuance of a
notice of garnishment against the funds of petitioners with DBP to the Regional Trial Court, Branch 88, Quezon City in Special Civil Action No.
extent of ₱16,581,429.00 even when no such amount was awarded in Q-99-38275 are REINSTATED.17
its December 16, 1999 Decision.
Meantime, the Civil Service Commission issued Resolution No. 001295
However, in its subsequent Orders dated May 17, 2000 and January 8, dated June 1, 200118 and interpreted Section 12 of Republic Act No.
2001, the RTC attempted to set matters right by directing the parties to 6758 in this manner:
now await the outcome of the legal processes for the settlement of
respondents’ claims. Material to the resolution of this instant request is Section 12 of SSL x x
x.
That is only right.
xxxx
Without question, petitioner NEA is a GOCC -- a juridical personality
separate and distinct from the government, with capacity to sue and The Commission, x x x is of the view that this provision of law does not
be sued. As such GOCC, petitioner NEA cannot evade execution; its imply that such other additional compensation not integrated into the
funds may be garnished or levied upon in satisfaction of a judgment salary rates shall not be received by employees appointed after July 1,
rendered against it. However, before execution may proceed against it, 1989. The word "only" before the phrase "as of July 1, 1989" does not
a claim for payment of the judgment award must first be filed with the refer to incumbents but qualifies what additional compensation can be
COA. continued together with the qualifying words "not integrated into the
standardized rates shall continue to be authorized." The correct
Under Commonwealth Act No. 327, as amended by Section 26 of P.D. interpretation therefore is that, additional compensation being received
No. 1445, it is the COA which has primary jurisdiction to examine, audit by employees not integrated into the standardized rates as of July 1,
and settle "all debts and claims of any sort" due from or owing the 1989 shall continue to be authorized and received/enjoyed by said
Government or any of its subdivisions, agencies and instrumentalities, employees, whether or not said employee was appointed prior to or
including government-owned or controlled corporations and their after July 1, 1989.
subsidiaries. With respect to money claims arising from the
implementation of R.A. No. 6758, their allowance or disallowance is for A different interpretation will result in the creation of two classes of
COA to decide, subject only to the remedy of appeal by petition employees, i.e., one class receiving less pay than another class for
for certiorari to this Court. substantially equal work. Said interpretation will violate Section 2 of the
SSL which provides, thus:
All told, the RTC acted prudently in halting implementation of the writ
of execution to allow the parties recourse to the processes of the COA. xxxx
It may be that the tenor of the March 23, 2000 Indorsement issued by
Additionally, this interpretation will also violate the constitutional
COA already spells doom for respondents’ claims; but it is not for this
precept that no person shall be denied the equal protection of law
Court to preempt the action of the COA on the post-audit to be
(Section 1, Article III of the 1987 Constitution). Applying this precept the
conducted by it per its Indorsement dated March 23, 2000.
Supreme Court declared that "equal protection of the law is against
In fine, it was grave error for the CA to reverse the RTC and direct unde favor on an individual or class (Tiu vs. Court of Appeals, GR No.
immediate implementation of the writ of execution through 127410, January 20, 1999).19
garnishment of the funds of petitioners,
The Office of the Government Corporate Counsel (OGCC), in response
WHEREFORE, the petition is GRANTED. The July 4, 2002 Decision of to the request of then NEA Administrator Manuel Luis S. Sanchez,
the Court of Appeals is REVERSED and SET ASIDE. The Resolution issued on August 14, 2001 its Opinion No. 157, s. 200120 declaring that
dated December 11, 2000 and Order dated January 8, 2001 of the the RTC decision, not having been appealed, had become the law of
the case which must now be applied. The pertinent portion of such
opinion reads:
HON. MANUEL LUIS S. SANCHEZ RESOLVED THEREFORE TO APPROVE, as it hereby approves, the
Administrator entitlement to rice, medical, children, meal and other related
National Electrification Administration allowances of NEA employees hired after October 31, 1989 and
NEA Road, Diliman, Quezon City payment of these benefits;

Re: Request for legal opinion on the propriety and applicability to NEA RESOLVED FURTHER TO CONFIRM, as it hereby confirms, the initial
employees hired after July 1, 1989 of OGCC Opinion NO. 086, s. 2001 appropriation and payment of One Million Six Hundred Forty Six
Thousand One Hundred Twenty Seven Pesos and Thirty Centavos
xxxx (P1,646,127.30) for this purpose chargeable against the Personnel
Services Savings.24
Pursuant to law, subject Decision became final and executory fifteen
(15) days after its rendition, there being no appeal or motion for Thus, NEA granted the questioned allowances to its employees who
reconsideration filed in the interim, as certified to by Atty. Lily D. were not receiving these benefits/allowances, including rice allowance
Labarda, Branch 88, Quezon City, on January 24, 2000. amounting to ₱1,865,811.84 covering the period January to August
2001.25
The foregoing considered, this Office therefore cannot opine otherwise
save to uphold the supremacy and finality of the aforequoted Decision However, the resident auditor of COA, Carmelita M. Agullana
of the Court on the matter. Its judgment is now res judicata, hence, the (Agullana), did not allow the payment of rice allowance for the period
controlling legal rule, as far as Petitioners NEA employees are January to August 2001 to NEA employees who were not incumbents
concerned, is that they must be extended the benefits and allowances as of June 30, 1989, under Notice of Disallowance26 No. 2001-004-101
"to which they are entitled but which until now they have been dated September 6, 2001. Agullana indicated the "Facts and/or
deprived of as enumerated under Section 5 of DBM CCC No. 101 x x x, Reasons for Disallowance" as follows:
retroactive from the date of their appointments up to the present or
until their separation from the service." This is the law of the case Payment of Rice Allowance for the period January, 2001 to August,
which must now be applied. At any rate, we have stated in OGCC 2001 to employees who were not incumbents as of June 30, 1989 not
Opinion No. 086, S. 2001 that even employees hired after July 1, 1989 allowed pursuant to RA #6758 as implemented by Corporate
may receive the subject benefits provided there is determination by Compensation Circular No. 10 prescribing the Rules and Regulations for
the DBM that the same have not been actually integrated into their the Implementation of the Revised Compensation and Position
basic salaries. Classification System for Government-Owned and/or Controlled
Corporations (GOCCs) and Financial Institutions (GFIs) specifically
Hence, your query is therefore answered in the affirmative.21 Sections 5.4 and 5.5 thereof. x x x.27
Pursuant to the above opinion in its favor, the NEA Board of NEA, through then Acting Administrator Francisco G. Silva, and assisted
Administrators issued Resolution No. 29 on August 9, 200122 approving by counsel, appealed Agullana’s disallowance to the COA on
the entitlement to rice, medical, children, meal, and other related September 27, 2001,28 arguing that the disallowance had no basis in
allowances to NEA employees hired after October 31, 1989, 23 and the law and in fact, and that the subject disbursement was anchored on a
payment of these benefits, chargeable to its Personnel Services court decision that had become final and executory.
Savings. This resolution was the outcome of the meeting of the NEA
Board of Administrators on the same date, and reads: The COA denied the appeal from the disallowance in a Decision 29 dated
October 9, 2003 (Decision No. 2003-134). The COA stated that:
RESOLUTION NO. 29
The Director of x x x Corporate Audit Office II recommended the
xxxx affirmance of the subject disallowance contending that Section 12 of
Republic Act (RA) No. 6758 (Salary Standardization Law) x x x remains
applicable on the matter since Department of Budget and Moreover, the Director noted that when the rice allowance to the
Management-Corporate Compensation Circular No. 10, s. 1989 (DBM- claimants was granted in the year 2001, the DBM had already
CCC No. 10) was declared ineffective by the Supreme Court in the case published CCC No. 10.
of De Jesus, et al. vs. COA, et al. (G.R. No. 109023, August 13, 1998)
due to its non-publication in the Official Gazette or in a newspaper of Anent the contention that the subject decision of the RTC has become
general circulation. She pointed out that the alleged discriminatory the law of the case which must be applied, she stressed that the said
effect and violation of the policy to provide equal pay for substantially doctrine is one of the policies only and will be disregarded when
equal work in the above-quoted provision have been sufficiently compelling circumstances call for a redetermination of the point of law.
considered in Philippine Ports Authority vs. COA, 214 SCRA 653 and As cited in Black’s Law Dictionary, 6th Edition, 1990, "the doctrine is
later confirmed in Philippine International Trading Corporation vs. COA, merely a rule of procedure and does not go to the power of the court,
G.R. No. 132593, June 25, 1999, wherein the Supreme Court ruled that: and will not be adhered to where its application will result in unjust
decision."
"x x x we must mention that this Court has confirmed in Philippine
Ports Authority vs. Commission on Audit the legislative intent to protect xxxx
incumbents who are receiving salaries and allowances over and above
PREMISES CONSIDERED, the instant appeal is hereby DENIED and the
those authorized by RA 6758 to continue to receive the same even
disallowance in the total amount of ₱1,865,811.84 is accordingly
after RA 6758 took effect. In reserving the benefit to incumbents, the
affirmed.30
legislature has manifested its intent to gradually phase out this
privilege without upsetting the policy of non-diminution of pay and NEA filed a Motion for Reconsideration of the said Decision, but this was
consistent with the rule that laws should only be applied prospectively denied in COA Decision No. 2005-01031 dated February 24, 2005, the
in the spirit of fair play." pertinent portions of which read:
She also conformed to the OGCC Opinion No. 52, s. 1999 dated March After a careful re-evaluation, this Commission finds herein motion
22, 1999, edifying the implication of the De Jesus Case which devoid of merit, the issues raised therein being a mere reiteration of
enunciated thusly: the previous arguments of the movant in his appeal and which were
already considered and passed upon by this Commission in the
"Notwithstanding the ruling in the De Jesus Case, the applicable law is
assailed decision.
still Section 12 of R.A. No. 6758 which allows additional compensation
being received by incumbents as of July 1, 1989 not integrated into the WHEREFORE, there being no new and material evidence adduced as
standard rates to continue. The recent nullification of DBM-CCC No. 10 would warrant a reversal or modification of the decision herein sought
applies favorably only to those incumbent employees (hired prior to to be reconsidered, the instant motion for reconsideration has to be, as
July 1, 1989) and does not in any way change the position or situation it is hereby, denied with finality.32
of those employees hired after the cut-off date. With the issuance of
R.A. 6758, employees hired after July 1, 1989 must follow the revised Thus, petitioners came to this Court questioning the COA’s decision and
and unified compensation and position classification system in the resolution on the disallowance of their rice subsidy.
government, for which the DBM was directed to establish and
Petitioners claim that the COA’s reliance on DBM-CCC No. 10 is totally
administer and which shall be applied for all government entities.
misplaced, alleging that this interpretation had been "squarely
xxxx debunked" by the Supreme Court in a number of cases, including Cruz
v. Commission on Audit.33 Furthermore, petitioners claim that in a
The new hirees having accepted their employment, aware of such a similar case involving Opinion No. 086, s. 2001 of the OGCC, it wrote:
condition that they are not entitled to additional benefits and "[It] is our considered opinion that employees of COA, whether
allowances, they would be estopped from complaining." appointed before or after July 1, 1989, are entitled to the benefits
enumerated under Section 5.5 of DBM-CCC No. 10 x x x."34
We quote portions of Opinion No. 086, s. 2001 of the OGCC below: those hired before and after October 31, 1989 (or in this case, July [1],
1989)," while "the COA sweepingly does so by just a wave of the
Please be informed that our Office had previously rendered legal hand."36 To support this claim, petitioners erroneously cite Javier v.
opinions involving the same issue upon the request of some of our Philippine Ports Authority, CA-G.R. No. 67937, March 12, 2002, as a
client corporations similarly situated. In our Opinion No. 55, Series of decision by this Court, but said decision was rendered by the Court of
2000, we stated: Appeals.
"At the outset we would like to clarify that the amount of the Petitioners argue that assuming that they are not entitled to the rice
standardized salary vis-à-vis the pre-SSL salary (plus allowance) is not allowance in question, they should not be required to refund the
conclusively determinant of whether or not a certain allowance is amounts received, on grounds of fairness and equity. In connection
deemed integrated into the former. Section 12 of R.A. 6758 expressly with this, petitioners allege as follows:
provides:
Prior to December 31, 2003, NEA consists of 720 employees more or
xxxx less who received the rice allowance. Upon [the] restructuring of NEA in
December 2003, all NEA employees were legally terminated. Out of
The law is thus clear. The general rule is that all allowances are
720 employees, only 320 employees are now left with to operate NEA.
deemed included in the standardized rates set forth in R.A. 6758. This
Most of the (sic) them are rehired while minority of them are newly
is consistent with the primary intent of the Act to eliminate wage
hired. Thus, the refund of P1,865,811.84, shall be shouldered by those
inequities. The law, however, admits of certain exceptions and as
who remained as NEA employees. Secondly, those who received the
stated in the second sentence of the aforecited provision, such other
said rice allowance accepted it in good faith believing that they are
additional compensation in cash or in kind not integrated into the
entitled to it as a matter of law.37
standardized rates being received by incumbents as of July 1, 1989
shall continue to be authorized. It is our view, however, that a In its Comment38 dated September 21, 2005, COA’s lone argument is
government agency, in this case NDC, does not have discretion to that "[t]he assailed COA decision is not tainted with grave abuse of
determine what allowances received by incumbent employees prior to discretion. The disallowance of payment for the rice [subsidy] by the
SSL are deemed included or integrated in the standardized rates. It is COA is in accord with the law and the rules." COA maintains that the
the DBM which has the mandate and authority under the SSL to law on the matter, Section 12 of Republic Act No. 6758, is clear, as its
determine what additional compensation shall be integrated and it is last sentence provides reservation of certain allowances to incumbents.
precisely why it issued NCC No. 10." COA argues in this wise:
The foregoing opinion is consistent with our Opinion No. 52, Series of The Supreme Court in Philippine Ports Authority vs. Commission on
1999, wherein we opined: Audit confirmed the legislative intent to protect incumbents who are
receiving salaries and/or allowances over and above those authorized
"x x x Nonetheless, as Section 12 of RA 6758 expressly provides that
by R.A. 6758 to continue to receive the same even after the law took
such additional compensation, whether in cash or in kind, being
effect. In reserving the benefit to incumbents, the legislature has
received by incumbent employees as of July 1, 1989 not integrated to
manifested its intent to gradually phase out this privilege without
the standardized salary rates as may be determined by the DBM shall
upsetting the policy of non-diminution of pay and consistent with the
continue to be authorized, the question becomes a matter of fact, on
rule that laws should only be applied prospectively in the spirit of
whether or not the aforementioned allowances have been integrated
fairness and justice.
into the salaries of employees."35 (Emphases in the quoted text.)
Thus, pursuant to its authority under Section 23 of R.A. No. 6758, the
Petitioners claim that "the Civil Service Commission, the Office of the
DBM x x x issued on October 2, 1989, DBM-CCC No. 10. Section 5.5 of
Government Corporate Counsel and the highest court of the land, the
DBM-CCC No. 10 enumerated the various allowances/fringe benefits
Supreme Court, chose not to distinguish the entitlement of benefits to
authorized to GOCCs/GFIs which are not to be integrated into the basic
salary and allowed to be continued only for incumbents of positions as 1. Whether or not the immutability of final decision doctrine must
of June 30, 1989 who are authorized and actually receiving said prevail over the exclusive jurisdiction of [the COA] to audit and settle
allowances/benefits as of said date. Among these was the rice disbursements of funds; and
subsidy/allowance.
2. Whether or not the NEA employees hired after June 30, 1989 are
Hence, in light of the effectivity of DBM-CCC No. 10 on March 16, 1999 entitled to rice allowance.45
following its reissuance (in its entirety on February 15, 1999) and
publication in the Official Gazette on March 1, 1999, the disallowance The COA resolved these issues in this manner:
by the COA of the rice allowance for the period beginning January 2001
As to the first issue, the immutability rule applies only when the
up to August 2001 is not tainted with grave abuse of discretion but in
decision is promulgated by a court possessed of jurisdiction to hear and
accord with the law and the rules.39
decide the case. Undoubtedly, the petition in the guise of a case for
Petitioners, in their Reply,40 anchor their petition on their allegation that mandamus is a money claim falling within the original and exclusive
the RTC Decision had already become final and executory, could no jurisdiction of this Commission. Noting the propensity of the lower
longer be disturbed, and must be respected by the parties. To support courts in taking cognizance of cases filed by claimants in violation of
their claim, they cite Arcenas v. Court of Appeals41 wherein this Court such primary jurisdiction, the Supreme Court issued Administrative
held: Circular 10-2000 dated October 23, 2000 enjoining judges of lower
courts to exercise caution in order to prevent "possible circumvention
For, it is a fundamental rule that when a final judgment becomes of the rules and procedures of the Commission on Audit" and
executory, it thereby becomes immutable and unalterable. The reiterating the basic rule that: "All money claims against the
judgment may no longer be modified in any respect, even if the Government must be filed with the Commission on Audit which shall
modification is meant to correct what is perceived to be an erroneous act upon it within sixty days. Rejection of the claim will authorize the
conclusion of fact or law, and regardless of whether the modification is claimant to elevate the matter to the Supreme Court on certiorari and
attempted to be made by the court rendering it or by the highest Court in effect sue the State thereby."
of the land. The only recognized exceptions are the correction of
clerical errors or the making of so-called nunc pro tunc entries which Under the doctrine of primary jurisdiction, when an administrative body
cause no prejudice to any party, and, of course, where the judgment is is clothed with original and exclusive jurisdiction, courts are utterly
void. Any amendment or alteration which substantially affects a final without power and authority to exercise concurrently such jurisdiction.
and executory judgment is null and void for lack of jurisdiction, Accordingly, all the proceedings of the court in violation of that doctrine
including the entire proceedings held for that purpose.42 (Emphasis and all orders and decisions reached thereby are null and void. It will be
ours.) noted in the cited Supreme Court Circular that money claims are
cognizable by the COA and its decision is appealable only to the
Petitioners likewise cite Panado v. Court of Appeals 43 wherein the Court Supreme Court. The lower courts have nothing to do with such genus
held that "[i]t is axiomatic that final and executory judgments can no of transactions.
longer be attacked by any of the parties or be modified, directly or
indirectly, even by the highest court of the land."44 From the foregoing Anent the issue of entitlement to rice allowance by employees hired
jurisprudence, petitioners conclude that the acts of COA in disallowing after June 30, 1989, this Commission is left with no option but to affirm
the claims and ordering refund of benefits already received clearly the disallowance in the face of the explicit provisions of DBM-CCC No.
constitute grave abuse of discretion amounting to lack of jurisdiction 10. After its publication on March 9, 1999 in the Official Gazette, rice
inasmuch as said acts frustrated the final and executory decision of the allowance was allowed only for incumbents as of July 1, 1989.
trial court. Obviously, there is no violation of the equal protection clause as cited in
the PITC case, supra, because whatever increments the incumbents
The pivotal issues as determined by the COA are: are enjoying over those of non-incumbents are transitory, for the same
law provides that such difference shall be deducted from the salary
increase the former should receive under Section 17. Thus, the DBM under Section 12 of Republic Act No. 6758, was correctly applied
equalization or standardization of what the two categories of by the COA.
employees will be receiving in terms of benefits is ensured.
We find our pronouncements in Philippine National Bank v. Palma53 to
PREMISES CONSIDERED, the instant appeal is hereby DENIED and the be applicable and conclusive on this issue now before us:
disallowance in the total amount of ₱1,865,811.84 is accordingly
affirmed.46 During these tough economic times, this Court understands, and in fact
sympathizes with, the plight of ordinary government employees.
We agree with the findings of the COA. Whenever legally possible, it has bent over backwards to protect labor
and favor it with additional economic advantages. In the present case,
In National Electrification Administration v. Morales, the order of however, the Salary Standardization Law clearly provides that the
garnishment against the NEA funds to implement the RTC Decision claimed benefits shall continue to be granted only to employees who
was in issue, and we said that the COA had exclusive jurisdiction to were "incumbents" as of July 1, 1989. Hence, much to its regret, the
decide on the allowance or disallowance of money claims arising from Court has no authority to reinvent or modify the law to extend those
the implementation of Republic Act No. 6758. We observed therein benefits even to employees hired after that date.1awphil
that "the RTC acted prudently in halting implementation of the writ of
execution to allow the parties recourse to the processes of the xxxx
COA."47 In fact, we even stated there that "it is not for this Court to
preempt the action of the COA on the post-audit to be conducted by it Stare Decisis
per its Indorsement dated March 23, 2000."48
The doctrine "stare decisis et non quieta movere (Stand by the
We find that the COA had ruled in accordance with law and decisions and disturb not what is settled)" is firmly entrenched in our
jurisprudence, and we see no reason to reverse its decision. jurisprudence. Once this Court has laid down a principle of law as
applicable to a certain state of facts, it would adhere to that principle
Section 5.5 of DBM-CCC No. 10 is clear that rice subsidy is one of the and apply it to all future cases in which the facts are substantially the
benefits that will be granted to employees of GOCCs 49 or GFIs50 only if same as in the earlier controversy.
they are "incumbents" as of July 1, 1989. We reproduce the first
paragraph of Section 5.5 below: The precise interpretation and application of the assailed provisions of
RA 6758, namely those in Section 12, have long been established
5.5 The following allowances/fringe benefits authorized to GOCCs/GFIs in Philippine Ports Authority v. COA. The essential pronouncements in
pursuant to the aforementioned issuances are not likewise to be that case have further been fortified by Manila International Airport
integrated into the basic salary and allowed to be continued only for Authority v. COA, Philippine International Trading Corporation v. COA,
incumbents of positions as of June 30, 1989 who are authorized and and Social Security System v. COA.
actually receiving said allowances/benefits as of said date, at the same
terms and conditions prescribed in said issuances[:] This Court has consistently held in those cases that allowances or
fringe benefits, whether or not integrated into the standardized salaries
5.5.1 Rice Subsidy; x x x.51 prescribed by RA 6758, should continue to be enjoyed by employees
who (1) were incumbents and (2) were receiving those benefits as of
We have defined an incumbent as "a person who is in present July 1, 1989.
possession of an office; one who is legally authorized to discharge the
duties of an office."52 There is no question that petitioners were not In Philippine Ports Authority v. COA, the x x x Court said that the
incumbents as of June 30, 1989. We have likewise characterized NEA intention of the framers of that law was to phase out certain allowances
as a GOCC in National Electrification Administration v. Morales. Thus, and privileges gradually, without upsetting the principle of non-
Section 5.5 quoted above, issued pursuant to the authority given to the diminution of pay. The intention of Section 12 to
protect incumbents who were already receiving those allowances on Section 12 of Republic Act No. 6758, the only requirements for the
July 1, 1989, when RA 6758 took effect was emphasized thus: continuous grant of allowances and fringe benefits on top of the
standardized salary rates for employees of GOCCs and GFIs are as
"An incumbent is a person who is in present possession of an office. follows: (1) the employee must be an incumbent as of July 1, 1989; and
(2) the allowance or benefit was not consolidated in the standardized
"The consequential outcome, under sections 12 and 17, is that if the
salary rate as prescribed by Republic Act No. 6758.55
incumbent resigns or is promoted to a higher position, his successor is
no longer entitled to his predecessor’s RATA privilege x x x or to the We hereby reiterate our ruling in Philippine National Bank v. Palma as
transition allowance." regards Section 12 of Republic Act No. 6758, as follows:
Finally, to explain what July 1, 1989 pertained to, we held in the same In sum, we rule thus:
case as follows:
1. Under Section 12 of RA 6758, additional compensation already being
"x x x. The date July 1, 1989 becomes crucial only to determine that as received by the employees of petitioner, but not integrated into the
of said date, the officer was an incumbent and was receiving the standardized salary rates -- enumerated in Section 5.5 of DBM-CC[C]
RATA, for purposes of entitling him to its continued grant. x x x." No. 10, like "rice subsidy, sugar subsidy, death benefits other than
those granted by the GSIS," and so on -- shall continue to be given.
In Philippine International Trading Corporation v. COA, this Court
confirmed the legislative intention in this wise: 2. However, the continuation of the grant shall be available only to
those "incumbents" already receiving it on July 1, 1989.
"x x x [T]here was no intention on the part of the legislature to revoke
existing benefits being enjoyed by incumbents of government 3. Thus, in PPA v. COA, this Court held that PPA employees already
positions at the time of the passage of RA 6758 by virtue of Sections 12 receiving the RATA granted by LOI No. 97 should continue to receive
and 17 thereof. x x x." them, provided they were already "incumbents" on or before July 1,
1989.
The Court stressed that in reserving the benefits to incumbents alone,
the legislature’s intention was not only to adhere to the policy of non- 4. PITC v. COA held that in enacting RA 6758, Congress was adhering
diminution of pay, but also to be consistent with the prospective to the policy of non-diminution of existing pay. Hence, if a benefit was
application of laws and the spirit of fairness and justice. not yet existing when the law took effect on July 1, 1989, there was
nothing to continue and no basis for applying the policy.
xxxx
5. Neither would Cruz v. COA be applicable. In those cases, the COA
In consonance with stare decisis, there should be no more misgivings
arbitrarily set a specific date, October 31, 1989; RA 6758 had not made
about the proper application of Section 12. In the present case, the
a distinction between those hired before and those after that date. In
payment of benefits to employees hired after July 1, 1989, was
the present case, the law itself set July 1, 1989, as the date when
properly withheld, because the law clearly mandated that those
employees should be "incumbents," because that was when RA 6758
benefits should be reserved only to incumbents who were already
took effect. It was not an arbitrarily chosen date; there was sufficient
enjoying them before its enactment. Withholding them from the others
reason for setting it as the cutoff point.56
ensured that the compensation of the incumbents would not be
diminished in the course of the latter’s continued employment with the Notwithstanding our ruling above, however, we take up as another
government agency.54 (Emphasis ours, citations omitted.)1avvphi1 matter the refund ordered by the COA on the rice subsidy that
petitioners had already received. As regards the refund, we rule in
As petitioners were hired after June 30, 1989, the COA was correct in
favor of petitioners and will not require them to return the amounts
disallowing the grant of the benefit to them, as they were clearly not
anymore.
entitled to it. As quoted above, we have repeatedly held that under
This is because, to begin with, the officials and administrators of NEA SO ORDERED.
themselves had believed that their employees were entitled to the
allowances, and this was covered by Resolution No. 29 of the NEA
Board of Administrators. The petitioners thus received in good faith the
rice subsidy together with other allowances provided in said Resolution.
For reasons of equity and fairness, therefore, and considering their long
wait for this matter to be resolved with finality, we will no longer require
a refund from these public servants.

Our pronouncements on refund in De Jesus v. Commission on

Audit,57 wherein we cited Blaquera v. Hon. Alcala,58 are applicable:

Considering, however, that all the parties here acted in good faith, we
cannot countenance the refund of subject incentive benefits for the
year 1992, which amounts the petitioners have already received.
Indeed, no indicia of bad faith can be detected under the attendant
facts and circumstances. The officials and chiefs of offices concerned
disbursed such incentive benefits in the honest belief that the amounts
given were due to the recipients and the latter accepted the same with
gratitude, confident that they richly deserve such benefits.

This ruling in Blaquera applies to the instant case. Petitioners here

received the additional allowances and bonuses in good faith under the
honest belief that LWUA Board Resolution No. 313 authorized such
payment. At the time petitioners received the additional allowances
and bonuses, the Court had not yet decided Baybay Water District.
Petitioners had no knowledge that such payment was without legal
basis. Thus, being in good faith, petitioners need not refund the
allowances and bonuses they received but disallowed by the
COA.59 (Emphasis supplied.)

As in the cases above quoted, we cannot countenance the refund of

the rice subsidies given to petitioners by NEA for the period January to
August 2001 at this late time, especially since they were given by the
government agency to its employees in good faith.

WHEREFORE, premises considered, the petition is hereby PARTIALLY

GRANTED. COA Decision No. 2003-134 dated October 9, 2003 and
COA Resolution No. 2005-010 dated February 24, 2005 are hereby
AFFIRMED with the CLARIFICATION that the petitioners shall no longer
be required to refund the rice subsidies for the period January to August
2001, which they had received from NEA but were later disallowed by
the COA.
 G.R. No. 176343 September 18, 2012 Board hereby refers this case to the Office of the Government
Corporate Counsel to conduct a formal investigation on the following:
TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF
THE PHILIPPINES, Petitioner, 1) The incident during the Credit Committee Meeting on 06 March
vs. 2002 where you allegedly engaged yourself in a verbal tussle with Mr.
MA. ROSARIO S. MANALANG-DEMIGILIO, Respondent. Joel C. Valdes, President and CEO. Allegedly, you raised your voice, got
angry, shouted at Mr. Valdes and were infuriated by his remarks such
DECISION as "are we talking of apples and apples here?", "everybody should
focus on the issues at hand" and "out of the loop";
BERSAMIN, J.:
2) The incident during the Reorganization Meeting on 18 July 2002
The issuance by the proper disciplining authority of an order of
where you appeared to have been rude and arrogant in the way you
preventive suspension for 90 days of a civil service officer or employee
answered Mr. Valdes to some questions like "Ano gusto mo? Bibigay ko
pending investigation of her administrative case is authorized provided
personally sa iyo…sasabihan ko personally ikaw?", "You know Joel alam
that a formal charge is served to her and the charge involves
natin sa isa’t-isa…that…I don’t know how to term it…there is no love
dishonesty, oppression, grave misconduct, or neglect in the
lost no?", "Ang ibig sabihin kung may galit ka…" "Let’s be candid you
performance of duty, or if there are reasons to believe that she is guilty
know…" "What is the opportunity? Let me see…pakita ko sa’yo lahat
of the charge as to warrant her removal from the service. Proof
ang aking ano…" and "Anong output tell me?";
showing that the respondent officer or employee may unduly influence
the witnesses against her or may tamper the documentary evidence 3) The incident during the Planning Session on 05 August 2002.
on file at her office is not a prerequisite before she may be preventively Records show that you reacted to the statement of Mr. Valdes urging
suspended. everybody to give support to the Marketing Group in this manner –
"But of course, we would not want to be the whipping boy!" Records
Antecedents
also show that in the same meeting, you used arrogant and
Trade and Investment Development Corporation of the Philippines threatening remarks to the President and CEO like "don’t cause division
(TIDCORP) is a wholly owned government corporation whose primary to hide your inefficiency and gastos! If you push me to the wall, I have
purpose is to guarantee foreign loans, in whole or in part, granted to goods on you too…", "You want me to charge you to the
any domestic entity, enterprise or corporation organized or licensed to Ombudsman?", "May humihingi ng documents sa akin, sabayan ko na
engage in business in the Philippines.1 sila", "Now I’m fighting you openly…"and "I am threatening you";

On May 13, 2003, the Board of Directors of TIDCORP formally charged 4) The incident involving your Memorandum to Mr. Valdes dated 19
Maria Rosario Manalang-Demigillo (Demigillo), then a Senior Vice- September 2002, the pertinent portions of which read, as follows:
President in TIDCORP, with grave misconduct, conduct prejudicial to
"I am repulsed and nauseated by the information that yesterday, 18
the best interest of the service, insubordination, and gross discourtesy
September 2002 at the OPCOM meeting, you claim to have talked to
in the course of official duties. The relevant portions of the formal
me or consulted me about the car you caused to be purchased for the
charge read:
Corporate Auditor Ms. Maria Bautista.
After a thorough study, evaluation, and deliberation, the Board finds
I have never talked to you about your desire to give Ms. Bautista a car.
merit to the findings and recommendation of the Investigating
Committee on the existence of a probable cause for Grave Misconduct, This is a brazen lie, a fabrication. Such moral turpitude! How low, how
Conduct Prejudicial to the Best Interest of the Service, Insubordination, base, how desperate!
and Gross Discourtesy in the Course of Official Duties. However and to
avoid any suspicion of partiality in the conduct of the investigation, the
Accordingly, as you have given me no (sic), I am taking you to task for Finally, and after considering Section 19 of the same Rules, which gives
this and all the illegal acts you have done and are doing against me authority to the disciplining body to issue an order of preventive
and TIDCORP." suspension, you are hereby preventively suspended for a period of
ninety (90) days from receipt hereof.
It appears that the said Memorandum was circulated even to those
who were not privy to the cause of the issuance of such statement. Let a copy of this memorandum and the complete records of the case
be forwarded immediately to the Office of the Government Corporate
5) The incident where you assisted and made it appear to be acting as Counsel (OGCC) for appropriate action.2
counsel of Mr. Vicente C. Uy in the case involving the latter relative to
the conduct of the APEC Capacity Building for Trade and Investment TIDCORP referred the charge to the Office of the Government
Insurance Training Program in April 2002; Corporate Counsel (OGCC) for formal investigation and reception of
evidence. Pending the investigation, TIDCORP placed Demigillo under
6) The incident on 13 November 2002 where you allegedly urged and preventive suspension for 90 days.3
induced officials and employees at the 3rd floor of TIDCORP to proceed
to the Office of the President and CEO to give support to EVP Jane Demigillo assailed her preventive suspension in the Civil Service
Tambanillo who was allegedly then being forced to resign by Mr. Commission (CSC),4 which issued on January 21, 2004 Resolution No.
Valdes. This caused not only a commotion but disturbance and 040047 declaring her preventive suspension to be "not in order."5 The
disruption of the office work at both 3rd and 4th floors; CSC stated that under Section 19(2), Rule II, of the Uniform Rules on

7) The incident on 13 November 2002 where you allegedly shouted at Administrative Cases in the Civil Service (Uniform Rules), a civil service
Atty. Jane Laragan and berated Mr. Valdes in front of officers and officer like Demigillo might be preventively suspended by the
employees whom you gathered as per allegation number 6; and disciplining authority only if any of the two grounds were present, to
wit: (1) there was a possibility that the civil service employee might
8) Relative to allegation number 7, your stubborn refusal to obey the unduly influence or intimidate potential witnesses against him; or (2)
order of Mr. Valdes to go back to work as it was only 9:30 a.m. and there was a possibility that the civil service employee might tamper the
instead challenged him to be the one to bring you down to the 3rd floor documentary evidence on file in her office. 6 According to the CSC,
instead of asking the guard to do so. TIDCORP did not prove with substantial evidence the existence of any
of such grounds, explaining thus:
Pursuant to Section 16, Rule II of the Uniform Rules on Administrative
Cases in the Civil Service and in the spirit of justice, fair play, and due xxx. As the party claiming affirmative evidence, that is, Demigillo’s
process, you are hereby given the opportunity to submit additional possibility of influencing potential witnesses or tampering with
evidence to what you have already submitted during the preliminary evidence, TIDCORP is bound to prove the same by substantial
investigation, if any to the Board, through the OGCC, within seventy evidence. However, it failed to. TIDCORP claims that its witnesses
two (72) hours from receipt of this Memorandum. "refused to issue any sworn statement during the preliminary
investigation in deference to their immediate superior x x x and that
In this regard, you are informed of your right to be assisted by a
the same witnesses, however, intimated that they may be compelled
counsel of your choice and to indicate in your answer whether or not
to tell the truth if called to testify during the investigation." On the basis
you elect a formal investigation. Nevertheless, and in accordance with
of these statements, it is clear that the witnesses’ refusal to execute
the aforecited provision of the Uniform Rules on Administrative Cases
sworn statement is by reason of their "deference" to Demigillo not on
in the Civil Service, any requests for clarification, bills of particulars or
account of her "intimidation or influence." Further, the fact that said
motion to dismiss which are obviously designed to delay the
witnesses "will be compelled to tell the truth" is not because of
administrative proceeding shall not be entertained. If any of these
Demigillo’s continued presence or absence in the office but because
pleadings are interposed, the same shall be considered as an answer
they are bound by their oath to tell the truth during the investigation.
and shall be evaluated as such.
Under these circumstances, it is not difficult to ascertain that the order the same not in order. Further, petitioner contends that since the
of preventive suspension is not necessary. provision of the Administrative Code of 1987 on preventive suspension
does not set any condition on its imposition, the provision in the
Anent the potential tampering of documents by Demigillo, the Uniform Rules on Administrative Cases in the Civil Service promulgated
Commission similarly finds the same remote. There is no showing that by the CSC should be stricken out as it is not found in the law itself.
the documentary evidence of the case leveled against her were in her
possession or custody as would otherwise justify the imposition of We are not persuaded.
preventive suspension. As borne by the evidence on record, the acts
complained of against Demigillo constitute verbal tussles between her We agree with the CSC Resolution No. 040047 which cited Section 19
and President Valdes which were all recorded and documented by the (paragraph 2), Rule II, Uniform Rules on Administrative Cases in the
TIDCORP. In this situation, there is no chance of Demigillo’s tampering Civil Service as basis in ruling against the order of preventive
with documents. suspension against herein respondent. The pertinent portion of the
provision reads, as follows:
From the foregoing disquisition, the Commission finds that the
preventive suspension of Demigillo for ninety (90) days was An order of preventive suspension may be issued to temporarily
improvidently made because the possibility of exerting/influencing remove the respondent from the scene of his misfeasance or
possible witnesses or tampering with documents, which is the evil malfeasance and to preclude the possibility of exerting undue influence
sought to be avoided in this case, does not exist.7 or pressure on the witnesses against him or tampering of documentary
evidence on file with his Office.
Upon denial of its motion for reconsideration by the CSC, 8 TIDCORP
appealed to the Court of Appeals (CA),9 submitting the sole issue of: Based on the aforequoted provision, any of the two grounds: (1) to
preclude the possibility of exerting undue influence or pressure on the
WHETHER OR NOT THE CSC ERRED IN SO HOLDING THE PREVENTIVE witnesses against him; or (2) tampering of documentary evidence on
SUSPENSION OF APPELLANT DEMIGILLO WAS NOT IN ORDER.10 file with his office, can be validly invoked by the disciplining authority to
justify the imposition of the preventive suspension. As correctly pointed
On November 7, 2006, the CA promulgated its decision affirming the out by respondent in her motion for leave to file and admit attached
CSC,11 holding and ruling as follows: comment, and comment to amended petition for review, under Section
19 (paragraph 2), Rule II, of the Uniform Rules of Administrative Cases
The main issue in this case is whether or not respondent Demigillo was
in the Civil Service (URACCS), preventive suspension is warranted in
validly placed under preventive suspension on the ground that she
order to preclude the respondent from exerting "undue influence" on
could possibly influence or intimidate potential witnesses or tamper the
the witnesses against her. But in this case, TIDCORP failed to prove the
evidence on record in her office, thus, affecting the investigation of the
possibility of respondent exerting undue influence on the witnesses,
case against her.
but instead CSC found TIDCORP to have admitted unequivocally that it
Petitioner argues that the preventive suspension imposed against is because of the witnesses’ deference or respect for respondent that
respondent Demigillo is valid as it is in accordance with the CSC rules they did not execute sworn statements. Indeed, the esteem or respect
and regulations and Section 51, Chapter 6, Title I (A), Book V of given is not undue influence; it even negates any wrongdoing on the
Executive Order No. 292 which states that "the proper disciplining part of respondent. Indeed, the alleged incidents being harped about
authority may preventively suspend any subordinate officer or by TIDCORP do not in any way prove undue influence of respondent on
employee under his authority pending an investigation, if the charge the witnesses. The incidents involved mere verbal tussles between Mr.
against such officer or employee involves dishonesty, oppression or Joel Valdes, TIDCORP President and CEO, respondent Demigillo and
grave misconduct, or neglect in the performance of duty, or if there are Jane Larangon, who had already executed her affidavit even before
reasons to believe that the respondent is guilty of charges which would respondent’s preventive suspension. In brief, TIDCORP failed to prove
warrant his removal from the service", hence, the CSC erred in holding undue influence as there is nothing in those incidents showing the
commission or coercion or compulsion upon one to do what is against We agree with respondent that the aforequoted argument of petitioner
his will. is misplaced and unfounded. Section 12 (2), Chapter 3, Tile I (A) of
Book V of the Revised Administrative Code, provides that among the
We agree with the findings of the CSC that respondent’s possibility to powers and functions of the Civil Service Commission is to prescribe,
exert undue influence or pressure on the witnesses against her is amend and enforce rules and regulations for carrying into effect the
remote. The purpose of preventive suspension is to avoid the possibility provisions of the Civil Service Law and other pertinent laws. It is on the
on the part of the person charged of a certain offense, to exert basis of this grant of power to the CSC that CSC Resolution No. 991936,
influence or undue pressure on the potential witnesses against her. In otherwise known as the Uniform Rules on Administrative Cases in the
Gloria vs. Court of Appeals, the High Court said that preventive Civil Service was promulgated.
suspension pending investigation is a measure intended to enable the
disciplining authority to investigate charges against respondent by Indeed, the rule-making power of the administrative body is intended
preventing the latter from intimidating or in any way influencing to enable it to implement the policy of the law and to provide for the
witnesses against him. And as correctly pointed out by the CSC, the more effective enforcement of its provisions. Through the exercise of
possibility of exerting influence or pressure on the potential witnesses this power of subordinate legislation, it is possible for the administrative
does not exist in this case because the complainant or the person who body to transmit "the active power of the state from its source to the
stands to be a witness for the government is influential, so to speak, as point of application," that is, apply the law and so fulfill the mandate of
he holds the highest position in TIDCORP. It is really difficult to imagine the legislature. It is an elementary rule in administrative law that
that a person who occupies the highest position in an organization administrative regulations and policies enacted by administrative
could be influenced or intimidated by his subordinate. The president of bodies to interpret the law which they are entrusted to enforce, have
the organization has greater degree of control in the organization, and the force of law, are entitled to great respect, and have in their favor a
to claim that he could be intimated or influenced by his subordinate is presumption of legality.
baseless and unbelievable. Considering that Valdes was President of
TIDCROP and a primary witness against respondent who is his mere Furthermore, Section 10 of Rule 43 of the 1997 Rules of Civil
subordinate, we find no valid ground for petitioner to impose Procedure, provides that the findings of fact of the court or agency
preventive suspension against respondent. concerned, when supported by substantial evidence, shall be binding
on the Court of Appeals. Indeed, jurisprudence is replete with the rule
Moreover, as correctly pointed out by the CSC in its resolution, as the that findings of fact of quasi-judicial agencies which have acquired
party claiming affirmative relief, TIDCORP is bound to prove the basis expertise because their jurisdiction is confined to specific matters are
thereof, i.e. respondent’s possibility of influencing potential witnesses generally accorded not only respect, but at times even finality if such
or tampering with the evidence, by substantial evidence, which it failed findings are supported by substantial evidence.
to do. There is no showing that the documentary evidence against
respondent are in her possession or custody. The acts complained of WHEREFORE, the instant petition is DENIED. The assailed Resolutions
against respondent arose out of the verbal tussles between her and dated January 21, 2004 and June 7, 2004, issued by the Civil Service
President Valdes which were all recorded and documented by Commission, are AFFIRMED.
TIDCORP. In this situation, there is no chance for respondent’s
SO ORDERED.12
tampering with the documents.
Hence, TIDCORP has appealed to the Court.13
As regards the argument that since the provision of the Administrative
Code of 1987 on preventive suspension does not set any condition on Issue
its imposition, the provision in the Uniform Rules on Administrative
Cases in the Civil Service promulgated by the CSC should be stricken The sole issue concerns the validity of TIDCORP’s 90-day preventive
out as it is not found in the law itself, we rule in the negative. suspension of Demigillo.

Ruling
We grant the petition, and hold that the 90-day preventive suspension charge of grave misconduct, among others. Citing Section 51 of the
order issued against Demigillo was valid. RAC, the Court sustained the imposition of the 90-day preventive
suspension pending investigation of the charges, saying:
The Revised Administrative Code of 1987 (RAC) embodies the major
structural, functional and procedural principles and rules of governance The preventive suspension of civil service employees charged with
of government agencies and constitutional bodies like the CSC. Section dishonesty, oppression or grave misconduct, or neglect of duty is
1, Chapter 1, Subtitle A, Title I, Book V, of the RAC states that the CSC is authorized by the Civil Service Law. It cannot, therefore, be considered
the central personnel agency of the government. Section 51 and "unjustified," even if later the charges are dismissed so as to justify the
Section 52, Chapter 6, Subtitle A, Title I, Book V of the RAC respectively payment of salaries to the employee concerned. It is one of those
contain the rule on preventive suspension of a civil service officer or sacrifices which holding a public office requires for the public good
employee pending investigation, and the duration of the preventive xxx.15
suspension, viz:
Pursuant to its rule-making authority, the CSC promulgated the
Section 51. Preventive Suspension. – The proper disciplining authority Uniform Rules on August 31, 1999. Section 19 and Section 20 of Rule II
may preventively suspend any subordinate officer or employee under of the Uniform Rules defined the guidelines in the issuance of an order
his authority pending an investigation, if the charge against such officer of preventive suspension and the duration of the suspension, to wit:
or employee involves dishonesty, oppression or grave misconduct, or
neglect in the performance of duty, or if there are reasons to believe Section 19. Preventive Suspension. – Upon petition of the complainant
that the respondent is guilty of charges which would warrant his or motu proprio, the proper disciplining authority may issue an order of
removal from the service. preventive suspension upon service of the Formal Charge, or
immediately thereafter to any subordinate officer or employee under
Section 52. Lifting of Preventive Suspension Pending Administrative his authority pending an investigation, if the charge involves:
Investigation. – When the administrative case against the officer or
employee under preventive suspension is not finally decided by the a. dishonesty;
disciplining authority within the period of ninety (90) days after the date
b. oppression;
of suspension of the respondent who is not a presidential appointee,
the respondent shall be automatically reinstated in the service: c. grave misconduct;
Provided, That when the delay in the disposition of the case is due to
the fault, negligence or petition of the respondent, the period of delay d. neglect in the performance of duty; or
shall not be counted in computing the period of suspension herein
e. if there are reasons to believe that the respondent is guilty of
provided.
charges which would warrant his removal from the service.
Under Section 51, supra, the imposition of preventive suspension by
An order of preventive suspension may be issued to temporarily
the proper disciplining authority is authorized provided the charge
remove the respondent from the scene of his misfeasance or
involves dishonesty, oppression, or grave misconduct, or neglect in the
malfeasance and to preclude the possibility of exerting undue influence
performance of duty, or if there are reasons to believe that the
or pressure on the witnesses against him or tampering of documentary
respondent is guilty of charges which would warrant his removal from
evidence on file with his Office.
the service. Section 51 nowhere states or implies that before a
preventive suspension may issue there must be proof that the In lieu of preventive suspension, for the same purpose, the proper
subordinate may unduly influence the witnesses against him or may disciplining authority or head of office may reassign respondent to
tamper the documentary evidence on file in her office. other unit of the agency during the formal hearings.
In Gloria v. Court of Appeals,14 several public school teachers were
preventively suspended for 90 days while being investigated for the
Section 20. Duration of Preventive Suspension. – When the documentary evidence in her office is a purpose, not a condition, for
administrative case against an officer or employee under preventive imposing preventive suspension, as shown in the use of the word
suspension is not finally decided by the disciplining authority within the "intended."
period of ninety (90) days after the date of his preventive suspension,
unless otherwise provided by special law, he shall be automatically Relevantly, CSC Resolution No. 030502, which was issued on May 5,
reinstated in the service; provided that, when the delay in the 2003 for the proper enforcement of preventive suspension pending
disposition of the case is due to the fault, negligence or petition of the investigation, provides in part as follows:
respondent, the period of delay should not be included in the counting
WHEREAS, Sections 51 and 52, Chapter 6, Subtitle A, Title I, Book V of
of the 90 calendar days period of preventive suspension. Provided
the Administrative Code of 1987, set out the controlling standards on
further that should the respondent be on Maternity/Paternity leave,
the imposition of preventive suspension, as follows:
said preventive suspension shall be deferred or interrupted until such
time that said leave has been fully enjoyed. xxxx
It is clear from Section 19, supra, that before an order of preventive WHEREAS, in order to effectuate the afore-quoted provisions of law, the
suspension pending an investigation may validly issue, only two Civil Service Commission, as the central personnel agency of the
prerequisites need be shown, namely: (1) that the proper disciplining government empowered, inter alia, with the promulgation,
authority has served a formal charge to the affected officer or amendment and enforcement of rules and regulations intended to
employee; and (2) that the charge involves either dishonesty, carry out into effect the provisions of the Civil Service Law and other
oppression, grave misconduct, neglect in the performance of duty, or if pertinent laws, adopted Sections 19, 20, and 21 of the Uniform Rules
there are reasons to believe that the respondent is guilty of the on Administrative Cases in the Civil Service (CSC Memorandum Circular
charges which would warrant her removal from the service. Proof No. 19, s. 1999), to wit:
showing that the subordinate officer or employee may unduly influence
the witnesses against her or may tamper the documentary evidence xxxx
on file in her office is not among the prerequisites.
4. The imposition of preventive suspension shall be confined to the
Preventing the subordinate officer or employee from influencing the well-defined instances set forth under the pertinent provisions of the
witnesses and tampering the documentary evidence under her Administrative Code of 1987 and the Local Government Code of 1991.
custody are mere purposes for which an order of preventive Both of these laws decree that recourse may be had to preventive
suspension may issue as reflected under paragraph 2 of Section 19, suspension where the formal charge involves any of the following
supra. This is apparent in the phrase "for the same purpose" found in administrative offenses, or under the circumstances specified in
paragraph 3 of Section 19. A "purpose" cannot be considered and paragraph (e) herein:
understood as a "condition." A purpose means "reason for which
a. Dishonesty;
something is done or exists," while a condition refers to a "necessary
requirement for something else to happen;" or is a "restriction, b. Oppression;
qualification."16 The two terms have different meanings and
implications, and one cannot substitute for the other. c. Grave Misconduct;

In Gloria v. Court of Appeals,17 we stated that preventive suspension d. Neglect in the performance of duty; or
pending investigation "is a measure intended to enable the disciplining
authority to investigate charges against respondent by preventing the e. If there are reasons to believe that the respondent is guilty of the
latter from intimidating or in any way influencing witnesses against charge/s, which would warrant his removal from the service.
him." As such, preventing the subordinate officer or employee from xxxx
intimidating the witnesses during investigation or from tampering the
a. A declaration by a competent authority that an order of preventive 7, 2006, and DECLARE AS VALID the order for the preventive
suspension is null and void on its face entitles the respondent official or suspension for 90 days of MA. ROSARIO S. MANALANG-
employee to immediate reinstatement and payment of back salaries DEMIGILIO pending her investigation for grave misconduct.
corresponding to the period of the unlawful preventive suspension.
The respondent shall pay the costs of suit.
The phrase "null and void on its face" in relation to a preventive
suspension order imports any of the following circumstances: SO ORDERED.

i) The order was issued by one who is not authorized by law; LUCAS P. BERSAMIN
Associate Justice
ii) The order was not premised on any of the grounds or causes
warranted by law;

iii) The order of suspension was without a formal charge; or

iv) While lawful in the sense that it is based on the enumerated

grounds, the duration of the imposed preventive suspension has
exceeded the prescribed periods, in which case the payment of back
salaries shall correspond to the excess period only.

CSC Resolution No. 030502 apparently reiterates the rule stated in

Section 19 of the Uniform Rules, supra, that for a preventive
suspension to issue, there must be a formal charge and the charge
involves the offenses enumerated therein. The resolution considers an
order of preventive suspension as null and void if the order was not
premised on any of the mentioned grounds, or if the order was issued
without a formal charge. As in the case of Section 19, the resolution
does not include as a condition for issuing an order of preventive
suspension that there must be proof adduced showing that the
subordinate officer or employee may unduly influence the witnesses
against her or tamper the documentary evidence in her custody.

Consequently, the CSC and the CA erred in making the purpose of

preventive suspension a condition for its issuance.1âwphi1 Although,
as a rule, we defer to the interpretation by administrative agencies like
the CSC of their own rules, especially if the interpretation is affirmed by
the CA, we withhold deference if the interpretation is palpably
erroneous,18 like in this instance.

We hold that TIDCORP’s issuance against Demigillo of the order for her
90-day preventive suspension pending the investigation was valid and
lawful.

WHEREFORE, we GRANT the petition for review on certiorari; SET

ASIDE the decision of the Court of Appeals promulgated on November
 G.R. No. 154993 October 25, 2005 special assessments as provided for in the Master Deed with
Declaration of Restrictions of the Condominium.
LUZ R. YAMANE, in her capacity as the CITY TREASURER OF
MAKATI CITY, Petitioner, On 15 December 1998, the Corporation received a Notice of
vs. Assessment dated 14 December 1998 signed by the City Treasurer.
BA LEPANTO CONDOMINUM CORPORATION, Respondent. The Notice of Assessment stated that the Corporation is "liable to pay
the correct city business taxes, fees and charges," computed as
DECISION totaling ₱1,601,013.77 for the years 1995 to 1997.3 The Notice of
Assessment was silent as to the statutory basis of the business taxes
Tinga, J.:
assessed.
Petitioner City Treasurer of Makati, Luz Yamane (City Treasurer),
Through counsel, the Corporation responded with a written tax protest
presents for resolution of this Court two novel questions: one
dated 12 February 1999, addressed to the City Treasurer. It was
procedural, the other substantive, yet both of obvious significance. The
evident in the protest that the Corporation was perplexed on the
first pertains to the proper mode of judicial review undertaken from
statutory basis of the tax assessment.
decisions of the regional trial courts resolving the denial of tax protests
made by local government treasurers, pursuant to the Local With due respect, we submit that the Assessment has no basis as the
Government Code. The second is whether a local government unit can, Corporation is not liable for business taxes and surcharges and interest
under the Local Government Code, impel a condominium corporation thereon, under the Makati [Revenue] Code or even under the [Local
to pay business taxes.1 Government] Code.
While we agree with the City Treasurer’s position on the first issue, The Makati [Revenue] Code and the [Local Government] Code do not
there ultimately is sufficient justification for the Court to overlook what contain any provisions on which the Assessment could be based. One
is essentially a procedural error. We uphold respondents on the second might argue that Sec. 3A.02(m) of the Makati [Revenue] Code imposes
issue. Indeed, there are disturbing aspects in both procedure and business tax on owners or operators of any business not specified in
substance that attend the attempts by the City of Makati to flex its the said code. We submit, however, that this is not applicable to the
taxing muscle. Considering that the tax imposition now in question has Corporation as the Corporation is not an owner or operator of any
utterly no basis in law, judicial relief is imperative. There are fewer business in the contemplation of the Makati [Revenue] Code and even
indisputable causes for the exercise of judicial review over the exercise the [Local Government] Code.4
of the taxing power than when the tax is based on whim, and not on
law. Proceeding from the premise that its tax liability arose from Section
3A.02(m) of the Makati Revenue Code, the Corporation proceeded to
The facts, as culled from the record, follow. argue that under both the Makati Code and the Local Government
Code, "business" is defined as "trade or commercial activity regularly
Respondent BA-Lepanto Condominium Corporation (the "Corporation")
engaged in as a means of livelihood or with a view to profit." It was
is a duly organized condominium corporation constituted in accordance
submitted that the Corporation, as a condominium corporation, was
with the Condominium Act,2 which owns and holds title to the common
organized not for profit, but to hold title over the common areas of the
and limited common areas of the BA-Lepanto Condominium (the
Condominium, to manage the Condominium for the unit owners, and
"Condominium"), situated in Paseo de Roxas, Makati City. Its
to hold title to the parcels of land on which the Condominium was
membership comprises the various unit owners of the Condominium.
located. Neither was the Corporation authorized, under its articles of
The Corporation is authorized, under Article V of its Amended By-Laws,
incorporation or by-laws to engage in profit-making activities. The
to collect regular assessments from its members for operating
assessments it did collect from the unit owners were for capital
expenses, capital expenditures on the common areas, and other
expenditures and operating expenses.5
The protest was rejected by the City Treasurer in a letter dated 4 March liable to pay business taxes to the City of Makati. 17 In doing so, the
1999. She insisted that the collection of dues from the unit owners was Court of Appeals delved into jurisprudential definitions of profit, 18 and
effected primarily "to sustain and maintain the expenses of the concluded that the Corporation was not engaged in profit. For one, it
common areas, with the end in view [sic] of getting full appreciative was held that the very statutory concept of a condominium corporation
living values [sic] for the individual condominium occupants and to showed that it was not a juridical entity intended to make profit, as its
command better marketable [sic] prices for those occupants" who sole purpose was to hold title to the common areas in the
would in the future sell their respective units. 6 Thus, she concluded condominium and to maintain the condominium.19
since the "chances of getting higher prices for well-managed common
areas of any condominium are better and more effective that The Court of Appeals likewise cited provisions from the Corporation’s
condominiums with poor [sic] managed common areas," the Amended Articles of Incorporation and Amended By-Laws that, to its
corporation activity "is a profit venture making [sic]".7 estimation, established that the Corporation was not engaged in
business and the assessment collected from unit owners limited to
From the denial of the protest, the Corporation filed an Appeal with the those necessary to defray the expenses in the maintenance of the
Regional Trial Court (RTC) of Makati.8 On 1 March 2000, the Makati RTC common areas and management the condominium.20
Branch 57 rendered a Decision9 dismissing the appeal for lack of merit.
Accepting the premise laid by the City Treasurer, the RTC Upon denial of her Motion for Reconsideration,21 the City Treasurer
acknowledged, in sadly risible language: elevated the present Petition for Review under Rule 45. It is argued
that the Corporation is engaged in business, for the dues collected from
Herein appellant, to defray the improvements and beautification of the the different unit owners is utilized towards the beautification and
common areas, collect [sic] assessments from its members. Its end maintenance of the Condominium, resulting in "full appreciative living
view is to get appreciate living rules for the unit owners [sic], to give an values" for the condominium units which would command better
impression to outsides [sic] of the quality of service the condominium market prices should they be sold in the future. The City Treasurer
offers, so as to allow present owners to command better prices in the likewise avers that the rationale for business taxes is not on the income
event of sale.10 received or profit earned by the business, but the privilege to engage in
business. The fact that the
With this, the RTC concluded that the activities of the Corporation fell
squarely under the definition of "business" under Section 13(b) of the Corporation is empowered "to acquire, own, hold, enjoy, lease, operate
Local Government Code, and thus subject to local business taxation.11 and maintain, and to convey sell, transfer or otherwise dispose of real
or personal property" allegedly qualifies "as incident to the fact of [the
From this Decision of the RTC, the Corporation filed a Petition for Corporation’s] act of engaging in business.22
Review under Rule 42 of the Rules of Civil Procedure with the Court of
Appeals. Initially, the petition was dismissed outright12 on the ground The City Treasurer also claims that the Corporation had filed the wrong
that only decisions of the RTC brought on appeal from a first level court mode of appeal before the Court of Appeals when the latter filed its
could be elevated for review under the mode of review prescribed Petition for Review under Rule 42. It is reasoned that the decision of the
under Rule 42.13 However, the Corporation pointed out in its Motion for Makati RTC was rendered in the exercise of original jurisdiction, it being
Reconsideration that under Section 195 of the Local Government the first court which took cognizance of the case. Accordingly, with the
Code, the remedy of the taxpayer on the denial of the protest filed with Corporation having pursued an erroneous mode of appeal, the
the local treasurer is to appeal the denial with the court of competent RTC Decision is deemed to have become final and executory.
jurisdiction.14 Persuaded by this contention, the Court of Appeals
reinstated the petition.15 First, we dispose of the procedural issue, which essentially boils down
to whether the RTC, in deciding an appeal taken from a denial of a
On 7 June 2002, the Court of Appeals Special Sixteenth Division protest by a local treasurer under Section 195 of the Local Government
rendered the Decision16 now assailed before this Court. The appellate Code, exercises "original jurisdiction" or "appellate jurisdiction." The
court reversed the RTC and declared that the Corporation was not question assumes a measure of importance to this petition, for the
adoption of the position of the City Treasurer that the mode of review of quasi-judicial agencies, instrumentalities, boards or commission, by
of the decision taken by the RTC is governed by Rule 41 of the Rules of explicitly using the phrase "appellate jurisdiction."28 The power to
Civil Procedure means that the decision of the RTC would have long create or characterize jurisdiction of courts belongs to the legislature.
become final and executory by reason of the failure of the Corporation While the traditional notion of appellate jurisdiction connotes judicial
to file a notice of appeal.23 review over lower court decisions, it has to yield to statutory
redefinitions that clearly expand its breadth to encompass even review
There are discernible conflicting views on the issue. The first, as of decisions of officers in the executive branches of government.
expressed by the Court of Appeals, holds that the RTC, in reviewing
denials of protests by local treasurers, exercises appellate jurisdiction. Yet significantly, the Local Government Code, or any other statute for
This position is anchored on the language of Section 195 of the Local that matter, does not expressly confer appellate jurisdiction on the part
Government Code which states that the remedy of the taxpayer whose of regional trial courts from the denial of a tax protest by a local
protest is denied by the local treasurer is "to appeal with the court of treasurer. On the other hand, Section 22 of B.P. 129 expressly
competent jurisdiction."24 Apparently though, the Local Government delineates the appellate jurisdiction of the Regional Trial Courts,
Code does not elaborate on how such "appeal" should be undertaken. confining as it does said appellate jurisdiction to cases decided by
Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in the
The other view, as maintained by the City Treasurer, is that the case of the Court of Appeals, B.P. 129 does not confer appellate
jurisdiction exercised by the RTC is original in character. This is the first jurisdiction on Regional Trial Courts over rulings made by non-judicial
time that the position has been presented to the court for adjudication. entities.
Still, this argument does find jurisprudential mooring in our ruling
in Garcia v. De Jesus,25 where the Court proffered the following From these premises, it is evident that the stance of the City Treasurer
distinction between original jurisdiction and appellate jurisdiction: is correct as a matter of law, and that the proper remedy of the
"Original jurisdiction is the power of the Court to take judicial Corporation from the RTC judgment is an ordinary appeal under Rule
cognizance of a case instituted for judicial action for the first time under 41 to the Court of Appeals. However, we make this pronouncement
conditions provided by law. Appellate jurisdiction is the authority of a subject to two important qualifications. First, in this particular case
Court higher in rank to re-examine the final order or judgment of a there are nonetheless significant reasons for the Court to overlook the
lower Court which tried the case now elevated for judicial review."26 procedural error and ultimately uphold the adjudication of the
jurisdiction exercised by the Court of Appeals in this case. Second, the
The quoted definitions were taken from the commentaries of the doctrinal weight of the pronouncement is confined to cases and
esteemed Justice Florenz Regalado. With the definitions as beacon, the controversies that emerged prior to the enactment of Republic Act No.
review taken by the RTC over the denial of the protest by the local 9282, the law which expanded the jurisdiction of the Court of Tax
treasurer would fall within that court’s original jurisdiction. In short, the Appeals (CTA).
review is the initial judicial cognizance of the matter. Moreover, labeling
the said review as an exercise of appellate jurisdiction is inappropriate, Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the
since the denial of the protest is not the judgment or order of a lower CTA exercises exclusive appellate jurisdiction to review on appeal
court, but of a local government official. decisions, orders or resolutions of the Regional Trial Courts in local tax
cases original decided or resolved by them in the exercise of their
The stringent concept of original jurisdiction may seemingly be originally or appellate jurisdiction. Moreover, the provision also states
neutered by Rule 43 of the 1997 Rules of Civil Procedure, Section 1 of that the review is triggered "by filing a petition for review under a
which lists a slew of administrative agencies and quasi-judicial tribunals procedure analogous to that provided for under Rule 42 of the 1997
or their officers whose decisions may be reviewed by the Court of Rules of Civil Procedure."29
Appeals in the exercise of its appellate jurisdiction. However, the basic
law of jurisdiction, Batas Pambansa Blg. 129 (B.P. 129), 27 ineluctably Republic Act No. 9282, however, would not apply to this case simply
confers appellate jurisdiction on the Court of Appeals over final rulings because it arose prior to the effectivity of that law. To declare otherwise
would be to institute a jurisdictional rule derived not from express The power of local government units to impose taxes within its
statutory grant, but from implication. The jurisdiction of a court to take territorial jurisdiction derives from the Constitution itself, which
cognizance of a case should be clearly conferred and should not be recognizes the power of these units "to create its own sources of
deemed to exist on mere implications,30 and this settled rule would be revenue and to levy taxes, fees, and charges subject to such guidelines
needlessly emasculated should we declare that the Corporation’s and limitations as the Congress may provide, consistent with the basic
position is correct in law. policy of local autonomy."36 These guidelines and limitations as
provided by Congress are in main contained in the Local Government
Be that as it may, characteristic of all procedural rules is adherence to Code of 1991 (the "Code"), which provides for comprehensive
the precept that they should not be enforced blindly, especially if instances when and how local government units may impose taxes.
mechanical application would defeat the higher ends that animates our The significant limitations are enumerated primarily in Section 133 of
civil procedure—the just, speedy and inexpensive disposition of every the Code, which include among others, a prohibition on the imposition
action and proceeding.31 Indeed, we have repeatedly upheld—and of income taxes except when levied on banks and other financial
utilized ourselves—the discretion of courts to nonetheless take institutions.37 None of the other general limitations under Section 133
cognizance of petitions raised on an erroneous mode of appeal and find application to the case at bar.
instead treat these petitions in the manner as they should have
appropriately been filed.32 The Court of Appeals could very well have The most well-known mode of local government taxation is perhaps
treated the Corporation’s petition for review as an ordinary appeal. the real property tax, which is governed by Title II, Book II of the Code,
and which bears no application in this case. A different set of
Moreover, we recognize that the Corporation’s error in elevating the provisions, found under Title I of Book II, governs other taxes imposable
RTC decision for review via Rule 42 actually worked to the benefit of by local government units, including business taxes. Under Section 151
the City Treasurer. There is wider latitude on the part of the Court of of the Code, cities such as Makati are authorized to levy the same
Appeals to refuse cognizance over a petition for review under Rule 42 taxes fees and charges as provinces and municipalities. It is in Article II,
than it would have over an ordinary appeal under Rule 41. Under Title II, Book II of the Code, governing municipal taxes, where the
Section 13, Rule 41, the stated grounds for the dismissal of an ordinary provisions on business taxation relevant to this petition may be found.38
appeal prior to the transmission of the case records are when the
appeal was taken out of time or when the docket fees were not Section 143 of the Code specifically enumerates several types of
paid.33 On the other hand, Section 6, Rule 42 provides that in order that business on which municipalities and cities may impose taxes. These
the Court of Appeals may allow due course to the petition for review, it include manufacturers, wholesalers, distributors, dealers of any article
must first make a prima facie finding that the lower court has of commerce of whatever nature; those engaged in the export or
committed an error that would warrant the reversal or modification of commerce of essential commodities; contractors and other
the decision under review.34 There is no similar requirement of a prima independent contractors; banks and financial institutions; and peddlers
facie determination of error in the case of ordinary appeal, which is engaged in the sale of any merchandise or article of commerce.
perfected upon the filing of the notice of appeal in due time.35 Moreover, the local sanggunian is also authorized to impose taxes on
any other businesses not otherwise specified under Section 143 which
Evidently, by employing the Rule 42 mode of review, the Corporation the sanggunian concerned may deem proper to tax.
faced a greater risk of having its petition rejected by the Court of
Appeals as compared to having filed an ordinary appeal under Rule 41. The coverage of business taxation particular to the City of Makati is
This was not an error that worked to the prejudice of the City Treasurer. provided by the Makati Revenue Code ("Revenue Code"), enacted
through Municipal Ordinance No. 92-072. The Revenue Code remains
We now proceed to the substantive issue, on whether the City of in effect as of this
Makati may collect business taxes on condominium corporations.
writing. Article A, Chapter III of the Revenue Code governs business
We begin with an overview of the power of a local government unit to taxes in Makati, and it is quite specific as to the particular businesses
impose business taxes.
which are covered by business taxes. To give a sample of the specified (m) On owners or operators of any business not specified above shall
businesses under the Revenue Code which are not enumerated under pay the tax at the rate of two percent (2%) for 1993, two and one-half
the Local Government Code, we cite Section 3A.02(f) of the Code, percent (2 ½%) for 1994 and 1995, and three percent (3%) for 1996
which levies a gross receipt tax : and the years thereafter of the gross receipts during the preceding
year.42
(f) On contractors and other independent contractors defined in Sec.
3A.01(q) of Chapter III of this Code, and on owners or operators of The initial inquiry is what provision of the Makati Revenue Code does
business establishments rendering or offering services such as: the City Treasurer rely on to make the Corporation liable for business
advertising agencies; animal hospitals; assaying laboratories; belt and taxes. Even at this point, there already stands a problem with the City
buckle shops; blacksmith shops; bookbinders; booking officers for film Treasurer’s cause of action.
exchange; booking offices for transportation on commission basis;
breeding of game cocks and other sporting animals belonging to Our careful examination of the record reveals a highly disconcerting
others; business management services; collecting agencies; escort fact. At no point has the City Treasurer been candid enough to inform
services; feasibility studies; consultancy services; garages; garbage the Corporation, the RTC, the Court of Appeals, or this Court for that
disposal contractors; gold and silversmith shops; inspection services for matter, as to what exactly is the precise statutory basis under the
incoming and outgoing cargoes; interior decorating services; janitorial Makati Revenue Code for the levying of the business tax on petitioner.
services; job placement or recruitment agencies; landscaping We have examined all of the pleadings submitted by the City Treasurer
contractors; lathe machine shops; management consultants not in all the antecedent judicial proceedings, as well as in this present
subject to professional tax; medical and dental laboratories; mercantile petition, and also the communications by the City Treasurer to the
agencies; messsengerial services; operators of shoe shine stands; Corporation which form part of the record. Nowhere therein is there
painting shops; perma press establishments; rent-a-plant services; polo any citation made by the City Treasurer of any provision of the
players; school for and/or horse-back riding academy; real estate Revenue Code which would serve as the legal authority for the
appraisers; real estate brokerages; photostatic, white/blue printing, collection of business taxes from condominiums in Makati.
Xerox, typing, and mimeographing services; rental of bicycles and/or
Ostensibly, the notice of assessment, which stands as the first instance
tricycles, furniture, shoes, watches, household appliances, boats,
the taxpayer is officially made aware of the pending tax liability, should
typewriters, etc.; roasting of pigs, fowls, etc.; shipping agencies;
be sufficiently informative to apprise the taxpayer the legal basis of the
shipyard for repairing ships for others; shops for shearing animals;
tax. Section 195 of the Local Government Code does not go as far as to
silkscreen or T-shirt printing shops; stables; travel agencies; vaciador
expressly require that the notice of assessment specifically cite the
shops; veterinary clinics; video rentals and/or coverage services;
provision of the ordinance involved but it does require that it state the
dancing schools/speed reading/EDP; nursery, vocational and other
nature of the tax, fee or charge, the amount of deficiency, surcharges,
schools not regulated by the Department of Education, Culture and
interests and penalties. In this case, the notice of assessment sent to
Sports, (DECS), day care centers; etc.39
the Corporation did state that the assessment was for business taxes,
Other provisions of the Revenue Code likewise subject hotel and as well as the amount of the assessment. There may have been prima
restaurant owners and operators40, real estate dealers, and lessors of facie compliance with the requirement under Section 195. However in
real estate41 to business taxes. this case, the Revenue Code provides multiple provisions on business
taxes, and at varying rates. Hence, we could appreciate the
Should the comprehensive listing not prove encompassing enough, Corporation’s confusion, as expressed in its protest, as to the exact
there is also a catch-all provision similar to that under the Local legal basis for the tax.43 Reference to the local tax ordinance is vital, for
Government Code. This is found in Section 3A.02(m) of the Revenue the power of local government units to impose local taxes is exercised
Code, which provides: through the appropriate ordinance enacted by the sanggunian, and
not by the Local Government Code alone.44 What determines tax
liability is the tax ordinance, the Local Government Code being the In this case, the Corporation seems confident enough in litigating
enabling law for the local legislative body. despite the failure of the City Treasurer to admit on what exact
provision of the Revenue Code the tax liability ensued. This is perhaps
Moreover, a careful examination of the Revenue Code shows that while because the Corporation has anchored its central argument on the
Section 3A.02(m) seems designed as a catch-all provision, Section position that the Local Government Code itself does not sanction the
3A.02(f), which provides for a different tax rate from that of the former imposition of business taxes against it. This position was sustained by
provision, may be construed to be of similar import. While Section the Court of Appeals, and now merits our analysis.
3A.02(f) is quite exhaustive in enumerating the class of businesses
taxed under the provision, the listing, while it does not include As stated earlier, local tax on businesses is authorized under Section
condominium-related enterprises, ends with the abbreviation "etc.", or 143 of the Local Government Code. The word "business" itself is
"et cetera". defined under Section 131(d) of the Code as "trade or commercial
activity regularly engaged in as a means of livelihood or with a view to
We do note our discomfort with the unlimited breadth and the profit."45 This definition of "business" takes on importance, since
dangerous uncertainty which are the twin hallmarks of the words "et Section 143 allows local government units to impose local taxes on
cetera." Certainly, we cannot be disposed to uphold any tax imposition businesses other than those specified under the provision. Moreover,
that derives its authority from enigmatic and uncertain words such as even those business activities specifically named in Section 143 are
"et cetera." Yet we cannot even say with definiteness whether the tax themselves susceptible to broad interpretation. For example, Section
imposed on the Corporation in this case is based on "et cetera," or on 143(b) authorizes the imposition of business taxes on wholesalers,
Section 3A.02(m), or on any other provision of the Revenue Code. distributors, or dealers in any article of commerce of whatever kind or
Assuming that the assessment made on the Corporation is on a nature.
provision other than Section 3A.02(m), the main legal issue takes on a
different complexion. For example, if it is based on "et cetera" under It is thus imperative that in order that the Corporation may be
Section 3A.02(f), we would have to examine whether the Corporation subjected to business taxes, its activities must fall within the definition
faces analogous comparison with the other businesses listed under of business as provided in the Local Government Code. And to hold
that provision. that they do is to ignore the very statutory nature of a condominium
corporation.
Certainly, the City Treasurer has not been helpful in that regard, as she
has been silent all through out as to the exact basis for the tax The creation of the condominium corporation is sanctioned by Republic
imposition which she wishes that this Court uphold. Indeed, there is Act No. 4726, otherwise known as the Condominium Act. Under the
only one thing that prevents this Court from ruling that there has been law, a condominium is an interest in real property consisting of a
a due process violation on account of the City Treasurer’s failure to separate interest in a unit in a residential, industrial or commercial
disclose on paper the statutory basis of the tax–that the Corporation building and an undivided interest in common, directly or indirectly, in
itself does not allege injury arising from such failure on the part of the the land on which it is located and in other common areas of the
City Treasurer. building.46 To enable the orderly administration over these common
areas which are jointly owned by the various unit owners, the
We do not know why the Corporation chose not to put this issue into Condominium Act permits the creation of a condominium corporation,
litigation, though we can ultimately presume that no injury was which is specially formed for the purpose of holding title to the
sustained because the City Treasurer failed to cite the specific statutory common area, in which the holders of separate interests shall
basis of the tax. What is essential though is that the local treasurer be automatically be members or shareholders, to the exclusion of others,
required to explain to the taxpayer with sufficient particularity the basis in proportion to the appurtenant interest of their respective
of the tax, so as to leave no doubt in the mind of the taxpayer as to the
specific tax involved. units.47 The necessity of a condominium corporation has not gained
widespread acceptance48, and even is merely permissible under the
Condominium Act.49 Nonetheless, the condominium corporation has including the power to contract for security services and for insurance
been resorted to by many condominium projects, such as the coverage on the entire project; (c) making and adopting needful rules
Corporation in this case. and regulations concerning the use, enjoyment and occupancy of the
units and common areas, including the power to fix penalties and
In line with the authority of the condominium corporation to manage assessments for violation of such rules; (d) to provide for the
the condominium project, it may be authorized, in the deed of maintenance, repair, sanitation, and cleanliness of the common and
restrictions, "to make reasonable assessments to meet authorized limited common areas; (e) to provide and contract for public utilities
expenditures, each condominium unit to be assessed separately for its and other services to the common areas; (f) to contract for the services
share of such expenses in proportion (unless otherwise provided) to its of persons or firms to assist in the management and operation of the
owner’s fractional interest in any common areas."50 It is the collection Condominium Project; (g) to discharge any lien or encumbrances upon
of these assessments from unit owners that form the basis of the City the Condominium Project; (h) to enforce the terms contained in the
Treasurer’s claim that the Corporation is doing business. Master Deed with Declaration of Restrictions of the Project; (i) to levy
and
The Condominium Act imposes several limitations on the condominium
corporation that prove crucial to the disposition of this case. Under collect those assessments as provided in the Master Deed, in order to
Section 10 of the law, the defray the costs, expenses and losses of the condominium; (j) to
acquire, own, hold, enjoy, lease operate and maintain, and to convey,
corporate purposes of a condominium corporation are limited to the
sell transfer, mortgage or otherwise dispose of real or personal
holding of the common areas, either in ownership or any other interest
property in connection with the purposes and activities of the
in real property recognized by law; to the management of the project;
corporation; and (k) to exercise and perform such other powers
and to such other purposes as may be necessary, incidental or
reasonably necessary, incidental or convenient to accomplish the
convenient to the accomplishment of such purpose.51 Further, the
foregoing purposes.53
same provision prohibits the articles of incorporation or by-laws of the
condominium corporation from containing any provisions which are Obviously, none of these stated corporate purposes are geared
contrary to the provisions of the Condominium Act, the enabling or towards maintaining a livelihood or the obtention of profit. Even though
master deed, or the declaration of restrictions of the condominium the Corporation is empowered to levy assessments or dues from the
project.52 unit owners, these amounts collected are not intended for the
incurrence of profit by the Corporation or its members, but to shoulder
We can elicit from the Condominium Act that a condominium
the multitude of necessary expenses that arise from the maintenance
corporation is precluded by statute from engaging in corporate
of the Condominium Project. Just as much is confirmed by Section 1,
activities other than the holding of the common areas, the
Article V of the Amended By-Laws, which enumerate the particular
administration of the condominium project, and other acts necessary,
expenses to be defrayed by the regular assessments collected from
incidental or convenient to the accomplishment of such purposes.
the unit owners. These would include the salaries of the employees of
Neither the maintenance of livelihood, nor the procurement of profit,
the Corporation, and the cost of maintenance and ordinary repairs of
fall within the scope of permissible corporate purposes of a
the common areas.54
condominium corporation under the Condominium Act.
The City Treasurer nonetheless contends that the collection of these
The Court has examined the particular Articles of Incorporation and By-
assessments and dues are "with the end view of getting full
Laws of the Corporation, and these documents unmistakably hew to
appreciative living values" for the condominium units, and as a result,
the limitations contained in the Condominium Act. Per the Articles of
profit is obtained once these units are sold at higher prices. The Court
Incorporation, the Corporation’s corporate purposes are limited to: (a)
cites with approval the two counterpoints raised by the Court of
owning and holding title to the common and limited common areas in
Appeals in rejecting this contention. First, if any profit is obtained by the
the Condominium Project; (b) adopting such necessary measures for
sale of the units, it accrues not to the corporation but to the unit owner.
the protection and safeguard of the unit owners and their property,
Second, if the unit owner does obtain profit from the sale of the incorporated under the Code has the power and capacity "to purchase,
corporation, the owner is already required to pay capital gains tax on receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
the appreciated value of the condominium unit.55 otherwise deal with such real and personal property . . . as the
transaction of the lawful business of the corporation may reasonably
Moreover, the logic on this point of the City Treasurer is baffling. By this and necessarily require . . . ."60 Without this power, corporations, as
rationale, every Makati City car owner may be considered as being juridical persons, would be deprived of the capacity to engage in most
engaged in business, since the repairs or improvements on the car meaningful legal relations.
may be deemed oriented towards appreciating the value of the car
upon resale. There is an evident distinction between persons who Again, whatever capacity the Corporation may have pursuant to its
spend on repairs and improvements on their personal and real power to exercise acts of ownership over personal and real property is
property for the purpose of increasing its resale value, and those who limited by its stated corporate purposes, which are by themselves
defray such expenses for the purpose of preserving the property. The further limited by the Condominium Act. A condominium corporation,
vast majority of persons fall under the second category, and it would be while enjoying such powers of ownership, is prohibited by law from
highly specious to subject these persons to local business taxes. The transacting its properties for the purpose of gainful profit.
profit motive in such cases is hardly the driving factor behind such
improvements, if it were contemplated at all. Any profit that would be Accordingly, and with a significant degree of comfort, we hold that
derived under such circumstances would merely be incidental, if not condominium corporations are generally exempt from local business
accidental. taxation under the Local Government Code, irrespective of any local
ordinance that seeks to declare otherwise.
Besides, we shudder at the thought of upholding tax liability on the
basis of the standard of "full appreciative living values", a phrase that Still, we can note a possible exception to the rule. It is not unthinkable
defies statutory explication, commonsensical meaning, the English that the unit owners of a condominium would band together to engage
language, or even definition from Google. The exercise of the power of in activities for profit under the shelter of the condominium
taxation constitutes a deprivation of property under the corporation.61 Such activity would be prohibited under the
Condominium Act, but if the fact is established, we see no reason why
due process clause,56 and the taxpayer’s right to due process is the condominium corporation may be made liable by the local
violated when arbitrary or oppressive methods are used in assessing government unit for business taxes. Even though such activities would
and collecting taxes.57 The fact that the Corporation did not fall within be considered as ultra vires, since they are engaged in beyond the
the enumerated classes of taxable businesses under either the Local legal capacity of the condominium corporation62, the principle of
Government Code or the Makati Revenue Code already forewarns that estoppel would preclude the corporation or its officers and members
a clear demonstration is essential on the part of the City Treasurer on from invoking the void nature of its undertakings for profit as a means
why the Corporation should be taxed anyway. "Full appreciative living of acquitting itself of tax liability.
values" is nothing but blather in search of meaning, and to impose a
tax hinged on that standard is both arbitrary and oppressive. Still, the City Treasurer has not posited the claim that the Corporation is
engaged in business activities beyond the statutory purposes of a
The City Treasurer also contends that the fact that the Corporation is condominium corporation. The assessment appears to be based solely
engaged in business is evinced by the Articles of Incorporation, which on the Corporation’s collection of assessments from unit owners, such
specifically empowers the Corporation "to acquire, own, hold, enjoy, assessments being utilized to defray the necessary expenses for the
lease, operate and maintain, and to convey, sell, transfer mortgage or Condominium Project and the common areas. There is no
otherwise dispose of real or personal property."58 What the City contemplation of business, no orientation towards profit in this case.
Treasurer fails to add is that every corporation Hence, the assailed tax assessment has no basis under the Local
Government Code or the Makati Revenue Code, and the insistence of
organized under the Corporation Code59 is so specifically empowered.
Section 36(7) of the Corporation Code states that every corporation
the city in its collection of the void tax constitutes an attempt at
deprivation of property without due process of law.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.
 G.R. No. 141658 March 18, 2005 as such were not subject to the 3% lending investors’ tax under Section
195-A.
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs. The CTA archived respondents’ case for several years while another
THE PHILIPPINE AMERICAN ACCIDENT INSURANCE COMPANY, case with a similar issue was pending before the higher courts. When
INC., THE PHILIPPINE AMERICAN ASSURANCE COMPANY, INC., respondents’ case was reinstated, the CTA ruled that respondents were
and THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., entitled to their refund.
INC., Respondents.
The Ruling of the Court of Tax Appeals
DECISION
The CTA held that respondents are not taxable as lending investors
CARPIO, J.: because the term "lending investors" does not embrace insurance
companies. The CTA traced the history of the tax on lending investors,
The Case as follows:
Before the Court is a petition for review 1 assailing the Decision2 of 7 Originally, a person who was engaged in lending money at interest was
January 2000 of the Court of Appeals in CA-G.R. SP No. 36816. The taxed as a money lender. [Sec. 1464(x), Rev. Adm. Code] The term
Court of Appeals affirmed the Decision3 of 5 January 1995 of the Court money lenders was defined as including "all persons who make a
of Tax Appeals ("CTA") in CTA Cases Nos. 2514, 2515 and 2516. The practice of lending money for themselves or others at interest." [Sec.
CTA ordered the Commissioner of Internal Revenue ("petitioner") to 1465(v), id.] Under this law, an insurance company was not considered
refund a total of P29,575.02 to respondent companies ("respondents"). a money lender and was not taxable as such. To quote from an old BIR
Ruling:
Antecedent Facts
"The lending of money at interest by insurance companies constitutes
Respondents are domestic corporations licensed to transact insurance
a necessary incident of their regular business. For this reason,
business in the country. From August 1971 to September 1972,
insurance companies are not liable to tax as money lenders or real
respondents paid the Bureau of Internal Revenue under protest the 3%
estate brokers for making or negotiating loans secured by real
tax imposed on lending investors by Section 195-A 4 of Commonwealth
property. (Ruling, February 28, 1920; BIR 135.2)" (The Internal
Act No. 466 ("CA 466"), as amended by Republic Act No. 6110 ("RA
Revenue Law, Annotated, 2nd ed., 1929, by B.L. Meer, page 143)
6110") and other laws. CA 466 was the National Internal Revenue Code
("NIRC") applicable at the time. The same rule has been applied to banks.
Respondents paid the following amounts: P7,985.25 from Philippine "For making investments on salary loans, banks will not be required to
American ("PHILAM") Accident Insurance Company; P7,047.80 from pay the money lender’s tax imposed by this subsection, for the reason
PHILAM Assurance Company; and P14,541.97 from PHILAM General that money lending is considered a mere incident of the banking
Insurance Company. These amounts represented 3% of each business. [See Ruling No. 43, (October 8, 1926) 25 Off. Gaz. 1326)"
company’s interest income from mortgage and other loans. (The Internal Revenue Law, Annotated, id.)
Respondents also paid the taxes required of insurance companies
under CA 466. The term "money lenders" was later changed to "lending investors" but
the definition of the term remains the same. [Sec. 1464(x), Rev. Adm.
On 31 January 1973, respondents sent a letter-claim to petitioner Code, as finally amended by Com. Act No. 215, and Sec. 1465(v) of the
seeking a refund of the taxes paid under protest. When respondents same Code, as finally amended by Act No. 3963] The same law is
did not receive a response, each respondent filed on 26 April 1973 a embodied in the present National Internal Revenue Code (Com. Act No.
petition for review with the CTA. These three petitions, which were later 466) without change, except in the amount of the tax. [See Secs.
consolidated, argued that respondents were not lending investors and 182(A) (3) (dd) and 194(u), National Internal Revenue Code.]
It is a well-settled rule that an administrative interpretation of a law The Court of Appeals ruled that respondents are not taxable as lending
which has been followed and applied for a long time, and thereafter the investors. In its Decision of 7 January 2000 ("CA Decision"), the Court of
law is re-enacted without substantial change, such administrative Appeals affirmed the ruling of the CTA, thus:
interpretation is deemed to have received legislative approval. In short,
the administrative interpretation becomes part of the law as it is WHEREFORE, premises considered, the petition is DISMISSED, hereby
presumed to carry out the legislative purpose.5 AFFIRMING the decision, dated January 5, 1995, of the Court of Tax
Appeals in CTA Cases Nos. 2514, 2515 and 2516.
The CTA held that the practice of lending money at interest is part of
the insurance business. CA 466 already taxes the insurance business. SO ORDERED.9
The CTA pointed out that the law recognizes and even regulates this
Petitioner appealed the CA Decision to this Court.
practice of lending money by insurance companies.
The Issues
The CTA observed that CA 466 also treated differently insurance
companies from lending investors in regard to fixed taxes. Under Petitioner raises the sole issue:
Section 182(A)(3)(gg), insurance companies were subject to the same
fixed tax as banks and finance companies. The CTA reasoned that WHETHER RESPONDENT INSURANCE COMPANIES ARE SUBJECT TO
insurance companies were grouped with banks and finance companies THE 3% PERCENTAGE TAX AS LENDING INVESTORS UNDER SECTIONS
because the latter’s lending activities were also integral to their 182(A)(3)(DD) AND 195-A, RESPECTIVELY IN RELATION TO SECTION
business. In contrast, lending investors were taxed at a different fixed 194(U), ALL OF THE NIRC.10
tax under Section 182(A)(3)(dd) of CA 466. The CTA stated that
The Ruling of the Court
"insurance companies xxx had never been required by respondent
[CIR] to pay the fixed tax imposed on lending investors xxx."6 The petition lacks merit.
The dispositive portion of the Decision of 5 January 1995 of the Court of On the Additional Issue Raised by Petitioner
Tax Appeals ("CTA Decision") reads:
Section 182(A)(3)(dd) of CA 466 imposes an annual fixed tax on
WHEREFORE, premises considered, petitioners Philippine American lending investors, depending on their location.11 The sole question
Accident Insurance Co., Philippine American Assurance Co., and before the CTA was whether respondents were subject to
Philippine American General Insurance Co., Inc. are not taxable on their the percentage tax on lending investors under Section 195-A.
lending transactions independently of their insurance business. Petitioner raised for the first time the issue of the fixed tax in the
Accordingly, respondent is hereby ordered to refund to petitioner[s] the Petition for Review12 petitioner filed before the Court of Appeals.
sum of P7,985.25, P7,047.80 and P14,541.97 in CTA Cases No. 2514,
2515 and 2516, respectively representing the fixed and percentage Ordinarily, a party cannot raise for the first time on appeal an issue not
taxes when (sic) paid by petitioners as lending investor from August raised in the trial court.13 The Court of Appeals should not have taken
1971 to September 1972. cognizance of the issue on respondents’ supposed liability under
Section 182(A)(3)(dd). However, we cannot entirely fault the Court of
No pronouncement as to cost. Appeals or petitioner. Even if the percentage tax on lending investors
was the sole issue before it, the CTA ordered petitioner to refund to the
SO ORDERED.7
PHILAM companies "the fixed and percentage taxes [t]hen paid by
Dissatisfied, petitioner elevated the matter to the Court of Appeals.8 petitioners as lending investor."14 Although the amounts for refund
consisted only of what respondents paid as percentage taxes, the CTA
The Ruling of the Court of Appeals Decision also ordered the refund to respondents of the fixed tax on
lending investors. Respondents in their pleadings deny any liability
under Section 182(A)(3)(dd), on the same ground that they are not (3) Other fixed taxes. – The following fixed taxes shall be collected as
lending investors. follows, the amount stated being for the whole year, when not
otherwise specified;
The question of whether respondents should pay the fixed tax under
Section 182(A)(3)(dd) revolves around the same issue of whether xxx
respondents are taxable as lending investors. In similar circumstances,
the Court has held that an appellate court may consider an unassigned (dd) Lending investors –
error if it is closely related to an error that was properly assigned. 15 This
1. In chartered cities and first class municipalities, five hundred pesos;
rule properly applies to the present case. Thus, we shall consider and
rule on the issue of whether respondents are subject to the fixed tax 2. In second and third class municipalities, two hundred and fifty pesos;
under Section 182(A)(3)(dd).
3. In fourth and fifth class municipalities and municipal districts, one
Whether Insurance Companies are hundred and twenty-five pesos; Provided, That lending investors who
Taxable as Lending Investors do business as such in more than one province shall pay a tax of five
hundred pesos.
Invoking Sections 195-A and 182(A)(3)(dd) in relation to Section 194(u)
of CA 466, petitioner argues that insurance companies are subject to Section 195-A of CA 466 provides:
two fixed taxes and two percentage taxes. Petitioner alleges that:
Sec. 195-A. Percentage tax on dealers in securities; lending investors. –
As a lending investor, an insurance company is subject to an annual Dealers in securities and lending investors shall pay a tax equivalent to
fixed tax of P500.00 and another P500.00 under Section 182 (A)(3)(dd) three per centum on their gross income.
and (gg) of the Tax Code. As an underwriter, an insurance company is
subject to the 3% tax of the total premiums collected and another 3% Neither Section 182(A)(3)(dd) nor Section 195-A mentions insurance
on the gross receipts as a lending investor under Sections 255 and companies. Section 182(A)(3)(dd) provides for the taxation of lending
195-A, respectively of the same Code. xxx16 investors in different localities. Section 195-A refers to dealers in
securities and lending investors. The burden is thus on petitioner to
Petitioner also contends that the refund granted to respondents is in show that insurance companies are lending investors for purposes of
the nature of a tax exemption, and cannot be allowed unless granted taxation.
explicitly and categorically.
In this case, petitioner does not dispute that respondents are in the
The rule that tax exemptions should be construed strictly against the insurance business. Petitioner merely alleges that the definition of
taxpayer presupposes that the taxpayer is clearly subject to the tax lending investors under CA 466 is broad enough to encompass
being levied against him. Unless a statute imposes a tax clearly, insurance companies. Petitioner insists that because of Section 194(u),
expressly and unambiguously, what applies is the equally well-settled the two principal activities of the insurance business, namely,
rule that the imposition of a tax cannot be presumed. 17 Where there is underwriting and investment, are separately taxable.20
doubt, tax laws must be construed strictly against the government and
in favor of the taxpayer.18 This is because taxes are burdens on the Section 194(u) of CA 466 states:
taxpayer, and should not be unduly imposed or presumed beyond
(u) "Lending investor" includes all persons who make a practice of
what the statutes expressly and clearly import.19
lending money for themselves or others at interest.
Section 182(A)(3)(dd) of CA 466 also provides:
xxx
Sec. 182. Fixed taxes. – (A) On business xxx
As can be seen, Section 194(u) does not tax the practice of lending per
xxx se. It merely defines what lending investors are. The question is
whether the lending activities of insurance companies make them business. The granting of certain loans is one of several means of
lending investors for purposes of taxation. investment allowed to insurance companies. No less than the
Insurance Code mandates and regulates this practice.24
We agree with the CTA and Court of Appeals that it does not. Insurance
companies cannot be considered lending investors under CA 466, as Unlike the practice of lending investors, the lending activities of
amended. insurance companies are circumscribed and strictly regulated by the
State. Insurance companies cannot freely lend to "themselves or
Definition of Lending others" as lending investors can,25 nor can insurance companies grant
Investors under CA 466 Does simply any kind of loan. Even prior to 1978, the Insurance Code
Not Include Insurance prescribed strict rules for the granting of loans by insurance
Companies. companies.26 These provisions on mortgage, collateral and policy loans
were reiterated in the Insurance Code of 1978 and are still in force
The definition in Section 194(u) of CA 466 is not broad enough to
today.
include the business of insurance companies. The Insurance Code of
197821 is very clear on what constitutes an insurance company. It Petitioner concedes that respondents’ investment practices are as
provides that an insurer or insurance company "shall include all much a part of the insurance business as the task of underwriting.
individuals, partnerships, associations or corporations xxx engaged as Nevertheless, petitioner argues that such investment practices are
principals in the insurance business, excepting mutual benefit separately taxable under CA 466.
associations."22 More specifically, respondents fall under the category
of insurance corporations as defined in Section 185 of the Insurance The CTA and the Court of Appeals found that the investment of
Code, thus: premiums and other funds received by respondents – through the
granting of mortgage and other loans – was necessary to respondents’
SECTION 185. Corporations formed or organized to save any person or business and hence, should not be taxed separately.
persons or other corporations harmless from loss, damage, or liability
arising from any unknown or future or contingent event, or to Insurance companies are required by law to possess and maintain
indemnify or to compensate any person or persons or other substantial legal reserves to meet their obligations to
corporations for any such loss, damage, or liability, or to guarantee the policyholders.27 This obviously cannot be accomplished through the
performance of or compliance with contractual obligations or the collection of premiums alone, as the legal reserves and capital and
payment of debts of others shall be known as "insurance corporations." surplus insurance companies are obligated to maintain run into millions
of pesos. As such, the creation of "investment income" has long been
Plainly, insurance companies and lending investors are different held to be generally, if not necessarily, essential to the business of
enterprises in the eyes of the law. Lending investors cannot, for a insurance.28
consideration, hold anyone harmless from loss, damage or liability, nor
provide compensation or indemnity for loss. The underwriting of risks is The creation of investment income in the manner sanctioned by the
the prerogative of insurers, the great majority of which are laws on insurance is thus part of the business of insurance, and the
incorporated insurance companies23 like respondents. fruits of these investments are essentially income from the insurance
business. This is particularly true if the invested assets are held either
Granting of Mortgage and as reserved funds to provide for policy obligations or as capital and
other Loans are Investment surplus to provide an extra margin of safety which will be attractive to
Practices that are Part of the insurance buyers.29
Insurance Business.
The Court has also held that when a company is taxed on its main
True, respondents granted mortgage and other kinds of loans. business, it is no longer taxable further for engaging in an activity or
However, this was not done independently of respondents’ insurance work which is merely a part of, incidental to and is necessary to its
main business.30 Respondents already paid percentage and fixed taxes xxx (Emphasis supplied.)
on their insurance business. To require them to pay percentage and
fixed taxes again for an activity which is necessarily a part of the same The separate provisions on lending investors and insurance companies
business, the law must expressly require such additional payment of demonstrate an intention to treat these businesses differently. If
tax. There is, however, no provision of law requiring such additional Congress intended insurance companies to be taxed as lending
payment of tax. investors, there would be no need for Section 182(A)(3)(gg). Section
182(A)(3)(dd) would have been sufficient. That insurance companies
Sections 195-A and 182(A)(3)(dd) of CA 466 do not require insurance were included with banks, finance and investment companies also
companies to pay double percentage and fixed taxes. They merely tax supports the CTA’s conclusion that insurance companies had more in
lending investors, not lending activities. Respondents were not common with the latter enterprises than with lending investors. As the
transformed into lending investors by the mere fact that they granted CTA pointed out, banks also regularly lend money at interest, but are
loans, as these investments were part of, incidental and necessary to not taxable as lending investors.
their insurance business.
We find no merit in petitioner’s contention that Congress intended to
Different Tax Treatment of subject respondents to two percentage taxes and two fixed taxes.
Insurance Companies and Petitioner’s argument goes against the doctrine of strict interpretation
Lending Investors. of tax impositions.

Section 182(A)(3) of CA 466 accorded different tax treatments to Petitioner’s argument is likewise not in accord with existing
lending investors and insurance companies. The relevant portions of jurisprudence. In Commissioner of Internal Revenue v. Michel J.
Section 182 state: Lhuillier Pawnshop, Inc.,31 the Court ruled that the different tax
treatment accorded to pawnshops and lending investors in the NIRC of
Sec. 182. Fixed taxes. – (A) On business xxx 1977 and the NIRC of 1986 showed "the intent of Congress to deal with
both subjects differently." The same reasoning applies squarely to the
(3) Other fixed taxes. – The following fixed taxes shall be collected as
present case.
follows, the amount stated being for the whole year, when not
otherwise specified; Even the current tax law does not treat insurance companies as
lending investors. Under Section 108(A)32 of the NIRC of 1997, lending
xxx
investors and non-life insurance companies, except for their crop
(dd) Lending investors – insurances, are subject to value-added tax ("VAT"). Life insurance
companies are exempt from VAT, but are subject to percentage tax
1. In chartered cities and first class municipalities, five hundred pesos; under Section 123 of the NIRC of 1997.
2. In second and third class municipalities, two hundred and fifty pesos; Indeed, the fact that Sections 195-A and 182(A)(3)(dd) of CA 466 failed
to mention insurance companies already implies the latter’s exclusion
3. In fourth and fifth class municipalities and municipal districts, one
from the coverage of these provisions. When a statute enumerates the
hundred and twenty-five pesos; Provided, That lending investors who
things upon which it is to operate, everything else by implication must
do business as such in more than one province shall pay a tax of five
be excluded from its operation and effect.33
hundred pesos.
Definition of Lending
xxx
Investors in CA 466 is Not
(gg) Banks, insurance companies, finance and investment companies New.
doing business in the Philippines and franchise grantees, five hundred
pesos.
Petitioner does not dispute that it issued a ruling in 1920 to the effect been no need for a separate provision specifically requiring insurance
that the lending of money at interest was a necessary incident of the companies to pay fixed taxes.
insurance business, and that insurance companies were thus not
subject to the tax on money lenders. Petitioner argues only that the
1920 ruling does not apply to the instant case because RA 6110
The Court Accords Great
introduced the definition of lending investors to CA 466 only in 1969.
Weight to the Factual Findings
The subject definition was actually introduced much earlier, at a time of the CTA.
when lending investors were still referred to as money lenders.
Dedicated exclusively to the study and consideration of tax problems,
Sections 45 and 46 of the Internal Revenue Law of 1914 34 ("1914 Tax
the CTA has necessarily developed an expertise in the subject of
Code") state:
taxation that this Court has recognized time and again. For this reason,
SECTION 45. Amount of Tax on Business. — Fixed taxes on business the findings of fact of the CTA, particularly when affirmed by the Court
shall be collected as follows, the amount stated being for the whole of Appeals, are generally conclusive on this Court absent grave abuse
year, when not otherwise specified: of discretion or palpable error,37 which are not present in this case.

xxx WHEREFORE, we DENY the instant petition and AFFIRM the Decision
of 7 January 2000 of the Court of Appeals in CA-G.R. SP No. 36816.
(x) Money lenders, eighty pesos;
SO ORDERED.
xxx

SECTION 46. Words and Phrases Defined. — In applying the provisions

of the preceding section words and phrases shall be taken in the sense
and extension indicated below:

xxx

"Money lender" includes all persons who make a practice of

lending money for themselves or others at interest. (Emphasis
supplied)

As can be seen, the definitions of "money lender" under the 1914 Tax
Code and "lending investor" under CA 466 are identical. The term
"money lender" was merely changed to "lending investor" when Act
No. 3963 amended the Revised Administrative Code in 1932. 35 This
same definition of lending investor has since appeared in Section
194(u) of CA 466 and later tax laws.

Note that insurance companies were not included among the

businesses subject to an annual fixed tax under the 1914 Tax
Code.36 That Congress later saw the need to introduce Section 182(A)
(3)(gg) in CA 466 bolsters our view that there was no legislative intent
to tax insurance companies as lending investors. If insurance
companies were already taxed as lending investors, there would have
 G.R. No. 149724 August 19, 2003 Unit per Congressional District except in the Autonomous Region of
Muslim Mindanao (ARMM) and the National Capital Region (NCR). The
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, Regional Executive Directors (REDs) are hereby authorized to
represented herein by its Secretary, HEHERSON T. realign/relocate existing CENROs and implement this policy in
ALVAREZ, Petitioner, accordance with the attached distribution list per region which forms
vs. part of this Order. Likewise, the following realignment and
DENR REGION 12 EMPLOYEES, represented by BAGUIDALI administrative arrangements are hereby adopted:
KARIM, Acting President of COURAGE (DENR Region 12
Chapter), Respondents. xxx xxx xxx

DECISION 1.6. The supervision of the Provinces of South Cotabato and Sarangani
shall be transferred from Region XI to XII.4
YNARES-SANTIAGO, J.:
Respondents, employees of the DENR Region XII who are members of
This is a petition for review assailing the Resolutions dated May 31, the employees association, "COURAGE", represented by their Acting
20001 of the Court of Appeals which dismissed the petition President, Baguindanai A. Karim, filed with the Regional Trial Court of
for certiorari in CA-G.R. SP No. 58896, and its Resolution dated August Cotabato, a petition for nullity of orders with prayer for preliminary
20, 20012 , which denied the motion for reconsideration. injunction.
The facts are as follows: On December 8, 1999, the trial court issued a temporary restraining
order enjoining petitioner from implementing the assailed
On November 15, 1999, Regional Executive Director of the Department
Memorandum. The dispositive portion of the Order reads:
of Environment and Natural Resources for Region XII, Israel C. Gaddi,
issued a Memorandum3 directing the immediate transfer of the DENR WHEREFORE, defendants DENR Secretary Antonio H. Cerilles and
XII Regional Offices from Cotabato City to Koronadal (formerly Marbel), Regional Executive Director Israel C. Gaddi are hereby ordered to
South Cotabato. The Memorandum was issued pursuant to DENR cease and desist from doing the act complained of, namely, to stop the
Administrative Order No. 99-14, issued by then DENR Secretary transfer of DENR [Region] 12 offices from Cotabato City to Korandal
Antonio H. Cerilles, which reads in part: (Marbel), South Cotabato.
Subject: Providing for the Redefinition of Functions and xxx xxx xxx.
Realignment of Administrative Units in the Regional and Field
Offices: SO ORDERED.5

Pursuant to Executive Order No. 192, dated June 10, 1987 and as an Petitioner filed a Motion for Reconsideration with Motion to Dismiss,
interim administrative arrangement to improve the efficiency and raising the following grounds:
effectiveness of the Department of Environment and Natural
Resources (DENR) in delivering its services pending approval of the I.
government-wide reorganization by Congress, the following redefinition
The power to transfer the Regional Office of the Department of
of functions and realignment of administrative units in the regional and
Environment and Natural Resources (DENR) is executive in nature.
field offices are hereby promulgated:
II.
Section 1. Realignment of Administrative Units:
The decision to transfer the Regional Office is based on Executive
The DENR hereby adopts a policy to establish at least one Community
Order No. 429, which reorganized Region XII.
Environment and Natural Resources Office (CENRO) or Administrative
III. II

The validity of EO 429 has been affirmed by the Honorable Supreme THE DECISION OF THE LOWER COURT DATED 14 JANUARY 2000
Court in the Case of Chiongbian vs. Orbos (1995) 245 SCRA 255. WHICH WAS AFFIRMED IN THE QUESTIONED RESOLUTIONS OF THE
COURT OF APPEALS DATED 31 MAY 2000 AND 20 AUGUST 2001 IS
IV. PATENTLY ILLEGAL AND SHOULD BE NULLIFIED, CONSIDERING THAT:
Since the power to reorganize the Administrative Regions is Executive A. RESPONDENTS HAVE NO CAUSE OF ACTION AGAINST PETITIONER
in Nature citing Chiongbian, the Honorable Court has no jurisdiction to AS THEY HAVE NO RIGHT TO CAUSE THE DENR REGION 12 OFFICE TO
entertain this petition.6 REMAIN IN COTABATO CITY.
On January 14, 2000, the trial court rendered judgment, the dispositive B. THE STATE DID NOT GIVE ITS CONSENT TO BE SUED.
portion of which reads:
C. THE DECISION OF THE LOWER COURT DATED 14 JANUARY 2000 IS
CONSEQUENTLY, order is hereby issued ordering the respondents CONTRARY TO THE RULE OF PRESUMPTION OF REGULARITY IN THE
herein to cease and desist from enforcing their Memorandum Order PERFORMANCE OF OFFICIAL FUNCTIONS.
dated November 15, 1999 relative to the transfer of the DENR Regional
Offices from Region 12 to Region 11 at Koronadal, South Cotabato for D. IN ANY EVENT, THE DECISION OF THE LOWER COURT DATED 14
being bereft of legal basis and issued with grave abuse of discretion JANUARY 2000 IS CONTRARY TO THE LETTER AND INTENT OF
amounting to lack or excess of jurisdiction on their part, and they are EXECUTIVE ORDER NO. 429 AND REPUBLIC ACT NO. 6734.
further ordered to return back the seat of the DENR Regional Offices 12
to Cotabato City. E. THE DETERMINATION OF THE PROPRIETY AND PRACTICALITY OF
THE TRANSFER OF REGIONAL OFFICES IS INHERENTLY EXECUTIVE,
SO ORDERED.7 AND THEREFORE, NON-JUSTICIABLE.10

Petitioner’s motion for reconsideration was denied in an Order dated In essence, petitioner argues that the trial court erred in enjoining it
April 10, 2000. A petition for certiorari under Rule 65 was filed before from causing the transfer of the DENR XII Regional Offices, considering
the Court of Appeals, docketed as CA-G.R. SP No. 58896. The petition that it was done pursuant to DENR Administrative Order 99-14.
was dismissed outright for: (1) failure to submit a written explanation
why personal service was not done on the adverse party; (2) failure to The issues to be resolved in this petition are: (1) Whether DAO-99-14
attach affidavit of service; (3) failure to indicate the material dates and the Memorandum implementing the same were valid; and (2)
when copies of the orders of the lower court were received; (4) failure Whether the DENR Secretary has the authority to reorganize the DENR.
to attach certified true copy of the order denying petitioner’s motion for
Prefatorily, petitioner prays for a liberal application of procedural rules
reconsideration; (5) for improper verification, the same being based on
considering the greater interest of justice.
petitioner’s "knowledge and belief," and (6) wrong remedy of certiorari
under Rule 65 to substitute a lost appeal.8 This Court is fully aware that procedural rules are not to be simply
disregarded for these prescribed procedures ensure an orderly and
The motion for reconsideration was denied in a resolution dated August
speedy administration of justice. However, it is equally true that
20, 2001.9 Hence, this petition based on the following assignment of
litigation is not merely a game of technicalities. Time and again, courts
errors:
have been guided by the principle that the rules of procedure are not
I to be applied in a very rigid and technical manner, as rules of
procedure are used only to help secure and not to override substantial
RULES OF PROCEDURE CAN NOT BE USED TO DEFEAT THE ENDS OF justice.11 Thus, if the application of the Rules would tend to frustrate
SUBSTANTIAL JUSTICE
rather than promote justice, it is always within the power of this Court Sec. 17. The President shall have control of all the executive
to suspend the rules, or except a particular case from its operation.12 departments, bureaus, and offices. He shall ensure that the laws be
faithfully executed.
Despite the presence of procedural flaws, we find it necessary to
address the issues because of the demands of public interest, including However, as head of the Executive Department, the President cannot
the need for stability in the public service and the serious implications be expected to exercise his control (and supervisory) powers
this case may cause on the effective administration of the executive personally all the time. He may delegate some of his powers to the
department. Although no appeal was made within the reglementary Cabinet members except when he is required by the Constitution to act
period to appeal, nevertheless, the departure from the general rule in person or the exigencies of the situation demand that he acts
that the extraordinary writ of certiorari cannot be a substitute for the personally.17
lost remedy of appeal is justified because the execution of the assailed
decision would amount to an oppressive exercise of judicial authority.13 In Buklod ng Kawaning EIIB v. Zamora, 18 this Court upheld the
continuing authority of the President to carry out the reorganization in
Petitioner maintains that the assailed DAO-99-14 and the any branch or agency of the executive department. Such authority
implementing memorandum were valid and that the trial court should includes the creation, alteration or abolition of public offices.19 The Chief
have taken judicial notice of Republic Act No. 6734, otherwise known Executive’s authority to reorganize the National Government finds
as "An Organic Act for the Autonomous Region in Muslim Mindanao," basis in Book III, Section 20 of E.O. No. 292, otherwise known as the
and its implementing Executive Order 429,14 as the legal bases for the Administrative Code of 1987, viz:
issuance of the assailed DAO-99-14. Moreover, the validity of R.A. No.
6734 and E.O. 429 were upheld in the case of Chiongbian v. Section 20. Residual Powers. – Unless Congress provides otherwise, the
Orbos.15 Thus, the respondents cannot, by means of an injunction, President shall exercise such other powers and functions vested in the
force the DENR XII Regional Offices to remain in Cotabato City, as the President which are provided for under the laws and which are not
exercise of the authority to transfer the same is executive in nature. specifically enumerated above or which are not delegated by the
President in accordance with law.
It is apropos to reiterate the elementary doctrine of qualified political
agency, thus: Further, in Larin v. Executive Secretary,20 this Court had occasion to
rule:
Under this doctrine, which recognizes the establishment of a single
executive, all executive and administrative organizations are adjuncts This provision speaks of such other powers vested in the President
of the Executive Department, the heads of the various executive under the law. What law then gives him the power to reorganize? It is
departments are assistants and agents of the Chief Executive, and, Presidential Decree No. 1772 which amended Presidential Decree No.
except in cases where the Chief Executive is required by the 1416. These decrees expressly grant the President of the Philippines
Constitution or law to act in person or the exigencies of the situation the continuing authority to reorganize the national government, which
demand that he act personally, the multifarious executive and includes the power to group, consolidate bureaus and agencies, to
administrative functions of the Chief Executive are performed by and abolish offices, to transfer functions, to create and classify functions,
through the executive departments, and the acts of the Secretaries of services and activities and to standardize salaries and materials. The
such departments, performed and promulgated in the regular course validity of these two decrees is unquestionable. The 1987 Constitution
of business, are, unless disapproved or reprobated by the Chief clearly provides that "all laws, decrees, executive orders,
Executive, presumptively the acts of the Chief Executive.16 proclamations, letters of instructions and other executive issuances not
inconsistent with this Constitution shall remain operative until
This doctrine is corollary to the control power of the President as amended, repealed or revoked." So far, there is yet no law amending
provided for under Article VII, Section 17 of the 1987 Constitution, or repealing said decrees.
which reads:
Applying the doctrine of qualified political agency, the power of the SECTION 13. The creation of the Autonomous Region in Muslim
President to reorganize the National Government may validly be Mindanao shall take effect when approved by a majority of the votes
delegated to his cabinet members exercising control over a particular cast by the constituent units provided in paragraph (2) of Sec. 1 of
executive department. Thus, in DOTC Secretary v. Mabalot,21 we held Article II of this Act in a plebiscite which shall be held not earlier than
that the President – through his duly constituted political agent and ninety (90) days or later than one hundred twenty (120) days after the
alter ego, the DOTC Secretary – may legally and validly decree the approval of this Act: Provided, That only the provinces and cities voting
reorganization of the Department, particularly the establishment of favorably in such plebiscite shall be included in the Autonomous Region
DOTC-CAR as the LTFRB Regional Office at the Cordillera in Muslim Mindanao. The provinces and cities which in the plebiscite do
Administrative Region, with the concomitant transfer and performance not vote for inclusion in the Autonomous Region shall remain in the
of public functions and responsibilities appurtenant to a regional office existing administrative regions: Provided, however, That the President
of the LTFRB. may, by administrative determination, merge the existing regions.

Similarly, in the case at bar, the DENR Secretary can validly reorganize Pursuant to the authority granted by the aforequoted provision, then
the DENR by ordering the transfer of the DENR XII Regional Offices President Corazon C. Aquino issued on October 12, 1990 E.O. 429,
from Cotabato City to Koronadal, South Cotabato. The exercise of this "Providing for the Reorganization of the Administrative Regions in
authority by the DENR Secretary, as an alter ego, is presumed to be Mindanao." Section 4 thereof provides:
the acts of the President for the latter had not expressly repudiated the
same. SECTION 4. REGION XII, to be known as CENTRAL MINDANAO, shall
include the following provinces and cities:
The trial court should have taken judicial notice of R.A. No. 6734, as
implemented by E.O. No. 429, as legal basis of the President’s power to Provinces
reorganize the executive department, specifically those administrative
Sultan Kudarat
regions which did not vote for their inclusion in the ARMM. It is
axiomatic that a court has the mandate to apply relevant statutes and Cotabato
jurisprudence in determining whether the allegations in a complaint
establish a cause of action. While it focuses on the complaint, a court South Cotabato
clearly cannot disregard decisions material to the proper appreciation
Cities
of the questions before it.22 In resolving the motion to dismiss, the trial
court should have taken cognizance of the official acts of the Cotabato
legislative, executive, and judicial departments because they are
proper subjects of mandatory judicial notice as provided by Section 1 of General Santos
Rule 129 of the Rules of Court, to wit:
The Municipality of Koronadal (Marinduque) in South Cotabato shall
A court shall take judicial notice, without the introduction of evidence, serve as the regional center.
of the existence and territorial extent of states, their political history,
forms of government and symbols of nationality, the law of nations, the In Chiongbian v. Orbos, this Court stressed the rule that the power of
admiralty and maritime courts of the world and their seals, the political the President to reorganize the administrative regions carries with it the
constitution and history of the Philippines, the official acts of the power to determine the regional centers. In identifying the regional
legislative, executive and judicial departments of the centers, the President purposely intended the effective delivery of the
Philippines, the laws of nature, the measure of time, and the field services of government agencies.23 The same intention can be
geographical divisions. (Emphasis supplied) gleaned from the preamble of the assailed DAO-99-14 which the DENR
sought to achieve, that is, to improve the efficiency and effectiveness
Article XIX, Section 13 of R.A. No. 6734 provides: of the DENR in delivering its services.
It may be true that the transfer of the offices may not be timely
considering that: (1) there are no buildings yet to house the regional
offices in Koronadal, (2) the transfer falls on the month of Ramadan, (3)
the children of the affected employees are already enrolled in schools
in Cotabato City, (4) the Regional Development Council was not
consulted, and (5) the Sangguniang Panglungsond, through a
resolution, requested the DENR Secretary to reconsider the orders.
However, these concern issues addressed to the wisdom of the
transfer rather than to its legality. It is basic in our form of government
that the judiciary cannot inquire into the wisdom or expediency of the
acts of the executive or the legislative department,24 for each
department is supreme and independent of the others, and each is
devoid of authority not only to encroach upon the powers or field of
action assigned to any of the other department, but also to inquire into
or pass upon the advisability or wisdom of the acts performed,
measures taken or decisions made by the other departments.25

The Supreme Court should not be thought of as having been tasked

with the awesome responsibility of overseeing the entire bureaucracy.
Unless there is a clear showing of constitutional infirmity or grave
abuse of discretion amounting to lack or excess of jurisdiction, the
Court’s exercise of the judicial power, pervasive and limitless it may
seem to be, still must succumb to the paramount doctrine of
separation of powers.26 After a careful review of the records of the case,
we find that this jurisprudential element of abuse of discretion has not
been shown to exist.1âwphi1

WHEREFORE, in view of the foregoing, the petition for review is

GRANTED. The resolutions of the Court of Appeals in CA-G.R. SP No.
58896 dated May 31, 2000 and August 20, 2001, as well as the
decision dated January 14, 2000 of the Regional Trial Court of Cotabato
City, Branch 15, in Civil Case No 389, are REVERSED and SET ASIDE.
The permanent injunction, which enjoined the petitioner from enforcing
the Memorandum Order of the DENR XII Regional Executive Director, is
LIFTED.

SO ORDERED.

Vitug, (Acting Chairman), Carpio, and Azcuna, JJ., concur.

Davide, Jr., C.J., (Chairman), abroad, on official business.
 G.R. No. 166620 April 20, 2010 The NPO was formed on July 25, 1987, during the term of former
President Corazon C. Aquino (President Aquino), by virtue of Executive
ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. Order No. 2851 which provided, among others, the creation of the NPO
PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ, ANDY V. from the merger of the Government Printing Office and the relevant
MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, printing units of the Philippine Information Agency (PIA). Section 6 of
GLORIA BISDA, JOVITA V. CONCEPCION, TERESITA G. Executive Order No. 285 reads:
CARVAJAL, ROSANNA T. MALIWANAG, RICHARD ODERON,
CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E. SECTION 6. Creation of the National Printing Office. – There is hereby
LAROCO, CESAR ANDRA, FELICISIMO GALACIO, ELSA R. created a National Printing Office out of the merger of the Government
CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO Printing Office and the relevant printing units of the Philippine
G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO O. ANDAL, Information Agency. The Office shall have exclusive printing jurisdiction
NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R. ORTIZ, over the following:
FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C.
MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., a. Printing, binding and distribution of all standard and accountable
NELSON PADUA, MARCELA C. SAYAO, ANGELITO MALAKAS, forms of national, provincial, city and municipal governments, including
GLORIA RAMENTO, JULIANA SUPLEO, MANUEL MENDRIQUE, E. government corporations;
TAYLAN, CARMELA BOBIS, DANILO VARGAS, ROY-LEO C.
b. Printing of officials ballots;
PABLO, ALLAN VILLANUEVA, VICENTE R. VELASCO, JR.,
IMELDA ERENO, FLORIZA M. CATIIS, RANIEL R. BASCO, E. c. Printing of public documents such as the Official Gazette, General
JALIJALI, MARIO C. CARAAN, DOLORES M. AVIADO, MICHAEL P. Appropriations Act, Philippine Reports, and development information
LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO, ARTHUR G. materials of the Philippine Information Agency.
NARNE, LETICIA SORIANO, FEDERICO RAMOS, JR., PETERSON
CAAMPUED, RODELIO L. GOMEZ, ANTONIO D. GARCIA, JR., The Office may also accept other government printing jobs, including
ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE government publications, aside from those enumerated above, but not
A.M. COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. in an exclusive basis.
MALANUM, ALFREDO S. ESTRELLA, and JESUS MEL
The details of the organization, powers, functions, authorities, and
SAYO, Petitioners,
related management aspects of the Office shall be provided in the
vs.
implementing details which shall be prepared and promulgated in
EDUARDO R. ERMITA, in his capacity as Executive Secretary,
accordance with Section II of this Executive Order.
The Director General of the Philippine Information Agency and
The National Treasurer, Respondents. The Office shall be attached to the Philippine Information Agency.
DECISION On October 25, 2004, President Arroyo issued the herein assailed
Executive Order No. 378, amending Section 6 of Executive Order No.
LEONARDO-DE CASTRO, J.:
285 by, inter alia, removing the exclusive jurisdiction of the NPO over
The present controversy arose from a Petition for Certiorari and the printing services requirements of government agencies and
prohibition challenging the constitutionality of Executive Order No. 378 instrumentalities. The pertinent portions of Executive Order No. 378, in
dated October 25, 2004, issued by President Gloria Macapagal Arroyo turn, provide:
(President Arroyo). Petitioners characterize their action as a class suit
SECTION 1. The NPO shall continue to provide printing services to
filed on their own behalf and on behalf of all their co-employees at the
government agencies and instrumentalities as mandated by law.
National Printing Office (NPO).
However, it shall no longer enjoy exclusive jurisdiction over the printing
services requirements of the government over standard and
accountable forms. It shall have to compete with the private sector, "[c]ourts must exercise utmost caution before allowing a class suit,
except in the printing of election paraphernalia which could be shared which is the exception to the requirement of joinder of all indispensable
with the Bangko Sentral ng Pilipinas, upon the discretion of the parties. For while no difficulty may arise if the decision secured is
Commission on Elections consistent with the provisions of the Election favorable to the plaintiffs, a quandary would result if the decision were
Code of 1987. otherwise as those who were deemed impleaded by their self-
appointed representatives would certainly claim denial of due process."
SECTION 2. Government agencies/instrumentalities may source
printing services outside NPO provided that: Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:

2.1 The printing services to be provided by the private sector is Sec. 12. Class suit. – When the subject matter of the controversy is one
superior in quality and at a lower cost than what is offered by the NPO; of common or general interest to many persons so numerous that it is
and impracticable to join all as parties, a number of them which the court
finds to be sufficiently numerous and representative as to fully protect
2.2 The private printing provider is flexible in terms of meeting the the interests of all concerned may sue or defend for the benefit of all.
target completion time of the government agency. Any party in interest shall have the right to intervene to protect his
individual interest.
SECTION 3. In the exercise of its functions, the amount to be
appropriated for the programs, projects and activities of the NPO in the From the foregoing definition, the requisites of a class suit are: 1) the
General Appropriations Act (GAA) shall be limited to its income without subject matter of controversy is one of common or general interest to
additional financial support from the government. (Emphases and many persons; 2) the parties affected are so numerous that it is
underscoring supplied.) impracticable to bring them all to court; and 3) the parties bringing the
class suit are sufficiently numerous or representative of the class and
Pursuant to Executive Order No. 378, government agencies and
can fully protect the interests of all concerned.
instrumentalities are allowed to source their printing services from the
private sector through competitive bidding, subject to the condition In Mathay v. The Consolidated Bank and Trust Company, 3 the Court
that the services offered by the private supplier be of superior quality held that:
and lower in cost compared to what was offered by the NPO. Executive
Order No. 378 also limited NPO’s appropriation in the General An action does not become a class suit merely because it is designated
Appropriations Act to its income. as such in the pleadings. Whether the suit is or is not a class suit
depends upon the attending facts, and the complaint, or other pleading
Perceiving Executive Order No. 378 as a threat to their security of initiating the class action should allege the existence of the necessary
tenure as employees of the NPO, petitioners now challenge its facts, to wit, the existence of a subject matter of common interest, and
constitutionality, contending that: (1) it is beyond the executive powers the existence of a class and the number of persons in the alleged
of President Arroyo to amend or repeal Executive Order No. 285 issued class, in order that the court might be enabled to determine whether
by former President Aquino when the latter still exercised legislative the members of the class are so numerous as to make it impracticable
powers; and (2) Executive Order No. 378 violates petitioners’ security to bring them all before the court, to contrast the number appearing on
of tenure, because it paves the way for the gradual abolition of the the record with the number in the class and to determine whether
NPO. claimants on record adequately represent the class and the subject
matter of general or common interest. (Emphases ours.)
We dismiss the petition.
Here, the petition failed to state the number of NPO employees who
Before proceeding to resolve the substantive issues, the Court must
would be affected by the assailed Executive Order and who were
first delve into a procedural matter. Since petitioners instituted this
allegedly represented by petitioners. It was the Solicitor General, as
case as a class suit, the Court, thus, must first determine if the petition
counsel for respondents, who pointed out that there were about 549
indeed qualifies as one. In Board of Optometry v. Colet, 2 we held that
employees in the NPO.4 The 67 petitioners undeniably comprised a they claim to represent. Since it cannot be said that petitioners
small fraction of the NPO employees whom they claimed to represent. sufficiently represent the interests of the entire class, the instant case
Subsequently, 32 of the original petitioners executed an Affidavit of cannot be properly treated as a class suit.
Desistance, while one signed a letter denying ever signing the
petition,5 ostensibly reducing the number of petitioners to 34. We note As to the merits of the case, the petition raises two main grounds to
that counsel for the petitioners challenged the validity of the desistance assail the constitutionality of Executive Order No. 378:
or withdrawal of some of the petitioners and insinuated that such
First, it is contended that President Arroyo cannot amend or repeal
desistance was due to pressure from people "close to the seat of
Executive Order No. 285 by the mere issuance of another executive
power."6 Still, even if we were to disregard the affidavit of desistance
order (Executive Order No. 378). Petitioners maintain that former
filed by some of the petitioners, it is highly doubtful that a sufficient,
President Aquino’s Executive Order No. 285 is a legislative enactment,
representative number of NPO employees have instituted this
as the same was issued while President Aquino still had legislative
purported class suit. A perusal of the petition itself would show that of
powers under the Freedom Constitution;11 thus, only Congress through
the 67 petitioners who signed the Verification/Certification of Non-
legislation can validly amend Executive Order No. 285.
Forum Shopping, only 20 petitioners were in fact mentioned in the jurat
as having duly subscribed the petition before the notary public. In other Second, petitioners maintain that the issuance of Executive Order No.
words, only 20 petitioners effectively instituted the present case. 378 would lead to the eventual abolition of the NPO and would violate
the security of tenure of NPO employees.
Indeed, in MVRS Publications, Inc. v. Islamic Da’wah Council of the
Philippines, Inc.,7 we observed that an element of a class suit or Anent the first ground raised in the petition, we find the same patently
representative suit is the adequacy of representation. In determining without merit.
the question of fair and adequate representation of members of a
class, the court must consider (a) whether the interest of the named It is a well-settled principle in jurisprudence that the President has the
party is coextensive with the interest of the other members of the power to reorganize the offices and agencies in the executive
class; (b) the proportion of those made a party, as it so bears, to the department in line with the President’s constitutionally granted power
total membership of the class; and (c) any other factor bearing on the of control over executive offices and by virtue of previous delegation of
ability of the named party to speak for the rest of the class. the legislative power to reorganize executive offices under existing
statutes.
Previously, we held in Ibañes v. Roman Catholic Church 8 that where
the interests of the plaintiffs and the other members of the class they In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out that
seek to represent are diametrically opposed, the class suit will not Executive Order No. 292 or the Administrative Code of 1987 gives the
prosper. President continuing authority to reorganize and redefine the functions
of the Office of the President. Section 31, Chapter 10, Title III, Book III of
It is worth mentioning that a Manifestation of Desistance,9 to which the the said Code, is explicit:
previously mentioned Affidavit of Desistance10 was attached, was filed
by the President of the National Printing Office Workers Association Sec. 31. Continuing Authority of the President to Reorganize his Office.
(NAPOWA). The said manifestation expressed NAPOWA’s opposition to – The President, subject to the policy in the Executive Office and in
the filing of the instant petition in any court. Even if we take into order to achieve simplicity, economy and efficiency, shall have
account the contention of petitioners’ counsel that the NAPOWA continuing authority to reorganize the administrative structure of the
President had no legal standing to file such manifestation, the said Office of the President. For this purpose, he may take any of the
pleading is a clear indication that there is a divergence of opinions and following actions:
views among the members of the class sought to be represented, and
(1) Restructure the internal organization of the Office of the President
not all are in favor of filing the present suit. There is here an apparent
Proper, including the immediate Offices, the President Special
conflict between petitioners’ interests and those of the persons whom
Assistants/Advisers System and the Common Staff Support System, by
abolishing, consolidating or merging units thereof or transferring and the Common Staff Support System, by abolishing, consolidating or
functions from one unit to another; merging units thereof or transferring functions from one unit to
another, and (b) to transfer functions or offices from the Office of the
(2) Transfer any function under the Office of the President to any other President to any other Department or Agency in the Executive Branch,
Department or Agency as well as transfer functions to the Office of the and vice versa.
President from other Departments and Agencies; and
Concomitant to such power to abolish, merge or consolidate offices in
(3) Transfer any agency under the Office of the President to any other the Office of the President Proper and to transfer functions/offices not
department or agency as well as transfer agencies to the Office of the only among the offices in the Office of President Proper but also the
President from other Departments or agencies. (Emphases ours.) rest of the Office of the President and the Executive Branch, the
President implicitly has the power to effect less radical or less
Interpreting the foregoing provision, we held in Buklod ng Kawaning
substantive changes to the functional and internal structure of the
EIIB, thus:
Office of the President, including the modification of functions of such
But of course, the list of legal basis authorizing the President to executive agencies as the exigencies of the service may require.
reorganize any department or agency in the executive branch does not
In the case at bar, there was neither an abolition of the NPO nor a
have to end here. We must not lose sight of the very source of the
removal of any of its functions to be transferred to another agency.
power – that which constitutes an express grant of power. Under
Under the assailed Executive Order No. 378, the NPO remains the main
Section 31, Book III of Executive Order No. 292 (otherwise known as
printing arm of the government for all kinds of government forms and
the Administrative Code of 1987), "the President, subject to the policy
publications but in the interest of greater economy and encouraging
in the Executive Office and in order to achieve simplicity, economy and
efficiency and profitability, it must now compete with the private sector
efficiency, shall have the continuing authority to reorganize the
for certain government printing jobs, with the exception of election
administrative structure of the Office of the President." For this
paraphernalia which remains the exclusive responsibility of the NPO,
purpose, he may transfer the functions of other Departments or
together with the Bangko Sentral ng Pilipinas, as the Commission on
Agencies to the Office of the President. In Canonizado v. Aguirre [323
Elections may determine. At most, there was a mere alteration of the
SCRA 312 (2000)], we ruled that reorganization "involves the reduction
main function of the NPO by limiting the exclusivity of its printing
of personnel, consolidation of offices, or abolition thereof by reason of
responsibility to election forms.15
economy or redundancy of functions." It takes place when there is an
alteration of the existing structure of government offices or units There is a view that the reorganization actions that the President may
therein, including the lines of control, authority and responsibility take with respect to agencies in the Office of the President are strictly
between them. The EIIB is a bureau attached to the Department of limited to transfer of functions and offices as seemingly provided in
Finance. It falls under the Office of the President. Hence, it is subject to Section 31 of the Administrative Code of 1987.
the President’s continuing authority to reorganize.13 (Emphasis ours.)
However, Section 20, Chapter 7, Title I, Book III of the same Code
It is undisputed that the NPO, as an agency that is part of the Office of significantly provides:
the Press Secretary (which in various times has been an agency
directly attached to the Office of the Press Secretary or as an agency Sec. 20. Residual Powers. – Unless Congress provides otherwise, the
under the Philippine Information Agency), is part of the Office of the President shall exercise such other powers and functions vested in the
President.14 President which are provided for under the laws and which are not
specifically enumerated above, or which are not delegated by the
Pertinent to the case at bar, Section 31 of the Administrative Code of President in accordance with law. (Emphasis ours.)
1987 quoted above authorizes the President (a) to restructure the
internal organization of the Office of the President Proper, including the Pursuant to Section 20, the power of the President to reorganize the
immediate Offices, the President Special Assistants/Advisers System Executive Branch under Section 31 includes such powers and functions
that may be provided for under other laws. To be sure, an inclusive and the Economic Intelligence and Investigation Bureau (EIIB) of the
broad interpretation of the President’s power to reorganize executive Department of Finance, hewed closely to the reasoning in Larin. The
offices has been consistently supported by specific provisions in Court, among others, also traced from the General Appropriations
general appropriations laws. Act19 the President’s authority to effect organizational changes in the
department or agency under the executive structure, thus:
In the oft-cited Larin v. Executive Secretary,16 the Court likewise
adverted to certain provisions of Republic Act No. 7645, the general We adhere to the precedent or ruling in Larin that this provision
appropriations law for 1993, as among the statutory bases for the recognizes the authority of the President to effect organizational
President’s power to reorganize executive agencies, to wit: changes in the department or agency under the executive structure.
Such a ruling further finds support in Section 78 of Republic Act No.
Section 48 of R.A. 7645 provides that: 8760. Under this law, the heads of departments, bureaus, offices and
agencies and other entities in the Executive Branch are directed (a) to
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within
conduct a comprehensive review of their respective mandates,
the Executive Branch. — The heads of departments, bureaus and
missions, objectives, functions, programs, projects, activities and
offices and agencies are hereby directed to identify their respective
systems and procedures; (b) identify activities which are no longer
activities which are no longer essential in the delivery of public services
essential in the delivery of public services and which may be scaled
and which may be scaled down, phased out or abolished, subject to
down, phased-out or abolished; and (c) adopt measures that will result
civil [service] rules and regulations. x x x. Actual scaling down, phasing
in the streamlined organization and improved overall performance of
out or abolition of the activities shall be effected pursuant to Circulars
their respective agencies. Section 78 ends up with the mandate that
or Orders issued for the purpose by the Office of the President."
the actual streamlining and productivity improvement in agency
Said provision clearly mentions the acts of "scaling down, phasing out organization and operation shall be effected pursuant to Circulars or
and abolition" of offices only and does not cover the creation of offices Orders issued for the purpose by the Office of the President. x x
or transfer of functions. Nevertheless, the act of creating and x.20 (Emphasis ours)
decentralizing is included in the subsequent provision of Section 62,
Notably, in the present case, the 2003 General Appropriations Act,
which provides that:
which was reenacted in 2004 (the year of the issuance of Executive
"Sec. 62. Unauthorized organizational changes. — Unless otherwise Order No. 378), likewise gave the President the authority to effect a
created by law or directed by the President of the Philippines, no wide variety of organizational changes in any department or agency in
organizational unit or changes in key positions in any department or the Executive Branch. Sections 77 and 78 of said Act provides:
agency shall be authorized in their respective organization structures
Section 77. Organized Changes. – Unless otherwise provided by law or
and be funded from appropriations by this Act."
directed by the President of the Philippines, no changes in key positions
The foregoing provision evidently shows that the President is or organizational units in any department or agency shall be authorized
authorized to effect organizational changes including the creation of in their respective organizational structures and funded from
offices in the department or agency concerned. appropriations provided by this Act.

The contention of petitioner that the two provisions are riders deserves Section 78. Institutional Strengthening and Productivity Improvement
scant consideration. Well settled is the rule that every law has in its in Agency Organization and Operations and Implementation of
favor the presumption of constitutionality. Unless and until a specific Organization/Reorganization Mandated by Law. The Government shall
provision of the law is declared invalid and unconstitutional, the same is adopt institutional strengthening and productivity improvement
valid and binding for all intents and purposes.17 (Emphases ours) measures to improve service delivery and enhance productivity in the
government, as directed by the President of the Philippines. The heads
Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld as valid of departments, bureaus, offices, agencies, and other entities of the
then President Joseph Estrada’s Executive Order No. 191 "deactivating"
Executive Branch shall accordingly conduct a comprehensive review of the Office of the President under Section 31(2) and (3) of Executive
their respective mandates, missions, objectives, functions, programs, Order No. 292 and the power to reorganize the Office of the
projects, activities and systems and procedures; identify areas where President Proper. x x x
improvements are necessary; and implement corresponding structural,
functional and operational adjustments that will result in streamlined xxxx
organization and operations and improved performance and
The first sentence of the law is an express grant to the President of a
productivity: PROVIDED, That actual streamlining and productivity
continuing authority to reorganize the administrative structure of the
improvements in agency organization and operations, as authorized by
Office of the President. The succeeding numbered paragraphs are not
the President of the Philippines for the purpose, including the utilization
in the nature of provisos that unduly limit the aim and scope of the
of savings generated from such activities, shall be in accordance with
grant to the President of the power to reorganize but are to be viewed
the rules and regulations to be issued by the DBM, upon consultation
in consonance therewith. Section 31(1) of Executive Order No. 292
with the Presidential Committee on Effective Governance: PROVIDED,
specifically refers to the President’s power to restructure the internal
FURTHER, That in the implementation of organizations/reorganizations,
organization of the Office of the President Proper, by abolishing,
or specific changes in agency structure, functions and operations as a
consolidating or merging units hereof or transferring functions from one
result of institutional strengthening or as mandated by law, the
unit to another, while Section 31(2) and (3) concern executive offices
appropriation, including the functions, projects, purposes and
outside the Office of the President Proper allowing the President to
activities of agencies concerned may be realigned as may be
transfer any function under the Office of the President to any other
necessary: PROVIDED, FINALLY, That any unexpended balances or
Department or Agency and vice-versa, and the transfer of any agency
savings in appropriations may be made available for payment of
under the Office of the President to any other department or agency
retirement gratuities and separation benefits to affected personnel, as
and vice-versa.
authorized under existing laws. (Emphases and underscoring ours.)
In the present instance, involving neither an abolition nor transfer of
Implicitly, the aforequoted provisions in the appropriations law
offices, the assailed action is a mere reorganization under the general
recognize the power of the President to reorganize even executive
provisions of the law consisting mainly of streamlining the NTA in the
offices already funded by the said appropriations act, including the
interest of simplicity, economy and efficiency. It is an act well within the
power to implement structural, functional, and operational adjustments
authority of the President motivated and carried out, according to the
in the executive bureaucracy and, in so doing, modify or realign
findings of the appellate court, in good faith, a factual assessment that
appropriations of funds as may be necessary under such
this Court could only but accept.22 (Emphases and underscoring
reorganization. Thus, insofar as petitioners protest the limitation of the
supplied.)
NPO’s appropriations to its own income under Executive Order No. 378,
the same is statutorily authorized by the above provisions. In the more recent case of Tondo Medical Center Employees
Association v. Court of Appeals,23 which involved a structural and
In the 2003 case of Bagaoisan v. National Tobacco Administration,21 we
functional reorganization of the Department of Health under an
upheld the "streamlining" of the National Tobacco Administration
executive order, we reiterated the principle that the power of the
through a reduction of its personnel and deemed the same as included
President to reorganize agencies under the executive department by
in the power of the President to reorganize executive offices granted
executive or administrative order is constitutionally and statutorily
under the laws, notwithstanding that such streamlining neither
recognized. We held in that case:
involved an abolition nor a transfer of functions of an office. To quote
the relevant portion of that decision: This Court has already ruled in a number of cases that the President
may, by executive or administrative order, direct the reorganization of
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo
government entities under the Executive Department. This is also
D. Zamora, in his capacity as the Executive Secretary, et al., this Court
sanctioned under the Constitution, as well as other statutes.
has had occasion to also delve on the President’s power to reorganize
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he Clearly, Executive Order No. 102 is well within the constitutional power
president shall have control of all executive departments, bureaus and of the President to issue. The President did not usurp any legislative
offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, prerogative in issuing Executive Order No. 102. It is an exercise of the
also known as the Administrative Code of 1987 reads: President’s constitutional power of control over the executive
department, supported by the provisions of the Administrative Code,
SEC. 31. Continuing Authority of the President to Reorganize his Office - recognized by other statutes, and consistently affirmed by this
The President, subject to the policy in the Executive Office and in order Court.24 (Emphases supplied.)
to achieve simplicity, economy and efficiency, shall have continuing
authority to reorganize the administrative structure of the Office of the Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive
President. For this purpose, he may take any of the following actions: Secretary25 that:

xxxx The Constitution’s express grant of the power of control in the

President justifies an executive action to carry out reorganization
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the measures under a broad authority of law.
rationale behind the President’s continuing authority under the
Administrative Code to reorganize the administrative structure of the In enacting a statute, the legislature is presumed to have deliberated
Office of the President. The law grants the President the power to with full knowledge of all existing laws and jurisprudence on the
reorganize the Office of the President in recognition of the recurring subject. It is thus reasonable to conclude that in passing a statute
need of every President to reorganize his or her office "to achieve which places an agency under the Office of the President, it was in
simplicity, economy and efficiency." To remain effective and efficient, it accordance with existing laws and jurisprudence on the President’s
must be capable of being shaped and reshaped by the President in the power to reorganize.
manner the Chief Executive deems fit to carry out presidential
directives and policies. In establishing an executive department, bureau or office, the
legislature necessarily ordains an executive agency’s position in the
The Administrative Code provides that the Office of the President scheme of administrative structure. Such determination is primary, but
consists of the Office of the President Proper and the agencies under it. subject to the President’s continuing authority to reorganize the
The agencies under the Office of the President are identified in Section administrative structure. As far as bureaus, agencies or offices in the
23, Chapter 8, Title II of the Administrative Code: executive department are concerned, the power of control may justify
the President to deactivate the functions of a particular office. Or a law
Sec. 23. The Agencies under the Office of the President.—The agencies may expressly grant the President the broad authority to carry out
under the Office of the President refer to those offices placed under the reorganization measures. The Administrative Code of 1987 is one such
chairmanship of the President, those under the supervision and law.26
control of the President, those under the administrative supervision
of the Office of the President, those attached to it for policy and The issuance of Executive Order No. 378 by President Arroyo is an
program coordination, and those that are not placed by law or order exercise of a delegated legislative power granted by the
creating them under any specific department. aforementioned Section 31, Chapter 10, Title III, Book III of the
Administrative Code of 1987, which provides for the continuing
xxxx authority of the President to reorganize the Office of the President, "in
order to achieve simplicity, economy and efficiency." This is a matter
The power of the President to reorganize the executive department is
already well-entrenched in jurisprudence. The reorganization of such
likewise recognized in general appropriations laws. x x x.
an office through executive or administrative order is also recognized in
xxxx the Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I,
Book III of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a In this regard, we are mindful of the previous pronouncement of this
general or permanent character in implementation or execution of Court in Dario v. Mison28 that:
constitutional or statutory powers shall be promulgated in
executive orders. Reorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good faith. As a general rule, a
Sec. 3. Administrative Orders. - Acts of the President which relate to reorganization is carried out in "good faith" if it is for the purpose of
particular aspects of governmental operations in pursuance of his economy or to make bureaucracy more efficient. In that event, no
duties as administrative head shall be promulgated in dismissal (in case of a dismissal) or separation actually occurs because
administrative orders. (Emphases supplied.) the position itself ceases to exist. And in that case, security of tenure
would not be a Chinese wall. Be that as it may, if the "abolition," which
To reiterate, we find nothing objectionable in the provision in Executive is nothing else but a separation or removal, is done for political reasons
Order No. 378 limiting the appropriation of the NPO to its own income. or purposely to defeat security of tenure, or otherwise not in good faith,
Beginning with Larin and in subsequent cases, the Court has noted no valid "abolition" takes place and whatever "abolition" is done, is
certain provisions in the general appropriations laws as likewise void ab initio. There is an invalid "abolition" as where there is merely a
reflecting the power of the President to reorganize executive offices or change of nomenclature of positions, or where claims of economy are
agencies even to the extent of modifying and realigning appropriations belied by the existence of ample funds. (Emphasis ours.)
for that purpose.
Stated alternatively, the presidential power to reorganize agencies and
Petitioners’ contention that the issuance of Executive Order No. 378 is offices in the executive branch of government is subject to the
an invalid exercise of legislative power on the part of the President has condition that such reorganization is carried out in good faith.
no legal leg to stand on.
If the reorganization is done in good faith, the abolition of positions,
In all, Executive Order No. 378, which purports to institute necessary which results in loss of security of tenure of affected government
reforms in government in order to improve and upgrade efficiency in employees, would be valid. In Buklod ng Kawaning EIIB v.
the delivery of public services by redefining the functions of the NPO Zamora,29 we even observed that there was no such thing as an
and limiting its funding to its own income and to transform it into a self- absolute right to hold office. Except those who hold constitutional
reliant agency able to compete with the private sector, is well within offices, which provide for special immunity as regards salary and
the prerogative of President Arroyo under her continuing delegated tenure, no one can be said to have any vested right to an office or
legislative power to reorganize her own office. As pointed out in the salary.30
separate concurring opinion of our learned colleague, Associate Justice
Antonio T. Carpio, the objective behind Executive Order No. 378 is This brings us to the second ground raised in the petition – that
wholly consistent with the state policy contained in Republic Act No. Executive Order No. 378, in allowing government agencies to secure
9184 or the Government Procurement Reform Act to encourage their printing requirements from the private sector and in limiting the
competitiveness by extending equal opportunity to private contracting budget of the NPO to its income, will purportedly lead to the gradual
parties who are eligible and qualified.271avvphi1 abolition of the NPO and the loss of security of tenure of its present
employees. In other words, petitioners avow that the reorganization of
To be very clear, this delegated legislative power to reorganize pertains the NPO under Executive Order No. 378 is tainted with bad faith. The
only to the Office of the President and the departments, offices and basic evidentiary rule is that he who asserts a fact or the affirmative of
agencies of the executive branch and does not include the Judiciary, an issue has the burden of proving it.31
the Legislature or the constitutionally-created or mandated bodies.
Moreover, it must be stressed that the exercise by the President of the A careful review of the records will show that petitioners utterly failed to
power to reorganize the executive department must be in accordance substantiate their claim. They failed to allege, much less prove,
with the Constitution, relevant laws and prevailing jurisprudence. sufficient facts to show that the limitation of the NPO’s budget to its
own income would indeed lead to the abolition of the position, or
removal from office, of any employee. Neither did petitioners present
any shred of proof of their assertion that the changes in the functions of
the NPO were for political considerations that had nothing to do with
improving the efficiency of, or encouraging operational economy in, the
said agency.

In sum, the Court finds that the petition failed to show any
constitutional infirmity or grave abuse of discretion amounting to lack
or excess of jurisdiction in President Arroyo’s issuance of Executive
Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a

Temporary Restraining Order and/or a Writ of Preliminary Injunction is
hereby DENIED. No costs.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice
 G.R. No. 196425 July 24, 2012 xxx xxx xxx

PROSPERO A. PICHAY, JR., Petitioner, xxx xxx xxx

vs.
OFFICE OF THE DEPUTY EXECUTIVE SECRETARY FOR LEGAL Section 8. Submission of Report and Recommendations. – After
AFFAIRS INVESTIGATIVE AND ADJUDICATORY DIVISION, HON. completing its investigation or hearing, the Commission en banc shall
PAQUITO N. OCHOA, JR., in his capacity as Executive submit its report and recommendations to the President. The report
Secretary, and HON. CESAR V. PURISIMA, in his capacity as and recommendations shall state, among others, the factual findings
Secretary of Finance, and as an ex-officio member of the and legal conclusions, as well as the penalty recommend (sic) to be
Monetary Board, Respondents. imposed or such other action that may be taken."

DECISION On November 15, 2010, President Benigno Simeon Aquino III issued
Executive Order No. 13 (E.O. 13), abolishing the PAGC and transferring
PERLAS-BERNABE, J.: its functions to the Office of the Deputy Executive Secretary for Legal
Affairs (ODESLA), more particularly to its newly-established
The Case Investigative and Adjudicatory Division (IAD). The full text of the
assailed executive order reads:
This is a Petition for Certiorari and Prohibition with a prayer for the
issuance of a temporary restraining order, seeking to declare as EXECUTIVE ORDER NO. 13
unconstitutional Executive Order No. 13, entitled, "Abolishing the
Presidential Anti-Graft Commission and Transferring Its Investigative, ABOLISHING THE PRESIDENTIAL ANTI-GRAFT COMMISSION AND
Adjudicatory and Recommendatory Functions to the Office Of The TRANSFERRING ITS INVESTIGATIVE, ADJUDICATORY AND
Deputy Executive Secretary For Legal Affairs, Office of the RECOMMENDATORY FUNCTIONS TO THE OFFICE OF THE DEPUTY
President",1 and to permanently prohibit respondents from EXECUTIVE SECRETARY FOR LEGAL AFFAIRS, OFFICE OF THE
administratively proceeding against petitioner on the strength of the PRESIDENT
assailed executive order.
WHEREAS, this administration has a continuing mandate and advocacy
The Facts to fight and eradicate corruption in the different departments, bureaus,
offices and other government agencies and instrumentalities;
On April 16, 2001, then President Gloria Macapagal-Arroyo issued
Executive Order No. 12 (E.O. 12) creating the Presidential Anti-Graft WHEREAS, the government adopted a policy of streamlining the
Commission (PAGC) and vesting it with the power to investigate or government bureaucracy to promote economy and efficiency in
hear administrative cases or complaints for possible graft and government;
corruption, among others, against presidential appointees and to
submit its report and recommendations to the President. Pertinent WHEREAS, Section VII of the 1987 Philippine Constitution provides that
portions of E.O. 12 provide: the President shall have control of all the executive departments,
bureaus and offices;
Section 4. Jurisdiction, Powers and Functions. –
WHEREAS, Section 31 Chapter 10, Title III, Book III of Executive Order
(a) x x x xxx xxx 292 (Administrative Code of 1987) provides for the continuing authority
of the President to reorganize the administrative structure of the Office
(b) The Commission, acting as a collegial body, shall have the authority of the President;
to investigate or hear administrative cases or complaints against all
presidential appointees in the government and any of its agencies or WHEREAS, Presidential Decree (PD) No. 1416 (Granting Continuing
instrumentalities xxx Authority to the President of the Philippines to Reorganize the National
Government), as amended by PD 1722, provides that the President of Secretary, for approval, adoption or modification of the report and
the Philippines shall have continuing authority to reorganize the recommendations of the Investigative and Adjudicatory Division of
administrative structure of the National Government and may, at his ODESLA.
discretion, create, abolish, group, consolidate, merge or integrate
entities, agencies, instrumentalities and units of the National SECTION 4. Personnel Who May Be Affected By the Abolition of PAGC.
Government, as well as, expand, amend, change or otherwise modify The personnel who may be affected by the abolition of the PAGC shall
their powers, functions and authorities; be allowed to avail of the benefits provided under existing laws if
applicable. The Department of Budget and Management (DBM) is
WHEREAS, Section 78 of the General Provisions of Republic Act No. hereby ordered to release the necessary funds for the benefits of the
9970 (General Appropriations Act of 2010) authorizes the President of employees.
the Philippines to direct changes in the organizational units or key
positions in any department or agency; SECTION 5. Winding Up of the Operation and Disposition of the
Functions, Positions, Personnel, Assets and Liabilities of PAGC. The
NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the winding up of the operations of PAGC including the final disposition or
Philippines, by virtue of the powers vested in me by law, do hereby transfer of their functions, positions, personnel, assets and liabilities as
order the following: may be necessary, shall be in accordance with the applicable
provision(s) of the Rules and Regulations Implementing EO 72
SECTION 1. Declaration of Policy. It is the policy of the government to (Rationalizing the Agencies Under or Attached to the Office of the
fight and eradicate graft and corruption in the different departments, President) dated March 15, 2002. The winding up shall be implemented
bureaus, offices and other government agencies and instrumentalities. not later than 31 December 2010.
The government adopted a policy of streamlining the government The Office of the Executive Secretary, with the assistance of the
bureaucracy to promote economy and efficiency in the government. Department of Budget and Management, shall ensure the smooth and
efficient implementation of the dispositive actions and winding-up of
SECTION 2. Abolition of Presidential Anti-Graft Commission (PAGC). To
the activities of PAGC.
enable the Office of the President (OP) to directly investigate graft and
corrupt cases of Presidential appointees in the Executive Department SECTION 6. Repealing Clause. All executive orders, rules, regulations
including heads of government-owned and controlled corporations, the and other issuances or parts thereof, which are inconsistent with the
provisions of this Executive Order, are hereby revoked or modified
Presidential Anti-Graft Commission (PAGC) is hereby abolished and
accordingly.
their vital functions and other powers and functions inherent or
incidental thereto, transferred to the Office of the Deputy Executive SECTION 7. Effectivity. This Executive Order shall take effect
Secretary for Legal Affairs (ODESLA), OP in accordance with the immediately after its publication in a newspaper of general circulation.
provisions of this Executive Order.
On April 6, 2011, respondent Finance Secretary Cesar V. Purisima filed
SECTION 3. Restructuring of the Office of the Deputy Executive before the IAD-ODESLA a complaint affidavit 2 for grave misconduct
Secretary for Legal Affairs, OP. In addition to the Legal and Legislative against petitioner Prospero A. Pichay, Jr., Chairman of the Board of
Divisions of the ODESLA, the Investigative and Adjudicatory Division Trustees of the Local Water Utilities Administration (LWUA), as well as
shall be created. the incumbent members of the LWUA Board of Trustees, namely,
Renato Velasco, Susana Dumlao Vargas, Bonifacio Mario M. Pena, Sr.
The newly created Investigative and Adjudicatory Division shall perform
and Daniel Landingin, which arose from the purchase by the LWUA of
powers, functions and duties mentioned in Section 2 hereof, of PAGC.
Four Hundred Forty-Five Thousand Three Hundred Seventy Seven
The Deputy Executive Secretary for Legal Affairs (DESLA) will be the (445,377) shares of stock of Express Savings Bank, Inc.
recommending authority to the President, thru the Executive
On April 14, 2011, petitioner received an Order3 signed by Executive is also evident when weighed against the due process requirement and
Secretary Paquito N. Ochoa, Jr. requiring him and his co-respondents to equal protection clause under the 1987 Constitution.
submit their respective written explanations under oath. In compliance
therewith, petitioner filed a Motion to Dismiss Ex Abundante Ad The contentions are unavailing.
Cautelam manifesting that a case involving the same transaction and
The President has Continuing Authority to Reorganize the Executive
charge of grave misconduct entitled, "Rustico B. Tutol, et al. v. Prospero
Department under E.O. 292.
Pichay, et al.", and docketed as OMB-C-A-10-0426-I, is already pending
before the Office of the Ombudsman. Section 31 of Executive Order No. 292 (E.O. 292), otherwise known as
the Administrative Code of 1987, vests in the President the continuing
Now alleging that no other plain, speedy and adequate remedy is
authority to reorganize the offices under him in order to achieve
available to him in the ordinary course of law, petitioner has resorted to
simplicity, economy and efficiency. E.O. 292 sanctions the following
the instant petition for certiorari and prohibition upon the following
actions undertaken for such purpose:
grounds:
(1)Restructure the internal organization of the Office of the President
I. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE
Proper, including the immediate Offices, the Presidential Special
LEGISLATURE TO CREATE A PUBLIC OFFICE.
Assistants/Advisers System and the Common Staff Support System, by
II. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE abolishing, consolidating, or merging units thereof or transferring
LEGISLATURE TO APPROPRIATE FUNDS. functions from one unit to another;

III. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF (2)Transfer any function under the Office of the President to any other
CONGRESS TO DELEGATE QUASI-JUDICIAL POWERS TO Department or Agency as well as transfer functions to the Office of the
ADMINISTRATIVE AGENCIES. President from other Departments and Agencies; and

IV. E.O. 13 IS UNCONSTITUTIONAL FOR ENCROACHING UPON THE (3)Transfer any agency under the Office of the President to any other
POWERS OF THE OMBUDSMAN. Department or Agency as well as transfer agencies to the Office of the
President from other departments or agencies.4
V. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE GUARANTEE OF
DUE PROCESS. In the case of Buklod ng Kawaning EIIB v. Zamora 5 the Court affirmed
that the President's authority to carry out a reorganization in any
VI. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE EQUAL branch or agency of the executive department is an express grant by
PROTECTION CLAUSE. the legislature by virtue of E.O. 292, thus:

Our Ruling But of course, the list of legal basis authorizing the President to
reorganize any department or agency in the executive branch does not
In assailing the constitutionality of E.O. 13, petitioner asseverates that have to end here. We must not lose sight of the very source of the
the President is not authorized under any existing law to create the power – that which constitutes an express grant of power. Under
Investigative and Adjudicatory Division, Office of the Deputy Executive Section 31, Book III of Executive Order No. 292 (otherwise known as
Secretary for Legal Affairs (IAD-ODESLA) and that by creating a new, the Administrative Code of 1987), "the President, subject to the policy
additional and distinct office tasked with quasi-judicial functions, the of the Executive Office and in order to achieve simplicity, economy and
President has not only usurped the powers of congress to create a efficiency, shall have the continuing authority to reorganize the
public office, appropriate funds and delegate quasi-judicial functions to administrative structure of the Office of the President." For this
administrative agencies but has also encroached upon the powers of purpose, he may transfer the functions of other Departments or
the Ombudsman. Petitioner avers that the unconstitutionality of E.O. 13 Agencies to the Office of the President. (Emphasis supplied)
And in Domingo v. Zamora,6 the Court gave the rationale behind the is crucial not only as it affects employees' tenurial security but also
President's continuing authority in this wise: insofar as it touches upon the validity of the reorganization, that is,
whether the executive actions undertaken fall within the limitations
The law grants the President this power in recognition of the recurring prescribed under E.O. 292. When the PAGC was created under E.O. 12,
need of every President to reorganize his office "to achieve simplicity, it was composed of a Chairman and two (2) Commissioners who held
economy and efficiency." The Office of the President is the nerve the ranks of Presidential Assistant II and I, respectively,9 and was placed
center of the Executive Branch. To remain effective and efficient, the directly "under the Office of the President." 10 On the other hand, the
Office of the President must be capable of being shaped and reshaped ODESLA, to which the functions of the PAGC have now been
by the President in the manner he deems fit to carry out his directives transferred, is an office within the Office of the President Proper.11 Since
and policies. After all, the Office of the President is the command post both of these offices belong to the Office of the President Proper, the
of the President. (Emphasis supplied) reorganization by way of abolishing the PAGC and transferring its
functions to the ODESLA is allowable under Section 31 (1) of E.O. 292.
Clearly, the abolition of the PAGC and the transfer of its functions to a
division specially created within the ODESLA is properly within the Petitioner, however, goes on to assert that the President went beyond
prerogative of the President under his continuing "delegated legislative the authority granted by E.O. 292 for him to reorganize the executive
authority to reorganize" his own office pursuant to E.O. 292. department since his issuance of E.O. 13 did not merely involve the
abolition of an office but the creation of one as well. He argues that
Generally, this authority to implement organizational changes is limited
nowhere in the legal definition laid down by the Court in several cases
to transferring either an office or a function from the Office of the
does a reorganization include the act of creating an office.
President to another Department or Agency, and the other way
around.7 The contention is misplaced.
Only Section 31(1) gives the President a virtual freehand in dealing with The Reorganization Did not Entail the Creation of a New, Separate and
the internal structure of the Office of the President Proper by allowing Distinct Office.
him to take actions as extreme as abolition, consolidation or merger of
units, apart from the less drastic move of transferring functions and The abolition of the PAGC did not require the creation of a new,
offices from one unit to another. Again, in Domingo v. Zamora 8 the additional and distinct office as the duties and functions that pertained
Court noted: to the defunct anti-graft body were simply transferred to the ODESLA,
which is an existing office within the Office of the President Proper. The
However, the President's power to reorganize the Office of the reorganization required no more than a mere alteration of the
President under Section 31 (2) and (3) of EO 292 should be administrative structure of the ODESLA through the establishment of a
distinguished from his power to reorganize the Office of the President third division – the Investigative and Adjudicatory Division – through
Proper. Under Section 31 (1) of EO 292, the President can reorganize which ODESLA could take on the additional functions it has been
the Office of the President Proper by abolishing, consolidating or tasked to discharge under E.O. 13. In Canonizado v. Aguirre,12 We ruled
merging units, or by transferring functions from one unit to another. In that –
contrast, under Section 31 (2) and (3) of EO 292, the President's power
to reorganize offices outside the Office of the President Proper but still Reorganization takes place when there is an alteration of the existing
within the Office of the structure of government offices or units therein, including the lines of
control, authority and responsibility between them. It involves a
President is limited to merely transferring functions or agencies from reduction of personnel, consolidation of offices, or abolition thereof by
the Office of the President to Departments or Agencies, and vice versa. reason of economy or redundancy of functions.
The distinction between the allowable organizational actions under The Reorganization was Pursued in Good Faith.
Section 31(1) on the one hand and Section 31 (2) and (3) on the other
A valid reorganization must not only be exercised through legitimate And to further enable the President to run the affairs of the executive
authority but must also be pursued in good faith. A reorganization is department, he is likewise given constitutional authority to augment
said to be carried out in good faith if it is done for purposes of economy any item in the General Appropriations Law using the savings in other
and efficiency.13 It appears in this case that the streamlining of items of the appropriation for his office.19 In fact, he is explicitly allowed
functions within the Office of the President Proper was pursued with by law to transfer any fund appropriated for the different departments,
such purposes in mind. bureaus, offices and agencies of the Executive Department which is
included in the General Appropriations Act, to any program, project or
In its Whereas clauses, E.O. 13 cites as bases for the reorganization the activity of any department, bureau or office included in the General
policy dictates of eradicating corruption in the government and Appropriations Act or approved after its enactment.20
promoting economy and efficiency in the bureaucracy. Indeed, the
economical effects of the reorganization is shown by the fact that while Thus, while there may be no specific amount earmarked for the IAD-
Congress had initially appropriated P22 Million for the PAGC's operation ODESLA from the total amount appropriated by Congress in the annual
in the 2010 annual budget,14 no separate or added funding of such a budget for the Office of the President, the necessary funds for the IAD-
considerable amount was ever required after the transfer of the PAGC ODESLA may be properly sourced from the President's own office
functions to the IAD-ODESLA. budget without committing any illegal appropriation. After all, there is
no usurpation of the legislature's power to appropriate funds when the
Apparently, the budgetary requirements that the IAD-ODESLA needed President simply allocates the existing funds previously appropriated
to discharge its functions and maintain its personnel would be sourced by Congress for his office.
from the following year's appropriation for the President's Offices under
the General Appropriations Act of 2011.15 Petitioner asseverates, The IAD-ODESLA is a fact-finding and recommendatory body not
however, that since Congress did not indicate the manner by which the vested with quasi-judicial powers.
appropriation for the Office of the President was to be distributed,
taking therefrom the operational funds of the IAD-ODESLA would Petitioner next avers that the IAD-ODESLA was illegally vested with
amount to an illegal appropriation by the President. The contention is judicial power which is reserved to the Judicial Department and, by way
without legal basis. of exception through an express grant by the legislature, to
administrative agencies. He points out that the name Investigative and
There is no usurpation of the legislative power to appropriate public Adjudicatory Division is proof itself that the IAD-ODESLA wields quasi-
funds. judicial power.

In the chief executive dwell the powers to run government. Placed The argument is tenuous. As the OSG aptly explained in its
upon him is the power to recommend the budget necessary for the Comment,21 while the term "adjudicatory" appears part of its
operation of the Government,16 which implies that he has the appellation, the IAD-ODESLA cannot try and resolve cases, its authority
necessary authority to evaluate and determine the structure that each being limited to the conduct of investigations, preparation of reports
government agency in the executive department would need to and submission of recommendations. E.O. 13 explicitly states that the
operate in the most economical and efficient manner. 17 Hence, the IAD-ODESLA shall "perform powers, functions and duties xxx, of
express recognition under Section 78 of R.A. 9970 or the General PAGC."22
Appropriations Act of 2010 of the President’s authority to "direct
changes in the organizational units or key positions in any department Under E.O. 12, the PAGC was given the authority to "investigate or hear
or agency." The aforecited provision, often and consistently included in administrative cases or complaints against all presidential appointees
the general appropriations laws, recognizes the extent of the in the government"23 and to "submit its report and recommendations
President’s power to reorganize the executive offices and agencies to the President."24 The IAD-ODESLA is a fact-finding and
under him, which is, "even to the extent of modifying and realigning recommendatory body to the President, not having the power to settle
appropriations for that purpose."18 controversies and adjudicate cases. As the Court ruled in Cariño v.
Commission on Human Rights,25 and later reiterated in Biraogo v. The (1)Investigate and prosecute on its own or on complaint by any person,
Philippine Truth Commission:26 any act or omission of any public officer or employee, office or agency,
when such act or omission appears to be illegal, unjust, improper or
Fact-finding is not adjudication and it cannot be likened to the judicial inefficient. It has primary jurisdiction over cases cognizable by the
function of a court of justice, or even a quasi-judicial agency or office. Sandiganbayan and, in the exercise of its primary jurisdiction, it may
The function of receiving evidence and ascertaining therefrom the facts take over, at any stage, from any investigatory agency of government,
of a controversy is not a judicial function. To be considered as such, the the investigation of such cases. (Emphasis supplied)
act of receiving evidence and arriving at factual conclusions in a
controversy must be accompanied by the authority of applying the law Since the case filed before the IAD-ODESLA is an administrative
to the factual conclusions to the end that the controversy may be disciplinary case for grave misconduct, petitioner may not invoke the
decided or determined authoritatively, finally and definitively, subject primary jurisdiction of the Ombudsman to prevent the IAD-ODESLA
to such appeals or modes of review as may be provided by law. from proceeding with its investigation. In any event, the Ombudsman's
authority to investigate both elective and appointive officials in the
The President's authority to issue E.O. 13 and constitute the IAD- government, extensive as it may be, is by no means exclusive. It is
ODESLA as his fact-finding investigator cannot be doubted. After all, as shared with other similarly authorized government agencies.28
Chief Executive, he is granted full control over the Executive
Department to ensure the enforcement of the laws. Section 17, Article While the Ombudsman's function goes into the determination of the
VII of the Constitution provides: existence of probable cause and the adjudication of the merits of a
criminal accusation, the investigative authority of the IAD- ODESLA is
Section 17. The President shall have control of all the executive limited to that of a fact-finding investigator whose determinations and
departments, bureaus and offices. He shall ensure that the laws be recommendations remain so until acted upon by the President. As
faithfully executed. such, it commits no usurpation of the Ombudsman's constitutional
duties.
The obligation to see to it that laws are faithfully executed necessitates
the corresponding power in the President to conduct investigations into Executive Order No. 13 Does Not Violate Petitioner's Right to Due
the conduct of officials and employees in the executive department.27 Process and the Equal Protection of the Laws.
The IAD-ODESLA does not encroach upon the powers and duties of the Petitioner goes on to assail E.O. 13 as violative of the equal protection
Ombudsman. clause pointing to the arbitrariness of limiting the IAD-ODESLA's
investigation only to presidential appointees occupying upper-level
Contrary to petitioner's contention, the IAD-ODESLA did not encroach
positions in the government. The equal protection of the laws is a
upon the Ombudsman's primary jurisdiction when it took cognizance of
guaranty against any form of undue favoritism or hostility from the
the complaint affidavit filed against him notwithstanding the earlier
government.29 It is embraced under the due process concept and
filing of criminal and administrative cases involving the same charges
simply requires that, in the application of the law, "all persons or things
and allegations before the Office of the Ombudsman. The primary
similarly situated should be treated alike, both as to rights conferred
jurisdiction of the Ombudsman to investigate and prosecute cases
and responsibilities imposed."30 The equal protection clause, however,
refers to criminal cases cognizable by the Sandiganbayan and not to
is not absolute but subject to reasonable classification so that
administrative cases. It is only in the exercise of its primary jurisdiction
aggrupations bearing substantial distinctions may be treated differently
that the Ombudsman may, at any time, take over the investigation
from each other. This we ruled in Farinas v. Executive
being conducted by another investigatory agency. Section 15 (1) of
Secretary,31 wherein we further stated that –
R.A. No. 6770 or the Ombudsman Act of 1989, empowers the
Ombudsman to – The equal protection of the law clause is against undue favor and
individual or class privilege, as well as hostile discrimination or the
oppression of inequality. It is not intended to prohibit legislation which
is limited either in the object to which it is directed or by territory within Considering that elected officials are put in office by their constituents
which it is to operate. It does not demand absolute equality among for a definite term, x x x complete deference is accorded to the will of
residents; it merely requires that all persons shall be treated alike, the electorate that they be served by such officials until the end of the
under like circumstances and conditions both as to privileges conferred term for which they were elected. In contrast, there is no such
and liabilities enforced. The equal protection clause is not infringed by expectation insofar as appointed officials are concerned. (Emphasis
legislation which applies only to those persons falling within a specified supplied)
class, if it applies alike to all persons within such class, and reasonable
grounds exist for making a distinction between those who fall within Also, contrary to petitioner's assertions, his right to due process was not
such class and those who do not. (Emphasis supplied) violated when the IAD-ODESLA took cognizance of the administrative
complaint against him since he was given sufficient opportunity to
Presidential appointees come under the direct disciplining authority of oppose the formal complaint filed by Secretary Purisima. In
the President. This proceeds from the well settled principle that, in the administrative proceedings, the filing of charges and giving reasonable
absence of a contrary law, the power to remove or to discipline is opportunity for the person so charged to answer the accusations
lodged in the same authority on which the power to appoint is against him constitute the minimum requirements of due
vested.32 Having the power to remove and/or discipline presidential process,35 which simply means having the opportunity to explain one’s
appointees, the President has the corollary authority to investigate side.36 Hence, as long as petitioner was given the opportunity to explain
such public officials and look into their conduct in office.33 Petitioner is a his side and present evidence, the requirements of due process are
presidential appointee occupying the high-level position of Chairman of satisfactorily complied with because what the law abhors is an absolute
the LWUA. Necessarily, he comes under the disciplinary jurisdiction of lack of opportunity to be heard.37 The records show that petitioner was
the President, who is well within his right to order an investigation into issued an Order requiring him to submit his written explanation under
matters that require his informed decision. oath with respect to the charge of grave misconduct filed against him.
His own failure to submit his explanation despite notice defeats his
There are substantial distinctions that set apart presidential appointees subsequent claim of denial of due process.
occupying upper-level positions in government from non-presidential
appointees and those that occupy the lower positions in government. Finally, petitioner doubts that the IAD-ODESLA can lawfully perform its
In Salumbides v. Office of the Ombudsman,34 we had ruled extensively duties as an impartial tribunal, contending that both the IAD-ODESLA
on the substantial distinctions that exist between elective and and respondent Secretary Purisima are connected to the President. The
appointive public officials, thus: mere suspicion of partiality will not suffice to invalidate the actions of
the IAD-ODESLA. Mere allegation is not equivalent to proof. Bias and
Substantial distinctions clearly exist between elective officials and partiality
appointive officials. The former occupy their office by virtue of the
mandate of the electorate. They are elected to an office for a definite cannot be presumed.38 Petitioner must present substantial proof to
term and may be removed therefrom only upon stringent conditions. show that the lAD-ODES LA had unjustifiably sided against him in the
On the other hand, appointive officials hold their office by virtue of their conduct of the investigation. No such evidence has been presented as
designation thereto by an appointing authority. Some appointive to defeat the presumption of regularity m the performance of the fact-
officials hold their office in a permanent capacity and are entitled to finding investigator's duties. The assertion, therefore, deserves scant
security of tenure while others serve at the pleasure of the appointing consideration.
authority.

xxxx

An election is the embodiment of the popular will, perhaps the purest

expression of the sovereign power of the people.1âwphi1 It involves
the choice or selection of candidates to public office by popular vote.
Every law has in its favor the presumption of constitutionality, and to
justify its nullification, there must be a clear and unequivocal breach of
the Constitution, not a doubtful and argumentative one.39 Petitioner has
failed to discharge the burden of proving the illegality of E.O. 13, which
IS indubitably a valid exercise of the President's continuing authority to
reorganize the Office of the President.

WHEREFORE, premises considered, the petition IS hereby DISMISSED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate justice
 G.R. No. 151908 August 12, 2003 upon request of the customer at no additional charge except the
presentation of a valid prepaid call card.
SMART COMMUNICATIONS, INC. (SMART) and PILIPINO
TELEPHONE CORPORATION (PILTEL), petitioners, (4) Subscribers shall be updated of the remaining value of their cards
vs. before the start of every call using the cards.
NATIONAL TELECOMMUNICATIONS COMMISSION
(NTC), respondent. (5) The unit of billing for the cellular mobile telephone service whether
postpaid or prepaid shall be reduced from 1 minute per pulse to 6
x---------------------------------------------------------x seconds per pulse. The authorized rates per minute shall thus be
divided by 10.1
G.R. No. 152063 August 12, 2003
The Memorandum Circular provided that it shall take effect 15 days
GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS after its publication in a newspaper of general circulation and three
CO., INC. (ISLACOM), petitioners, certified true copies thereof furnished the UP Law Center. It was
vs. published in the newspaper, The Philippine Star, on June 22,
COURT OF APPEALS (The Former 6th Division) and the 2000.2 Meanwhile, the provisions of the Memorandum Circular
NATIONAL TELECOMMUNICATIONS COMMISSION, respondents. pertaining to the sale and use of prepaid cards and the unit of billing for
cellular mobile telephone service took effect 90 days from the
YNARES-SANTIAGO, J.:
effectivity of the Memorandum Circular.
Pursuant to its rule-making and regulatory powers, the National
On August 30, 2000, the NTC issued a Memorandum to all cellular
Telecommunications Commission (NTC) issued on June 16, 2000
mobile telephone service (CMTS) operators which contained measures
Memorandum Circular No. 13-6-2000, promulgating rules and
to minimize if not totally eliminate the incidence of stealing of cellular
regulations on the billing of telecommunications services. Among its
phone units. The Memorandum directed CMTS operators to:
pertinent provisions are the following:
a. strictly comply with Section B(1) of MC 13-6-2000 requiring the
(1) The billing statements shall be received by the subscriber of the
presentation and verification of the identity and addresses of prepaid
telephone service not later than 30 days from the end of each billing
SIM card customers;
cycle. In case the statement is received beyond this period, the
subscriber shall have a specified grace period within which to pay the b. require all your respective prepaid SIM cards dealers to comply with
bill and the public telecommunications entity (PTEs) shall not be Section B(1) of MC 13-6-2000;
allowed to disconnect the service within the grace period.
c. deny acceptance to your respective networks prepaid and/or
(2) There shall be no charge for calls that are diverted to a voice postpaid customers using stolen cellphone units or cellphone units
mailbox, voice prompt, recorded message or similar facility excluding registered to somebody other than the applicant when properly
the customer's own equipment. informed of all information relative to the stolen cellphone units;
(3) PTEs shall verify the identification and address of each purchaser of d. share all necessary information of stolen cellphone units to all other
prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at CMTS operators in order to prevent the use of stolen cellphone units;
least 2 years from the date of first use. Holders of prepaid SIM cards and
shall be given 45 days from the date the prepaid SIM card is fully
consumed but not beyond 2 years and 45 days from date of first use to e. require all your existing prepaid SIM card customers to register and
replenish the SIM card, otherwise the SIM card shall be rendered present valid identification cards.3
invalid. The validity of an invalid SIM card, however, shall be installed
This was followed by another Memorandum dated October 6, 2000 On October 27, 2000, the trial court issued a temporary restraining
addressed to all public telecommunications entities, which reads: order enjoining the NTC from implementing Memorandum Circular No.
13-6-2000 and the Memorandum dated October 6, 2000.7
This is to remind you that the validity of all prepaid cards sold on 07
October 2000 and beyond shall be valid for at least two (2) years from In the meantime, respondent NTC and its co-defendants filed a motion
date of first use pursuant to MC 13-6-2000. to dismiss the case on the ground of petitioners' failure to exhaust
administrative remedies.
In addition, all CMTS operators are reminded that all SIM packs used by
subscribers of prepaid cards sold on 07 October 2000 and beyond shall Subsequently, after hearing petitioners' application for preliminary
be valid for at least two (2) years from date of first use. Also, the billing injunction as well as respondent's motion to dismiss, the trial court
unit shall be on a six (6) seconds pulse effective 07 October 2000. issued on November 20, 2000 an Order, the dispositive portion of
which reads:
For strict compliance.4
WHEREFORE, premises considered, the defendants' motion to dismiss
On October 20, 2000, petitioners Isla Communications Co., Inc. and is hereby denied for lack of merit. The plaintiffs' application for the
Pilipino Telephone Corporation filed against the National issuance of a writ of preliminary injunction is hereby granted.
Telecommunications Commission, Commissioner Joseph A. Santiago, Accordingly, the defendants are hereby enjoined from implementing
Deputy Commissioner Aurelio M. Umali and Deputy Commissioner NTC Memorandum Circular 13-6-2000 and the NTC Memorandum,
Nestor C. Dacanay, an action for declaration of nullity of NTC dated October 6, 2000, pending the issuance and finality of the
Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC decision in this case. The plaintiffs and intervenors are, however,
Memorandum dated October 6, 2000, with prayer for the issuance of a required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS
writ of preliminary injunction and temporary restraining order. The (P500,000.00), Philippine currency.
complaint was docketed as Civil Case No. Q-00-42221 at the Regional
Trial Court of Quezon City, Branch 77.5 SO ORDERED.8

Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no Defendants filed a motion for reconsideration, which was denied in an
jurisdiction to regulate the sale of consumer goods such as the prepaid Order dated February 1, 2001.9
call cards since such jurisdiction belongs to the Department of Trade
and Industry under the Consumer Act of the Philippines; that the Billing Respondent NTC thus filed a special civil action for certiorari and
Circular is oppressive, confiscatory and violative of the constitutional prohibition with the Court of Appeals, which was docketed as CA-G.R.
prohibition against deprivation of property without due process of law; SP. No. 64274. On October 9, 2001, a decision was rendered, the
that the Circular will result in the impairment of the viability of the decretal portion of which reads:
prepaid cellular service by unduly prolonging the validity and expiration
WHEREFORE, premises considered, the instant petition for certiorari
of the prepaid SIM and call cards; and that the requirements of
and prohibition is GRANTED, in that, the order of the court a
identification of prepaid card buyers and call balance announcement
quo denying the petitioner's motion to dismiss as well as the order of
are unreasonable. Hence, they prayed that the Billing Circular be
the court a quo granting the private respondents' prayer for a writ of
declared null and void ab initio.
preliminary injunction, and the writ of preliminary injunction issued
Soon thereafter, petitioners Globe Telecom, Inc and Smart thereby, are hereby ANNULLED and SET ASIDE. The private
Communications, Inc. filed a joint Motion for Leave to Intervene and to respondents' complaint and complaint-in-intervention below are
Admit Complaint-in-Intervention.6 This was granted by the trial court. hereby DISMISSED, without prejudice to the referral of the private
respondents' grievances and disputes on the assailed issuances of the
NTC with the said agency.

SO ORDERED.10
Petitioners' motions for reconsideration were denied in a Resolution 3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED
dated January 10, 2002 for lack of merit.11 BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE
REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS
Hence, the instant petition for review filed by Smart and Piltel, which COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND
was docketed as G.R. No. 151908, anchored on the following grounds: THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE
INJURY.
A.
4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING
BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE
THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND
REMEDIES AVAILABLE TO THEM.
NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE.
5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN
B.
ISSUING ITS QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE
THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.13
HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN
The two petitions were consolidated in a Resolution dated February 17,
AVAILABLE ADMINISTRATIVE REMEDY.
2003.14
C.
On March 24, 2003, the petitions were given due course and the
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT parties were required to submit their respective memoranda.15
THE BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS
We find merit in the petitions.
UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY.
Administrative agencies possess quasi-legislative or rule-making
D.
powers and quasi-judicial or administrative adjudicatory powers. Quasi-
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE legislative or rule-making power is the power to make rules and
PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE regulations which results in delegated legislation that is within the
RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY confines of the granting statute and the doctrine of non-delegability
INJUNCTION.12 and separability of powers.16

Likewise, Globe and Islacom filed a petition for review, docketed as G.R. The rules and regulations that administrative agencies promulgate,
No. 152063, assigning the following errors: which are the product of a delegated legislative power to create new
and additional legal provisions that have the effect of law, should be
1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED within the scope of the statutory authority granted by the legislature to
BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND the administrative agency. It is required that the regulation be
EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE germane to the objects and purposes of the law, and be not in
THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL contradiction to, but in conformity with, the standards prescribed by
INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE law.17 They must conform to and be consistent with the provisions of
REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS the enabling statute in order for such rule or regulation to be valid.
RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW. Constitutional and statutory provisions control with respect to what
rules and regulations may be promulgated by an administrative body,
2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED
as well as with respect to what fields are subject to regulation by it. It
BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE
may not make rules and regulations which are inconsistent with the
REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE
provisions of the Constitution or a statute, particularly the statute it is
PURELY LEGAL QUESTIONS.
administering or which created it, or which are in derogation of, or respective position papers setting forth their objections and submitting
defeat, the purpose of a statute. In case of conflict between a statute proposed schemes for the billing circular.21 After the same was issued,
and an administrative order, the former must prevail.18 petitioners wrote successive letters dated July 3, 200022 and July 5,
2000,23 asking for the suspension and reconsideration of the so-called
Not to be confused with the quasi-legislative or rule-making power of Billing Circular. These letters were not acted upon until October 6,
an administrative agency is its quasi-judicial or administrative 2000, when respondent NTC issued the second assailed Memorandum
adjudicatory power. This is the power to hear and determine questions implementing certain provisions of the Billing Circular. This was taken
of fact to which the legislative policy is to apply and to decide in by petitioners as a clear denial of the requests contained in their
accordance with the standards laid down by the law itself in enforcing previous letters, thus prompting them to seek judicial relief.
and administering the same law. The administrative body exercises its
quasi-judicial power when it performs in a judicial manner an act which In like manner, the doctrine of primary jurisdiction applies only where
is essentially of an executive or administrative nature, where the power the administrative agency exercises its quasi-judicial or adjudicatory
to act in such manner is incidental to or reasonably necessary for the function. Thus, in cases involving specialized disputes, the practice has
performance of the executive or administrative duty entrusted to it. In been to refer the same to an administrative agency of special
carrying out their quasi-judicial functions, the administrative officers or competence pursuant to the doctrine of primary jurisdiction. The courts
bodies are required to investigate facts or ascertain the existence of will not determine a controversy involving a question which is within
facts, hold hearings, weigh evidence, and draw conclusions from them the jurisdiction of the administrative tribunal prior to the resolution of
as basis for their official action and exercise of discretion in a judicial that question by the administrative tribunal, where the question
nature.19 demands the exercise of sound administrative discretion requiring the
special knowledge, experience and services of the administrative
In questioning the validity or constitutionality of a rule or regulation tribunal to determine technical and intricate matters of fact, and a
issued by an administrative agency, a party need not exhaust uniformity of ruling is essential to comply with the premises of the
administrative remedies before going to court. This principle applies regulatory statute administered. The objective of the doctrine of
only where the act of the administrative agency concerned was primary jurisdiction is to guide a court in determining whether it should
performed pursuant to its quasi-judicial function, and not when the refrain from exercising its jurisdiction until after an administrative
assailed act pertained to its rule-making or quasi-legislative power. agency has determined some question or some aspect of some
In Association of Philippine Coconut Dessicators v. Philippine Coconut question arising in the proceeding before the court. It applies where the
Authority,20 it was held: claim is originally cognizable in the courts and comes into play
whenever enforcement of the claim requires the resolution of issues
The rule of requiring exhaustion of administrative remedies before a
which, under a regulatory scheme, has been placed within the special
party may seek judicial review, so strenuously urged by the Solicitor
competence of an administrative body; in such case, the judicial
General on behalf of respondent, has obviously no application here.
process is suspended pending referral of such issues to the
The resolution in question was issued by the PCA in the exercise of its
administrative body for its view.24
rule- making or legislative power. However, only judicial review of
decisions of administrative agencies made in the exercise of their However, where what is assailed is the validity or constitutionality of a
quasi-judicial function is subject to the exhaustion doctrine. rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have
Even assuming arguendo that the principle of exhaustion of
jurisdiction to pass upon the same. The determination of whether a
administrative remedies apply in this case, the records reveal that
specific rule or set of rules issued by an administrative agency
petitioners sufficiently complied with this requirement. Even during the
contravenes the law or the constitution is within the jurisdiction of the
drafting and deliberation stages leading to the issuance of
regular courts. Indeed, the Constitution vests the power of judicial
Memorandum Circular No. 13-6-2000, petitioners were able to register
review or the power to declare a law, treaty, international or executive
their protests to the proposed billing guidelines. They submitted their
agreement, presidential decree, order, instruction, ordinance, or
regulation in the courts, including the regional trial courts. 25 This is within the knowledge of a good percentage of our population – and
within the scope of judicial power, which includes the authority of the expertise in fundamental principles of civil law and the Constitution.
courts to determine in an appropriate action the validity of the acts of
the political departments.26 Judicial power includes the duty of the Hence, the Regional Trial Court has jurisdiction to hear and decide Civil
courts of justice to settle actual controversies involving rights which are Case No. Q-00-42221. The Court of Appeals erred in setting aside the
legally demandable and enforceable, and to determine whether or not orders of the trial court and in dismissing the case.
there has been a grave abuse of discretion amounting to lack or excess
WHEREFORE, in view of the foregoing, the consolidated petitions are
of jurisdiction on the part of any branch or instrumentality of the
GRANTED. The decision of the Court of Appeals in CA-G.R. SP No.
Government.27
64274 dated October 9, 2001 and its Resolution dated January 10,
In the case at bar, the issuance by the NTC of Memorandum Circular 2002 are REVERSED and SET ASIDE. The Order dated November 20,
No. 13-6-2000 and its Memorandum dated October 6, 2000 was 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case
pursuant to its quasi-legislative or rule-making power. As such, No. Q-00-42221 is REINSTATED. This case is REMANDED to the court a
petitioners were justified in invoking the judicial power of the Regional quo for continuation of the proceedings.
Trial Court to assail the constitutionality and validity of the said
SO ORDERED.
issuances. In Drilon v. Lim,28 it was held:

We stress at the outset that the lower court had jurisdiction to consider
the constitutionality of Section 187, this authority being embraced in
the general definition of the judicial power to determine what are the
valid and binding laws by the criterion of their conformity to the
fundamental law. Specifically, B.P. 129 vests in the regional trial courts
jurisdiction over all civil cases in which the subject of the litigation is
incapable of pecuniary estimation, even as the accused in a criminal
action has the right to question in his defense the constitutionality of a
law he is charged with violating and of the proceedings taken against
him, particularly as they contravene the Bill of Rights. Moreover, Article
X, Section 5(2), of the Constitution vests in the Supreme Court
appellate jurisdiction over final judgments and orders of lower courts in
all cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in
question.29

In their complaint before the Regional Trial Court, petitioners averred

that the Circular contravened Civil Code provisions on sales and
violated the constitutional prohibition against the deprivation of
property without due process of law. These are within the competence
of the trial judge. Contrary to the finding of the Court of Appeals, the
issues raised in the complaint do not entail highly technical matters.
Rather, what is required of the judge who will resolve this issue is a
basic familiarity with the workings of the cellular telephone service,
including prepaid SIM and call cards – and this is judicially known to be
 G.R. No. 135992 July 23, 2004 thereby promoting universal access to basic telecommunications
service.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and
TELECOMMUNICATIONS TECHNOLOGIES, INC., petitioners, The NTC promulgated Memorandum Circular No. 11-9-93 on
vs. September 17, 1993 implementing the objectives of E.O. No.
INTERNATIONAL COMMUNICATION CORPORATION, respondent. 109.3 Section 3 of the Circular mandates existing IGF operators to file a
petition for the issuance of Certificate of Public Convenience and
Necessity (CPCN) to install, operate and maintain local exchange
DECISION carrier services within two years from effectivity thereof. Section 4
further requires IGF operators to provide a minimum of 300 local
exchange lines per one international switch termination and a
AUSTRIA-MARTINEZ, J.:
minimum of 300,000 local exchange lines within three years from
The role of the telecommunications industry in Philippine progress and grant of authority.
development cannot be understated. Time was when the industry was
To cap the government's efforts, Republic Act No. 7925, otherwise
dominated by a few -- an oligarchy of sorts where the elite made the
known as the Public Telecommunications Policy Act of the Philippines,
decisions and serfdom had no choice but acquiesce. Sensing the need
was enacted on March 23, 1995. With regard to local exchange
to abrogate their dominion, the government formulated policies in
service, Section 10 thereof mandates an international carrier to comply
order to create an environment conducive to the entry of new players.
with its obligation to provide local exchange service in unserved or
Thus, in October 1990, the National Telecommunications
underserved areas within three years from the grant of authority as
Development Plan 1991-2010 (NTDP) was formulated and came into
required by existing regulations. On September 25, 1995, the NTC
being. Designed by the Department of Transportation and
issued the Implementing Rules and Regulations for R.A. No. 7925 per
Communications (DOTC), the NTDP provides for the framework of
its NTC MC No. 8-9-95.
government policies, objectives and strategies that will guide the
industry's development for the next 20 years. As expected, with it Taking advantage of the opportunities brought about by the passage of
came the increase in the demand for telecommunications services, these laws, several IGF operators applied for CPCN to install, operate
especially in the area of local exchange carrier service (LECS).1 and maintain local exchange carrier services in certain areas.
Respondent International Communication Corporation, now known as
Concomitantly, the DOTC issued guidelines for the rationalization of
Bayan Telecommunications Corporation or Bayantel,4 applied for and
local exchange telecommunications service. In particular, the DOTC
was given by the NTC a Provisional Authority (PA)5 on March 3, 1995, to
issued on September 30, 1991, Department Circular No. 91-260, with
install, operate and provide local exchange service in Quezon City,
the purpose of minimizing or eliminating situations wherein multiple
Malabon and Valenzuela, Metro Manila, and the entire Bicol region.
operators provide local exchange service in a given area. Pursuant
Meanwhile, petitioner Telecommunications Technologies Philippines,
thereto, the National Telecommunications Commission (NTC) was
Inc. (TTPI), as an affiliate of petitioner Eastern Telecommunications
tasked to define the boundaries of local exchange areas and authorize
Philippines, Inc. (ETPI), was granted by the NTC a PA on September 25,
only one franchised local exchange carrier to provide local exchange
1996, to install, operate and maintain a local exchange service in the
service within such areas.
Provinces of Batanes, Cagayan Valley, Isabela, Kalinga-Apayao, Nueva
Thereafter, on July 12, 1993, then President Fidel V. Ramos issued Vizcaya, Ifugao, Quirino, the cities of Manila and Caloocan, and the
Executive Order No. 109 entitled Local Exchange Carrier Service. Municipality of Navotas, Metro Manila.
Section 2 thereof provides that all existing International Gateway
It appears, however, that before TTPI was able to fully accomplish its
Facility (IGF) operators2 are required to provide local exchange carrier
rollout obligation, ICC applied for and was given a PA by the NTC on
services in unserved and underserved areas, including Metro Manila,
November 10, 1997, to install, operate and maintain a local exchange
service in Manila and Navotas,6 two areas which were already covered (2) ICC did not make any showing that an existing operator, TTPI
by TTPI under its PA dated September 25, 1996. in this case, failed to comply with the service performance and
technical standards prescribed by the NTC, and that the area is
Aggrieved, petitioners filed a petition for review with the Court of underserved, as required under Section 23 of MC No. 11-9-93;
Appeals with application for a temporary restraining order and a writ of
preliminary injunction, docketed as CA-G.R. SP No. 46047, arguing that (3) The facts and figures cited by the NTC, i.e., ICC's alleged
the NTC committed grave abuse of discretion in granting a provisional remarkable performance in fulfilling its rollout obligation and the
authority to respondent ICC to operate in areas already assigned to growth rate in the installation of telephone lines in Manila and Navotas,
TTPI. do not justify the grant of the PA in favor of ICC, nor are they supported
by the evidence on record as these were not presented during the
On April 30, 1998, the Court of Appeals dismissed 7 the petition for proceedings before the NTC;
review on the ground that the NTC did not commit any grave abuse of
discretion in granting the PA to TTPI. It sustained the NTC's finding (4) ICC did not comply with the requirement of "prior
that ICC is "legally and financially competent and its network plan consultation" with the NTC before it filed its application, in violation of
technically feasible." The Court of Appeals also ruled that there was no Sections 3 and 3.1 of MC 11-9-93;
violation of the equal protection clause because the PA granted to ICC
and TTPI were given under different situations and there is no point of (5) ICC did not comply with Section 27 of MC 11-9-93 requiring
comparison between the two.8 that an escrow deposit be made equivalent to 20% and a performance
bond equivalent to 10% of the investment required for the first two
Hence, the present petition for review on certiorari, raising the years of the project;
following issues:
(6) ICC is not financially and technically capable of undertaking
I the project;

Whether or not the Honorable Court of Appeals committed a serious (7) The grant of a PA in favor of ICC to operate in areas covered
error of law in upholding the Order of the NTC granting a PA to by TTPI will render it difficult for the latter to cross-subsidize its
Respondent to operate LEC services in Manila and Navotas which are operations in less profitable areas covered by it and will threaten its
areas already assigned to petitioner TTPI under a prior and subsisting viability to continue as a local exchange operator.10
PA.
After a review of the records of this case, the Court finds no grave
II abuse of discretion committed by the Court of Appeals in sustaining the
NTC's grant of provisional authority to ICC.
Whether or not Petitioner is entitled to a Writ of Preliminary Injunction
to restrain Respondent from installing LEC services in the areas The power of the NTC to grant a provisional authority has long been
granted to it by the Order under review.9 settled. As the regulatory agency of the national government with
jurisdiction over all telecommunications entities, it is clothed with
In support thereof, petitioners posit the following arguments: authority and given ample discretion to grant a provisional permit or
authority.11 It also has the authority to issue Certificates of Public
(1) The assignment to ICC of areas already allocated to TTPI
Convenience and Necessity (CPCN) for the installation, operation, and
violates the Service Area Scheme (SAS), which is the guidepost of the
maintenance of communications facilities and services, radio
laws and issuances governing local exchange service;
communications systems, telephone and telegraph systems, including
the authority to determine the areas of operations of applicants for
telecommunications services.12 In this regard, the NTC is clothed with
sufficient discretion to act on matters solely within its competence.13
In granting ICC the PA to operate a local exchange carrier service in the to meet the targets of Government through the National
Manila and Navotas areas, the NTC took into consideration ICC's Telecommunications Development Plan (NTDP) of the Department of
financial and technical resources and found them to be adequate. The Transportation and Communications (DOTC), specifically: (1) to ensure
NTC also noted ICC's performance in complying with its rollout the orderly development of the telecommunications sector through the
obligations under the previous PA granted to it, thus: provision of service to all areas of the country; (2) to satisfy the
unserviced demand for telephones; and (3) to provide healthy
With the proven track record of herein applicant as one of the competition among authorized service providers." Likewise, one of the
pacesetters in carrying out its landlines commitment in its assigned national policies and objectives of R.A. No. 7925 is to foster the
areas, applicant can best respond to public demand for faster improvement and expansion of telecommunications services in the
installation of telephone lines in Manila and Navotas. country through a healthy competitive environment, in which
telecommunications carriers are free to make business decisions and
The grant of this application is, therefore, a fitting recognition that
to interact with one another in providing telecommunications services,
should be accorded to any deserving applicant, such as herein
with the end in view of encouraging their financial viability while
applicant ICC whose remarkable performance in terms of public service
maintaining affordable rates.17
as mandated by Executive Order 109 and Republic Act No. 7925 has
persuaded this Commission to affix the stamp of its approval.14 Recently, in Pilipino Telephone Corporation vs. NTC,18 the Court
had occasion to rule on a case akin to the present dispute, involving
The Court will not interfere with these findings of the NTC, as these are
the same respondent ICC, and the Pilipino Telephone Corporation
matters that are addressed to its sound discretion, being the
(Piltel). In the Piltel case, ICC applied for a provisional authority to
government agency entrusted with the regulation of activities coming
operate a local exchange service in areas already covered by Piltel,
under its special and technical forte.15 Moreover, the exercise of
which includes Misamis Occidental, Zamboanga del Sur, Davao del Sur,
administrative discretion is a policy decision and a matter that can best
South Cotabato and Saranggani. Piltel opposed ICC's application but
be discharged by the government agency concerned, and not by the
the NTC denied it, and granted ICC's application. The Court of Appeals
courts.16
dismissed Piltel's petition for review, and on certiorari before this Court,
Petitioner insists compliance with the service area scheme (SAS) we affirmed the dismissal. The Court found that the NTC did not
mandated by DOTC Dept. Circular No. 91-260, to wit: commit any grave abuse of discretion when it granted the ICC a
provisional authority to operate in areas covered by Piltel. We held:
1. The National Telecommunications Commission (NTC) shall
define the boundaries of local exchange areas, and shall henceforth We will not disturb the factual findings of the NTC on the technical and
authorize only one franchised Local Exchange Carrier (LEC) to provide financial capability of the ICC to undertake the proposed project. We
LEC service within such areas. generally accord great weight and even finality to factual findings of
administrative bodies such as the NTC, if substantial evidence supports
The Court is not persuaded. Said department circular was issued by the findings as in this case. The exception to this rule is when the
the DOTC in 1991, before the advent of E.O. No. 109 and R.A. No. administrative agency arbitrarily disregarded evidence before it or
7925. When E.O. No. 109 was promulgated in 1993, and R.A. No. 7925 misapprehended evidence to such an extent as to compel a contrary
enacted in 1995, the service area scheme was noticeably omitted conclusion had it properly appreciated the evidence. PILTEL gravely
therefrom. Instead, E.O. No. 109 and R.A. No. 7925 adopted a policy of failed to show that this exception applies to the instant case.
healthy competition among the local exchange carrier service Moreover, the exercise of administrative discretion, such as the
providers. issuance of a PA, is a policy decision and a matter that the NTC can
best discharge, not the courts.
The need to formulate new policies is dictated by evolving goals and
demands in telecommunications services. Thus, E.O. No. 109
acknowledges that there is a "need to promulgate new policy directives
PILTEL contends that the NTC violated Section 23 of NTC Memorandum Obviously, "the need for a healthy competitive environment in
Circular No. 11-9-93, otherwise known as the "Implementing Guidelines telecommunications is sufficient impetus for the NTC to consider all
on the Provisions of EO 109" which states: those applicants, who are willing to offer competition, develop the
market and provide the environment necessary for greater public
Section 23. No other company or entity shall be authorized to provide service."
local exchange service in areas where the LECs comply with the
relevant provisions of MTC MC No. 10-17-90 and NTC MC No. 10-16-90 Furthermore, "free competition in the industry may also provide the
and that the local exchange service area is not underserved. answer to a much-desired improvement in the quality and delivery of
(Emphasis supplied) this type of public utility, to improved technology, fast and handy
mobil[e] service, and reduced user dissatisfaction."
Section 23 of EO 109 does not categorically state that the issuance of a
PA is exclusive to any telecommunications company. Neither PILTEL's contention that the NTC Order amounts to a confiscation of
Congress nor the NTC can grant an exclusive "franchise, certificate, or property without due process of law is untenable. "Confiscation"
any other form of authorization" to operate a public utility. means the seizure of private property by the government without
In Republic v. Express Telecommunications Co., the Court held compensation to the owner. A franchise to operate a public utility is
that "the Constitution is quite emphatic that the operation of a public not an exclusive private property of the franchisee. Under the
utility shall not be exclusive." Section 11, Article XII of the Constitution Constitution, no franchisee can demand or acquire exclusivity in the
provides: operation of a public utility. Thus, a franchisee of a public utility cannot
complain of seizure or taking of property because of the issuance of
Sec. 11. No franchise, certificate, or any other form of authorization for another franchise to a competitor. Every franchise, certificate or
the operation of a public utility shall be granted except to citizens of the authority to operate a public utility is, by constitutional mandate, non-
Philippines or to corporations or associations organized under the laws exclusive. PILTEL cannot complain of a taking of an exclusive right that
of the Philippines at least sixty per centum of whose capital is owned it does not own and which no franchisee can ever own.
by such citizens, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than Likewise, PILTEL's argument that the NTC Order violates PILTEL's rights
fifty years. Neither shall any such franchise or right be granted except as a prior operator has no merit. The Court resolved a similar question
under the condition that it shall be subject to amendment, alteration, or in Republic v. Republic Telephone Company, Inc. In striking
repeal by the Congress when the common good so requires. xxx down Retelco's claim that it had a right to be protected in its
(Emphasis supplied) investment as a franchise-holder and prior operator of a telephone
service in Malolos, Bulacan, the Court held:
Thus, in Radio Communications of the Philippines, Inc. v.
National Telecommunications Commission, the Court ruled that RETELCO's foremost argument is that "such operations and
the "Constitution mandates that a franchise cannot be exclusive in maintenance of the telephone system and solicitation of subscribers by
nature." [petitioners] constituted an unfair and ruinous competition to the
detriment of [RETELCO which] is a grantee of both municipal and
... legislative franchises for the purpose." In effect, RETELCO pleads for
protection from the courts on the assumption that its franchises vested
Among the declared national policies in Republic Act No. 7925,
in it an exclusive right as prior operator. There is no clear showing by
otherwise known as the "Public Telecommunications Policy Act of the
RETELCO, however, that its franchises are of an exclusive character.
Philippines," is the healthy competition among telecommunications
xxx At any rate, it may very well be pointed out as well that neither
carriers, to wit:
did the franchise of PLDT at the time of the controversy confer
… exclusive rights upon PLDT in the operation of a telephone system. In
fact, we have made it a matter of judicial notice that all legislative
franchises for the operation of a telephone system contain the ICC's viability to render local exchange service in the Manila and
following provision: Navotas areas, and its impact on the telecommunications industry.

"It is expressly provided that in the even_t the Philippine Government It is also true that NTC MC No. 8-9-95 allows a duly enfranchised entity
should desire to maintain and operate for itself the system and to maintain a local exchange network if it is shown that an existing
enterprise herein authorized, the grantee shall surrender his franchise authorized local exchange operator fails to satisfy the demand for local
and will turn over to the Government said system and all serviceable exchange service.22 In this case, the NTC noted the increasing rate in
equipment therein, at cost, less reasonable depreciation."19 the demand for local lines within the Manila and Navotas areas, and in
order for these areas to catch up with its neighboring cities, installation
Similarly in this case, the grant of a PA to ICC to operate in areas of lines must be sped up.23 This, in fact, is tantamount to a finding that
covered by TTPI is not tainted with any grave abuse of discretion as it the existing local exchange operator failed to meet the growing
was issued by the NTC after taking into account ICC's technical and demand for local lines.
financial capabilities, and in keeping with the policy of healthy
competition fostered by E.O. No. 109 and R.A. No. 7925. ICC's technical and financial capabilities, as well as the growth rate in
the number of lines in particular areas, are matters within NTC's
In addition, Section 6 of R.A. No. 7925 specifically limits the DOTC from competence and should be accorded respect. The NTC is given wide
exercising any power that will tend to influence or effect a review or a latitude in the evaluation of evidence and in the exercise of its
modification of the NTC's quasi-judicial functions, to wit: adjudicative functions, and this includes the authority to take judicial
notice of facts within its special competence.24
Section 6. Responsibilities of and Limitations to Department Powers. --
The Department of Transportation and Communications (Department) TTPI anticipates that allowing ICC to enter its service areas will make it
shall not exercise any power which will tend to influence or effect a difficult for it to cross-subsidize its operations in the less profitable
review or a modification of the Commission's quasi-judicial function. areas. Such argument, however, is futile. The cross-subsidy approach
is apparently the government's response to the foreseen situation
…
wherein given its policy of universal access, a local exchange provider
The power of the NTC in granting or denying a provisional authority to will find itself operating in areas where the demand and the public's
operate a local exchange carrier service is a quasi-judicial function, 20 a capacity to subscribe will be lesser than in other areas, making these
sphere in which the DOTC cannot intrude upon. If at all, the service areas more of a liability than an asset. Thus, Section 4 of E.O. No. 109
area scheme provided in DOTC Dept. Circular No. 91-260 is only one of provides:
the factors, but should not in any way, tie down the NTC in its
SEC. 4. Cross-Subsidy. Until universal access to basic
determination of the propriety of a grant of a provisional authority to a
telecommunications is achieved, and such service is priced to reflect
qualified applicant for local exchange service.
actual costs, local exchange service shall continue to be cross-
True, NTC MC No. 11-9-93 requires prior consultation with the NTC of subsidized by other telecommunications services within the same
the proposed service areas. As petitioners themselves argue, prior company.
consultation allows the NTC to assess the impact of the proposed
Meanwhile, NTC MC No. 8-9-95 provides:
application on the viability of the local exchange operator in the area
desired by the would-be applicant and on the viability of the entire ACCESS CHARGES
telecommunications industry as well as rationalize the plans to
minimize any adverse impact.21 In this case, prior consultation was GENERAL
substantially complied with and its purpose accomplished, when ICC
filed its application and the NTC was given the opportunity to assess (a) Until the local exchange service is priced reflecting actual
costs, the local exchange service shall be cross-subsidized by other
telecommunications services.
… distinct from its projects in other areas; hence, the NTC should have
directed ICC to submit such requirements. Evidently, the escrow
(c) The subsidy need by the LE service operator to earn a rate of deposit is required to ensure that there is available money on hand to
return at parity with other segments of telecommunications industry defray ICC's expenditures for its project, while the performance bond
shall be charged against the international and domestic toll and CMTS will answer for the faithful compliance and performance of ICC's rollout
interconnect services.25 obligation and to compensate the government for any damages
incurred in case of ICC's default. Without these, the government will
Both issuances allow a local exchange operator to cross-subsidize its
be left holding an "empty bag" in the event ICC reneges in its rollout
operations from its other telecommunications services, and not solely
obligation.
on the revenues derived from the operator's local exchange service.
Section 27 of NTC MC No. 11-9-93 is silent as to whether the posting of
Notably, R.A. No. 7617, as amended by R.A. No. 7674, grants TTPI the
an escrow deposit and performance bond is a condition sine qua
legislative franchise to install, operate and maintain
non for the grant of a provisional authority. While the provision uses
telecommunications systems throughout the Philippines but not limited
the term "shall," said directive pertains to the NTC, which shall require
to the operations of local exchange service or public switched network,
the public telecommunications carrier to make such deposit and
public-calling stations, inter-exchange carrier or national toll
posting. In any event, records show that as of May 20, 2004, ICC has
transmission, value-added or enhanced services intelligent networks,
been granted an extension of its provisional authority up to November
mobile or personal communications services, international gateway
10, 2006.28 Records also show that ICC has already been providing
facility, and paging services, among others.<sup26<
local exchange carrier service in the areas concerned, having installed
sup=""></sup26<> From these services, TTPI has other sources of
16,000 lines in the City of Manila, 12,000 of which have already been
revenue from which it may cross-subsidize its local exchange
subscribed, 624 lines in Caloocan City, all of which have been
operations.
subscribed, while the roll-out plan for facilities and provisioning in the
The Court, however, agrees with petitioners that the NTC erred when it City of Navotas is being finalized. 29 Hence, so as not to disrupt ICC's
failed to require ICC to make an escrow deposit and a performance rollout plan compliance, it would be more judicious for the Court to
bond. Section 27 of NTC MC No. 11-9-93 specifically provides: merely require ICC to comply with Section 27 of NTC MC No. 11-9-93,
within such period to be determined by the NTC.
SEC. 27. Authorized public telecommunications carriers shall be
required to deposit in escrow in a reputable bank 20% of the Furthermore, it is well to stress that petitioner TTPI cannot claim any
investment required for the first two years of the implementation of exclusive right to render telecommunications service in areas which
the proposed project. the NTC considers to be in need of additional providers. R.A. No. 7925
is quite emphatic on this score, viz.:
In addition to escrow, the authorized public telecommunications
carriers shall be required to post a performance bond equivalent SEC. 23. Equality of Treatment in the Telecommunications Industry. —
to 10% of the investment required for the first two years of Any advantage, favor, privilege, exemption, or immunity granted under
the approved project but not to exceed P500 Million. The existing franchises, or may hereafter be granted, shall ipso
performance bond shall be forfeited in favor of the government in the facto become part of previously granted telecommunications
event that the authorized PTC fail to comply with the terms and franchises and shall be accorded immediately and unconditionally to
conditions of the authority granted. (Emphases Ours) the grantees of such franchises: Provided, however, That the
foregoing shall neither apply to nor affect provisions of
The escrow deposit and the posting of a performance bond are telecommunications franchises concerning territory covered
required in each proposed and approved project of a local exchange by the franchise, the life span of the franchise, or the type of service
operator. Project refers to a planned undertaking. 27 ICC's project for authorized by the franchise. (Emphasis Ours)
local exchange service in the Manila and Navotas areas is separate and
More than anything else, public service should be the primordial
objective of local exchange operators. The entry of another provider in
areas covered by TTPI should pose as a challenge for it to improve its
quality of service. Ultimately, it will be the public that will benefit. As
pointed out in Republic of the Phils. vs. Rep. Telephone Co,
Inc.:30

Free competition in the industry may also provide the answer to a

much-desired improvement in the quality and delivery of this type of
public utility, to improved technology, fast and handy mobil service,
and reduced user dissatisfaction. After all, neither PLDT nor any other
public utility has a constitutional right to a monopoly position in view of
the Constitutional proscription that no franchise certificate or
authorization shall be exclusive in character or shall last longer than
fifty (50) years (ibid., Section 11; Article XIV, Section 5, 1973
Constitution; Article XIV, Section 8, 1935 Constitution).

WHEREFORE, the petition for review on certiorari is PARTIALLY

GRANTED. The Order of the National Telecommunications
Commission dated November 10, 1997 in NTC Case No. 96-195 is
AFFIRMED with the following modifications:

Respondent International Communication Corporation, in accordance

with Section 27 of NTC MC No. 11-9-93, is required to:

(1) Deposit in escrow in a reputable bank 20% of the investment

required for the first two years of the implementation of the proposed
project; and

(2) Post a performance bond equivalent to 10% of the

investment required for the first two years of the approved project but
not to exceed P500 Million.

within such period to be determined by the National

Telecommunications Commission.

No pronouncement as to costs.

SO ORDERED.
 G.R. No. 110120 March 16, 1994 Estate, Barangay Camarin, Caloocan City due to its harmful effects on
the health of the residents and the possibility of pollution of the water
LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, content of the surrounding area.
vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding On November 15, 1991, the LLDA conducted an on-site investigation,
Judge RTC, Branch 127, Caloocan City, HON. MACARIO A. monitoring and test sampling of the leachate3 that seeps from said
ASISTIO, JR., City Mayor of Caloocan and/or THE CITY dumpsite to the nearby creek which is a tributary of the Marilao River.
GOVERNMENT OF CALOOCAN, respondents. The LLDA Legal and Technical personnel found that the City
Government of Caloocan was maintaining an open dumpsite at the
Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner. Camarin area without first securing an Environmental Compliance
Certificate (ECC) from the Environmental Management Bureau (EMB)
The City Legal Officer & Chief, Law Department for Mayor Macario A.
of the Department of Environment and Natural Resources, as required
Asistio, Jr. and the City Government of Caloocan.
under Presidential Decree No. 1586,4 and clearance from LLDA as
required under Republic Act No. 4850,5 as amended by Presidential
Decree No. 813 and Executive Order No. 927, series of 1983.6
ROMERO, J.:
After a public hearing conducted on December 4, 1991, the LLDA,
The clash between the responsibility of the City Government of acting on the complaint of Task Force Camarin Dumpsite, found that
Caloocan to dispose off the 350 tons of garbage it collects daily and the the water collected from the leachate and the receiving streams could
growing concern and sensitivity to a pollution-free environment of the considerably affect the quality, in turn, of the receiving waters since it
residents of Barangay Camarin, Tala Estate, Caloocan City where these indicates the presence of bacteria, other than coliform, which may
tons of garbage are dumped everyday is the hub of this controversy have contaminated the sample during collection or handling.7 On
elevated by the protagonists to the Laguna Lake Development December 5, 1991, the LLDA issued a Cease and Desist
Authority (LLDA) for adjudication. Order8 ordering the City Government of Caloocan, Metropolitan Manila
Authority, their contractors, and other entities, to completely halt, stop
The instant case stemmed from an earlier petition filed with this Court
and desist from dumping any form or kind of garbage and other waste
by Laguna Lake Development Authority (LLDA for short) docketed as
matter at the Camarin dumpsite.
G.R.
No. 107542 against the City Government of Caloocan, et al. In the The dumping operation was forthwith stopped by the City Government
Resolution of November 10, 1992, this Court referred G.R. No. 107542 of Caloocan. However, sometime in August 1992 the dumping
to the Court of Appeals for appropriate disposition. Docketed therein as operation was resumed after a meeting held in July 1992 among the
CA-G.R. SP City Government of Caloocan, the representatives of Task Force
No. 29449, the Court of Appeals, in a decision1 promulgated on January Camarin Dumpsite and LLDA at the Office of Environmental
29, 1993 ruled that the LLDA has no power and authority to issue a Management Bureau Director Rodrigo U. Fuentes failed to settle the
cease and desist order enjoining the dumping of garbage in Barangay problem.
Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this
petition, a review of the decision of the Court of Appeals. After an investigation by its team of legal and technical personnel on
August 14, 1992, the LLDA issued another order reiterating the
The facts, as disclosed in the records, are undisputed. December 5, 1991, order and issued an Alias Cease and Desist Order
enjoining the City Government of Caloocan from continuing its
On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of
dumping operations at the Camarin area.
Lourdes Parish, Barangay Camarin, Caloocan City, filed a letter-
complaint2 with the Laguna Lake Development Authority seeking to On September 25, 1992, the LLDA, with the assistance of the Philippine
stop the operation of the 8.6-hectare open garbage dumpsite in Tala National Police, enforced its Alias Cease and Desist Order by prohibiting
the entry of all garbage dump trucks into the Tala Estate, Camarin area On November 5, 1992, the LLDA filed a petition for certiorari,
being utilized as a dumpsite. prohibition and injunction with prayer for restraining order with the
Supreme Court, docketed as G.R. No. 107542, seeking to nullify the
Pending resolution of its motion for reconsideration earlier filed on aforesaid order dated October 16, 1992 issued by the Regional Trial
September 17, 1992 with the LLDA, the City Government of Caloocan Court, Branch 127 of Caloocan City denying its motion to dismiss.
filed with the Regional Trial Court of Caloocan City an action for the
declaration of nullity of the cease and desist order with prayer for the The Court, acting on the petition, issued a Resolution 12 on November
issuance of writ of injunction, docketed as Civil Case No. C-15598. In its 10, 1992 referring the case to the Court of Appeals for proper
complaint, the City Government of Caloocan sought to be declared as disposition and at the same time, without giving due course to the
the sole authority empowered to promote the health and safety and petition, required the respondents to comment on the petition and file
enhance the right of the people in Caloocan City to a balanced ecology the same with the Court of Appeals within ten (10) days from notice. In
within its territorial jurisdiction.9 the meantime, the Court issued a temporary restraining order,
effective immediately and continuing until further orders from it,
On September 25, 1992, the Executive Judge of the Regional Trial ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding
Court of Caloocan City issued a temporary restraining order enjoining Judge, Regional Trial Court, Branch 127, Caloocan City to cease and
the LLDA from enforcing its cease and desist order. Subsequently, the desist from exercising jurisdiction over the case for declaration of nullity
case was raffled to the Regional Trial Court, Branch 126 of Caloocan of the cease and desist order issued by the Laguna Lake Development
which, at the time, was presided over by Judge Manuel Jn. Serapio of Authority (LLDA); and (2) City Mayor of Caloocan and/or the City
the Regional Trial Court, Branch 127, the pairing judge of the recently- Government of Caloocan to cease and desist from dumping its garbage
retired presiding judge. at the Tala Estate, Barangay Camarin, Caloocan City.
The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on Respondents City Government of Caloocan and Mayor Macario A.
the ground, among others, that under Republic Act No. 3931, as Asistio, Jr. filed on November 12, 1992 a motion for reconsideration
amended by Presidential Decree No. 984, otherwise known as the and/or to quash/recall the temporary restraining order and an urgent
Pollution Control Law, the cease and desist order issued by it which is motion for reconsideration alleging that ". . . in view of the calamitous
the subject matter of the complaint is reviewable both upon the law situation that would arise if the respondent city government fails to
and the facts of the case by the Court of Appeals and not by the collect 350 tons of garbage daily for lack of dumpsite (i)t is therefore,
Regional Trial Court. 10 imperative that the issue be resolved with dispatch or with sufficient
leeway to allow the respondents to find alternative solutions to this
On October 12, 1992 Judge Manuel Jn. Serapio issued an order
garbage problem."
consolidating Civil Case No. C-15598 with Civil Case No. C-15580, an
earlier case filed by the Task Force Camarin Dumpsite entitled "Fr. John On November 17, 1992, the Court issued a Resolution13 directing the
Moran, et al. vs. Hon. Macario Asistio." The LLDA, however, maintained Court of Appeals to immediately set the case for hearing for the
during the trial that the foregoing cases, being independent of each purpose of determining whether or not the temporary restraining order
other, should have been treated separately. issued by the Court should be lifted and what conditions, if any, may be
required if it is to be so lifted or whether the restraining order should be
On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the
maintained or converted into a preliminary injunction.
motion to dismiss, issued in the consolidated cases an order 11 denying
LLDA's motion to dismiss and granting the issuance of a writ of The Court of Appeals set the case for hearing on November 27, 1992,
preliminary injunction enjoining the LLDA, its agent and all persons at 10:00 in the morning at the Hearing Room, 3rd Floor, New Building,
acting for and on its behalf, from enforcing or implementing its cease Court of Appeals.14 After the oral argument, a conference was set on
and desist order which prevents plaintiff City of Caloocan from December 8, 1992 at 10:00 o'clock in the morning where the Mayor of
dumping garbage at the Camarin dumpsite during the pendency of this Caloocan City, the General Manager of LLDA, the Secretary of DENR or
case and/or until further orders of the court.
his duly authorized representative and the Secretary of DILG or his duly issue on the proper interpretation of the powers and authority of the
authorized representative were required to appear. LLDA under its enabling law.

It was agreed at the conference that the LLDA had until December 15, On July, 19, 1993, the Court issued a temporary restraining
1992 to finish its study and review of respondent's technical plan with order16 enjoining the City Mayor of Caloocan and/or the City
respect to the dumping of its garbage and in the event of a rejection of Government of Caloocan to cease and desist from dumping its garbage
respondent's technical plan or a failure of settlement, the parties will at the Tala Estate, Barangay Camarin, Caloocan City, effective as of
submit within 10 days from notice their respective memoranda on the this date and containing until otherwise ordered by the Court.
merits of the case, after which the petition shall be deemed submitted
for resolution.15 Notwithstanding such efforts, the parties failed to settle It is significant to note that while both parties in this case agree on the
the dispute. need to protect the environment and to maintain the ecological
balance of the surrounding areas of the Camarin open dumpsite, the
On April 30, 1993, the Court of Appeals promulgated its decision question as to which agency can lawfully exercise jurisdiction over the
holding that: (1) the Regional Trial Court has no jurisdiction on appeal matter remains highly open to question.
to try, hear and decide the action for annulment of LLDA's cease and
desist order, including the issuance of a temporary restraining order The City Government of Caloocan claims that it is within its power, as a
and preliminary injunction in relation thereto, since appeal therefrom is local government unit, pursuant to the general welfare provision of the
within the exclusive and appellate jurisdiction of the Court of Appeals Local Government Code, 17 to determine the effects of the operation of
under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the the dumpsite on the ecological balance and to see that such balance is
Laguna Lake Development Authority has no power and authority to maintained. On the basis of said contention, it questioned, from the
issue a cease and desist order under its enabling law, Republic Act No. inception of the dispute before the Regional Trial Court of Caloocan
4850, as amended by P.D. No. 813 and Executive Order City, the power and authority of the LLDA to issue a cease and desist
No. 927, series of 1983. order enjoining the dumping of garbage in the Barangay Camarin over
which the City Government of Caloocan has territorial jurisdiction.
The Court of Appeals thus dismissed Civil Case No. 15598 and the
preliminary injunction issued in the said case was set aside; the cease The Court of Appeals sustained the position of the City of Caloocan on
and desist order of LLDA was likewise set aside and the temporary the theory that Section 7 of Presidential Decree No. 984, otherwise
restraining order enjoining the City Mayor of Caloocan and/or the City known as the Pollution Control law, authorizing the defunct National
Government of Caloocan to cease and desist from dumping its garbage Pollution Control Commission to issue an ex-parte cease and desist
at the Tala Estate, Barangay Camarin, Caloocan City was lifted, subject, order was not incorporated in Presidential Decree No. 813 nor in
however, to the condition that any future dumping of garbage in said Executive Order No. 927, series of
area, shall be in conformity with the procedure and protective works 1983. The Court of Appeals ruled that under Section 4, par. (d), of
contained in the proposal attached to the records of this case and Republic Act No. 4850, as amended, the LLDA is instead required "to
found on pages 152-160 of the Rollo, which was thereby adopted by institute the necessary legal proceeding against any person who shall
reference and made an integral part of the decision, until the commence to implement or continue implementation of any project,
corresponding restraining and/or injunctive relief is granted by the plan or program within the Laguna de Bay region without previous
proper Court upon LLDA's institution of the necessary legal clearance from the Authority."
proceedings.
The LLDA now assails, in this partition for review, the abovementioned
Hence, the Laguna Lake Development Authority filed the instant ruling of the Court of Appeals, contending that, as an administrative
petition for review on certiorari, now docketed as G.R. No. 110120, agency which was granted regulatory and adjudicatory powers and
with prayer that the temporary restraining order lifted by the Court of functions by Republic Act No. 4850 and its amendatory laws,
Appeals be re-issued until after final determination by this Court of the Presidential Decree No. 813 and Executive Order No. 927, series of
1983, it is invested with the power and authority to issue a cease and
desist order pursuant to Section 4 par. (c), (d), (e), (f) and (g) of authorized by the City Government of Caloocan which is allegedly
Executive Order No. 927 series of 1983 which provides, thus: endangering the health, safety, and welfare of the residents therein
and the sanitation and quality of the water in the area brought about
Sec. 4. Additional Powers and Functions. The authority shall have the by exposure to pollution caused by such open garbage dumpsite?
following powers and functions:
The matter of determining whether there is such pollution of the
xxx xxx xxx environment that requires control, if not prohibition, of the operation of
a business establishment is essentially addressed to the Environmental
(c) Issue orders or decisions to compel compliance with the provisions
Management Bureau (EMB) of the DENR which, by virtue of Section 16
of this Executive Order and its implementing rules and regulations only
of Executive Order No. 192, series of 1987,18 has assumed the powers
after proper notice and hearing.
and functions of the defunct National Pollution Control Commission
(d) Make, alter or modify orders requiring the discontinuance of created under Republic Act No. 3931. Under said Executive Order, a
pollution specifying the conditions and the time within which such Pollution Adjudication Board (PAB) under the Office of the DENR
discontinuance must be accomplished. Secretary now assumes the powers and functions of the National
Pollution Control Commission with respect to adjudication of pollution
(e) Issue, renew, or deny permits, under such conditions as it may cases. 19
determine to be reasonable, for the prevention and abatement of
pollution, for the discharge of sewage, industrial waste, or for the As a general rule, the adjudication of pollution cases generally pertains
installation or operation of sewage works and industrial disposal to the Pollution Adjudication Board (PAB), except in cases where the
system or parts thereof. special law provides for another forum. It must be recognized in this
regard that the LLDA, as a specialized administrative agency, is
(f) After due notice and hearing, the Authority may also revoke, specifically mandated under Republic Act No. 4850 and its amendatory
suspend or modify any permit issued under this Order whenever the laws to carry out and make effective the declared national policy 20 of
same is necessary to prevent or abate pollution. promoting and accelerating the development and balanced growth of
the Laguna Lake area and the surrounding provinces of Rizal and
(g) Deputize in writing or request assistance of appropriate
Laguna and the cities of San Pablo, Manila, Pasay, Quezon and
government agencies or instrumentalities for the purpose of enforcing
Caloocan21 with due regard and adequate provisions for environmental
this Executive Order and its implementing rules and regulations and
management and control, preservation of the quality of human life and
the orders and decisions of the Authority.
ecological systems, and the prevention of undue ecological
The LLDA claims that the appellate court deliberately suppressed and disturbances, deterioration and pollution. Under such a broad grant
totally disregarded the above provisions of Executive Order No. 927, and power and authority, the LLDA, by virtue of its special charter,
series of 1983, which granted administrative quasi-judicial functions to obviously has the responsibility to protect the inhabitants of the Laguna
LLDA on pollution abatement cases. Lake region from the deleterious effects of pollutants emanating from
the discharge of wastes from the surrounding areas. In carrying out the
In light of the relevant environmental protection laws cited which are aforementioned declared policy, the LLDA is mandated, among others,
applicable in this case, and the corresponding overlapping jurisdiction to pass upon and approve or disapprove all plans, programs, and
of government agencies implementing these laws, the resolution of the projects proposed by local government offices/agencies within the
issue of whether or not the LLDA has the authority and power to issue region, public corporations, and private persons or enterprises where
an order which, in its nature and effect was injunctive, necessarily such plans, programs and/or projects are related to those of the LLDA
requires a determination of the threshold question: Does the Laguna for the development of the region. 22
Lake Development Authority, under its Charter and its amendatory
laws, have the authority to entertain the complaint against the In the instant case, when the complainant Task Force Camarin
dumping of garbage in the open dumpsite in Barangay Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan
City, filed its letter-complaint before the LLDA, the latter's jurisdiction therefrom the conclusion that there is a denial of the power to issue the
under its charter was validly invoked by complainant on the basis of its order in question when the power "to make, alter or modify orders
allegation that the open dumpsite project of the City Government of requiring the discontinuance of pollution" is expressly and clearly
Caloocan in Barangay Camarin was undertaken without a clearance bestowed upon the LLDA by Executive Order No. 927, series of 1983.
from the LLDA, as required under Section 4, par. (d), of Republic Act.
No. 4850, as amended by P.D. No. 813 and Executive Order No. 927. Assuming arguendo that the authority to issue a "cease and desist
While there is also an allegation that the said project was without an order" were not expressly conferred by law, there is jurisprudence
Environmental Compliance Certificate from the Environmental enough to the effect that the rule granting such authority need not
Management Bureau (EMB) of the DENR, the primary jurisdiction of the necessarily be express.25 While it is a fundamental rule that an
LLDA over this case was recognized by the Environmental administrative agency has only such powers as are expressly granted
Management Bureau of the DENR when the latter acted as to it by law, it is likewise a settled rule that an administrative agency
intermediary at the meeting among the representatives of the City has also such powers as are necessarily implied in the exercise of its
Government of Caloocan, Task Force Camarin Dumpsite and LLDA express powers.26 In the exercise, therefore, of its express powers
sometime in July 1992 to discuss the possibility of under its charter as a regulatory and quasi-judicial body with respect to
re-opening the open dumpsite. pollution cases in the Laguna Lake region, the authority of the LLDA to
issue a "cease and desist order" is, perforce, implied. Otherwise, it may
Having thus resolved the threshold question, the inquiry then narrows well be reduced to a "toothless" paper agency.
down to the following issue: Does the LLDA have the power and
authority to issue a "cease and desist" order under Republic Act No. In this connection, it must be noted that in Pollution Adjudication Board
4850 and its amendatory laws, on the basis of the facts presented in v. Court of Appeals, et al.,27 the Court ruled that the Pollution
this case, enjoining the dumping of garbage in Tala Estate, Barangay Adjudication Board (PAB) has the power to issue an ex-parte cease and
Camarin, Caloocan City. desist order when there is prima facie evidence of an establishment
exceeding the allowable standards set by the anti-pollution laws of the
The irresistible answer is in the affirmative. country. The ponente, Associate Justice Florentino P. Feliciano,
declared:
The cease and desist order issued by the LLDA requiring the City
Government of Caloocan to stop dumping its garbage in the Camarin Ex parte cease and desist orders are permitted by law and regulations
open dumpsite found by the LLDA to have been done in violation of in situations like that here presented precisely because stopping the
Republic Act No. 4850, as amended, and other relevant environment continuous discharge of pollutive and untreated effluents into the rivers
laws,23 cannot be stamped as an unauthorized exercise by the LLDA of and other inland waters of the Philippines cannot be made to wait until
injunctive powers. By its express terms, Republic Act No. 4850, as protracted litigation over the ultimate correctness or propriety of such
amended by P.D. No. 813 and Executive Order No. 927, series of 1983, orders has run its full course, including multiple and sequential appeals
authorizes the LLDA to "make, alter or modify order requiring the such as those which Solar has taken, which of course may take several
discontinuance or pollution."24 (Emphasis supplied) Section 4, par. (d) years. The relevant pollution control statute and implementing
explicitly authorizes the LLDA to make whatever order may be regulations were enacted and promulgated in the exercise of that
necessary in the exercise of its jurisdiction. pervasive, sovereign power to protect the safety, health, and general
welfare and comfort of the public, as well as the protection of plant and
To be sure, the LLDA was not expressly conferred the power "to issue animal life, commonly designated as the police power. It is a
and ex-parte cease and desist order" in a language, as suggested by constitutional commonplace that the ordinary requirements of
the City Government of Caloocan, similar to the express grant to the procedural due process yield to the necessities of protecting vital public
defunct National Pollution Control Commission under Section 7 of P.D. interests like those here involved, through the exercise of police power.
No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. ...
No. 927, series of 1983. However, it would be a mistake to draw
The immediate response to the demands of "the necessities of Insofar as the implementation of relevant anti-pollution laws in the
protecting vital public interests" gives vitality to the statement on Laguna Lake region and its surrounding provinces, cities and towns are
ecology embodied in the Declaration of Principles and State Policies or concerned, the Court will not dwell further on the related issues raised
the 1987 Constitution. Article II, Section 16 which provides: which are more appropriately addressed to an administrative agency
with the special knowledge and expertise of the LLDA.
The State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and WHEREFORE, the petition is GRANTED. The temporary restraining
harmony of nature. order issued by the Court on July 19, 1993 enjoining the City Mayor of
Caloocan and/or the City Government of Caloocan from dumping their
As a constitutionally guaranteed right of every person, it carries the garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby
correlative duty of non-impairment. This is but in consonance with the made permanent.
declared policy of the state "to protect and promote the right to health
of the people and instill health consciousness among them."28 It is to be SO ORDERED.
borne in mind that the Philippines is party to the Universal Declaration
of Human Rights and the Alma Conference Declaration of 1978 which Feliciano, Bidin, Melo and Vitug, JJ., concur.
recognize health as a fundamental human right. 29

The issuance, therefore, of the cease and desist order by the LLDA, as
a practical matter of procedure under the circumstances of the case, is
a proper exercise of its power and authority under its charter and its
amendatory laws. Had the cease and desist order issued by the LLDA
been complied with by the City Government of Caloocan as it did in the
first instance, no further legal steps would have been necessary.

The charter of LLDA, Republic Act No. 4850, as amended, instead of

conferring upon the LLDA the means of directly enforcing such orders,
has provided under its Section 4 (d) the power to institute "necessary
legal proceeding against any person who shall commence to
implement or continue implementation of any project, plan or program
within the Laguna de Bay region without previous clearance from the
LLDA."

Clearly, said provision was designed to invest the LLDA with sufficiently
broad powers in the regulation of all projects initiated in the Laguna
Lake region, whether by the government or the private sector, insofar
as the implementation of these projects is concerned. It was meant to
deal with cases which might possibly arise where decisions or orders
issued pursuant to the exercise of such broad powers may not be
obeyed, resulting in the thwarting of its laudabe objective. To meet
such contingencies, then the writs of mandamus and injunction which
are beyond the power of the LLDA to issue, may be sought from the
proper courts.
 G.R. No. 135808 October 6, 2008 the Westmont Group of Companies in Malaysia, shall extend or arrange
a loan required to pay for the proposed acquisition by IRC of PRCI.4
SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs. IRC alleged that on 8 August 1994, a press release announcing the
INTERPORT RESOURCES CORPORATION, MANUEL S. RECTO, approval of the agreement was sent through facsimile transmission to
RENE S. VILLARICA, PELAGIO RICALDE, ANTONIO REINA, the Philippine Stock Exchange and the SEC, but that the facsimile
FRANCISCO ANONUEVO, JOSEPH SY and SANTIAGO TANCHAN, machine of the SEC could not receive it. Upon the advice of the SEC,
JR., respondents. the IRC sent the press release on the morning of 9 August 1994.5

DECISION The SEC averred that it received reports that IRC failed to make timely
public disclosures of its negotiations with GHB and that some of its
CHICO-NAZARIO, J.: directors, respondents herein, heavily traded IRC shares utilizing this
material insider information. On 16 August 1994, the SEC Chairman
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
issued a directive requiring IRC to submit to the SEC a copy of its
Court, assailing the Decision,1 dated 20 August 1998, rendered by the
aforesaid Memorandum of Agreement with GHB. The SEC Chairman
Court of Appeals in C.A.-G.R. SP No. 37036, enjoining petitioner
further directed all principal officers of IRC to appear at a hearing
Securities and Exchange Commission (SEC) from taking cognizance of
before the Brokers and Exchanges Department (BED) of the SEC to
or initiating any action against the respondent corporation Interport
explain IRC's failure to immediately disclose the information as required
Resources Corporation (IRC) and members of its board of directors,
by the Rules on Disclosure of Material Facts.6
respondents Manuel S. Recto, Rene S. Villarica, Pelagio Ricalde, Antonio
Reina, Francisco Anonuevo, Joseph Sy and Santiago Tanchan, Jr., with In compliance with the SEC Chairman's directive, the IRC sent a letter
respect to Sections 8, 30 and 36 of the Revised Securities Act. In the dated 16 August 1994 to the SEC, attaching thereto copies of the
same Decision of the appellate court, all the proceedings taken against Memorandum of Agreement. Its directors, Manuel Recto, Rene Villarica
the respondents, including the assailed SEC Omnibus Orders of 25 and Pelagio Ricalde, also appeared before the SEC on 22 August 1994
January 1995 and 30 March 1995, were declared void. to explain IRC's alleged failure to immediately disclose material
information as required under the Rules on Disclosure of Material
The antecedent facts of the present case are as follows.
Facts.7
On 6 August 1994, the Board of Directors of IRC approved a
On 19 September 1994, the SEC Chairman issued an Order finding that
Memorandum of Agreement with Ganda Holdings Berhad (GHB).
IRC violated the Rules on Disclosure of Material Facts, in connection
Under the Memorandum of Agreement, IRC acquired 100% or the
with the Old Securities Act of 1936, when it failed to make timely
entire capital stock of Ganda Energy Holdings, Inc. (GEHI), 2 which
disclosure of its negotiations with GHB. In addition, the SEC pronounced
would own and operate a 102 megawatt (MW) gas turbine power-
that some of the officers and directors of IRC entered into transactions
generating barge. The agreement also stipulates that GEHI would
involving IRC shares in violation of Section 30, in relation to Section 36,
assume a five-year power purchase contract with National Power
of the Revised Securities Act.8
Corporation. At that time, GEHI's power-generating barge was 97%
complete and would go on-line by mid-September of 1994. In Respondents filed an Omnibus Motion, dated 21 September 1994,
exchange, IRC will issue to GHB 55% of the expanded capital stock of which was superseded by an Amended Omnibus Motion, filed on 18
IRC amounting to 40.88 billion shares which had a total par value October 1994, alleging that the SEC had no authority to investigate the
of P488.44 million.3 subject matter, since under Section 8 of Presidential Decree No. 902-
A,9 as amended by Presidential Decree No. 1758, jurisdiction was
On the side, IRC would acquire 67% of the entire capital stock of
conferred upon the Prosecution and Enforcement Department (PED) of
Philippine Racing Club, Inc. (PRCI). PRCI owns 25.724 hectares of real
the SEC. Respondents also claimed that the SEC violated their right to
estate property in Makati. Under the Agreement, GHB, a member of
due process when it ordered that the respondents appear before the
SEC and "show cause why no administrative, civil or criminal sanctions injunction enjoining the SEC and its agents from investigating and
should be imposed on them," and, thus, shifted the burden of proof to proceeding with the hearing of the case against respondents herein.
the respondents. Lastly, they sought to have their cases tried jointly On 5 May 1995, the Court of Appeals granted their motion and issued a
given the identical factual situations surrounding the alleged violation writ of preliminary injunction, which effectively enjoined the SEC from
committed by the respondents.10 filing any criminal, civil or administrative case against the respondents
herein.17
Respondents also filed a Motion for Continuance of Proceedings on 24
October 1994, wherein they moved for discontinuance of the On 23 October 1995, the SEC filed a Motion for Leave to Quash SEC
investigations and the proceedings before the SEC until the undue Omnibus Orders so that the case may be investigated by the PED in
publicity had abated and the investigating officials had become accordance with the SEC Rules and Presidential Decree No. 902-A, and
reasonably free from prejudice and public pressure.11 not by the special body whose creation the SEC had earlier ordered.18

No formal hearings were conducted in connection with the The Court of Appeals promulgated a Decision19 on 20 August 1998. It
aforementioned motions, but on 25 January 1995, the SEC issued an determined that there were no implementing rules and regulations
Omnibus Order which thus disposed of the same in this wise:12 regarding disclosure, insider trading, or any of the provisions of the
Revised Securities Acts which the respondents allegedly violated. The
WHEREFORE, premised on the foregoing considerations, the Court of Appeals likewise noted that it found no statutory authority for
Commission resolves and hereby rules: the SEC to initiate and file any suit for civil liability under Sections 8, 30
and 36 of the Revised Securities Act. Thus, it ruled that no civil, criminal
1. To create a special investigating panel to hear and decide the instant
or administrative proceedings may possibly be held against the
case in accordance with the Rules of Practice and Procedure Before the
respondents without violating their rights to due process and equal
Prosecution and Enforcement Department (PED), Securities and
protection. It further resolved that absent any implementing rules, the
Exchange Commission, to be composed of Attys. James K. Abugan,
SEC cannot be allowed to quash the assailed Omnibus Orders for the
Medardo Devera (Prosecution and Enforcement Department), and Jose
sole purpose of re-filing the same case against the respondents.20
Aquino (Brokers and Exchanges Department), which is hereby directed
to expeditiously resolve the case by conducting continuous hearings, if The Court of Appeals further decided that the Rules of Practice and
possible. Procedure Before the PED, which took effect on 14 April 1990, did not
comply with the statutory requirements contained in the Administrative
2. To recall the show cause orders dated September 19, 1994 requiring
Code of 1997. Section 8, Rule V of the Rules of Practice and Procedure
the respondents to appear and show cause why no administrative, civil
Before the PED affords a party the right to be present but without the
or criminal sanctions should be imposed on them.
right to cross-examine witnesses presented against him, in violation of
3. To deny the Motion for Continuance for lack of merit. Section 12(3), Chapter 3, Book VII of the Administrative Code. 21

Respondents filed an Omnibus Motion for Partial In the dispositive portion of its Decision, dated 20 August 1998, the
Reconsideration,13 questioning the creation of the special investigating Court of Appeals ruled that22:
panel to hear the case and the denial of the Motion for Continuance.
WHEREFORE, [herein petitioner SEC's] Motion for Leave to Quash SEC
The SEC denied reconsideration in its Omnibus Order dated 30 March
Omnibus Orders is hereby DENIED. The petition for certiorari,
1995.14
prohibition and mandamus is GRANTED. Consequently, all
The respondents filed a petition before the Court of Appeals docketed proceedings taken against [herein respondents] in this case, including
as C.A.-G.R. SP No. 37036, questioning the Omnibus Orders dated 25 the Omnibus Orders of January 25, 1995 and March 30, 1995 are
January 1995 and 30 March 1995.15 During the proceedings before the declared null and void. The writ of preliminary injunction is
Court of Appeals, respondents filed a Supplemental Motion 16 dated 16 hereby made permanent and, accordingly, [SEC] is hereby
May 1995, wherein they prayed for the issuance of a writ of preliminary prohibited from taking cognizance or initiating any action, be
they civil, criminal, or administrative against [respondents] with respect the PED, was already repealed as provided for in Section 76 of the
to Sections 8 (Procedure for Registration), 30 (Insider's duty to disclose Securities Regulation Code:
when trading) and 36 (Directors, Officers and Principal Stockholders) in
relation to Sections 46 (Administrative sanctions) 56 (Penalties) 44 SEC. 76. Repealing Clause. - The Revised Securities Act (Batas
(Liabilities of Controlling persons) and 45 (Investigations, injunctions Pambansa Blg. 178), as amended, in its entirety, and Sections 2, 4 and
and prosecution of offenses) of the Revised Securities Act and Section 8 of Presidential Decree 902-A, as amended, are hereby repealed. All
144 (Violations of the Code) of the Corporation Code. (Emphasis other laws, orders, rules and regulations, or parts thereof, inconsistent
provided.) with any provision of this Code are hereby repealed or modified
accordingly.
The SEC filed a Motion for Reconsideration, which the Court of Appeals
denied in a Resolution23 issued on 30 September 1998. Thus, under the new law, the PED has been abolished, and the
Securities Regulation Code has taken the place of the Revised
Hence, the present petition, which relies on the following grounds24: Securities Act.

I The Court now proceeds with a discussion of the present case.

THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONER'S I. Sctions 8, 30 and 36 of the Revised Securities Act do not
MOTION FOR LEAVE TO QUASH THE ASSAILED SEC OMNIBUS ORDERS require the enactment of implementing rules to make them
DATED JANUARY 25 AND MARCH 30, 1995. binding and effective.

II The Court of Appeals ruled that absent any implementing rules for
Sections 8, 30 and 36 of the Revised Securities Act, no civil, criminal or
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE IS NO administrative actions can possibly be had against the respondents
STATUTORY AUTHORITY WHATSOEVER FOR PETITIONER SEC TO without violating their right to due process and equal protection, citing
INITIATE AND FILE ANY SUIT BE THEY CIVIL, CRIMINAL OR as its basis the case Yick Wo v. Hopkins.26 This is untenable.
ADMINISTRATIVE AGAINST RESPONDENT CORPORATION AND ITS
DIRECTORS WITH RESPECT TO SECTION 30 (INSIDER'S DUTY TO In the absence of any constitutional or statutory infirmity, which may
DISCOLSED [sic] WHEN TRADING) AND 36 (DIRECTORS OFFICERS AND concern Sections 30 and 36 of the Revised Securities Act, this Court
PRINCIPAL STOCKHOLDERS) OF THE REVISED SECURITIES ACT; AND upholds these provisions as legal and binding. It is well settled that
every law has in its favor the presumption of validity. Unless and until a
III specific provision of the law is declared invalid and unconstitutional, the
same is valid and binding for all intents and purposes. 27 The mere
THE COURT OF APPEALS ERRED WHEN IT RULED THAT RULES OF
absence of implementing rules cannot effectively invalidate provisions
PRACTICE AND PROSECUTION BEFORE THE PED AND THE SICD RULES
of law, where a reasonable construction that will support the law may
OF PROCEDURE ON ADMINISTRATIVE ACTIONS/PROCEEDINGS25 ARE
be given. In People v. Rosenthal,28 this Court ruled that:
INVALID AS THEY FAIL TO COMPLY WITH THE STATUTORY
REQUIREMENTS CONTAINED IN THE ADMINISTRATIVE CODE OF 1987. In this connection we cannot pretermit reference to the rule that
"legislation should not be held invalid on the ground of uncertainty if
The petition is impressed with merit.
susceptible of any reasonable construction that will support and give it
Before discussing the merits of this case, it should be noted that while effect. An Act will not be declared inoperative and ineffectual on the
this case was pending in this Court, Republic Act No. 8799, otherwise ground that it furnishes no adequate means to secure the purpose for
known as the Securities Regulation Code, took effect on 8 August 2000. which it is passed, if men of common sense and reason can devise and
Section 8 of Presidential Decree No. 902-A, as amended, which created provide the means, and all the instrumentalities necessary for its
execution are within the reach of those intrusted therewith." (25 R.C.L., unconstitutional an ordinance which gave the board of supervisors
pp. 810, 811) authority to refuse permission to carry on laundries located in buildings
that were not made of brick and stone, because it violated the equal
In Garcia v. Executive Secretary,29 the Court underlined the protection clause and was highly discriminatory and hostile to Chinese
importance of the presumption of validity of laws and the careful residents and not because the standards provided therein were vague
consideration with which the judiciary strikes down as invalid acts of or ambiguous.
the legislature:
This Court does not discern any vagueness or ambiguity in Sections
The policy of the courts is to avoid ruling on constitutional questions 30 and 36 of the Revised Securities Act, such that the acts
and to presume that the acts of the political departments are valid in proscribed and/or required would not be understood by a person of
the absence of a clear and unmistakable showing to the contrary. To ordinary intelligence.
doubt is to sustain. This presumption is based on the doctrine of
separation of powers which enjoins upon each department a becoming Section 30 of the Revised Securities Act
respect for the acts of the other departments. The theory is that as the
joint act of Congress and the President of the Philippines, a law has Section 30 of the Revised Securities Act reads:
been carefully studied and determined to be in accordance with the
Sec. 30. Insider's duty to disclose when trading. - (a) It shall be
fundamental law before it was finally enacted.
unlawful for an insider to sell or buy a security of the issuer, if he knows
The necessity for vesting administrative authorities with power to make a fact of special significance with respect to the issuer or the security
rules and regulations is based on the impracticability of lawmakers' that is not generally available, unless (1) the insider proves that the fact
providing general regulations for various and varying details of is generally available or (2) if the other party to the transaction (or his
management.30 To rule that the absence of implementing rules can agent) is identified, (a) the insider proves that the other party knows it,
render ineffective an act of Congress, such as the Revised Securities or (b) that other party in fact knows it from the insider or otherwise.
Act, would empower the administrative bodies to defeat the legislative
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person
will by delaying the implementing rules. To assert that a law is less
controlling, controlled by, or under common control with, the issuer, (3)
than a law, because it is made to depend on a future event or act, is to
a person whose relationship or former relationship to the issuer gives or
rob the Legislature of the power to act wisely for the public welfare
gave him access to a fact of special significance about the issuer or the
whenever a law is passed relating to a state of affairs not yet
security that is not generally available, or (4) a person who learns such
developed, or to things future and impossible to fully know. 31 It is well
a fact from any of the foregoing insiders as defined in this subsection,
established that administrative authorities have the power to
with knowledge that the person from whom he learns the fact is such
promulgate rules and regulations to implement a given statute and to
an insider.
effectuate its policies, provided such rules and regulations conform to
the terms and standards prescribed by the statute as well as purport to (c) A fact is "of special significance" if (a) in addition to being material it
carry into effect its general policies. Nevertheless, it is undisputable would be likely, on being made generally available, to affect the market
that the rules and regulations cannot assert for themselves a more price of a security to a significant extent, or (b) a reasonable person
extensive prerogative or deviate from the mandate of the would consider it especially important under the circumstances in
statute.32 Moreover, where the statute contains sufficient standards determining his course of action in the light of such factors as the
and an unmistakable intent, as in the case of Sections 30 and 36 of the degree of its specificity, the extent of its difference from information
Revised Securities Act, there should be no impediment to its generally available previously, and its nature and reliability.
implementation.
(d) This section shall apply to an insider as defined in subsection (b) (3)
The reliance placed by the Court of Appeals in Yick Wo v. hereof only to the extent that he knows of a fact of special significance
Hopkins33 shows a glaring error. In the cited case, this Court found by virtue of his being an insider.
The provision explains in simple terms that the insider's misuse of since the duty to disclose such fact or to abstain from any transaction is
nonpublic and undisclosed information is the gravamen of illegal imposed on the insider only in connection with a fact of special
conduct. The intent of the law is the protection of investors against significance.
fraud, committed when an insider, using secret information, takes
advantage of an uninformed investor. Insiders are obligated to disclose Under the law, what is required to be disclosed is a fact of "special
material information to the other party or abstain from trading the significance" which may be (a) a material fact which would be likely,
shares of his corporation. This duty to disclose or abstain is based on on being made generally available, to affect the market price of a
two factors: first, the existence of a relationship giving access, directly security to a significant extent, or (b) one which a reasonable person
or indirectly, to information intended to be available only for a would consider especially important in determining his course of action
corporate purpose and not for the personal benefit of anyone; and with regard to the shares of stock.
second, the inherent unfairness involved when a party takes
(a) Material Fact - The concept of a "material fact" is not a new one.
advantage of such information knowing it is unavailable to those with
As early as 1973, the Rules Requiring Disclosure of Material Facts by
whom he is dealing.34
Corporations Whose Securities Are Listed In Any Stock Exchange or
In the United States (U.S.), the obligation to disclose or abstain has Registered/Licensed Under the Securities Act, issued by the SEC on 29
been traditionally imposed on corporate "insiders," particularly officers, January 1973, explained that "[a] fact is material if it induces or tends
directors, or controlling stockholders, but that definition has since been to induce or otherwise affect the sale or purchase of its securities."
expanded.35 The term "insiders" now includes persons whose Thus, Section 30 of the Revised Securities Act provides that if a fact
relationship or former relationship to the issuer gives or gave them affects the sale or purchase of securities, as well as its price, then the
access to a fact of special significance about the issuer or the security insider would be required to disclose such information to the other
that is not generally available, and one who learns such a fact from an party to the transaction involving the securities. This is the first
insider knowing that the person from whom he learns the fact is such definition given to a "fact of special significance."
an insider. Insiders have the duty to disclose material facts which are
(b.1) Reasonable Person - The second definition given to a fact of
known to them by virtue of their position but which are not known to
special significance involves the judgment of a "reasonable person."
persons with whom they deal and which, if known, would affect their
Contrary to the allegations of the respondents, a "reasonable person" is
investment judgment. In some cases, however, there may be valid
not a problematic legal concept that needs to be clarified for the
corporate reasons for the nondisclosure of material information. Where
purpose of giving effect to a statute; rather, it is the standard on which
such reasons exist, an issuer's decision not to make any public
most of our legal doctrines stand. The doctrine on negligence uses the
disclosures is not ordinarily considered as a violation of insider trading.
discretion of the "reasonable man" as the standard.38 A purchaser in
At the same time, the undisclosed information should not be
good faith must also take into account facts which put a "reasonable
improperly used for non-corporate purposes, particularly to
man" on his guard.39 In addition, it is the belief of the reasonable and
disadvantage other persons with whom an insider might transact, and
prudent man that an offense was committed that sets the criteria for
therefore the insider must abstain from entering into transactions
probable cause for a warrant of arrest.40 This Court, in such cases,
involving such securities.36
differentiated the reasonable and prudent man from "a person with
Respondents further aver that under Section 30 of the Revised training in the law such as a prosecutor or a judge," and identified him
Securities Act, the SEC still needed to define the following as "the average man on the street," who weighs facts and
terms: "material fact," "reasonable person," "nature and circumstances without resorting to the calibrations of our technical
reliability" and "generally available." 37 In determining whether or rules of evidence of which his knowledge is nil. Rather, he relies on the
not these terms are vague, these terms must be evaluated in the calculus of common sense of which all reasonable men have in
context of Section 30 of the Revised Securties Act. To fully understand abundance.41 In the same vein, the U.S. Supreme Court similarly
how the terms were used in the aforementioned provision, a discussion determined its standards by the actual significance in the deliberations
of what the law recognizes as a fact of special significance is required, of a "reasonable investor," when it ruled in TSC Industries, Inc. v.
Northway, Inc.,42 that the determination of materiality "requires inherently fact-specific finding such as materiality, must necessarily be
delicate assessments of the inferences a ‘reasonable shareholder' overinclusive or underinclusive.
would draw from a given set of facts and the significance of those
inferences to him." Moreover, materiality "will depend at any given time upon a balancing
of both the indicated probability that the event will occur and the
(b.2) Nature and Reliability - The factors affecting the second anticipated magnitude of the event in light of the totality of the
definition of a "fact of special significance," which is of such importance company activity."45 In drafting the Securities Act of 1934, the U.S.
that it is expected to affect the judgment of a reasonable man, were Congress put emphasis on the limitations to the definition of
substantially lifted from a test of materiality pronounced in the case In materiality:
the Matter of Investors Management Co., Inc.43:
Although the Committee believes that ideally it would be desirable to
Among the factors to be considered in determining whether have absolute certainty in the application of the materiality concept, it
information is material under this test are the degree of its specificity, is its view that such a goal is illusory and unrealistic. The materiality
the extent to which it differs from information previously publicly concept is judgmental in nature and it is not possible to
disseminated, and its reliability in light of its nature and source and the translate this into a numerical formula. The Committee's
circumstances under which it was received. advice to the [SEC] is to avoid this quest for certainty and to
continue consideration of materiality on a case-by-case basis
It can be deduced from the foregoing that the "nature and reliability" of as disclosure problems are identified." House Committee on
a significant fact in determining the course of action a reasonable Interstate and Foreign Commerce, Report of the Advisory Committee
person takes regarding securities must be clearly viewed in connection on Corporate Disclosure to the Securities and Exchange Commission,
with the particular circumstances of a case. To enumerate all 95th Cong., 1st Sess., 327 (Comm.Print 1977). (Emphasis provided.)46
circumstances that would render the "nature and reliability" of a fact to
be of special significance is close to impossible. Nevertheless, the (d) Generally Available - Section 30 of the Revised Securities Act
proper adjudicative body would undoubtedly be able to determine if allows the insider the defense that in a transaction of securities, where
facts of a certain "nature and reliability" can influence a reasonable the insider is in possession of facts of special significance, such
person's decision to retain, sell or buy securities, and thereafter explain information is "generally available" to the public. Whether information
and justify its factual findings in its decision. found in a newspaper, a specialized magazine, or any cyberspace
media be sufficient for the term "generally available" is a matter which
(c) Materiality Concept - A discussion of the "materiality concept" may be adjudged given the particular circumstances of the case. The
would be relevant to both a material fact which would affect the standards cannot remain at a standstill. A medium, which is widely
market price of a security to a significant extent and/or a fact which a used today was, at some previous point in time, inaccessible to most.
reasonable person would consider in determining his or her cause of Furthermore, it would be difficult to approximate how the rules may be
action with regard to the shares of stock. Significantly, what is referred applied to the instant case, where investigation has not even been
to in our laws as a fact of special significance is referred to in the U.S. started. Respondents failed to allege that the negotiations of their
as the "materiality concept" and the latter is similarly not provided with agreement with GHB were made known to the public through any form
a precise definition. In Basic v. Levinson,44 the U.S. Supreme Court of media for there to be a proper appreciation of the issue presented.
cautioned against confining materiality to a rigid formula, stating thus:
Section 36(a) of the Revised Securities Act
A bright-line rule indeed is easier to follow than a standard that requires
the exercise of judgment in the light of all the circumstances. But ease As regards Section 36(a) of the Revised Securities Act, respondents
of application alone is not an excuse for ignoring the purposes of the claim that the term "beneficial ownership" is vague and that it requires
Securities Act and Congress' policy decisions. Any approach that implementing rules to give effect to the law. Section 36(a) of the
designates a single fact or occurrence as always determinative of an Revised Securities Act is a straightforward provision that imposes upon
(1) a beneficial owner of more than ten percent of any class of any
equity security or (2) a director or any officer of the issuer of such unscrupulous individuals, who by their positions obtain non-public
security, the obligation to submit a statement indicating his or her information, from taking advantage of an uninformed public. No
ownership of the issuer's securities and such changes in his or her individual would invest in a market which can be manipulated by a
ownership thereof. The said provision reads: limited number of corporate insiders. Such reaction would stifle, if not
stunt, the growth of the securities market. To avert the occurrence of
Sec. 36. Directors, officers and principal stockholders. - (a) Every such an event, Section 30 of the Revised Securities Act prevented the
person who is directly or indirectly the beneficial owner of more than unfair use of non-public information in securities transactions, while
ten per centum of any [class] of any equity security which is registered Section 36 allowed the SEC to monitor the transactions entered into by
pursuant to this Act, or who is [a] director or an officer of the issuer of corporate officers and directors as regards the securities of their
such security, shall file, at the time of the registration of such security companies.
on a securities exchange or by the effective date of a registration
statement or within ten days after he becomes such a beneficial owner, In the case In the Matter of Investor's Management Co.,49 it was
director or officer, a statement with the Commission and, if such cautioned that "the broad language of the anti-fraud provisions," which
security is registered on a securities exchange, also with the exchange, include the provisions on insider trading, should not be "circumscribed
of the amount of all equity securities of such issuer of which he is the by fine distinctions and rigid classifications." The ambit of anti-fraud
beneficial owner, and within ten days after the close of each calendar provisions is necessarily broad so as to embrace the infinite variety of
month thereafter, if there has been a change in such ownership during deceptive conduct.50
such month, shall file with the Commission, and if such security is
registered on a securities exchange, shall also file with the exchange, a In Tatad v. Secretary of Department of Energy,51 this Court brushed
statement indicating his ownership at the close of the calendar month aside a contention, similar to that made by the respondents in this
and such changes in his ownership as have occurred during such case, that certain words or phrases used in a statute do not set
calendar month. (Emphasis provided.) determinate standards, declaring that:

Section 36(a) refers to the "beneficial owner." Beneficial owner has Petitioners contend that the words "as far as practicable," "declining"
been defined in the following manner: and "stable" should have been defined in R.A. No. 8180 as they do not
set determinate and determinable standards. This stubborn submission
[F]irst, to indicate the interest of a beneficiary in trust property (also deserves scant consideration. The dictionary meanings of these words
called "equitable ownership"); and second, to refer to the power of a are well settled and cannot confuse men of reasonable intelligence. x x
corporate shareholder to buy or sell the shares, though the shareholder x. The fear of petitioners that these words will result in the exercise of
is not registered in the corporation's books as the owner. Usually, executive discretion that will run riot is thus groundless. To be sure, the
beneficial ownership is distinguished from naked ownership, which is Court has sustained the validity of similar, if not more general
the enjoyment of all the benefits and privileges of ownership, as standards in other cases.
against possession of the bare title to property.47
Among the words or phrases that this Court upheld as valid standards
Even assuming that the term "beneficial ownership" was vague, it were "simplicity and dignity,"52 "public interest,"53 and "interests of law
would not affect respondents' case, where the respondents are and order."54
directors and/or officers of the corporation, who are specifically
required to comply with the reportorial requirements under Section The Revised Securities Act was approved on 23 February 1982. The
36(a) of the Revised Securities Act. The validity of a statute may be fact that the Full Disclosure Rules were promulgated by the SEC only
contested only by one who will sustain a direct injury as a result of its on 24 July 1996 does not render ineffective in the meantime Section 36
enforcement.48 of the Revised Securities Act. It is already unequivocal that the Revised
Securities Act requires full disclosure and the Full Disclosure Rules were
Sections 30 and 36 of the Revised Securities Act were enacted to issued to make the enforcement of the law more consistent, efficient
promote full disclosure in the securities market and prevent and effective. It is equally reasonable to state that the disclosure forms
later provided by the SEC, do not, in any way imply that no compliance obtaining in the courts of law. The Rules of Court may apply in said
was required before the forms were provided. The effectivity of a proceedings in suppletory character whenever practicable.
statute which imposes reportorial requirements cannot be suspended
by the issuance of specified forms, especially where compliance Rule V of the PED Rules of Practice and Procedure further specified
therewith may be made even without such forms. The forms merely that:
made more efficient the processing of requirements already identified
Section 5. Submission of Documents - During the preliminary
by the statute.
conference/hearing, or immediately thereafter, the Hearing Officer may
For the same reason, the Court of Appeals made an evident mistake require the parties to simultaneously submit their respective verified
when it ruled that no civil, criminal or administrative actions can position papers accompanied by all supporting documents and the
possibly be had against the respondents in connection with Sections 8, affidavits of their witnesses, if any which shall take the place of their
30 and 36 of the Revised Securities Act due to the absence of direct testimony. The parties shall furnish each other with copies of the
implementing rules. These provisions are sufficiently clear and position papers together with the supporting affidavits and documents
complete by themselves. Their requirements are specifically set out, submitted by them.
and the acts which are enjoined are determinable. In particular, Section
Section 6. Determination of necessity of hearing. - Immediately after
855 of the Revised Securities Act is a straightforward enumeration of
the submission by the parties of their position papers and supporting
the procedure for the registration of securities and the particular
documents, the Hearing Officer shall determine whether there is a
matters which need to be reported in the registration statement
need for a formal hearing. At this stage, he may, in his discretion, and
thereof. The Decision, dated 20 August 1998, provides no valid reason
for the purpose of making such determination, elicit pertinent facts or
to exempt the respondent IRC from such requirements. The lack of
information, including documentary evidence, if any, from any party or
implementing rules cannot suspend the effectivity of these provisions.
witness to complete, as far as possible, the facts of the case. Facts or
Thus, this Court cannot find any cogent reason to prevent the SEC from
information so elicited may serve as basis for his clarification or
exercising its authority to investigate respondents for violation of
simplifications of the issues in the case. Admissions and stipulation of
Section 8 of the Revised Securities Act.
facts to abbreviate the proceedings shall be encouraged.
II. The right to cross-examination is not absolute and cannot
Section 7. Disposition of Case. If the Hearing Officer finds no necessity
be demanded during investigative proceedings before the
of further hearing after the parties have submitted their position papers
PED.
and supporting documents, he shall so inform the parties stating the
In its assailed Decision dated 20 August 1998, the Court of Appeals reasons therefor and shall ask them to acknowledge the fact that they
pronounced that the PED Rules of Practice and Procedure was invalid were so informed by signing the minutes of the hearing and the case
since Section 8, Rule V56 thereof failed to provide for the parties' right shall be deemed submitted for resolution.
to cross-examination, in violation of the Administrative Code of 1987
As such, the PED Rules provided that the Hearing Officer may require
particularly Section 12(3), Chapter 3, Book VII thereof. This ruling is
the parties to submit their respective verified position papers, together
incorrect.
with all supporting documents and affidavits of witnesses. A formal
Firstly, Section 4, Rule I of the PED Rules of Practice and Procedure, hearing was not mandatory; it was within the discretion of the Hearing
categorically stated that the proceedings before the PED are summary Officer to determine whether there was a need for a formal hearing.
in nature: Since, according to the foregoing rules, the holding of a hearing before
the PED is discretionary, then the right to cross-examination could not
Section 4. Nature of Proceedings - Subject to the requirements of due have been demanded by either party.
process, proceedings before the "PED" shall be summary in nature not
necessarily adhering to or following the technical rules of evidence Secondly, it must be pointed out that Chapter 3, Book VII of the
Administrative Code, entitled "Adjudication," does not affect the
investigatory functions of the agencies. The law creating the PED, inquiry;" "to inquire; to make an investigation," "investigation" being in
Section 8 of Presidential Decree No. 902-A, as amended, defines the turn described as "(a)n administrative function, the exercise of which
authority granted to the PED, thus: ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; xx an
inquiry, judicial or otherwise, for the discovery and collection of facts
SEC. 8. The Prosecution and Enforcement Department shall have, concerning a certain matter or matters."
subject to the Commission's control and supervision, the exclusive
authority to investigate, on complaint or motu proprio, any act or "Adjudicate," commonly or popularly understood, means to adjudge,
omission of the Board of Directors/Trustees of corporations, or of arbitrate, judge, decide, determine, resolve, rule on, settle. The
partnerships, or of other associations, or of their stockholders, officers dictionary defines the term as "to settle finally (the rights and duties of
or partners, including any fraudulent devices, schemes or parties to a court case) on the merits of issues raised: xx to pass
representations, in violation of any law or rules and regulations judgment on: settle judicially: xx act as judge." And "adjudge" means
administered and enforced by the Commission; to file and "to decide or rule upon as a judge or with judicial or quasi-judicial
prosecute in accordance with law and rules and regulations issued by powers: xx to award or grant judicially in a case of controversy x x x."
the Commission and in appropriate cases, the corresponding criminal
or civil case before the Commission or the proper court or body upon In a legal sense, "adjudicate" means: "To settle in the exercise of
prima facie finding of violation of any laws or rules and regulations judicial authority. To determine finally. Synonymous with adjudge in its
administered and enforced by the Commission; and to perform such strictest sense;" and "adjudge" means: "To pass on judicially, to decide,
other powers and functions as may be provided by law or duly settle, or decree, or to sentence or condemn. x x x Implies a judicial
delegated to it by the Commission. (Emphasis provided.) determination of a fact, and the entry of a judgment."

The law creating PED empowers it to investigate violations of the rules There is no merit to the respondent's averment that the sections under
and regulations promulgated by the SEC and to file and prosecute such Chapter 3, Book VII of the Administrative Code, do not distinguish
cases. It fails to mention any adjudicatory functions insofar as the PED between investigative and adjudicatory functions. Chapter 3, Book VII
is concerned. Thus, the PED Rules of Practice and Procedure need not of the Administrative Code, is unequivocally entitled "Adjudication."
comply with the provisions of the Administrative Code on adjudication,
Respondents insist that the PED performs adjudicative functions, as
particularly Section 12(3), Chapter 3, Book VII.
enumerated under Section 1(h) and (j), Rule II; and Section 2(4), Rule
In Cariño v. Commission on Human Rights,57 this Court sets out the VII of the PED Rules of Practice and Procedure:
distinction between investigative and adjudicative functions, thus:
Section 1. Authority of the Prosecution and Enforcement Department -
"Investigate," commonly understood, means to examine, explore, Pursuant to Presidential Decree No. 902-A, as amended by Presidential
inquire or delve or probe into, research on, study. The dictionary Decree No. 1758, the Prosecution and Enforcement Department is
definition of "investigate" is "to observe or study closely; inquire into primarily charged with the following:
systematically: "to search or inquire into" xx to subject to an official
xxxx
probe xx: to conduct an official inquiry." The purpose of an
investigation, of course is to discover, to find out, to learn, obtain (h) Suspends or revokes, after proper notice and hearing in accordance
information. Nowhere included or intimated is the notion of settling, with these Rules, the franchise or certificate of registration of
deciding or resolving a controversy involved in the facts inquired into corporations, partnerships or associations, upon any of the following
by application of the law to the facts established by the inquiry. grounds:
The legal meaning of "investigate" is essentially the same: "(t)o follow 1. Fraud in procuring its certificate of registration;
up step by step by patient inquiry or observation. To trace or track; to
search into; to examine and inquire into with care and accuracy; to find 2. Serious misrepresentation as to what the corporation can do or is
out by careful inquisition; examination; the taking of evidence; a legal doing to the great prejudice of or damage to the general public;
3. Refusal to comply or defiance of any lawful order of the Commission b. Initiates proper investigation of corporations and partnerships or
restraining commission of acts which would amount to a grave persons, their books, records and other properties and assets, involving
violation of its franchise; their business transactions, in coordination with the operating
department involved;
xxxx
xxxx
(j) Imposes charges, fines and fees, which by law, it is authorized to
collect; e. Files and prosecutes civil or criminal cases before the Commission
and other courts of justice involving violations of laws and decrees
xxxx enforced by the Commission and the rules and regulations
promulgated thereunder;
Section 2. Powers of the Hearing Officer. The Hearing Officer shall have
the following powers: f. Prosecutes erring directors, officers and stockholders of corporations
and partnerships, commercial paper issuers or persons in accordance
xxxx
with the pertinent rules on procedures;
4. To cite and/or declare any person in direct or indirect contempt in
The authority granted to the PED under Section 1(b), (e), and (f), Rule II
accordance with pertinent provisions of the Rules of Court.
of the PED Rules of Practice and Procedure, need not comply with
Even assuming that these are adjudicative functions, the PED, in the Section 12, Chapter 3, Rule VII of the Administrative Code, which
instant case, exercised its investigative powers; thus, respondents do affects only the adjudicatory functions of administrative bodies. Thus,
not have the requisite standing to assail the validity of the rules on the PED would still be able to investigate the respondents under its
adjudication. A valid source of a statute or a rule can only be contested rules for their alleged failure to disclose their negotiations with GHB and
by one who will sustain a direct injury as a result of its the transactions entered into by its directors involving IRC shares.
enforcement.58 In the instant case, respondents are only being
This is not to say that administrative bodies performing adjudicative
investigated by the PED for their alleged failure to disclose their
functions are required to strictly comply with the requirements of
negotiations with GHB and the transactions entered into by its directors
Chapter 3, Rule VII of the Administrative Code, particularly, the right to
involving IRC shares. The respondents have not shown themselves to
cross-examination. It should be noted that under Section 2.2 of
be under any imminent danger of sustaining any personal injury
Executive Order No. 26, issued on 7 October 1992, abbreviated
attributable to the exercise of adjudicative functions by the SEC. They
proceedings are prescribed in the disposition of administrative cases:
are not being or about to be subjected by the PED to charges, fees or
fines; to citations for contempt; or to the cancellation of their certificate 2. Abbreviation of Proceedings. All administrative agencies are hereby
of registration under Section 1(h), Rule II of the PED Rules of Practice directed to adopt and include in their respective Rules of Procedure the
and Procedure. following provisions:
To repeat, the only powers which the PED was likely to exercise over xxxx
the respondents were investigative in nature, to wit:
2.2 Rules adopting, unless otherwise provided by special laws and
Section 1. Authority of the Prosecution and Enforcement Department - without prejudice to Section 12, Chapter 3, Book VII of the
Pursuant to Presidential Decree No. 902-A, as amended by Presidential Administrative Code of 1987, the mandatory use of affidavits in lieu of
Decree No. 1758, the Prosecution and Enforcement Department is direct testimonies and the preferred use of depositions whenever
primarily charged with the following: practicable and convenient.
xxxx As a consequence, in proceedings before administrative or quasi-
judicial bodies, such as the National Labor Relations Commission and
the Philippine Overseas Employment Agency, created under laws effect on pending actions. Another exception is where the repealing
which authorize summary proceedings, decisions may be reached on act reenacts the former statute and punishes the act previously
the basis of position papers or other documentary evidence only. They penalized under the old law. In such instance, the act committed before
are not bound by technical rules of procedure and evidence. 59 In fact, the reenactment continues to be an offense in the statute books and
the hearings before such agencies do not connote full adversarial pending cases are not affected, regardless of whether the new penalty
proceedings.60 Thus, it is not necessary for the rules to require affiants to be imposed is more favorable to the accused. (Emphasis provided.)
to appear and testify and to be cross-examined by the counsel of the
adverse party. To require otherwise would negate the summary nature In the present case, a criminal case may still be filed against the
of the administrative or quasi-judicial proceedings. 61 In Atlas respondents despite the repeal, since Sections
Consolidated Mining and Development Corporation v. Factoran, 8, 65 12,66 26,67 2768 and 2369 of the Securities Regulations Code
Jr.,62 this Court stated that: impose duties that are substantially similar to Sections 8, 30 and 36 of
the repealed Revised Securities Act.
[I]t is sufficient that administrative findings of fact are supported by
evidence, or negatively stated, it is sufficient that findings of fact are Section 8 of the Revised Securities Act, which previously provided for
not shown to be unsupported by evidence. Substantial evidence is all the registration of securities and the information that needs to be
that is needed to support an administrative finding of fact, and included in the registration statements, was expanded under Section
substantial evidence is "such relevant evidence as a reasonable mind 12, in connection with Section 8 of the Securities Regulations Code.
might accept as adequate to support a conclusion." Further details of the information required to be disclosed by the
registrant are explained in the Amended Implementing Rules and
In order to comply with the requirements of due process, what is Regulations of the Securities Regulations Code, issued on 30 December
required, among other things, is that every litigant be given reasonable 2003, particularly Sections 8 and 12 thereof.
opportunity to appear and defend his right and to introduce relevant
evidence in his favor.63 Section 30 of the Revised Securities Act has been reenacted as Section
27 of the Securities Regulations Code, still penalizing an insider's
III. The Securities Regulations Code did not repeal Sections 8, misuse of material and non-public information about the issuer, for the
30 and 36 of the Revised Securities Act since said provisions purpose of protecting public investors. Section 26 of the Securities
were reenacted in the new law. Regulations Code even widens the coverage of punishable acts, which
intend to defraud public investors through various devices,
The Securities Regulations Code absolutely repealed the Revised misinformation and omissions.
Securities Act. While the absolute repeal of a law generally deprives a
court of its authority to penalize the person charged with the violation Section 23 of the Securities Regulations Code was practically lifted from
of the old law prior to its appeal, an exception to this rule comes about Section 36(a) of the Revised Securities Act. Both provisions impose
when the repealing law punishes the act previously penalized under upon (1) a beneficial owner of more than ten percent of any class of
the old law. The Court, in Benedicto v. Court of Appeals, sets down the any equity security or (2) a director or any officer of the issuer of such
rules in such instances:64 security, the obligation to submit a statement indicating his or her
ownership of the issuer's securities and such changes in his or her
As a rule, an absolute repeal of a penal law has the effect of depriving ownership thereof.
the court of its authority to punish a person charged with violation of
the old law prior to its repeal. This is because an unqualified repeal of a Clearly, the legislature had not intended to deprive the courts of their
penal law constitutes a legislative act of rendering legal what had been authority to punish a person charged with violation of the old law that
previously declared as illegal, such that the offense no longer exists was repealed; in this case, the Revised Securities Act.
and it is as if the person who committed it never did so. There are,
however, exceptions to the rule. One is the inclusion of a saving clause
in the repealing statute that provides that the repeal shall have no
IV. The SEC retained the jurisdiction to investigate violations resulting from the SEC's investigation of this case has already
of the Revised Securities Act, reenacted in the Securities prescribed.73 They point out that the prescription period applicable to
Regulations Code, despite the abolition of the PED. offenses punished under special laws, such as violations of the Revised
Securities Act, is twelve years under Section 1 of Act No. 3326, as
Section 53 of the Securities Regulations Code clearly provides that amended by Act No. 3585 and Act No. 3763, entitled "An Act to
criminal complaints for violations of rules and regulations enforced or Establish Periods of Prescription for Violations Penalized by Special Acts
administered by the SEC shall be referred to the Department of Justice and Municipal Ordinances and to Provide When Prescription Shall Begin
(DOJ) for preliminary investigation, while the SEC nevertheless retains to Act."74 Since the offense was committed in 1994, they reasoned that
limited investigatory powers.70 Additionally, the SEC may still impose prescription set in as early as 2006 and rendered this case moot. Such
the appropriate administrative sanctions under Section 54 of the position, however, is incongruent with the factual circumstances of this
aforementioned law.71 case, as well as the applicable laws and jurisprudence.
In Morato v. Court of Appeals,72 the cases therein were still pending It is an established doctrine that a preliminary investigation interrupts
before the PED for investigation and the SEC for resolution when the the prescription period.75 A preliminary investigation is essentially a
Securities Regulations Code was enacted. The case before the SEC determination whether an offense has been committed, and whether
involved an intra-corporate dispute, while the subject matter of the there is probable cause for the accused to have committed an offense:
other case investigated by the PED involved the schemes, devices, and
violations of pertinent rules and laws of the company's board of A preliminary investigation is merely inquisitorial, and it is often the
directors. The enactment of the Securities Regulations Code did not only means of discovering the persons who may be reasonably
result in the dismissal of the cases; rather, this Court ordered the charged with a crime, to enable the fiscal to prepare the complaint or
transfer of one case to the proper regional trial court and the SEC to information. It is not a trial of the case on the merits and has no
continue with the investigation of the other case. purpose except that of determining whether a crime has been
committed or whether there is probable cause to believe that the
The case at bar is comparable to the aforecited case. In this case, the accused is guilty thereof.76
SEC already commenced the investigative proceedings against
respondents as early as 1994. Respondents were called to appear Under Section 45 of the Revised Securities Act, which is entitled
before the SEC and explain their failure to disclose pertinent Investigations, Injunctions and Prosecution of Offenses, the Securities
information on 14 August 1994. Thereafter, the SEC Chairman, having Exchange Commission (SEC) has the authority to "make such
already made initial findings that respondents failed to make timely investigations as it deems necessary to determine whether any person
disclosures of their negotiations with GHB, ordered a special has violated or is about to violate any provision of this Act XXX." After a
investigating panel to hear the case. The investigative proceedings finding that a person has violated the Revised Securities Act, the SEC
were interrupted only by the writ of preliminary injunction issued by the may refer the case to the DOJ for preliminary investigation and
Court of Appeals, which became permanent by virtue of the Decision, prosecution.
dated 20 August 1998, in C.A.-G.R. SP No. 37036. During the pendency
of this case, the Securities Regulations Code repealed the Revised While the SEC investigation serves the same purpose and entails
Securities Act. As in Morato v. Court of Appeals, the repeal cannot substantially similar duties as the preliminary investigation conducted
deprive SEC of its jurisdiction to continue investigating the case; or the by the DOJ, this process cannot simply be disregarded. In Baviera v.
regional trial court, to hear any case which may later be filed against Paglinawan,77 this Court enunciated that a criminal complaint is first
the respondents. filed with the SEC, which determines the existence of probable cause,
before a preliminary investigation can be commenced by the DOJ. In
V. The instant case has not yet prescribed. the aforecited case, the complaint filed directly with the DOJ was
dismissed on the ground that it should have been filed first with the
Respondents have taken the position that this case is moot and SEC. Similarly, the offense was a violation of the Securities Regulations
academic, since any criminal complaint that may be filed against them
Code, wherein the procedure for criminal prosecution was reproduced herein.79 Thereafter, on 20 August 1998, the appellate court issued the
from Section 45 of the Revised Securities Act. 78 This Court affirmed the assailed Decision in C.A. G.R. SP. No. 37036 ordering that the writ of
dismissal, which it explained thus: injunction be made permanent and prohibiting the SEC from taking
cognizance of and initiating any action against herein respondents. The
The Court of Appeals held that under the above provision, a criminal SEC was bound to comply with the aforementioned writ of preliminary
complaint for violation of any law or rule administered by the SEC must injunction and writ of injunction issued by the Court of Appeals
first be filed with the latter. If the Commission finds that there is enjoining it from continuing with the investigation of respondents for 12
probable cause, then it should refer the case to the DOJ. Since years. Any deviation by the SEC from the injunctive writs would be
petitioner failed to comply with the foregoing procedural requirement, sufficient ground for contempt. Moreover, any step the SEC takes in
the DOJ did not gravely abuse its discretion in dismissing his complaint defiance of such orders will be considered void for having been taken
in I.S. No. 2004-229. against an order issued by a court of competent jurisdiction.
A criminal charge for violation of the Securities Regulation Code is a An investigation of the case by any other administrative or judicial body
specialized dispute. Hence, it must first be referred to an administrative would likewise be impossible pending the injunctive writs issued by the
agency of special competence, i.e., the SEC. Under the doctrine of Court of Appeals. Given the ruling of this Court in Baviera v.
primary jurisdiction, courts will not determine a controversy involving a Paglinawan,80 the DOJ itself could not have taken cognizance of the
question within the jurisdiction of the administrative tribunal, where the case and conducted its preliminary investigation without a prior
question demands the exercise of sound administrative discretion determination of probable cause by the SEC. Thus, even presuming
requiring the specialized knowledge and expertise of said that the DOJ was not enjoined by the Court of Appeals from conducting
administrative tribunal to determine technical and intricate matters of a preliminary investigation, any preliminary investigation conducted by
fact. The Securities Regulation Code is a special law. Its enforcement is the DOJ would have been a futile effort since the SEC had only started
particularly vested in the SEC. Hence, all complaints for any violation of with its investigation when respondents themselves applied for and
the Code and its implementing rules and regulations should be filed were granted an injunction by the Court of Appeals.
with the SEC. Where the complaint is criminal in nature, the SEC shall
indorse the complaint to the DOJ for preliminary investigation and Moreover, the DOJ could not have conducted a preliminary
prosecution as provided in Section 53.1 earlier quoted. investigation or filed a criminal case against the respondents during the
time that issues on the effectivity of Sections 8, 30 and 36 of the
We thus agree with the Court of Appeals that petitioner committed a Revised Securities Act and the PED Rules of Practice and Procedure
fatal procedural lapse when he filed his criminal complaint directly with were still pending before the Court of Appeals. After the Court of
the DOJ. Verily, no grave abuse of discretion can be ascribed to the DOJ Appeals declared the aforementioned statutory and regulatory
in dismissing petitioner's complaint. provisions invalid and, thus, no civil, criminal or administrative case
may be filed against the respondents for violations thereof, the DOJ
The said case puts in perspective the nature of the investigation
would have been at a loss, as there was no statutory provision which
undertaken by the SEC, which is a requisite before a criminal case may
respondents could be accused of violating.
be referred to the DOJ. The Court declared that it is imperative that the
criminal prosecution be initiated before the SEC, the administrative Accordingly, it is only after this Court corrects the erroneous ruling of
agency with the special competence. the Court of Appeals in its Decision dated 20 August 1998 that either
the SEC or DOJ may properly conduct any kind of investigation against
It should be noted that the SEC started investigative proceedings
the respondents for violations of Sections 8, 30 and 36 of the Revised
against the respondents as early as 1994. This investigation effectively
Securities Act. Until then, the prescription period is deemed interrupted.
interrupted the prescription period. However, said proceedings were
disrupted by a preliminary injunction issued by the Court of Appeals on To reiterate, the SEC must first conduct its investigations and make a
5 May 1995, which effectively enjoined the SEC from filing any criminal, finding of probable cause in accordance with the doctrine pronounced
civil, or administrative case against the respondents
in Baviera v. Paglinawan.81 In this case, the DOJ was precluded from In the assailed decision, the Court of Appeals denied the SEC's Motion
initiating a preliminary investigation since the SEC was halted by the for Leave to Quash SEC Omnibus Orders, since it found other issues
Court of Appeals from continuing with its investigation. Such a situation that were more important than whether or not the PED was the proper
leaves the prosecution of the case at a standstill, and neither the SEC body to investigate the matter. Its refusal was premised on its earlier
nor the DOJ can conduct any investigation against the respondents, finding that no criminal, civil, or administrative case may be filed
who, in the first place, sought the injunction to prevent their against the respondents under Sections 8, 30 and 36 of the Revised
prosecution. All that the SEC could do in order to break the impasse Securities Act, due to the absence of any implementing rules and
was to have the Decision of the Court of Appeals overturned, as it had regulations. Moreover, the validity of the PED Rules on Practice and
done at the earliest opportunity in this case. Therefore, the period Procedure was also raised as an issue. The Court of Appeals, thus,
during which the SEC was prevented from continuing with its reasoned that if the quashal of the orders was granted, then it would
investigation should not be counted against it. The law on the be deprived of the opportunity to determine the validity of the
prescription period was never intended to put the prosecuting bodies in aforementioned rules and statutory provisions. In addition, the SEC
an impossible bind in which the prosecution of a case would be placed would merely pursue the same case without the Court of Appeals
way beyond their control; for even if they avail themselves of the having determined whether or not it may do so in accordance with due
proper remedy, they would still be barred from investigating and process requirements. Absent a determination of whether the SEC may
prosecuting the case. file a case against the respondents based on the assailed provisions of
the Revised Securities Act, it would have been improper for the Court of
Indubitably, the prescription period is interrupted by commencing the Appeals to grant the SEC's Motion for Leave to Quash SEC Omnibus
proceedings for the prosecution of the accused. In criminal cases, this Orders.
is accomplished by initiating the preliminary investigation. The
prosecution of offenses punishable under the Revised Securities Act In all, this Court rules that no implementing rules were needed to
and the Securities Regulations Code is initiated by the filing of a render effective Sections 8, 30 and 36 of the Revised Securities Act; nor
complaint with the SEC or by an investigation conducted by the was the PED Rules of Practice and Procedure invalid, prior to the
SEC motu proprio. Only after a finding of probable cause is made by enactment of the Securities Regulations Code, for failure to provide
the SEC can the DOJ instigate a preliminary investigation. Thus, the parties with the right to cross-examine the witnesses presented against
investigation that was commenced by the SEC in 1995, soon after it them. Thus, the respondents may be investigated by the appropriate
discovered the questionable acts of the respondents, effectively authority under the proper rules of procedure of the Securities
interrupted the prescription period. Given the nature and purpose of Regulations Code for violations of Sections 8, 30, and 36 of the Revised
the investigation conducted by the SEC, which is equivalent to the Securities Act.82
preliminary investigation conducted by the DOJ in criminal cases, such
investigation would surely interrupt the prescription period. IN VIEW OF THE FOREGOING, the instant Petition is GRANTED.
This Court hereby REVERSES the assailed Decision of the Court of
VI. The Court of Appeals was justified in denying SEC's Motion Appeals promulgated on 20 August 1998 in CA-G.R. SP No. 37036
for Leave to Quash SEC Omnibus Orders dated 23 October and LIFTS the permanent injunction issued pursuant thereto. This
1995. Court further DECLARES that the investigation of the respondents for
violations of Sections 8, 30 and 36 of the Revised Securities Act may be
The SEC avers that the Court of Appeals erred when it denied its Motion undertaken by the proper authorities in accordance with the Securities
for Leave to Quash SEC Omnibus Orders, dated 23 October 1995, in Regulations Code. No costs.
the light of its admission that the PED had the sole authority to
investigate the present case. On this matter, this Court cannot agree SO ORDERED.
with the SEC.
 G.R. No. 181293 February 23, 2015 Petitioners also seek to prohibit Skyway O & M Corporation from
assuming operations and maintenance responsibilities over the
ANA THERESIA "RISA" HONTIVEROS-BARAQUEL, DANIEL L. Skyway toll facilities. ANTECEDENT FACTS
EDRALIN, VICTOR M. GONZALES, SR., JOSE APOLLO R. ADO,
RENE D. SORIANO, ALLIANCE OF PROGRESSIVE LABOR, The Toll Regulatory Board (TRB) was created on 31 March 1977 by
BUKLURAN NG MANGGAGAWANG PILIPINO, LAHING PILIPINO Presidential Decree No. (P.D.) 11121 in order to supervise and regulate,
MULTIPURPOSE TRANSPORT SERVICE COOPERATIVE, PNCC on behalf of the government, the collection of toll fees and the
SKYWAY CORPORATION EMPLOYEES UNION (PSCEU), and operation of toll facilities by the private sector.
PNCC TRAFFIC MANAGEMENT & SECURITY DEPARTMENT
WORKERS ORGANIZATION (PTMSDWO), Petitioners, On the same date, P.D. 11132 was issued granting to the Construction
vs. and Development Corporation of the Philippines (now Philippine
TOLL REGULATORY BOARD, THE SECRETARY OF THE National Construction Corporation or PNCC) the right, privilege, and
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS authority to construct, operate, and maintain toll facilities in the North
(DOTC), PNCC SKYWAY CORPORATION, PHILIPPINE NATIONAL and South Luzon Toll Expressways for a period of 30 years starting 1
CONSTRUCTION CORPORATION, SKYWAY O & M May1977.
CORPORATION, and CITRA METRO MANILA TOLLWAYS
TRB and PNCC later entered into a Toll Operation Agreement,3 which
CORP., Respondents.
prescribed the operating conditions of the right granted to PNCC under
DECISION P.D. 1113.

SERENO, CJ: P.D. 1113 was amended by P.D. 1894,4 which granted PNCC the right,
privilege, and authority to construct, maintain, and operate the North
This is an original petition for certiorari and prohibition under Rule 65 of Luzon, South Luzon and Metro Manila Expressways, together with the
the Rules of Court, with a prayer for the issuance of a writ of toll facilities appurtenant thereto. The term of 30 years provided under
preliminary injunction and/or temporary restraining order, seeking the P. D. 1113 starting from 1 May 1977 remained the same for the North
annulment of the following: and the South Luzon Expressways, while the franchise granted for the
Metro Manila Expressway (MME) provided a term of 30 years
1. The Amendment to the Supplemental Toll Operation Agreement commencing from the date of completion of the project.
executed on 18 July 2007 between the Republic of the Philippines, the
Philippine National Construction Corporation, and Citra Metro Manila On 22 September 1993, PNCC entered into an agreement 5 with PT
Tollways Corporation; Citra Lamtoro Gung Persada (CITRA), a limited liability company
organized and established under the laws of the Republic of Indonesia,
2. The Memorandum dated 20 July 2007 of the Secretary of whereby the latter committed to provide PNCC with a pre-feasibility
Transportation and Communications, approving the Amendment to the study on the proposed MME project. The agreement was
Supplemental Toll Operation Agreement; supplemented6 on 14 February 1994 with a related undertaking on the
part of CITRA. CITRA was to provide a preliminary feasibility study on
3. The Memorandum of Agreement executed on 21 December 2007
the Metro Manila Skyways (MMS) project, a system of elevated
between the Philippine National Construction Corporation, PNCC
roadway networks passing through the heart of the Metropolitan
Skyway Corporation, and Citra Metro Manila Tollways Corporation; and
Manila area. In order to accelerate the actual implementation of both
4. The Toll Operation Certificate issued by the Toll Regulatory Board on the MME and the MMS projects, PNCC and CITRA entered into a second
28 December 2007 in favor of Skyway O & M Corporation. agreement.7 Through that agreement, CITRA committed to finance
and undertake the preparation, updating, and revalidation of previous
The annulment of the above is sought for being unconstitutional, studies on the construction, operation, and maintenance of the
contrary to law, and grossly disadvantageous to the government. projects.
As a result of the feasibility and related studies, PNCC and CITRA Communications (DOTC) Secretary Leandro Mendoza approved the
submitted, through the TRB, a Joint Investment Proposal (JIP) to the ASTOA through the challenged Memorandum dated 20 July 2007.15
Republic of the Philippines.8 The JIP embodied the implementation
schedule for the financing, design and construction of the MMS in three On 21 December 2007, PNCC, PSC, and CMMTC entered into the
stages: the South Metro Manila Skyway, the North Metro Manila assailed Memorandum of Agreement (MOA)16 providing for the
Skyway, and the Central Metro Manila Skyway.9 successful and seamless assumption by SOMCO of the operations and
maintenance of Stage 1 of the South Metro Manila Skyway. Under the
The TRB reviewed, evaluated and approved the JIP, particularly as it MOA, PSC received the amount of ₱320 million which was used for the
related to Stage 1, Phases 1 and 2; and Stage 2, Phase 1 of the South settlement of its liabilities arising from the consequent retrenchment or
Metro Manila Skyway. separation of its affected employees.

On 30 August 1995, PNCC and CITRA entered into a Business and Joint The TRB issued the challenged Toll Operation Certificate (TOC)17 to
Venture Agreement10 and created the Citra Metro Manila Tollways SOM CO on 28 December 2007, authorizing the latter to operate and
Corporation (CMMTC). CMMTC was a joint venture corporation maintain Stage 1 of the South Metro Manila Skyway effective 10:00
organized under Philippine laws to serve as a channel through which p.m. on 31December2007.
CITRA shall participate in the construction and development of the
project. Meanwhile, on 28 December 2007, petitioner PNCC Traffic
Management and Security Department Workers Organization
On 27 November 1995, the Republic of the Philippines - through the (PTMSDWO) filed a Notice of Strike against PSC on the ground of unfair
TRB - as Grantor, CMMTC as Investor, and PNCC as Operator executed labor practice, specifically union busting.18 The Secretary of Labor and
a Supplemental Toll Operation Agreement (STOA)11 covering Stage 1, Employment19 assumed jurisdiction over the dispute in an Order dated
Phases 1 and 2; and Stage 2, Phase 1 of the South Metro Manila 31 December 2007 and set the initial hearing of the case on 2 January
Skyway. Under the STOA, the design and construction of the project 2008.20
roads became the primary and exclusive privilege and responsibility of
CMMTC. The operation and maintenance of the project roads became On 3 January 2008, petitioners PTMSDWO and PNCC Skyway
the primary and exclusive privilege and responsibility of the PNCC Corporation Employees Union (PSCEU) filed before the Regional Trial
Skyway Corporation (PSC), a wholly owned subsidiary of PNCC, which Court of Parañaque City, Branch 258 (RTC), a complaint against
undertook and performed the latter's obligations under the STOA. respondents TRB, PNCC, PSC, CMMTC, and SOMCO. The complaint was
for injunction and prohibition with a prayer for a writ of preliminary
CMMTC completed the design and construction of Stage 1 of the South injunction and/or a temporary restraining order, and sought to prohibit
Metro Manila Skyway, which was operated and maintained by PSC.12 the implementation of the AS TOA and the MOA, as well as the
assumption of the toll operations by SOMCO. 21 Petitioners PSCEU and
On 18 July 2007, the Republic of the Philippines, through the TRB, PTMSDWO also sought the subsequent nullification of the ASTOA and
CMMTC, and PNCC executed the assailed Amendment to the the MOA for being contrary to law and for being grossly
Supplemental Toll Operation Agreement (ASTOA).13 The ASTOA disadvantageous to the government.22 They later filed an Amended
incorporated the amendments, revisions, and modifications necessary Complaint23 dated 8 January 2008, additionally praying that PSC be
to cover the design and construction of Stage 2 of the South Metro allowed to continue the toll operations. With the exception of TRB, all
Manila Skyway. Also under the ASTOA, Skyway 0 & M Corporation defendants therein filed their Opposition.
(SOMCO) replaced PSC in performing the operations and maintenance
of Stage 1 of the South Metro Manila Skyway. On 23 January 2008, the RTC issued an Order24 denying the prayer for
the issuance of a temporary restraining order and/or writ of preliminary
Pursuant to the authority granted to him under Executive Order No. injunction. According to the RTC, petitioners were seeking to enjoin a
(E.O.) 49714 dated 24 January 2006, Department of Transportation and national government infrastructure project. Under Republic Act No.
(R.A.) 8975,25 lower courts are prohibited from issuing a temporary
restraining order or preliminary injunction against the government - or arrangement whereby SOMCO would replace PSC in the toll operations
any person or entity acting under the government's direction - to and management, PNCC seriously breached the terms and conditions
restrain the execution, implementation, or operation of any such of its undertaking under the franchise and effectively abdicated its
contract or project. Furthermore, the RTC ruled that it could no longer rights and privileges in favor of SOMCO.
issue a temporary restraining order or preliminary injunction,
considering that the act sought to be restrained had already been Furthermore, the TOC granted to SOMCO was highly irregular and
consummated.26 The AS TOA, the MOA, and the assumption of the toll contrary to law, because 1) it did not indicate the conditions that shall
operations by SOMCO took effect at 10:00 p.m. on 31 December 2007, be imposed on SOMCO as provided under P.D. 1112;41 2) none of the
while petitioners PSCEU and PTMSDWO sought to prohibit their requirements on public bidding, negotiations, or even publication was
implementation only on 3 January 2008. complied with before the issuance of the TOC to SOMCO; 3) applying
the stricter "grandfather rule," SOMCO does not qualify as a facility
In view of its denial of the ancillary prayer, the RTC required defendants operator as defined under R.A. 6957,42 as amended by R.A.
to file their respective Answers to the Amended Complaint.27 7718;43 and 4) there were no public notices and hearings conducted
wherein all legitimate issues and concerns about the transfer of the toll
On 28 January 2008, petitioners PSCEU and PTMSDWO filed a Notice of operations would have been properly ventilated.
Dismissal with Urgent Ex-Parte Motion for the Issuance of Order
Confirming the Dismissal,28 considering that no Answers had yet been Petitioners also claim that the approval by the DOTC Secretary of the
filed. On the basis thereof, the R TC dismissed the case without AS TOA could not take the place of the presidential approval required
prejudice on 29 January 2008.29 under P.D. 111344 and P.D. 189445 concerning the franchise granted to
PNCC.
On 4 February 2008, petitioners filed the instant Petition 30 before this
Court. On 13 February 2008, we required respondents to comment on Finally, petitioners claim that the assumption of the toll operations by
the same.31 SOM CO was grossly disadvantageous to the government, because 1)
for a measly capital investment of ₱2.5 million, SOMCO stands to earn
Meanwhile, defendants PNCC32 and PSC33 filed their respective Motions ₱400 million in gross revenues based on official and historical records;
for Partial Reconsideration of the Order of the R TC dismissing the case 2) with its measly capital, SOMCO would not be able to cover the direct
without prejudice. Both argued that the RTC should have dismissed the overhead for personal services in the amount of ₱226 million as borne
case with prejudice. They pointed out that petitioners PSCEU and out by Commission on Audit reports; 3) the net revenue from toll
PTMSDWO had acted in bad faith by filing the complaint before the operations would go to private shareholders of SOMCO, whereas all
RTC, despite the pendency of a labor case over which the Secretary of earnings of PSC when it was still in charge of the toll operations went to
Labor and Employment had assumed jurisdiction. Defendant CMMTC PNCC - the mother company whose earnings, as an "acquired-asset
joined PNCC and PSC in moving for a partial reconsideration of the RTC corporation," formed part of the public treasury; 4) the new
Order.34 arrangement would result in the poor delivery of toll services by
SOMCO, which had no proven track record; 5) PSC received only ₱320
The RTC denied the Motions for Partial Reconsideration in an Order
million as settlement for the transfer of toll operations to SOMCO.
dated 13 June 2008.35
All respondents counter that petitioners do not have the requisite legal
Before this Court, SOMCO,36 PSC,37 PNCC,38 CMMTC,39 and TRB40 filed
standing to file the petition. According to respondents, petitioner
their respective Comments on the Petition.
Hontiveros-Baraquel filed the instant petition as a legislator in her
THE PARTIES' POSITIONS capacity as party-list representative of Akbayan. As such, she was only
allowed to sue to question the validity of any official action when it
Petitioners argue that the franchise for toll operations was exclusively infringed on her prerogative as a legislator. 46 Presently, she has cited
vested by P.D. 1113 in PNCC, which exercised the powers under its
franchise through PSC in accordance with the STOA. By agreeing to the
no such prerogative, power, or privilege that is adversely affected by between the Republic of the Philippines through the TRB, PNCC, and
the assailed acts.47 CMMTC.58 In fact, PNCC's franchise was never sold, transferred, or
otherwise assigned to SOMCO59 in the same way that PSC's previous
While suing as citizens, the individual petitioners have not shown any assumption of the operation and maintenance of the South Metro
personal or substantial interest in the case indicating that they Manila Skyway did not amount to a sale, transfer or assignment of
sustained or will sustain direct injury as a result of the implementation PNCC's franchise.60
of the assailed acts.48 The maintenance of the suit by petitioners as
taxpayers has no merit either because the assailed acts do not involve There can be no valid objection to the approval of the ASTOA by the
the disbursement of public funds.49 Finally, the bringing of the suit by DOTC Secretary, because he was authorized by the President to do so
petitioners as people's organizations does not automatically confer by virtue of E.O. 497.61 Also, the phrase "subject to the approval of the
legal standing, especially since petitioner-organizations do not even President of the Philippines" in P.D. 1112 and 1113 does not in any way
allege that they represent their members,50 nor do they cite any mean that the presidential approval must be obtained prior to the
particular constitutional provision that has been violated or disregarded execution of a contract, or that the approval be made personally by the
by the assailed acts.51 In fact, the suit raises only issues of contract law, President.62 The presidential approval may be obtained under the
and none of the petitioners is a party or is privy to the assailed doctrine of qualified political agency.63
agreements and issuances.52
Respondents argue that there is no merit in the claim that the TOC
Respondents also argue that petitioners violate the hierarchy of courts. granted to SOMCO was highly irregular and contrary to law. First, the
In particular, it is alleged that while lower courts are prohibited from TOC clearly states that the toll operation and maintenance by SOMCO
issuing temporary restraining orders or preliminary injunctions against shall be regulated by the Republic of the Philippines in accordance with
national government projects under R.A. 8975, the law does not P.D. 1112, the STOA, the toll operations and maintenance rules and
preclude them from assuming jurisdiction over complaints that seek regulations, and lawful orders, instructions, and conditions that may be
the nullification of a national government project as ultimate relief.53 imposed from time to time.64 Second, there is no need to comply with
the public bidding and negotiation requirements, because the South
As a final procedural challenge to the petition, respondents aver that Metro Manila Skyway is an ongoing project, not a new
petitioners are guilty of forum shopping. When petitioners filed the one.65 Furthermore, the STOA, which was the basis for the ASTOA, was
instant petition, the case before the R TC seeking similar reliefs was still concluded way before the effectivity of R.A. 918466 in 2003.67
pending, as respondents PNCC, PSC and CMMTC had moved for the
partial reconsideration of the RTC's Order of dismissal within the Third, SOMCO is a Filipino corporation with substantial 72% Filipino
reglementary period.54 Furthermore, the instant case and the one ownership.68 Fourth, the law requires prior notice and hearing only in
before the RTC were filed while petitioners' labor grievances seeking an administrative body's exercise of quasi-judicial functions. 69 In this
similar reliefs were also being heard before the Department of Labor case, the transfer of the toll operations and maintenance to SOM CO
and Employment.55 was a contractual arrangement entered into in accordance with law.70

On the merits of the arguments in the petition, respondents argue that Finally, the assumption of the toll operation and maintenance by
nothing in the ASTOA, the approval thereof by the DOTC Secretary, the SOMCO is not disadvantageous to the government. Petitioners belittle
MOA, or the TOC was violative of the Constitution. It is argued that the the ₱2.5 million capitalization of SOMCO, considering that PSC's
authority to operate a public utility can be granted by administrative capitalization at the time it was incorporated was merely ₱500,000.71
agencies when authorized by law.56 Under P.D. 1112, the TRB is
empowered to grant authority and enter into contracts for the Respondents claim that under the ASTOA, PNCC shall get a direct share
construction, operation, and maintenance of a toll facility,57 such as the in the toll revenues without any corollary obligation, unlike the
ASTOA in this case. Also, the ASTOA was an amendment, not to the arrangement in the STOA whereby PNCC's 10% share in the toll
legislative franchise of PNCC, but to the STOA previously executed revenues was intended primarily for the toll operation and
maintenance by PSC.72
Finally, respondents assert that there is no reason to fear that the Secretary and the issuance of the TOC infringed on the constitutional
assumption by SOMCO would result in poor delivery of toll services. power of Congress, which has the sole authority to grant franchises for
CITRA and the other shareholders of SOMCO are entities with the operation of public utilities. This Court has had a few occasions to
experience and proven track record in toll operations.73 Also, SOM CO rule that a franchise from Congress is not required before each and
hired or absorbed more than 300 PSC employees,74 who brought with every public utility may operate.78 Unless there is a law that specifically
them their work expertise and experience. requires a franchise for the operation of a public utility, particular
agencies in the executive branch may issue authorizations and licenses
ISSUES for the operation of certain classes of public utilities. 79 In the instant
case, there is no law that states that a legislative franchise is necessary
The instant case shall be resolved on the basis of the following issues:
for the operation of toll facilities.
Procedural:
In PAL v. Civil Aeronautics Board,80 this Court enunciated:
I. Whether petitioners have standing;
Congress has granted certain administrative agencies the power to
II. Whether petitioners are guilty of forum-shopping; grant licenses for, or to authorize the operation of certain public utilities.
With the growing complexity of modem life, the multiplication of the
Substantive: subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency towards
III. Whether the TRB has the power to grant authority to operate a toll
the delegation of greater powers by the legislature, and towards the
facility;
approval of the practice by the courts. It is generally recognized that a
IV. Whether the TOC issued to SOMCO was valid; franchise may be derived indirectly from the state through a duly
designated agency, and to this extent, the power to grant franchises
V. Whether the approval of the ASTOA by the DOTC Secretary was has frequently been delegated, even to agencies other than those of a
valid; and legislative nature. In pursuance of this, it has been held that privileges
conferred by grant by local authorities as agents for the state constitute
VI. Whether the assumption of toll operations by SOMCO is as much a legislative franchise as though the grant had been made by
disadvantageous to the government. an act of the Legislature.81
OUR RULING It is thus clear that Congress does not have the sole authority to grant
I franchises for the operation of public utilities. Considering the
foregoing, we find that the petition raises no issue of constitutional
Not all petitioners have personality to sue. import. More particularly, no legislative prerogative, power, or privilege
has been impaired. Hence, legislators have no standing to file the
Standing is a constitutional law concept allowing suits to be brought not instant petition, for they are only allowed to sue to question the validity
necessarily by parties personally injured by the operation of a law or of any official action when it infringes on their prerogatives as members
official action, but by concerned citizens, taxpayers, or voters who sue of Congress.82 Standing is accorded to them only if there is an
in the public interest.75 Determining the standing of concerned citizens, unmistakable showing that the challenged official act affects or impairs
taxpayers, or voters requires a partial consideration of the substantive their rights and prerogatives as legislators.83
merit of the constitutional question,76 or at least a preliminary estimate
thereof.77 In line with our ruling in Kilosbayan, Inc. v. Morato, 84 the rule
concerning a real party in interest - which is applicable to private
In this case, petitioners raise the power of Congress to grant franchises litigation – rather than the liberal rule on standing, should be applied to
as a constitutional question. They allege that the execution of the petitioners.
ASTOA and the MOA, the approval of the AS TOA by the DOTC
A real party in interest is one who stands to be benefited or injured by II
the judgment in the suit, or the party entitled to the avails of the
suit.85 One's interest must be personal and not one based on a desire PSCEU and PTMSDWO are not guilty of forum-shopping.
to vindicate the constitutional right of some third and unrelated
Forum shopping refers to the act of availing of several remedies in
party.86 The purposes of the rule are to prevent the prosecution of
different courts and/or administrative agencies, either simultaneously
actions by persons without any right or title to or interest in the case; to
or successively, when these remedies are substantially founded on the
require that the actual party entitled to legal relief be the one to
same material facts and circumstances and raise basically the same
prosecute the action; to avoid a multiplicity of suits; and to discourage
issues either pending in or already resolved by some other court or
litigation and keep it within certain bounds, pursuant to sound public
administrative agency.93 What is pivotal in determining whether forum
policy.87
shopping exists is the vexation caused to the courts and litigants and
At bottom, what is being questioned in the petition is the the possibility of conflicting decisions being rendered by different courts
relinquishment by PSC of the toll operations in favor of SOMCO, and/or administrative agencies upon the same issues.94
effectively leading to the cessation of the former' s business. In this
The elements of forum shopping are as follows: a) identity of parties or
case, we find that among petitioners, the only real parties in interest
at least such parties that represent the same interests in both actions;
are the labor unions PSCEU and PTMSDWO.
b) identity of rights asserted and the relief prayed for, the relief founded
PSCEU and PTMSDWO filed the petition not as a representative suit on on the same facts; and c) identity of the two preceding particulars,
behalf of their members who are rank-and-file employees of PSC, but such that any judgment rendered in one action will amount to res
as people's organizations "invested with a public duty to defend the judicata in the other.95 Respondents argue that petitioners PSCEU and
rule of law."88 PSCEU and PTMSDWO cite Kilosbayan v. Ermita89 as PTMSDWO committed forum shopping by filing the complaint for
authority to support their standing to file the instant suit. injunction and prohibition before the RTC during the pendency of
NCMB-NCR-NS-12-188-07 entitled In Re: Labor Dispute at PNCC
It is well to point out that the Court, in Ermita, accorded standing to Skyway Corporation. It was a case they also filed, over which the
people's organizations to file the suit, because the matter involved Secretary of Labor and Employment has assumed jurisdiction.
therein was the qualification of a person to be appointed as a member
of this Court -"an issue of utmost and far-reaching constitutional The case involves a Notice of Strike filed against PSC on the ground of
importance."90 As discussed, the instant petition raises no genuine unfair labor practice. While the specific act in question is not specified,
constitutional issues. the prohibited acts constituting unfair labor practice96 essentially relate
to violations concerning the workers' right to self-organization.97 When
Nevertheless, for a different reason, we accord standing to PSCEU and compared with the complaint filed with the RTC for injunction and
PTMSDWO to file the instant suit. With the transfer of toll operations to prohibition seeking to prohibit the implementation of the ASTOA and
SOMCO and the resulting cessation of PSC's business comes the the MOA, as well as the assumption of the toll operations by SOM CO
retrenchment and separation of all its employees. The existence of for being unconstitutional, contrary to law and disadvantageous to the
petitioner labor unions would terminate with the dissolution of its government, it is easily discernible that there is no identity of rights
employer and the separation of its members. This is why the petition asserted and relief prayed for. These cases are distinct and dissimilar in
also prays that this Court issue an order "that would smoothly preserve their nature and character.
the toll operations services of respondent PNCC and/or respondent PSC
under its legislative franchise."91 For the sake of argument, let us assume that, in order to hurt the
unions, PSC feigned a cessation of business that led to the
We have recognized that the right of self-preservation is inherent in retrenchment and separation of all employees. That is an unfair labor
every labor union or any organization for that matter. 92 Thus, PSCEU practice. In that complaint, the unions cannot be expected to ask for, or
and PTMSDWO, as real parties in interest, have the personality to the Secretary of Labor and Employment to grant, the annulment of the
question the assumption of the toll operations by SOMCO. ASTOA and the MOA and the continuation of toll operations by PSC.
The Secretary would only focus on the legality of the retrenchment and prejudice, because petitioners allegedly acted in bad faith in filing the
separation, and on the presence or absence of bad faith in PSC's notice of dismissal, were guilty of forum shopping, and did not notify
cessation of business. On the other hand, the complaint before the RTC respondents of their intention to file a notice of dismissal. With regard
would require it to focus on the legality of the ASTOA, the MOA and the to the first and the third allegation, petitioners may ask for dismissal at
transfer of toll operations. Ultimately, even if the Secretary of Labor and any time before the filing of the answer as a matter of right, even if the
Employment makes a finding of unfair labor practice, this notice cites "the most ridiculous of grounds for dismissal."101 As to the
determination would not amount to res judicata as regards the case second, we have already ruled that there was no forum shopping as
before the RTC. regards the successive filings of the labor case and the complaint
before the RTC.
We also reject the claim of respondents that petitioners PSCEU and
PTMSDWO committed forum shopping by filing the instant petition II
before this Court while the motion for partial reconsideration of the
RTC's Order of dismissal without prejudice was still pending. Section 1, TRB has the power to grant authority to operate a toll facility.
Rule 17 of the Rules of Court states:
This matter has already been settled by the Court in Francisco, Jr. v.
SECTION 1. Dismissal upon notice by plaintiff. - A complaint may be TRB,102 which ruled thus:
dismissed by the plaintiff by filing a notice of dismissal at any time
It is abundantly clear that Sections 3 (a) and (e) of P.D. 1112 in relation
before service of the answer or of a motion for summary judgment.
to Section 4 of P.D. 1894 have invested the TRB with sufficient power
Upon such notice being filed, the court shall issue an order confirming
to grant a qualified person or entity with authority to construct,
the dismissal. Unless otherwise stated in the notice, the dismissal is
maintain, and operate a toll facility and to issue the corresponding toll
without prejudice, except that a notice operates as an adjudication
operating permit or TOC.
upon the merits when filed by a plaintiff who has once dismissed in a
competent court an action based on or including the same claim. Sections 3 (a) and (e) of P.D. 1112 and Section 4 of P.D. 1894 amply
provide the power to grant authority to operate toll facilities:
In this case, petitioners PSCEU and PTMSDWO had filed a notice of
dismissal of the complaint before the RTC on 28 January 2008, before Section 3. Powers and Duties of the Board. - The Board shall have in
respondents filed their Answers. The following day, the RTC issued an addition to its general powers of administration the following powers
order confirming the dismissal. Under the above-cited rule, this and duties:
confirmation is the only qualification imposed on the right of a party to
dismiss the action before the adverse party files an answer.98 In this (a) Subject to the approval of the President of the Philippines, to enter
case, the dismissal of the action therefore became effective upon that into contracts in behalf of the Republic of the Philippines with persons,
confirmation by the RTC despite the subsequent filing of the motions natural or juridical, for the construction, operation and maintenance of
for partial reconsideration. toll facilities such as but not limited to national highways, roads,
bridges, and public thoroughfares. Said contract shall be open to
Thus, when the instant petition was filed on 4 February 2008, the citizens of the Philippines and/or to corporations or associations
complaint before the RTC was no longer pending. The complaint was qualified under the Constitution and authorized by law to engage in toll
dismissed without prejudice by virtue of the notice of dismissal filed by operations;
petitioners PSCEU and PTMSDWO. Consequently, there was not even
any need for petitioners to mention the prior filing and dismissal of the xxxx
complaint in the certificate of non-forum shopping in the instant
(e) To grant authority to operate a toll facility and to issue therefore the
petition,99 but they did so anyway.100
necessary "Toll Operation Certificate" subject to such conditions as
Parenthetically, in their motions for partial reconsideration, respondents shall be imposed by the Board including inter alia the following:
PNCC and PSC insisted that the dismissal should have been with
(1) That the Operator shall desist from collecting toll upon the facilities necessarily appurtenant thereto and, subject to the provisions
expiration of the Toll Operation Certificate. of Section 8 and 9 hereof, the toll that the GRANTEE will charge the
users thereof.
(2) That the entire facility operated as a toll system including all
operation and maintenance equipment directly related thereto shall be By explicit provision of law, the TRB was given the power to grant
turned over to the government immediately upon the expiration of the administrative franchise for toll facility projects.103 (Emphases supplied)
Toll Operation Certificate.
We cannot abide by the contention of petitioners that the franchise for
(3) That the toll operator shall not lease, transfer, grant the usufruct of, toll operations was exclusively vested in PNCC, which effectively
sell or assign the rights or privileges acquired under the Toll Operation breached its franchise when it transferred the toll operations to
Certificate to any person, firm, company, corporation or other SOMCO. First, there is nothing in P.D. 1113 or P.D. 1894 that states that
commercial or legal entity, nor merge with any other company or the franchise granted to PNCC is to the exclusion of all others.
corporation organized for the same purpose, without the prior approval
of the President of the Philippines. In the event of any valid transfer of Second, if we were to go by the theory of petitioners, it is only the
the Toll Operation Certificate, the Transferee shall be subject to all the operation and maintenance of the toll facilities that is vested with
conditions, terms, restrictions and limitations of this Decree as fully and PNCC. This interpretation is contrary to the wording of P.D. 1113 and
completely and to the same extent as if the Toll Operation Certificate P.D. 1894 g ranting PNCC the right, privilege and authority to construct,
has been granted to the same person, firm, company, corporation or operate and maintain the North Luzon, South Luzon and Metro Manila
other commercial or legal entity. Expressways and their toll facilities.

(4) That in time of war, rebellion, public peril, emergency, calamity, It appears that petitioners have confused the franchise granted under
disaster or disturbance of peace and order, the President of the P.D. 1113 and P.D. 1894 with particular provisions in the STOA. To
Philippines may cause the total or partial closing of the toll facility or clarify, the operation and maintenance of the project roads were the
order to take over thereof by the Government without prejudice to the primary and exclusive privilege and responsibility of PNCC through PSC
payment of just compensation. under the STOA. On the other hand, the design and construction of the
project roads were the primary and exclusive privilege and
(5) That no guarantee, Certificate of Indebtedness, collateral, securities, responsibility of CMMTC. However, with the execution of the AS TOA,
or bonds shall be issued by any government agency or government- the parties agreed that SOM CO shall replace PSC in undertaking the
owned or controlled corporation on any financing program of the toll operations and maintenance of the project roads. Thus, the "exclusivity
operator in connection with his undertaking under the Toll Operation clause" was a matter of agreement between the parties, which
Certificate. amended it in a later contract; it was not a matter provided under the
law.
(6) The Toll Operation Certificate may be amended, modified or
revoked whenever the public interest so requires. Third, aside from having been granted the power to grant
administrative franchises for toll facility projects, TRB is also
(a) The Board shall promulgate rules and regulations governing the empowered to modify, amend, and impose additional conditions on the
procedures for the grant of Toll Certificates. The rights and privileges of franchise of PNCC in an appropriate contract, particularly when public
a grantee under a Toll Operation Certificate shall be defined by the interest calls for it. This is provided under Section 3 of P.D. 1113 and
Board. Section 6 of P.D. 1894, to wit:
(b) To issue rules and regulations to carry out the purposes of this
Decree.

SECTION 4. The Toll Regulatory Board is hereby given jurisdiction and

supervision over the GRANTEE with respect to the Expressways, the toll
SECTION 3. This franchise is granted subject to such conditions as may holds true in this instance since the TRB has the power to issue "the
be imposed by the [Toll Regulatory] Board in an appropriate contract to necessary 'Toll Operation Certificate' subject to such conditions as shall
be executed for this purpose, and with the understanding and upon the be imposed by the Board including inter alia" those specified under
condition that it shall be subject to amendment, alteration or repeal Section 3(e) of P.D. 1112. Thus, impliedly written into every TOC are
when public interest so requires. the conditions prescribed therein.

xxx In any case, part of the TOC issued to SOMCO reads:

SECTION 6. This franchise is granted subject to such conditions, Pursuant to Section 3(e) of Presidential Decree No. 1112 or the Toll
consistent with the provisions of this Decree, as may be imposed by Operation Decree, Skyway O & M Corporation is hereby given authority
the Toll Regulatory Board in the Toll Operation Agreement and such to operate and maintain Stage 1 of the South Metro Manila Skyway
other modifications or amendments that may be made thereto, and effective as of 10:00 p.m. of 31 December 2007.
with the understanding and upon the condition that it shall be subject
to amendment or alteration when public interest so dictates. This authorization is issued upon the clear understanding that the
operation and maintenance of Stage 1 of the South Metro Manila
Section 6 of P.D. 1894 specifically mentions the Toll Operation Skyway as a toll facility and the collection of toll fees shall be closely
Agreement. The STOA was one such modification or amendment of the supervised and regulated by the Grantor, by and through the Board of
franchise of PNCC. So was the ASTOA, which further modified the Directors, in accordance with the terms and conditions set forth in the
franchise. PNCC cannot be said to have breached its franchise when it STOA, as amended, the rules and regulations duly promulgated by the
transferred the toll operations to SOMCO. PNCC remained the franchise Grantor for toll road operations and maintenance, as well as the lawful
holder for the construction, operation, and maintenance of the project orders, instructions and conditions which the Grantor, through the TRB,
roads; it only opted to partner with investors in the exercise of its may impose from time to time in view of the public nature of the
franchise leading to the organization of companies such as PSC and facility.
SOMCO.
As regards the allegation that none of the requirements for public
Again, considering that PNCC was granted the right, privilege, and bidding was observed before the TOC was issued to SOMCO, this
authority to construct, operate, and maintain the North Luzon, South matter was also squarely answered by the Court in Francisco, Jr. v.
Luzon, and Metro Manila Expressways and their toll facilities, we have TRB,106 to wit:
not heard petitioners decrying the "breach" by PNCC of its franchise
when it agreed to make CMMTC responsible for the design and Where, in the instant case, a franchisee undertakes the tollway projects
construction of the project roads under the STOA. of construction, rehabilitation and expansion of the tollways under its
franchise, there is no need for a public bidding. In pursuing the projects
IV with the vast resource requirements, the franchisee can partner with
other investors, which it may choose in the exercise of its management
The TOC issued to SOMCO was not irregular. prerogatives. In this case, no public bidding is required upon the
franchisee in choosing its partners as such process was done in the
Petitioners argue that the conditions provided under Section 3(e) of
exercise of management prerogatives and in pursuit of its right of
P.D. 1112104 were not imposed on SOMCO, because these do not
delectus personae. Thus, the subject tollway projects were undertaken
appear on the face of the TOC. Petitioners are mistaken.
by companies, which are the product of the joint ventures between
The TOC, as a grant of authority from the government, is subject to the PNCC and its chosen partners.107
latter's control insofar as the grant affects or concerns the
Under the STOA in this case, PNCC partnered with CMMTC in Stages 1
public.105 Like all other franchises or licenses issued by the
and 2 of the South Metro Manila Skyway. The STOA gave birth to PSC,
government, the TOC is issued subject to terms, conditions, and
which was put in charge of the operation and maintenance of the
limitations under existing laws and agreements. This rule especially
project roads. The ASTOA had to be executed for Stage 2 to petitioners have failed to prove their allegation that SOMCO is not
accommodate changes and modifications in the original design. The qualified to operate a toll facility for failure to meet the nationality
ASTOA then brought forth the incorporation of SOMCO to replace PSC requirement under the Constitution.
in the operations and maintenance of Stage 1 of the South Metro
Manila Skyway. Clearly, no public bidding was necessary because Finally, no public notices and hearings were necessary prior to the
PNCC, the franchisee, merely exercised its management prerogative issuance of the TOC to SOMCO. For the same reason that a public
when it decided to undertake the construction, operation, and bidding is not necessary, PNCC cannot be required to call for public
maintenance of the project roads through companies which are hearings concerning matters within its prerogative. At any rate, we
products of joint ventures with chosen partners. have studied P.D. 1112 and the Implementing Rules and Regulations
Authorizing the Establishment of Toll Facilities and found no provision
Petitioners also insist that SOMCO is not qualified to operate a toll requiring the issuance of public notices and the conduct of public
facility, because it does not meet the nationality requirement for a hearings prior to the issuance of a TOC.
corporation when scrutinized under the "grandfather rule." Other than
advancing this argument, however, petitioners have not shown how V
SOMCO fails to meet the nationality requirement for a public utility
Approval of the AS TOA by the DOTC Secretary was approval by the
operator. Petitioners only aver in their petition that 40% of SOMCO is
President.
owned by CMMTC, a foreign company, while the rest is owned by the
following: a) Toll Road Operation and Maintenance Venture Corporation The doctrine of qualified political agency declares that, save in matters
(TROMVC), almost 40% of which is owned by a Singaporean company; on which the Constitution or the circumstances require the President to
b) Asset values Holding Company, Inc. (AHCI), of which almost 40% is act personally, executive and administrative functions are exercised
Dutch-owned; and c) Metro Strategic Infrastructure Holdings, Inc. through executive departments headed by cabinet secretaries, whose
(MSIHI), 40% of which is owned by Metro Pacific Corporation, whose acts are presumptively the acts of the President unless disapproved by
ownership or nationality was not specified.108 the latter.110 As explained in Villena v. Executive Secretary,111 this
doctrine is rooted in the Constitution:
Section 11, Article XII of the Constitution provides that "[n]o franchise,
certificate, or any other form of authorization for the operation of a x x x With reference to the Executive Department of the government,
public utility shall be granted except to citizens of the Philippines or to there is one purpose which is crystal-clear and is readily visible without
corporations or associations organized under the laws of the Philippines the projection of judicial searchlight, and that is, the establishment of a
at least sixty per centum of whose capital is owned by such citizens x x single, not plural, Executive. The first section of Article VII of the
x." Clearly, under the Constitution, a corporation at least 60% of whose Constitution, dealing with the Executive Department, begins with the
capital is owned by Filipinos is of Philippine nationality. Considering this enunciation of the principle that "The executive power shall be vested
constitutional provision, petitioners' silence on the ownership of the in a President of the Philippines." This means that the President of the
remaining 60% of the corporations cited is very telling. Philippines is the Executive of the Government of the Philippines, and
no other. The heads of the executive departments occupy political
In order to rebut petitioners' allegations, respondents readily present
positions and hold office in an advisory capacity, and, in the language
matrices showing the itemization of percentage ownerships of the
of Thomas Jefferson, "should be of the President's bosom confidence,"
subscribed capital stock of SOMCO, as well as that of TROMVC, AHCI,
and, in the language of Attorney-General Cushing, "are subject to the
and MSIHI. Respondents attempt to show that all these corporations
direction of the President." Without minimizing the importance of the
are of Philippine nationality, with 60% of their capital stock owned by
heads of the various departments, their personality is in reality but the
Filipino citizens. We need not reproduce the itemization here. Suffice it
projection of that of the President. Stated otherwise, and as forcibly
to say that in their Consolidated Reply,109 petitioners did not refute the
characterized by Chief Justice Taft of the Supreme Court of the United
unanimous claim of respondents. It is axiomatic that one who alleges a
States, "each head of a department is, and must be, the President's
fact has the burden of proving it. On this matter, we find that
alter ego in the matters of that department where the President is
required by law to exercise authority." Secretaries of departments, of of this Decree as fully and completely and to the same extents as if the
course, exercise certain powers under the law but the law cannot franchise has been granted to the same person, firm, company,
impair or in any way affect the constitutional power of control and corporation or other commercial or legal entity. (Emphasis supplied)
direction of the President. As a matter of executive policy, they may be
granted departmental autonomy as to certain matters but this is by SECTION 13. The GRANTEE shall not lease, transfer, grant the usufruct
mere concession of the executive, in the absence of valid legislation in of, sell or assign this franchise nor the rights or privileges required
the particular field. If the President, then, is the authority in the hereby, to any person, firm, company, corporation or other legal entity,
Executive Department, he assumes the corresponding responsibility. nor merge with any other company or corporation without the prior
The head of a department is a man of his confidence; he controls and approval of the President of the Philippines. In the event that this
directs his acts; he appoints him and can remove him at pleasure; he is franchise is sold, transferred or assigned, the transferee shall be
the executive, not any of his secretaries.112 x x x (Citations omitted) subject to all the conditions, terms, restrictions and limitations of this
Decree as fully and completely and to the same extent as if the
Applying the doctrine of qualified political agency, we have ruled that franchise has been granted to the said person, firm, company,
the Secretary of Environment and Natural Resources can validly order corporation or other legal entity. (Emphasis supplied) Petitioners insist
the transfer of a regional office by virtue of the power of the President that based on the above provisions, it is the President who should give
to reorganize the national government.113 In Constantino v. personal approval considering that the power to grant franchises was
Cuisia,114 the Court upheld the authority of the Secretary of Finance to exclusively vested in Congress. Hence, to allow the DOTC Secretary to
execute debt-relief contracts. The authority emanates from the power exercise the power of approval would supposedly dilute that legislative
of the President to contract foreign loans under Section 20, Article VII of prerogative.
the Constitution. In Angeles v. Gaite,115 the Court ruled that there can
be no issue with regard to the President's act of limiting his power to The argument of petitioners is founded on the assumption that PNCC in
review decisions and orders of the Secretary of Justice, especially since some way leased, transferred, granted the usufruct of, sold, or
the decision or order was issued by the secretary, the President's "own assigned to SOMCO its franchise or the rights or privileges PNCC had
alter ego."116 acquired by it. Here lies the error in petitioners' stand. First, as
discussed above, the power to grant franchises or issue authorizations
There can be no question that the act of the secretary is the act of the for the operation of a public utility is not exclusively exercised by
President, unless repudiated by the latter. In this case, approval of the Congress. Second, except where the situation falls within that special
ASTOA by the DOTC Secretary had the same effect as approval by the class that demands the exclusive and personal exercise by the
President. The same would be true even without the issuance of E.O. President of constitutionally vested power,117 the President acts
497, in which the President, on 24 January 2006, specifically delegated through alter egos whose acts are as if the Chief Executive's own.
to the DOTC Secretary the authority to approve contracts entered into
by the TRB. Third, no lease, transfer, grant of usufruct, sale, or assignment of
franchise by PNCC or its merger with another company ever took
Petitioners are unimpressed. They cite Section 8 of P.D. 1113 and place.
Section 13 of P.D. 1894 as follows:
The creation of the TRB and the grant of franchise to PNCC were made
SECTION 8. The GRANTEE shall not lease, transfer, grant the usufruct in the light of the recognition on the part of the government that the
of, sell or assign this franchise nor the rights or privileges acquired private sector had to be involved as an alternative source of financing
hereby, to any person, firm, company, corporation or other commercial for the pursuance of national infrastructure projects. As the franchise
or legal entity, nor merge with any other company or corporation holder for the construction, maintenance and operation of
without the prior approval of the President of the Philippines. In the infrastructure toll facilities, PNCC was equipped with the right and
event that this franchise is sold, transferred or assigned, the transferee privilege, but not necessarily the means, to undertake the project. This
shall be subject to all the conditions, terms, restrictions and limitations is where joint ventures with private investors become necessary.
A joint venture is an association of companies jointly undertaking a petitioners belittle the initial capital investment, private ownership, and
commercial endeavor, with all of them contributing assets and sharing track record of SOMCO.
risks, profits, and losses.118 It is hardly distinguishable from a
partnership considering that their elements are similar and, thus, When one uses the term "grossly disadvantageous to the
generally governed by the law on partnership.119 government," the allegations in support thereof must reflect the
meaning accorded to the phrase. "Gross" means glaring,
In joint ventures with investor companies, PNCC contributes the reprehensible, culpable, flagrant, and shocking.120 It requires that the
franchise it possesses, while the partner contributes the financing - mere allegation shows that the disadvantage on the part of the
both necessary for the construction, maintenance, and operation of the government is unmistakable, obvious, and certain.
toll facilities. PNCC did not thereby lease, transfer, grant the usufruct of,
sell, or assign its franchise or other rights or privileges. This remains In this case, we find that the allegations of petitioners are nothing more
true even though the partnership acquires a distinct and separate than speculations, apprehensions, and suppositions.1âwphi1 They
personality from that of the joint venturers or leads to the formation of speculate that with its "measly" capital investment, SOMCO would not
a new company that is the product of such joint venture, such as PSC be able to cover the overhead expenses for personal services alone.
and SOMCO in this case. They fear that the revenue from toll operations would go to "private
pockets" in exchange for a small settlement amount to be given to
Hence, when we say that the approval by the DOTC Secretary in this PSC. Given that SOMCO has no proven track record, petitioners deduce
case was approval by the President, it was not in connection with the that its assumption of the toll operations would lead to poor delivery of
franchise of PNCC, as required under Section 8 of P.D. 1113 and toll services to the public.
Section 13 of P.D. 1894. Rather, the approval was in connection with
the powers of the TRB to enter into contracts on behalf of the The aim in the establishment of toll facilities is to draw from private
government as provided under Section 3(a) of P.D. 1112, which states: resources the financing of government infrastructure projects.
Naturally, these private investors would want to receive reasonable
SECTION 3. Powers and Duties of the Board. - The Board shall have in return on their investments. Thus, the collection of toll fees for the use
addition to its general powers of administration the following powers of public improvements has been authorized, subject to supervision
and duties: and regulation by the national government.121 As regards the ₱320
million settlement given to PSC, the amount was to be used principally
(a) Subject to the approval of the President of the Philippines, to enter for the payment of its liabilities of PSC arising from the retrenchment of
into contracts in behalf of the Republic of the Philippines with persons, its employees. We note that under the MOA, the residual assets of PSC
natural or juridical, for the construction, operation and maintenance of shall still be offered for sale to CMMTC, subject to valuation.122 Thus, it
toll facilities such as but not limited to national highways, roads, would be inaccurate to say that PSC would receive only ₱320 million for
bridges, and public thoroughfares. Said contract shall be open to the entire arrangement.
citizens of the Philippines and/or to corporations or associations
qualified under the Constitution and authorized by law to engage in toll It is quite understandable that SOMCO does not yet have a proven
operations; (Emphasis supplied) track record in toll operations, considering that it was only the ASTOA
and the MOA that gave birth to it. We are not prepared to rule that this
VI lack of track record would result in poor delivery of toll services,
especially because most of the former employees of PSC have been
Petitioners have not shown that the transfer of toll operations to SOM
rehired by SOMCO, an allegation of respondents that was never refuted
CO was grossly disadvantageous to the government.
by petitioners. Neither are we prepared to take the amount of SOMCO's
In support of their contention that the transfer of toll operations from initial capital investment against it, as it is considerably higher than
PSC to SOMCO was grossly disadvantageous to the government, ₱500,000, the authorized capital stock of PSC as of 2002.123

A FINAL NOTE
R.A. 8975 prohibits lower courts from issuing any temporary restraining December 2007. On the other hand, the complaint before the RTC
order, preliminary injunction, or preliminary mandatory injunction seeking to enjoin the assumption by SOMCO was filed only on 3
against the government - or any of its subdivisions, officials or any January 2008, while the instant petition was filed on 4 February 2008.
person or entity, whether public or private, acting under the
government's direction - to restrain, prohibit or compel acts related to As we held in Aznar Brothers Realty, Inc. v. CA,125 injunction does not lie
the implementation and completion of government infrastructure when the act sought to be enjoined has already become a fait accompli
projects. or an accomplished or consummated act.

The rationale for the law is easily discernible. Injunctions and Parties must observe the hierarchy of courts before seeking relief from
restraining orders tend to derail the expeditious and efficient this Court. Observance thereof minimizes the imposition on the already
implementation and completion of government infrastructure projects; limited time of this Court and prevents delay, intended or otherwise, in
increase construction, maintenance and repair costs; and delay the the adjudication of cases.126 We do not appreciate the litigants' practice
enjoyment of the social and economic benefits therefrom. Thus, unless of directly seeking recourse before this Court, relying on the gravitas of
the matter is of extreme urgency involving a constitutional issue, a personality yet making serious claims without the proof to support
judges of lower courts who shall issue injunctive writs or restraining them.
orders in violation of the law shall be administratively liable.
WHEREFORE, the petition is DISMISSED. The prayer for the issuance of
The law is clear that what is prohibited is merely the issuance of a writ of preliminary injunction and/or temporary restraining order is
provisional orders enjoining the implementation of a national DENIED.
government project. R.A. 8975 does not bar lower courts from
SO ORDERED.
assuming jurisdiction over complaints that seek the nullification or
implementation of a national government infrastructure project as MARIA LOURDES P.A. SERENO
ultimate relief.124 Chief Justice, Chairperson
There is no question that the ultimate prayer in the instant case is the
nullification of a national government project considering that the
ASTOA involved the design and construction of Stage 2 of the South
Metro Manila Skyway, as well as the operation and maintenance of
Stage 1 thereof. The prayer is grounded on the contract's alleged
unconstitutionality, violation of the law, and gross disadvantage to the
government. Such principal action and relief were within the jurisdiction
of the RTC, which acted correctly when it ordered respondents to file
their respective answers to the complaint, even while it denied the
prayer for the issuance of a writ of preliminary injunction and/or
temporary restraining order in observance of R.A. 8975.

It was therefore error on the part of petitioners to come directly before

this Court for the sole reason that the lower courts will not be able to
grant the prayer for the issuance of a writ of preliminary injunction
and/or temporary restraining order to enjoin the assumption of toll
operations by SOMCO. The error even takes on a whole new meaning,
because SOMCO assumed responsibility for the operations and
maintenance of the South Metro Manila Skyway at 10:00 p.m. on 31
 G.R. No. 144109 February 17, 2003 the franchise was transferred to petitioner Associated Communications
& Wireless Services – United Broadcasting Network, Inc. (ACWS for
ASSOCIATED COMMUNICATIONS & WIRELESS SERVICES – brevity) through Congress’ Concurrent Resolution No. 58.3 Petitioner
UNITED BROADCASTING NETWORKS, petitioner, ACWS then engaged in the installation and operation of several radio
vs. stations around the country.
NATIONAL TELECOMMUNICATIONS COMMISSION, respondent.
In 1974, P.D. No. 576-A, "Regulating the Ownership and Operation of
DECISION Radio and Television Stations and for other Purposes" was issued, with
the following pertinent provisions on franchise of radio and television
PUNO, J.:
broadcasting systems:
For many years now, there has been a "pervading confusion in the
"Sec. 1. No radio station or television channel may obtain a franchise
state of affairs of the broadcast industry brought about by conflicting
unless it has sufficient capital on the basis of equity for its operation for
laws, decrees, executive orders and other pronouncements
at least one year, including purchase of equipment.
promulgated during the Martial Law regime."1 The question that has
taken a long life is whether the operation of a radio or television station xxxxxxxxx
requires a congressional franchise. The Court shall now lay to rest the
issue. Sec. 6. All franchises, grants, licenses, permits, certificates or other
forms of authority to operate radio or television broadcasting systems
This is a petition for review on certiorari of the Court of Appeals’ January shall terminate on December 31, 1981. Thereafter, irrespective of any
31, 2000 decision and February 21, 2000 resolution affirming the franchise, grant, license, permit, certificate or other forms of authority
January 13, 1999 decision of the National Telecommunications to operate granted by any office, agency or person, no radio or
Commission (NTC for brevity). television station shall be authorized to operate without the authority of
the Board of Communications and the Secretary of Public Works and
First, the facts.
Communications or their successors who have the right and authority
On November 11, 1931, Act No. 3846, entitled "An Act Providing for the to assign to qualified parties frequencies, channels or other means of
Regulation of Radio Stations and Radio Communications in the identifying broadcasting system; Provided, however, that any conflict
Philippines and for Other Purposes," was enacted. Sec. 1 of the law over, or disagreement with a decision of the aforementioned
reads, viz: authorities may be appealed finally to the Office of the President within
fifteen days from the date the decision is received by the party in
"Sec. 1. No person, firm, company, association, or corporation shall interest."
construct, install, establish, or operate a radio transmitting station, or a
radio receiving station used for commercial purposes, or a radio A few years later or in 1979, E.O. No. 5464 was issued. It integrated the
broadcasting station, without having first obtained a franchise therefor Board of Communications and the Telecommunications Control Bureau
from the Congress of the Philippines..." under the Integrated Reorganization Plan of 1972 into the NTC. Among
the powers vested in the NTC under Sec. 15 of E.O. No. 546 are the
Pursuant to the above provision, Congress enacted in 1965 R.A. No. following:
4551, entitled "An Act Granting Marcos J. Villaverde, Jr. and Winfred E.
Villaverde a Franchise to Construct, Install, Maintain and Operate Public "a. Issue Certificate of Public Convenience for the operation of
Radiotelephone and Radiotelegraph Coastal Stations, and Public Fixed communication utilities and services, radio communications systems,
and Public Based and Land Mobile Stations within the Philippines for the wire or wireless telephone or telegraph system, radio and television
Reception and Transmission of Radiotelephone and Radiotelegraph for broadcasting system and other similar public utilities;
Domestic Communications and Provincial Telephone Systems in
xxxxxxxxx
Certain Provinces." It gave the grantees a 50-year franchise.2 In 1969,
c. Grant permits for the use of radio frequencies for wireless telephone the following: (a) a franchise from Congress (Sec. 1); (b) a permit to
and telegraph systems and radio communication systems including construct or install a station from the Secretary of Commerce and
amateur radio stations and radio and television broadcasting systems; . Industry (Sec. 2); and (c) a license to operate the station also from the
.." Secretary of Commerce and Industry (id.). The franchise is the privilege
granted by the State through its legislative body and is subject to
Upon termination of petitioner’s franchise on December 31, 1981 regulation by the State itself by virtue of its police power through its
pursuant to P.D. No. 576-A, it continued operating its radio stations administrative agencies (RCPI vs. NTC, 150 SCRA 450). The permit and
under permits granted by the NTC. license are the administrative authorizations issued by the
administrative agency in the exercise of regulation. It is clear that what
As these presidential issuances relating to the radio and television
was transferred to the Board of Communications and the Secretary of
broadcasting industry brought about confusion as to whether the NTC
Commerce and Industry under Section 6 of P.D. No. 576-A was merely
could issue permits to radio and television broadcast stations without
the regulatory powers vested solely in the Secretary of Commerce and
legislative franchise, the NTC sought the opinion of the Department of
Industry under Section 2 of Act No. 3846, as amended. The franchising
Justice (DOJ) on the matter. On June 20, 1991, the DOJ rendered
authority was retained by the then incumbent President as repository
Opinion No. 98, Series of 1991, viz:
of legislative power under Martial Law, as is clearly indicated in the first
"We believe that under P.D. No. 576-A dated November 11, 1974 and WHEREAS clause of P.D. No. 576-A to wit:
prior to the issuance of E.O No. 546 dated July 23, 1979, the NTC, then
‘WHEREAS, the President of the Philippines is empowered under the
Board of Communications, had no authority to issue permits or
Constitution to review and approve franchises for public utilities.’
authorizations to operate radio and television broadcasting systems
without a franchise first being obtained pursuant to Section 1 of Act No. Of course, under the Constitution, said power (the power to review and
3846, as amended. A close reading of the provisions of Sections 1 and approve franchises), belongs to the lawmaking body (Sec. 5, Art. XIV,
6 of P.D. No. 576-A, supra, does not reveal any indication of a 1973 Constitution; Sec. 11, Art. XII, 1987 Constitution).
legislative intent to do away with the franchising requirement under
Section 1 of Act No. 3846. In fact, a mere reading of Section 1 would The corollary question to be resolved is: Has E.O. No 546 (which is a
readily indicate that a franchise was necessary for the operation of law issued pursuant to P.D. No. 1416, as amended by P.D. No. 1771,
radio and television broadcasting systems as it expressly provided that granting the then President continuing authority to reorganize the
no such franchise may be obtained unless the radio station or administrative structure of the national government) modified the
television channel has ‘sufficient capital on the basis of equity for its franchising and licensing arrangement for radio and television
operation for at least one year, including purchase of equipment.’ broadcasting systems under P.D. No. 576-A?

It is believed that the termination of all franchises granted for the We believe so.
operation of radio and television broadcasting systems effective
December 31, 1981 and the vesting of the power to authorize the E.O. No. 546 integrated the Board of Communications and the
operation of any radio or television station upon the Board of Telecommunications Bureau into a single entity known as the NTC (See
Communications and the Secretary of Public Works and Sec. 14), and vested the new body with broad powers, among them,
Communications and their successors under Section 6 of P.D. No. 576- the power to issue Certificates of Public Convenience for the operation
A does not necessarily imply the abrogation of the requirement of of communications utilities, including radio and televisions
obtaining a franchise under Section 1 of Act No. 3846, as amended, in broadcasting systems and the power to grant permits for the use of
the absence of a clear provision in P.D. No. 576-A providing to this radio frequencies (Sec. 14[a] and [c], supra). Additionally, NTC was
effect. vested with broad rule making authority ‘to encourage a larger and
more effective use of communications, radio and television
It should be noted that under Act No. 3846, as amended, a person, firm broadcasting facilities, and to maintain effective competition among
or entity desiring to operate a radio broadcasting station must obtain
private entities in these activities whenever the Commission finds it WHEREAS, there is a pervading confusion in the state of affairs of the
reasonably feasible’ (Sec. 15[f]). broadcast industry brought about by conflicting laws, decrees,
executive orders and other pronouncements promulgated during the
In the recent case of Albano vs. Reyes (175 SCRA 264), the Supreme Martial Law regime, the parties in their common desire to rationalize
Court held that ‘franchises issued by Congress are not required before the broadcast industry, promote the interest of public welfare, avoid a
each and every public utility may operate.’ Administrative agencies vacuum in the delivery of broadcast services, and foremost to better
may be empowered by law ‘to grant licenses for or to authorize the serve the ends of press freedom, the parties hereto have agreed as
operation of certain public utilities.’ The Supreme Court stated that the follows:
provision in the Constitution (Art. XII, Sec. 11) ‘that the issuance of a
franchise, certificate or other form of authorization for the operation of ‘The NTC shall continue to issue and grant permits or authorizations to
a public utility shall be subject to amendment, alteration or repeal by operate radio and television broadcast stations within their mandate
Congress, does not necessarily imply . . . that only Congress has the under Section 15 of Executive Order No. 546, provided that such
power to grant such authorization. Our statute books are replete with temporary permits or authorization to operate shall be valid for two (2)
laws granting specified agencies in the Executive Branch the power to years within which the permittee shall be required to file an application
issue such authorization for certain classes of public utilities.’ for legislative franchise with Congress not later than December 31,
1994; provided finally, that if the permittee of the temporary permit or
We believe that E.O. No. 546 is one law which authorizes an authorization to operate fails to secure the legislative franchise with
administrative agency, the NTC, to issue authorizations for the Congress within this period, the NTC shall not extend or renew its
operation of radio and television broadcasting systems without need of permit or authorization to operate any further.’"6
a prior franchise issued by Congress.
Prior to the December 31, 1994 deadline set by the MOU, petitioner
Based on all the foregoing, we hold the view that NTC is empowered filed with Congress an application for a franchise on December 20,
under E.O. No. 546 to issue authorization and permits to operate radio 1994. Pending its approval, the NTC issued to petitioner a temporary
and television broadcasting system."5 permit dated July 7, 1995 to operate a television station via Channel 25
of the UHF Band from June 29, 1995 to June 28, 1997. 7 In 1996, the
However, on May 3, 1994, the NTC, the Committee on Legislative
NTC authorized petitioner to increase the power output of Channel 25
Franchises of Congress, and the Kapisanan ng mga Brodkaster sa
from 1.0 kilowatt to 25 kilowatts after finding it financially and
Pilipinas of which petitioner is a member of good standing, entered into
technically capable;8 it also granted petitioner a permit to purchase
a Memorandum of Understanding (MOU) that requires a congressional
radio transmitters/transceivers for use in its television Channel 25
franchise to operate radio and television stations. The MOU states, viz:
broadcasting.9 Shortly before the expiration of its temporary permit,
"WHEREAS, under the provisions of Section 1 of Act No. 3846 (Radio petitioner applied for its renewal on May 14, 1997.10
Laws of the Philippines, as amended), only radio and television
On October 28, 1997, the House Committee on Legislative Franchises
broadcast stations with legislative franchise are authorized to operate.
of Congress replied to an inquiry of the NTC’s Broadcast Division Chief
WHEREAS, Executive Order No. 546, which created the National regarding the franchise application of ACWS filed on December 20,
Telecommunications Commission (NTC) and abolished the Board of 1994. The Committee certified that petitioner’s franchise application
Communications (BOC) and the Telecommunications Control Bureau was not deliberated on by the 9th Congress because petitioner failed to
(TCB), and integrated the functions and prerogative of the latter two submit the required supporting documents. In the next Congress,
agencies into the National Telecommunications Commission (NTC); petitioner did not re-file its application.11

WHEREAS, the National Telecommunications Commission (NTC) is The following month or on November 17, 1997, the NTC’s Broadcast
authorized to issue certificate of public convenience for the operation of Service Department wrote to petitioner ordering it to submit a new
radio and television broadcast stations; congressional franchise for the operation of its seven radio stations and
informing it that pending compliance, its application for temporary 1. Existing broadcast operators who were not able to secure a
permits to operate these radio stations would be held in legislative franchise up to this date are given up to December 31, 1999
abeyance.12 Petitioner failed to comply with the franchise requirement; within which to have their application for a legislative franchise bill
it claims that it did not receive the November 17, 1997 letter. approved by Congress. The franchise bill must be filed immediately but
not later than November 30th of this year to give both Houses time to
Despite the absence of a congressional franchise, the NTC notified deliberate upon and recommend approval/disapproval thereof.
petitioner on January 19, 1998 that its May 14, 1997 application for
renewal of its temporary permit to operate television Channel 25 was 2. Broadcast operators affected by this circular must file their
approved and would be released upon payment of the prescribed fee respective applications for renewal/extension of their Temporary
of ₱3,600.00.13 After paying said amount,14 however, the NTC refused Permits in the prescribed form together with the certification from the
to release to petitioner its renewed permit. Instead, the NTC Committee on Legislative Franchises, House of Representatives that a
commenced against petitioner Administrative Case No. 98-009 based franchise bill has indeed been filed prior to 30 November 1998.
on the November 17, 1997 letter. On February 26, 1998, the NTC
issued an Order directing petitioner to show cause why its assigned 3. In the event the permittee will not be able to have its franchise bill
frequency, television Channel 25, should not be recalled for lack of the approved within the prescribed period, the NTC will no longer
required congressional franchise. Petitioner was also directed to cease renew/extend its Temporary Permit and the Commission shall initiate
and desist from operating Channel 25 unless subsequently authorized the recall of its assigned frequency provided that due process of law is
by the NTC.15 observed.

In compliance with the February 26, 1998 Order, petitioner filed its 4. Henceforth, no application/petition for Certificate of Public
Answer on March 17, 1998.16 In a hearing on April 22, 1998, petitioner Convenience (CPC) to establish, maintain and operate a broadcast
presented evidence and asked for continuance of the presentation to station in the broadcast service shall be accepted for filing without
May 20, 1998.17 On May 4, 1998, however, petitioner filed before the showing that the applicant has an approved Legislative Franchise.
Court of Appeals a Petition for Mandamus, Prohibition, and Damages to
This Memorandum Circular shall be published in one (1) newspaper of
compel the NTC to release its temporary permit to operate Channel 25
general circulation in the Philippines and shall take effect thirty (30)
which was approved in January 1998. The appellate court denied the
days from its publication.
petition on September 30, 1998.
August 17, 1998, Quezon City, Philippines."18
Meantime, on August 17, 1998, the NTC issued Memorandum Circular
No. 14-10-98 which reads, viz: The Memorandum Circular was published in the Philippine Star on
October 15, 1998.
"SUBJECT: Guidelines in the Renewal/Extension of Temporary Permit of
Radio/TV Broadcast operators who failed to secure a legislative Well within the November 30, 1998 deadline under the Memorandum
franchise conformably with the Memorandum of Understanding (MOU) Circular, House Bill No. 3216, entitled "An Act Granting the ACWS-
dated May 3, 1994, entered into by and between the National United Broadcasting Network, Inc. a Franchise to Construct, Install,
Telecommunications and the Committee on Legislative Franchises, Operate and Maintain Radio and Television Broadcasting Stations
House of Representatives, and the Kapisanan ng mga Brodkaster sa within the Philippines, and for other Purposes," was filed with the
Pilipinas (KBP). Legislative Calendar Section, Bills and Index Division on September 2,
1998.19
In compliance with the MOU and in order to clear the ambiguity
surrounding the operation of broadcast operators who were not able to On January 13, 1999, the NTC rendered a decision on Administrative
have their legislative franchise approved during the last congress, the Case No. 98-009 against petitioner, the dispositive portion of which
following guidelines are hereby issued: reads:
"WHEREFORE, for lack of a legal personality to justify the issuance of THE COURT OF APPEALS ERRED IN UPHOLDING THE RECALL OF THE
any permit or license to the respondent (ACWS), the respondent not FREQUENCY CHANNEL 25 PREVIOUSLY ASSIGNED TO THE PETITIONER
having a valid legislative franchise, the Commission hereby renders AND/OR THE CANCELLATION OF ITS PERMIT TO OPERATE WHICH IS
judgment as follows: UNREASONABLE, UNFAIR, OPPRESSIVE, WHIMSICAL AND
CONFISCATORY WHEN IT PREVIOUSLY ISSUED THE SAID PERMIT
1) Channel 25 assigned to herein respondent ACWS is hereby WITHOUT REQUIRING A LEGISLATIVE FRANCHISE.
RECALLED;
V.
2) Respondent’s application for renewal of its temporary permit to
operate Channel 25 is hereby DENIED; and THE COURT OF APPEALS ERRED IN NOT HOLDING THAT NTC CASE NO.
98-009 HAD BEEN RENDERED MOOT AND ACADEMIC WITH THE
3) Respondent is hereby ordered to CEASE and DESIST from further ADOPTION AND PROMULGATION BY THE NTC OF MEMORANDUM
operating Channel 25."20 CIRCULAR NO. 14-10-98 DATED AUGUST 17, 1998 AS PETITIONER
FILED THE APPLICATION FOR LEGISLATIVE FRANCHISE PURSUANT
Petitioner sought recourse at the Court of Appeals which affirmed the
THERETO."21
NTC decision.
The petition is devoid of merit.
Hence, this petition for review on certiorari on the following grounds:
We shall discuss together the first three assigned errors as they are
"I.
interrelated.
THE COURT OF APPEALS ERRED IN UPHOLDING THE RULING OF THE
Petitioner stresses that Act. No. 3846 covers only the operation of radio
NTC THAT A CONGRESSIONAL FRANCHISE IS A CONDITION SINE QUA
and not television stations as Section 1 of the said law does not
NON IN THE OPERATION OF A RADIO AND TELEVISION BROADCASTING
mention television stations in its coverage, viz:
SYSTEM.
"Sec. 1. No person, firm, company, association or corporation shall
II.
construct, install, establish, or operate a radio transmitting station, or a
THE COURT OF APPEALS ERRED IN NOT CONSIDERING OPINION 98 radio receiving station used for commercial purposes, or a radio
SERIES OF 1991 DATED JUNE 20, 1991 OF THE SECRETARY OF JUSTICE broadcasting station, without having first obtained a franchise therefor
HOLDING THAT THE NTC MAY ISSUE AUTHORIZATION FOR THE from the Congress of the Philippines…"
OPERATION OF RADIO AND TELEVISION BROADCASTING SYSTEMS,
Petitioner observes that quite understandably, television stations were
WITHOUT THE NEED OF A PRIOR FRANCHISE ISSUED BY CONGRESS,
not included in Act No. 3846 because the law was enacted in 1931
AS BINDING ON THE NTC WHO REQUESTED FOR SAID OPINION AND IS
when there was yet no television station in the Philippines. Following
NOT MERELY ADVISORY, AS IT IS PREDICATED ON A DECISION OF THIS
the rule in statutory construction that what is not included in the law is
HONORABLE COURT.
deemed excluded, petitioner avers that television stations are not
III. covered by Act No. 3846. Petitioner notes that in fact, the NTC
previously issued to it a temporary permit dated July 7, 1995 to operate
THE COURT OF APPEALS ERRED IN CONSIDERING ACT NO. 3846 AS Channel 25 from June 29, 1995 to June 28, 1997 without requiring a
REQUIRING A FRANCHISE FROM CONGRESS FOR THE LAWFUL congressional franchise. Likewise, in 1996, the NTC issued to it a permit
OPERATION OF RADIO OR TELEVISION BROADCASTING STATIONS to increase its television operating power and to purchase a radio
WHEN CLEARLY ITS PROVISIONS COVER ONLY RADIO BUT IT DOES transmitter/transceiver for use in its television broadcasting, again
NOT INCLUDE TELEVISION STATIONS. without requiring a congressional franchise. Petitioner thus argues that,
contrary to the January 19, 1999 decision of the NTC, its application for
IV.
renewal of its temporary permit to operate television Channel 25 does To understand why it was necessary to identify these agencies, we turn
not require a congressional franchise. a heedful eye on the laws regarding authorizations for the operation of
radio and television stations that preceded P.D. No. 576-A.
In upholding the NTC decision, the Court of Appeals held that a
congressional franchise is required for the operation of radio and Act No. 3846 of 1931 provides, viz:
television broadcasting stations as this requirement under Act No. 3846
was not expressly repealed by P.D. No. 576-A nor E.O. No. 546. Citing "Sec. 1. No person, firm, company, association, or corporation shall
Berces, Sr. v. Guingona,22 it ruled that without an express repeal, a construct, install, establish, or operate a radio transmitting station, or a
subsequent law cannot be construed as repealing a prior law unless radio receiving station used for commercial purposes, or a radio
there is an irreconcilable inconsistency and repugnancy in the broadcasting station, without having first obtained a franchise therefor
language of the new and old laws, which petitioner was not able to from the Congress of the Philippines:
show.23
xxxxxxxxx
The appellate court correctly ruled that a congressional franchise is
Sec. 1-A. No person, firm, company, association or corporation shall
necessary for petitioner to operate television Channel 25. Even
possess or own transmitters or transceivers (combination transmitter-
assuming that Act No. 3846 applies only to radio stations and not to
receiver), without registering the same with the Secretary of Public
television stations as petitioner adamantly insists, the subsequent P.D.
Works and Communications . . . and no person, firm, company,
No. 576-A clearly shows in Section 1 that a franchise is required to
association or corporation shall construct or manufacture, or purchase
operate radio as well as television stations, viz:
radio transmitters or transceivers without a permit issued by the
"Sec. 1. No radio station or television channel may obtain a franchise Secretary of Public Works and Communications.
unless it has sufficient capital on the basis of equity for its operation for
xxxxxxxxx
at least one year, including purchase of equipment." (emphasis
supplied) Sec. 3. The Secretary of Public Works and Communications is hereby
empowered to regulate the construction or manufacture, possession,
As pointed out in DOJ Opinion No. 98, there is nothing in P.D. No. 576-A
control, sale and transfer of radio transmitters or transceivers
that reveals any intention to do away with the requirement of a
(combination transmitter-receiver) and the establishment, use, the
franchise for the operation of radio and television stations. Section 6 of
operation of all radio stations and of all forms of radio communications
P.D. No. 576-A merely identifies the regulatory agencies from whom
and transmissions within the Philippines. In addition to the above, he
authorizations, in addition to the required congressional franchise, must
shall have the following specific powers and duties:
be secured after December 31, 1981, viz:
xxxxxxxxx
"Sec. 6. All franchises, grants, licenses, permits, certificates or other
forms of authority to operate radio or television broadcasting systems (c) He shall assign call letter and assign frequencies for each station
shall terminate on December 31, 1981. Thereafter, irrespective of any licensed by him and for each station established by virtue of a franchise
franchise, grant, license, permit, certificate or other forms of authority granted by the Congress of the Philippines and specify the stations to
to operate granted by any office, agency or person, no radio or which each of such frequencies may be used;. . ."
television station shall be authorized to operate without the authority of
the Board of Communications and the Secretary of Public Works and Shortly after the declaration of Martial Law, then President Marcos
Communications or their successors who have the right and authority issued P.D. No. 1 dated September 24, 1972, through which the
to assign to qualified parties frequencies, channels or other means of Integrated Reorganization Plan for the executive branch was adopted.
identifying broadcasting system . . ." (emphasis supplied) Under the Plan, the Public Service Commission was abolished and its
functions transferred to special regulatory boards, among which was
the Board of Communications with the following functions:
"5a. Issue Certificates of Public Convenience for the operation of certificates or other forms of authority to operate radio or television
communications utilities and services, radio communications broadcasting systems shall terminate on December 31, 1981." It is
systems . . ., radio and television broadcasting systems and other therefore already understood that these forms of authority have no
similar public utilities; more force and effect after December 31, 1981. If the intention were to
do away with the franchise requirement, Section 6 would have simply
xxxxxxxxx laid down after the first sentence the requirements to operate radio
and television stations after December 31, 1981, i.e., "no radio or
c. Grant permits for the use of radio frequencies for . . . radio and
television station shall be authorized to operate without the authority of
television broadcasting systems including amateur radio stations."
the Board of Communications and the Secretary of Public Works and
With the creation of the Board of Communications under the Plan, it Communications." Instead, however, the phrase "irrespective of any
was no longer sufficient to secure authorization from the Secretary of franchise,…" was inserted to emphasize that a franchise or any other
Public Works and Communications as provided in Act No. 3846. The form of authorization from any office, agency or person does not suffice
Board’s authorization was also necessary. Thus, P.D. No. 576-A to operate radio and television stations because the authorizations of
provides in Section 6 that radio and television station operators must both the Board of Communications and the Secretary of Public Works
secure authorization from both the Secretary of Public Works and and Communications are required as well. This interpretation adheres
Communications and the Board of Communications. to the rule in statutory construction that words in a statute should not
be construed as surplusage if a reasonable construction which will give
Dispensing with the requirement of a congressional franchise is not in them some force and meaning is possible.24
line with the declared purposes of P.D. No. 576-A, viz:
Contrary to the opinion of the Secretary of Justice in DOJ Opinion No.
"WHEREAS, it has been observed that some public utilities, especially 98, Series of 1991, the appellate court was correct in ruling that E.O.
radio and television stations, have a tendency toward monopoly in No. 546 which came after P.D. No. 576-A did not dispense with the
ownership and operation to such an extent that a region or section of requirement of a congressional franchise. It merely abolished the Board
the country may be covered by any number of such broadcast stations, of Communications and the Telecommunications Control Bureau under
all or most of which are owned, operated or managed by one person or the Reorganization Plan and transferred their functions to the
corporation; NTC,25 including the power to issue Certificates of Public Convenience
(CPC) and grant permits for the use of frequencies, viz:
xxxxxxxxx
"Sec. 15. a. Issue Certificate of Public Convenience for the operation of
WHEREAS, on account of the limited number of frequencies available
communication utilities and services, radio communications systems,
for broadcasting in the Philippines, it is necessary to regulate the
wire or wireless telephone or telegraph system, radio and television
ownership and operation of radio and television stations and provide
broadcasting system and other similar public utilities;
measures that would enhance quality and viability in broadcasting and
help serve the public interests; . . ." xxxxxxxxx
A textual interpretation of Section 6 of P.D. No. 576-A yields the same c. Grant permits for the use of radio frequencies for wireless telephone
interpretation that after December 31, 1981, a franchise is still and telegraph systems and radio communication systems including
necessary to operate radio and television stations. Were it the intention amateur radio stations and radio and television broadcasting systems; .
of the law to do away with the requirement of a franchise after said .."
date, then the phrase "(t)hereafter, irrespective of any franchise, grant,
license, permit, certificate or other forms of authority to operate E.O. No. 546 defines the regulatory and technical aspect of the legal
granted by any office, agency or person (emphasis supplied)" would process preparatory to the full exercise of the privilege to operate radio
not have been necessary because the first sentence of Section 6 and television stations, which is different from the grant of a franchise
already states that "(a)ll franchises, grants, licenses, permits, from Congress, viz:
"The statutory functions of NTC may then be given effect as Congress’ Telecommunications Commission,30 buttresses the interpretation
prerogative to grant franchises under Act No. 3846 is upheld for they that the requirement of a congressional franchise for the operation of
are distinct forms of authority. The former covers matters dealing radio and television stations exists alongside the requirement of a CPC.
mostly with the technical side of radio or television broadcasting, while In that case, we held that under E.O. No. 546, the regulation of radio
the latter involves the exercise by the legislature of an exclusive power communications is a function assigned to and performed by the NTC
resulting in a franchise or a grant under authority of government, and at the same time recognized the requirement of a congressional
conferring a special right to do an act or series of acts of public concern franchise for the operation of a radio station under Act No. 3846. We
(37 C.J.S., secs. 1, 14, pp. 144, 157). did not interpret E.O. No. 546 to have repealed the congressional
franchise requirement under Act No. 3846 as these two laws are not
In fine, there being no clear showing that the laws here involved cannot inconsistent and can both be given effect. Likewise, in Radio
stand together, the presumption is against inconsistency or Communication of the Philippines, Inc. v. National
repugnance, hence, against implied repeal of the earlier law by the Telecommunications Commission,31 we recognized the necessity
later statute (Agujetas v. Court of Appeals, 261 SCRA 17, 1996)."26 of both a congressional franchise under Act No. 3846 and a CPC under
E.O. No. 546 to operate a radio communications system.
As we held in Radio Communication of the Philippines, Inc. v. National
Telecommunications Commission,27 a franchise is distinguished from a In buttressing its position that a congressional franchise is not required
CPC in that the former is a grant or privilege from the sovereign power, to operate its television station, petitioner banks on DOJ Opinion No. 98,
while the latter is a form of regulation through the administrative Series of 1991 which states that under E.O. No. 546, the NTC may issue
agencies, viz: a permit or authorization for the operation of radio and television
broadcasting systems without a prior franchise issued by Congress.
"A franchise started out as a "royal privilege or (a) branch of the King’s
Petitioner argues that the opinion is binding and conclusive upon the
prerogative, subsisting in the hands of a subject." This definition was
NTC as the NTC itself requested the advisory from the Secretary of
given by Finch, adopted by Blackstone, and accepted by every
Justice who is the legal adviser of government. Petitioner claims that it
authority since (State v. Twin Village Water Co., 98 Me 214, 56 A 763
was precisely because of the above DOJ Opinion No. 98 that the NTC
[1903]). Today, a franchise, being merely a privilege emanating from
did not previously require a congressional franchise in all of its
the sovereign power of the state and owing its existence to a grant, is
applications for permits with the NTC.
subject to regulation by the state itself by virtue of its police power
through its administrative agencies."28 Petitioner, however, cannot rely on DOJ Opinion No. 98 as this opinion
is merely persuasive and not necessarily controlling.32 As shown above,
Even prior to E.O. No. 546, the NTC’s precursor, i.e., the Board of
the opinion is erroneous insofar as it holds that E.O. No. 546 dispenses
Communications, already had the function of issuing CPC under the
with the requirement of a congressional franchise to operate radio and
Integrated Reorganization Plan. The CPC was required by the Board at
television stations. The case of Albano v. Reyes33 cited in the DOJ
the same time that P.D. No. 576-A required a franchise to operate radio
opinion, which allegedly makes it binding upon the NTC, does not lend
and television stations. The function of the NTC to issue CPC under E.O.
support to petitioner’s cause. In that case, we held, viz:
No. 546 is thus nothing new and exists alongside the requirement of a
congressional franchise under P.D. No. 576-A. There is no conflict "Franchises issued by Congress are not required before each and every
between E.O. No. 546 and P.D. No 576-A; Section 15 of the former does public utility may operate. Thus, the law has granted certain
not dispense with the franchise requirement in the latter. We adhere to administrative agencies the power to grant licenses for or to authorize
the cardinal rule in statutory construction that statutes in pare materia, the operation of certain public utilities. (See E.O. Nos. 172 and 202)
although in apparent conflict, or containing apparent inconsistencies,
should, as far as reasonably possible, be construed in harmony with That the Constitution provides in Art. XII, Sec. 11 that the issuance of a
each other, so as to give force and effect to each. 29 The ruling of franchise, certificate or other form of authorization for the operation of
this Court in Crusaders Broadcasting System, Inc. v. National a public utility shall be subject to amendment, alteration or repeal by
Congress does not necessarily imply, as petitioner posits, that only That the legislative intent is to continue requiring a franchise for the
Congress has the power to grant such authorization. Our statute books operation of radio and television broadcasting stations is clear from the
are replete with laws granting specified agencies in the Executive franchises granted by Congress after the effectivity of E.O. No. 546 in
Branch the power to issue such authorization for certain classes of 1979 for the operation of radio and television stations. Among these
public utilities. (footnote omitted)"34 are: (1) R.A. No. 9131 dated April 24, 2001, entitled "An Act Granting
the Iddes Broadcast Group, Inc., a Franchise to Construct, Install,
Our ruling in Albano that a congressional franchise is not required Establish, Operate and Maintain Radio and Television Broadcasting
before "each and every public utility may operate" should be viewed in Stations in the Philippines;" (2) R.A. No. 9148 dated July 31, 2001,
its proper light. Where there is a law such as P.D. No. 576-A which entitled "An Act Granting the Hypersonic Broadcasting Center, Inc., a
requires a franchise for the operation of radio and television stations, Franchise to Construct, Install, Establish, Operate and Maintain Radio
that law must be followed until subsequently repealed. As we have Broadcasting Stations in the Philippines;" and (3) R.A. No. 7678 dated
earlier shown, however, there is nothing in the subsequent E.O. No. February 17, 1994, entitled "An Act Granting the Digital
546 which evinces an intent to dispense with the franchise Telecommunication Philippines, Incorporated, a Franchise to Install,
requirement. In contradistinction with the case at bar, the law Operate and Maintain Telecommunications Systems Throughout the
applicable in Albano, i.e., E.O. No. 30, did not require a franchise for the Philippines." All three franchises require the grantees to secure a
Philippine Ports Authority to take over, manage and operate the Manila CPCN/license/permit to construct and operate their stations/systems.
International Port Complex and undertake the providing of cargo Likewise, the Tax Reform Act of 1997 provides in Section 119 for tax on
handling and port related services thereat. Similarly, in Philippine franchise of radio and/or television broadcasting companies, viz:
Airlines, Inc. v. Civil Aeronautics Board, et al.,35 we ruled that a
legislative franchise is not necessary for the operation of domestic air "Sec. 119. Tax on Franchises. – Any provision of general or special law
transport because "there is nothing in the law nor in the Constitution to the contrary notwithstanding, there shall be levied, assessed and
which indicates that a legislative franchise is an indispensable collected in respect to all franchises on radio and/or television
requirement for an entity to operate as a domestic air transport broadcasting companies whose annual gross receipts of the preceding
operator."36 Thus, while it is correct to say that specified agencies in the year does not exceed Ten million pesos (₱10,000,000), subject to
Executive Branch have the power to issue authorization for certain Section 236 of this Code, a tax of three percent (3%) and on electric,
classes of public utilities, this does not mean that the authorization or gas and water utilities, a tax of two percent (2%) on the gross receipts
CPC issued by the NTC dispenses with the requirement of a franchise derived from the business covered by the law granting the franchise. . .
as this is clearly required under P.D. No. 576-A. " (emphasis supplied)

Petitioner contends that the NTC erroneously denied its application for Undeniably, petitioner is aware that a congressional franchise is
renewal of its temporary permit to operate Channel 25 and recalled its necessary to operate its television station Channel 25 as shown by its
Channel 25 frequency based on the May 3, 1994 MOU that requires a actuations. Shortly before the December 31, 1994 deadline set in the
congressional franchise for the operation of television broadcast MOU, petitioner filed an application for a franchise with Congress. It
stations.1a\^/phi1.net The MOU is not an act of Congress and thus was not, however, acted upon in the 9th Congress for petitioner’s
cannot amend Act No. 3846 which requires a congressional franchise failure to submit the necessary supporting documents; petitioner failed
for the operation of radio stations alone, and not television stations. to re-file the application in the following Congress. Petitioner also filed
an application for a franchise with Congress on September 2, 1998,
We find no merit in petitioner’s contention. As we have shown, even before the November 30, 1998 deadline under Memorandum Circular
assuming that Act No. 3846 requires only radio stations to secure a No. 14-10-98.37
congressional franchise for its operation, P.D. No. 576-A was
subsequently issued in 1974, which clearly requires a franchise for both We now come to the fourth assigned error. Petitioner avers that the
radio and television stations. Thus, the 1994 MOU did not amend any Court of Appeals erred in upholding the recall of frequency Channel 25
law, but merely clarified the existing law that requires a franchise. previously assigned to it and the cancellation of its permit to operate
which was already approved in January 1998. It claims that these acts congressional franchise. In the absence of a renewed temporary
of the NTC were unreasonable, unfair, oppressive, whimsical and permit, the NTC was correct in ordering petitioner to cease and desist
confiscatory considering that the NTC previously issued petitioner a from operating Channel 25, regardless of whether or not petitioner
temporary permit without requiring a congressional franchise. received the November 17, 1997 letter. The NTC’s erroneous approval
of petitioner’s application in January 1998 did not estop the NTC from
On February 26, 1998, the NTC issued a show cause order to petitioner ordering petitioner on February 26, 1998 to cease and desist from
with the following decretal portion: operating Channel 25 for failure to comply with the franchise
requirement as estoppel does not work against the government.40
"IN VIEW THEREOF, respondents are hereby directed to show cause in
writing within ten (10) days from receipt of this order why their Likewise, the NTC’s denial of petitioner’s application for renewal of its
assigned frequency, more specifically Channel 25 in the UHF Band, temporary permit to operate Channel 25 and recall of its Channel 25
should not be recalled for lack of the necessary Congressional frequency in its January 13, 1999 decision were not unreasonable,
Franchise as required by Section 1, Act No. 3846, as amended. unfair, oppressive, whimsical and confiscatory so as to offend
petitioner’s right to due process. In Crusaders Broadcasting System,
Moreover, respondent is hereby directed to cease and desist from
Inc. v. National Telecommunications Commission,41 the Court ruled that
operating DWQH-TV, unless subsequently authorized by the
although a particular ground for suspending operations of the
Commission."38
broadcasting company was not reflected in the show cause order, the
The order was supposedly based on a letter of the NTC dated NTC could nevertheless raise said ground if any basis therefore was
November 17, 1997 informing petitioner that its application for renewal gleaned during the administrative proceedings. In the instant case, the
of temporary permits of its seven radio stations were being held in lack of congressional franchise as ground for denial of petitioner’s
abeyance pending submission of its new congressional franchise. application for renewal of temporary permit and recall of its Channel 25
Petitioner was directed to submit the franchise within thirty days from frequency was raised not only during the administrative proceedings
expiration of its temporary permits to be renewed and informed that its against it, but was even stated in the February 26, 1998 show cause
failure to do so might constitute denial of its application. order, viz:

Petitioner is correct that the November 17, 1997 letter referred only to "IN VIEW THEREOF, respondents are hereby directed to show cause in
its radio stations and not to its television Channel 25. Thus, it could not writing within ten (10) days from receipt of this order why their
serve as basis for the February 26, 1998 show cause order which assigned frequency, more specifically Channel 25 in the UHF Band,
referred solely to its television Channel 25. Besides, petitioner claims should not be recalled for lack of the necessary Congressional
that it did not receive the letter. Be that as it may, the NTC’s February Franchise as required by Section 1, Act No. 3846, as amended.
26, 1998 order for petitioner to cease and desist from operating
Moreover, respondent is hereby directed to cease and desist from
Channel 25 was not unreasonable, unfair, oppressive, whimsical and
operating DWQH-TV, unless subsequently authorized by the
confiscatory. The 1994 MOU states in unmistakable terms that
Commission." 42 (emphasis supplied)
petitioner’s temporary permit to operate Channel 25 would be valid for
only two years, i.e., from June 29, 1995 to June 28, 1997. During these In Eastern Broadcasting Corporation v. Dans, Jr., et al., 43 we held that
two years, petitioner was supposed to have secured a congressional the requirements of due process in administrative proceedings laid
franchise, otherwise "the NTC shall not extend or renew its permit or down by this Court in Ang Tibay v. Court of Industrial Relations44 should
authorization to operate any further."39 Apparently, petitioner did not be satisfied before a broadcast station may be closed or its operations
submit a congressional franchise to the NTC in applying for renewal of curtailed. We enumerated these requirements, viz:
this temporary permit on May 14, 1997. The NTC’s approval of
petitioner’s application to renew its temporary permit in January 1998 ". . . (1) the right to a hearing which includes the right to present one’s
was thus erroneous because under the 1994 MOU, the NTC could not case and submit evidence in support thereof; (2) the tribunal must
renew petitioner’s temporary permit to operate Channel 25 without a consider the evidence presented; (3) the decision must have
something to support itself; (4) the evidence must be substantial. Petitioner avers that the NTC erroneously held that this Memorandum
Substantial evidence means such reasonable evidence as a reasonable Circular is not applicable to it because the words of the circular are
mind might accept as adequate to support a conclusion; (5) the clear that it covers "existing broadcasting operators" including
decision must be based on the evidence presented at the hearing, or at petitioner. In compliance with the Memorandum Circular, petitioner
least contained in the record and disclosed to the parties affected; (6) filed House Bill No. 32 on September 2, 1998, well within the November
the tribunal or body or any of its judges must act on its own 30, 1998 deadline. Thus, petitioner argues that the NTC erred in
independent consideration of the law and facts of the controversy and denying its application for renewal of permit to operate Channel 25 and
not simply accept the views of a subordinate; (7) the board or body recalling its assigned Channel 25 frequency on January 13, 1999, long
should, in all controversial questions, render its decisions in such a before the Memorandum Circular’s December 31, 1999 deadline to
manner that the parties to the proceeding can know the various issues secure a congressional franchise. Petitioner posits that the NTC’s
involved, and the reasons for the decision rendered."45 premature and arbitrary promulgation of its January 13, 1999 decision
"slammed the door for the petitioner to secure its legislative franchise.
Petitioner had the opportunity to present its case and submit evidence The pending application for legislative franchise of petitioner was
on why its assigned frequency Channel 25 should not be recalled and effectively struck out by said NTC decision."47
its application for renewal denied. Petitioner filed its Answer to the
show cause order on March 17, 1998.46 A hearing was held on April 22, Whether or not the benefits of the Memorandum Circular extend to
1998 wherein petitioner presented its evidence in compliance with the petitioner, the fact is, as correctly pointed out by the appellate court,
show cause order. Based on the NTC’s findings that petitioner failed to petitioner failed to secure a legislative franchise by December 31,
comply with the requirement of a congressional franchise, the NTC 1999. Consequently, the NTC’s recall of petitioner’s assigned frequency
denied its application for renewal of its temporary permit to operate Channel 25 and denial of its application for renewal of its permit to
Channel 25 and recalled its assigned Channel 25 frequency. The operate the said television channel were proper as the Memorandum
requirements of due process in Ang Tibay were satisfied, thus Circular provides, viz:
petitioner cannot say that the NTC’s actions were unreasonable, unfair,
oppressive, whimsical and confiscatory. "1. Existing broadcast operators who are not able to secure a legislative
franchise up to this date (August 17, 1998) are given up to December
Finally, petitioner contends that the Court of Appeals erred in not 31, 1999 within which to have their application for a legislative
holding that Administrative Case No. 98-009, the administrative franchise approved by Congress. The franchise bill must be filed
proceeding against it for failure to secure a congressional franchise to immediately but not later than November 30th of this year . . .
operate its television Channel 25, has been rendered moot and
academic by the adoption and promulgation of NTC Memorandum xxxxxxxxx
Circular No. 14-10-98 dated August 17, 1998 which took effect on
3. In the event the permittee will not be able to have its franchise bill
November 15, 1998. The Memorandum Circular states, viz:
approved within the prescribed period, the NTC will no longer
"In compliance with the MOU and in order to clear the ambiguity renew/extend its temporary permit and the Commission shall initiate
surrounding the operation of broadcast operators who were not able to the recall of its assigned frequency provided that due process of law is
have their legislative franchise approved during the last Congress, the observed.
following guidelines are hereby issued:
4. Henceforth, no application/petition for Certificate of Public
1. Existing broadcast operators who were not able to secure a Convenience (CPC) to establish, maintain and operate a broadcast
legislative franchise up to this date (August 17, 1998) are given up to station in the broadcast service shall be accepted for filing without
December 31, 1999 within which to have their application for a showing that the applicant has an approved legislative
legislative franchise bill approved by Congress. The franchise bill must franchise."(emphasis supplied)
be filed immediately but not later than November 30th of this year . . ."
Petitioner’s argument is flawed when it states that the January 13, when it is just and reasonable and founded upon a legal
1999 decision of the NTC "slammed the door" on its application for a right."50 1a\^/phi1.net
congressional franchise as the process of securing a congressional
franchise is separate and distinct from the process of applying for The criticism against the requirement of a congressional franchise is
renewal of a temporary permit with the NTC. The latter is not a incisively expressed by a public utilities lawyer, viz:
prerequisite to the former. In fact, in the normal course of securing
"As will be noted, a legislative franchise is required to install and
authorizations to operate a television and radio station, the application
operate a radio station before an applicant can apply for a Certificate of
for a CPC with the NTC comes after securing a franchise from
Public Convenience to operate a radio station based in any part of the
Congress.48 The CPC is not a condition for the grant of a congressional
country. Under Act No. 3846 of 1929, Sec. 1, it was provided that no
franchise.49
one may install and operate a radio station ‘without having first
The Court is not unmindful that there is a trend towards delegating the obtained a franchise therefore from the Congress of the Philippines.’
legislative power to authorize the operation of certain public utilities to Since then, this has been strictly followed. And this holds true with
administrative agencies and dispensing with the requirement of a respect to application for electric, telephone and many other
congressional franchise as in the Albano case which involved the telecommunications services. Before, even mere application for
provision of cargo handling and port related services at the Manila authority to operate an ice plant must have prior congressional
International Port Complex and the PAL case involving the operation of franchise. But this was not strictly followed until ice plant operations
domestic air transport. The rationale for this trend was explained in the were eventually deregulated. Right now, the both houses of the
PAL case, viz: legislature are saddled with House Bill Nos. etc. for the grant of
legislative franchise to operate this and that public utility services in
". . . With the growing complexity of modern life, the multiplication of various places in the Philippines. We hear during sessions in both
the subjects of governmental regulation, and the increased difficulty of houses the time wasted on reports and considerations of these house
administering the laws, there is a constantly growing tendency towards bills for grant of franchises. The legislature is empowered and has
the delegation of greater powers by the legislature, and towards the created respective regulatory bodies with requisite expertise to handle
approval of the practice by the courts.1awphi1.nét (Pangasinan franchising and regulation of such types of public utility services, why
Transportation Co., Inc. vs. The Public Service Commission, G.R. No. not just entrust all these functions to them?
47065, June 26, 1940, 70 Phil 221.) It is generally recognized that a
franchise may be derived indirectly from the state through a duly What exactly is the reason or rationale for imposing a prior
designated agency, and to this extent, the power to grant franchises congressional franchise? There seems to be no valid reason for it
has frequently been delegated, even to agencies other than those of a except to impose added burden and expenses on the part of the
legislative nature. (Dyer vs. Tuskaloosa Bridge Co., 2 Port. 296, 27 Am. applicant. The justification appears to be simply because this was
D. 655; Christian-Todd Tel. Co. vs. Commonwealth, 161 S.W. 543, 156 required in the past so it is now. We are reminded of the forceful
Ky. 557, 37 C.J.S. 158) In pursuance of this, it has been held that denunciation of Justice Holmes of a stubborn adherence to an
privileges conferred by grant by local authorities as agents for the state anachronistic rule of law:
constitute as much a legislative franchise as though the grant had
‘It is revolting to have no better reason for a rule of law that so it was
been made by an act of the Legislature. (Superior Water, Light and
laid down in the time of Henry IV. It is still more revolting if the grounds
Power Co. vs. City of Superior, 181 N.W. 113, 174 Wis. 257, affirmed
upon which it was laid down have vanished long since, and the rule
183 N.W. 254, 37 C.J.S. 158.)
simply persists from blind imitation of the past. (The Path of the Law,
The trend of modern legislation is to vest the Public Service Collected Legal Papers [1920] 210, 212 quoted from The Justice
Commissioner with the power to regulate and control the operation of Holmes Reader, Julius N. Marke, 1955 ed., p. 278.)’"51
public services under reasonable rules and regulations, and as a
The call to dispense with the requisite legislative franchise must,
general rule, courts will not interfere with the exercise of that discretion
however, be addressed to Congress as the lawmaker of the land for the
Court’s function is to interpret and not to rewrite the law. As long as the vs.
law remains unchanged, the requirement of a franchise to operate a PRESIDENT BENIGNO SIMEON C. AQUINO III* and SECRETARY
television station must be upheld. FLORENCIO BUTCH ABAD, DEPARTMENT OF BUDGET AND
MANAGEMENT, Respondents.
WHEREFORE, the petition is DENIED and the Court of Appeals’ January
13, 2000 decision and February 21, 2000 resolution are AFFIRMED. No DECISION
costs.
PERLAS-BERNABE, J.:
SO ORDERED.
"Experience is the oracle of truth."1

-James Madison
G.R. No. 208566 November 19, 2013
Before the Court are consolidated petitions2 taken under Rule 65 of the
GRECO ANTONIOUS BEDA B. BELGICA JOSE M. VILLEGAS JR. Rules of Court, all of which assail the constitutionality of the Pork Barrel
JOSE L. GONZALEZ REUBEN M. ABANTE and QUINTIN PAREDES System. Due to the complexity of the subject matter, the Court shall
SAN DIEGO, Petitioners, heretofore discuss the system‘s conceptual underpinnings before
vs. detailing the particulars of the constitutional challenge.
HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA JR.
SECRETARY OF BUDGET AND MANAGEMENT FLORENCIO B. The Facts
ABAD, NATIONAL TREASURER ROSALIA V. DE LEON SENATE
I. Pork Barrel: General Concept.
OF THE PHILIPPINES represented by FRANKLIN M. DRILON m
his capacity as SENATE PRESIDENT and HOUSE OF "Pork Barrel" is political parlance of American -English
REPRESENTATIVES represented by FELICIANO S. BELMONTE, origin.3 Historically, its usage may be traced to the degrading ritual of
JR. in his capacity as SPEAKER OF THE HOUSE, Respondents. rolling out a barrel stuffed with pork to a multitude of black slaves who
would cast their famished bodies into the porcine feast to assuage their
x-----------------------x
hunger with morsels coming from the generosity of their well-fed
G.R. No. 208493 master.4 This practice was later compared to the actions of American
legislators in trying to direct federal budgets in favor of their
SOCIAL JUSTICE SOCIETY (SJS) PRESIDENT SAMSON S. districts.5 While the advent of refrigeration has made the actual pork
ALCANTARA, Petitioner, barrel obsolete, it persists in reference to political bills that "bring home
vs. the bacon" to a legislator‘s district and constituents. 6 In a more
HONORABLE FRANKLIN M. DRILON in his capacity as SENATE technical sense, "Pork Barrel" refers to an appropriation of government
PRESIDENT and HONORABLE FELICIANO S. BELMONTE, JR., in spending meant for localized projects and secured solely or primarily to
his capacity as SPEAKER OF THE HOUSE OF bring money to a representative's district.7 Some scholars on the
REPRESENTATIVES, Respondents. subject further use it to refer to legislative control of local
appropriations.8
x-----------------------x
In the Philippines, "Pork Barrel" has been commonly referred to as
G.R. No. 209251 lump-sum, discretionary funds of Members of the
Legislature,9 although, as will be later discussed, its usage would
PEDRITO M. NEPOMUCENO, Former Mayor-Boac, Marinduque
evolve in reference to certain funds of the Executive.
Former Provincial Board Member -Province of
Marinduque, Petitioner, II. History of Congressional Pork Barrel in the Philippines.
A. Pre-Martial Law Era (1922-1972). While the previous" Congressional Pork Barrel" was apparently
discontinued in 1972 after Martial Law was declared, an era when "one
Act 3044,10 or the Public Works Act of 1922, is considered11 as the man controlled the legislature,"19 the reprieve was only temporary. By
earliest form of "Congressional Pork Barrel" in the Philippines since the 1982, the Batasang Pambansa had already introduced a new item in
utilization of the funds appropriated therein were subjected to post- the General Appropriations Act (GAA) called the" Support for Local
enactment legislator approval. Particularly, in the area of fund release, Development Projects" (SLDP) under the article on "National Aid to
Section 312 provides that the sums appropriated for certain public Local Government Units". Based on reports, 20 it was under the SLDP
works projects13 "shall be distributed x x x subject to the approval of a that the practice of giving lump-sum allocations to individual legislators
joint committee elected by the Senate and the House of began, with each assemblyman receiving ₱500,000.00. Thereafter,
Representatives. "The committee from each House may also authorize assemblymen would communicate their project preferences to the
one of its members to approve the distribution made by the Secretary Ministry of Budget and Management for approval. Then, the said
of Commerce and Communications."14 Also, in the area of fund ministry would release the allocation papers to the Ministry of Local
realignment, the same section provides that the said secretary, "with Governments, which would, in turn, issue the checks to the city or
the approval of said joint committee, or of the authorized members municipal treasurers in the assemblyman‘s locality. It has been further
thereof, may, for the purposes of said distribution, transfer unexpended reported that "Congressional Pork Barrel" projects under the SLDP also
portions of any item of appropriation under this Act to any other item began to cover not only public works projects, or so- called "hard
hereunder." projects", but also "soft projects",21 or non-public works projects such
as those which would fall under the categories of, among others,
In 1950, it has been documented15 that post-enactment legislator
education, health and livelihood.22
participation broadened from the areas of fund release and
realignment to the area of project identification. During that year, the C. Post-Martial Law Era:
mechanics of the public works act was modified to the extent that the
discretion of choosing projects was transferred from the Secretary of Corazon Cojuangco Aquino Administration (1986-1992).
Commerce and Communications to legislators. "For the first time, the
law carried a list of projects selected by Members of Congress, they After the EDSA People Power Revolution in 1986 and the restoration of
‘being the representatives of the people, either on their own account or Philippine democracy, "Congressional Pork Barrel" was revived in the
by consultation with local officials or civil leaders.‘"16 During this period, form of the "Mindanao Development Fund" and the "Visayas
the pork barrel process commenced with local government councils, Development Fund" which were created with lump-sum appropriations
civil groups, and individuals appealing to Congressmen or Senators for of ₱480 Million and ₱240 Million, respectively, for the funding of
projects. Petitions that were accommodated formed part of a development projects in the Mindanao and Visayas areas in 1989. It
legislator‘s allocation, and the amount each legislator would eventually has been documented23 that the clamor raised by the Senators and the
get is determined in a caucus convened by the majority. The amount Luzon legislators for a similar funding, prompted the creation of the
was then integrated into the administration bill prepared by the "Countrywide Development Fund" (CDF) which was integrated into the
Department of Public Works and Communications. Thereafter, the 1990 GAA24 with an initial funding of ₱2.3 Billion to cover "small local
Senate and the House of Representatives added their own provisions infrastructure and other priority community projects."
to the bill until it was signed into law by the President – the Public
Under the GAAs for the years 1991 and 1992,25 CDF funds were, with
Works Act.17 In the 1960‘s, however, pork barrel legislation reportedly
the approval of the President, to be released directly to the
ceased in view of the stalemate between the House of Representatives
implementing agencies but "subject to the submission of the required
and the Senate.18
list of projects and activities."Although the GAAs from 1990 to 1992
B. Martial Law Era (1972-1986). were silent as to the amounts of allocations of the individual legislators,
as well as their participation in the identification of projects, it has been
reported26 that by 1992, Representatives were receiving ₱12.5 Million
each in CDF funds, while Senators were receiving ₱18 Million each, reportedly fashioned and inserted into the GAA (called "Congressional
without any limitation or qualification, and that they could identify any Insertions" or "CIs") in order to perpetuate the ad ministration‘s political
kind of project, from hard or infrastructure projects such as roads, agenda.37 It has been articulated that since CIs "formed part and parcel
bridges, and buildings to "soft projects" such as textbooks, medicines, of the budgets of executive departments, they were not easily
and scholarships.27 identifiable and were thus harder to monitor." Nonetheless, the
lawmakers themselves as well as the finance and budget officials of the
D. Fidel Valdez Ramos (Ramos) Administration (1992-1998). implementing agencies, as well as the DBM, purportedly knew about
the insertions.38 Examples of these CIs are the Department of
The following year, or in 1993,28 the GAA explicitly stated that the
Education (DepEd) School Building Fund, the Congressional Initiative
release of CDF funds was to be made upon the submission of the list of
Allocations, the Public Works Fund, the El Niño Fund, and the Poverty
projects and activities identified by, among others, individual
Alleviation Fund.39 The allocations for the School Building Fund,
legislators. For the first time, the 1993 CDF Article included an
particularly, ―shall be made upon prior consultation with the
allocation for the Vice-President.29 As such, Representatives were
representative of the legislative district concerned.” 40 Similarly, the
allocated ₱12.5 Million each in CDF funds, Senators, ₱18 Million each,
legislators had the power to direct how, where and when these
and the Vice-President, ₱20 Million.
appropriations were to be spent.41
In 1994,30 1995,31 and 1996,32 the GAAs contained the same provisions
E. Joseph Ejercito Estrada (Estrada) Administration (1998-2001).
on project identification and fund release as found in the 1993 CDF
Article. In addition, however, the Department of Budget and In 1999,42 the CDF was removed in the GAA and replaced by three (3)
Management (DBM) was directed to submit reports to the Senate separate forms of CIs, namely, the "Food Security Program Fund,"43 the
Committee on Finance and the House Committee on Appropriations on "Lingap Para Sa Mahihirap Program Fund,"44 and the "Rural/Urban
the releases made from the funds.33 Development Infrastructure Program Fund,"45 all of which contained a
special provision requiring "prior consultation" with the Member s of
Under the 199734 CDF Article, Members of Congress and the Vice-
Congress for the release of the funds.
President, in consultation with the implementing agency concerned,
were directed to submit to the DBM the list of 50% of projects to be It was in the year 200046 that the "Priority Development Assistance
funded from their respective CDF allocations which shall be duly Fund" (PDAF) appeared in the GAA. The requirement of "prior
endorsed by (a) the Senate President and the Chairman of the consultation with the respective Representative of the District" before
Committee on Finance, in the case of the Senate, and (b) the Speaker PDAF funds were directly released to the implementing agency
of the House of Representatives and the Chairman of the Committee concerned was explicitly stated in the 2000 PDAF Article. Moreover,
on Appropriations, in the case of the House of Representatives; while realignment of funds to any expense category was expressly allowed,
the list for the remaining 50% was to be submitted within six (6) with the sole condition that no amount shall be used to fund personal
months thereafter. The same article also stated that the project list, services and other personnel benefits.47 The succeeding PDAF
which would be published by the DBM, 35 "shall be the basis for the provisions remained the same in view of the re-enactment48 of the
release of funds" and that "no funds appropriated herein shall be 2000 GAA for the year 2001.
disbursed for projects not included in the list herein required."
F. Gloria Macapagal-Arroyo (Arroyo) Administration (2001-2010).
The following year, or in 1998,36 the foregoing provisions regarding the
required lists and endorsements were reproduced, except that the The 200249 PDAF Article was brief and straightforward as it merely
publication of the project list was no longer required as the list itself contained a single special provision ordering the release of the funds
sufficed for the release of CDF Funds. directly to the implementing agency or local government unit
concerned, without further qualifications. The following year,
The CDF was not, however, the lone form of "Congressional Pork 2003,50 the same single provision was present, with simply an
Barrel" at that time. Other forms of "Congressional Pork Barrel" were expansion of purpose and express authority to realign. Nevertheless,
the provisions in the 2003 budgets of the Department of Public Works negotiated procurement,67 the procedure whereby the Procuring
and Highways51 (DPWH) and the DepEd52 required prior consultation Entity68 (the implementing agency) may enter into a memorandum of
with Members of Congress on the aspects of implementation agreement with an NGO, provided that "an appropriation law or
delegation and project list submission, respectively. In 2004, the 2003 ordinance earmarks an amount to be specifically contracted out to
GAA was re-enacted.53 NGOs."69

In 2005,54 the PDAF Article provided that the PDAF shall be used "to G. Present Administration (2010-Present).
fund priority programs and projects under the ten point agenda of the
national government and shall be released directly to the Differing from previous PDAF Articles but similar to the CDF Articles, the
implementing agencies." It also introduced the program menu 201170 PDAF Article included an express statement on lump-sum
concept,55 which is essentially a list of general programs and amounts allocated for individual legislators and the Vice-President:
implementing agencies from which a particular PDAF project may be Representatives were given ₱70 Million each, broken down into ₱40
subsequently chosen by the identifying authority. The 2005 GAA was Million for "hard projects" and ₱30 Million for "soft projects"; while ₱200
re-enacted56 in 2006 and hence, operated on the same bases. In Million was given to each Senator as well as the Vice-President, with a
similar regard, the program menu concept was consistently integrated ₱100 Million allocation each for "hard" and "soft projects." Likewise, a
into the 2007,57 2008,58 2009,59 and 201060 GAAs. provision on realignment of funds was included, but with the
qualification that it may be allowed only once. The same provision also
Textually, the PDAF Articles from 2002 to 2010 were silent with respect allowed the Secretaries of Education, Health, Social Welfare and
to the specific amounts allocated for the individual legislators, as well Development, Interior and Local Government, Environment and
as their participation in the proposal and identification of PDAF projects Natural Resources, Energy, and Public Works and Highways to realign
to be funded. In contrast to the PDAF Articles, however, the provisions PDAF Funds, with the further conditions that: (a) realignment is within
under the DepEd School Building Program and the DPWH budget, the same implementing unit and same project category as the original
similar to its predecessors, explicitly required prior consultation with the project, for infrastructure projects; (b) allotment released has not yet
concerned Member of Congress61 anent certain aspects of project been obligated for the original scope of work, and (c) the request for
implementation. realignment is with the concurrence of the legislator concerned.71

Significantly, it was during this era that provisions which allowed formal In the 201272 and 201373 PDAF Articles, it is stated that the
participation of non-governmental organizations (NGO) in the "identification of projects and/or designation of beneficiaries shall
implementation of government projects were introduced. In the conform to the priority list, standard or design prepared by each
Supplemental Budget for 2006, with respect to the appropriation for implementing agency (priority list requirement) x x x." However, as
school buildings, NGOs were, by law, encouraged to participate. For practiced, it would still be the individual legislator who would choose
such purpose, the law stated that "the amount of at least ₱250 Million and identify the project from the said priority list.74
of the ₱500 Million allotted for the construction and completion of
school buildings shall be made available to NGOs including the Provisions on legislator allocations75 as well as fund realignment76 were
Federation of Filipino-Chinese Chambers of Commerce and Industry, included in the 2012 and 2013 PDAF Articles; but the allocation for the
Inc. for its "Operation Barrio School" program, with capability and Vice-President, which was pegged at ₱200 Million in the 2011 GAA, had
proven track records in the construction of public school buildings x x been deleted. In addition, the 2013 PDAF Article now allowed LGUs to
x."62 The same allocation was made available to NGOs in the 2007 and be identified as implementing agencies if they have the technical
2009 GAAs under the DepEd Budget.63 Also, it was in 2007 that the capability to implement the projects.77 Legislators were also allowed to
Government Procurement Policy Board64 (GPPB) issued Resolution No. identify programs/projects, except for assistance to indigent patients
12-2007 dated June 29, 2007 (GPPB Resolution 12-2007), amending and scholarships, outside of his legislative district provided that he
the implementing rules and regulations65 of RA 9184,66 the secures the written concurrence of the legislator of the intended
Government Procurement Reform Act, to include, as a form of outside-district, endorsed by the Speaker of the House.78 Finally, any
realignment of PDAF funds, modification and revision of project support.90 It was in 1996 when the first controversy surrounding the
identification, as well as requests for release of funds, were all required "Pork Barrel" erupted. Former Marikina City Representative Romeo
to be favorably endorsed by the House Committee on Appropriations Candazo (Candazo), then an anonymous source, "blew the lid on the
and the Senate Committee on Finance, as the case may be.79 huge sums of government money that regularly went into the pockets
of legislators in the form of kickbacks." 91 He said that "the kickbacks
III. History of Presidential Pork Barrel in the Philippines. were ‘SOP‘ (standard operating procedure) among legislators and
ranged from a low 19 percent to a high 52 percent of the cost of each
While the term "Pork Barrel" has been typically associated with lump-
project, which could be anything from dredging, rip rapping, sphalting,
sum, discretionary funds of Members of Congress, the present cases
concreting, and construction of school buildings."92 "Other sources of
and the recent controversies on the matter have, however, shown that
kickbacks that Candazo identified were public funds intended for
the term‘s usage has expanded to include certain funds of the
medicines and textbooks. A few days later, the tale of the money trail
President such as the Malampaya Funds and the Presidential Social
became the banner story of the Philippine Daily Inquirer issue of August
Fund.
13, 1996, accompanied by an illustration of a roasted pig."93 "The
On the one hand, the Malampaya Funds was created as a special fund publication of the stories, including those about congressional initiative
under Section 880 of Presidential Decree No. (PD) 910,81 issued by then allocations of certain lawmakers, including ₱3.6 Billion for a
President Ferdinand E. Marcos (Marcos) on March 22, 1976. In enacting Congressman, sparked public outrage."94
the said law, Marcos recognized the need to set up a special fund to
Thereafter, or in 2004, several concerned citizens sought the
help intensify, strengthen, and consolidate government efforts relating
nullification of the PDAF as enacted in the 2004 GAA for being
to the exploration, exploitation, and development of indigenous energy
unconstitutional. Unfortunately, for lack of "any pertinent evidentiary
resources vital to economic growth.82 Due to the energy-related
support that illegal misuse of PDAF in the form of kickbacks has
activities of the government in the Malampaya natural gas field in
become a common exercise of unscrupulous Members of Congress,"
Palawan, or the "Malampaya Deep Water Gas-to-Power Project", 83 the
the petition was dismissed.95
special fund created under PD 910 has been currently labeled as
Malampaya Funds.

On the other hand the Presidential Social Fund was created under
Section 12, Title IV84 of PD 1869,85 or the Charter of the Philippine
Amusement and Gaming Corporation (PAGCOR). PD 1869 was similarly
issued by Marcos on July 11, 1983. More than two (2) years after, he
amended PD 1869 and accordingly issued PD 1993 on October 31,
1985,86 amending Section 1287 of the former law. As it stands, the
Presidential Social Fund has been described as a special funding facility
managed and administered by the Presidential Management Staff
through which the President provides direct assistance to priority
programs and projects not funded under the regular budget. It is
sourced from the share of the government in the aggregate gross
earnings of PAGCOR.88

IV. Controversies in the Philippines.

Over the decades, "pork" funds in the Philippines have increased

tremendously,89 owing in no small part to previous Presidents who
reportedly used the "Pork Barrel" in order to gain congressional
Recently, or in July of the present year, the National Bureau of ● Amounts were released for projects outside of legislative districts of
Investigation (NBI) began its probe into allegations that "the sponsoring members of the Lower House.
government has been defrauded of some ₱10 Billion over the past 10
years by a syndicate using funds from the pork barrel of lawmakers ● Total VILP releases for the period exceeded the total amount
and various government agencies for scores of ghost projects."96 The appropriated under the 2007 to 2009 GAAs.
investigation was spawned by sworn affidavits of six (6) whistle-blowers
● Infrastructure projects were constructed on private lots without these
who declared that JLN Corporation – "JLN" standing for Janet Lim
having been turned over to the government.
Napoles (Napoles) – had swindled billions of pesos from the public
coffers for "ghost projects" using no fewer than 20 dummy NGOs for an ● Significant amounts were released to implementing agencies
entire decade. While the NGOs were supposedly the ultimate recipients without the latter‘s endorsement and without considering their
of PDAF funds, the whistle-blowers declared that the money was mandated functions, administrative and technical capabilities to
diverted into Napoles‘ private accounts.97 Thus, after its investigation implement projects.
on the Napoles controversy, criminal complaints were filed before the
Office of the Ombudsman, charging five (5) lawmakers for Plunder, and ● Implementation of most livelihood projects was not undertaken by
three (3) other lawmakers for Malversation, Direct Bribery, and the implementing agencies themselves but by NGOs endorsed by the
Violation of the Anti-Graft and Corrupt Practices Act. Also proponent legislators to which the Funds were transferred.
recommended to be charged in the complaints are some of the
● The funds were transferred to the NGOs in spite of the absence of
lawmakers‘ chiefs -of-staff or representatives, the heads and other
any appropriation law or ordinance.
officials of three (3) implementing agencies, and the several presidents
of the NGOs set up by Napoles.98 ● Selection of the NGOs were not compliant with law and regulations.
On August 16, 2013, the Commission on Audit (CoA) released the ● Eighty-Two (82) NGOs entrusted with implementation of seven
results of a three-year audit investigation99 covering the use of hundred seventy two (772) projects amount to ₱6.156 Billion were
legislators' PDAF from 2007 to 2009, or during the last three (3) years either found questionable, or submitted questionable/spurious
of the Arroyo administration. The purpose of the audit was to documents, or failed to liquidate in whole or in part their utilization of
determine the propriety of releases of funds under PDAF and the the Funds.
Various Infrastructures including Local Projects (VILP) 100 by the DBM,
the application of these funds and the implementation of projects by ● Procurement by the NGOs, as well as some implementing agencies,
the appropriate implementing agencies and several government- of goods and services reportedly used in the projects were not
owned-and-controlled corporations (GOCCs).101 The total releases compliant with law.
covered by the audit amounted to ₱8.374 Billion in PDAF and ₱32.664
Billion in VILP, representing 58% and 32%, respectively, of the total As for the "Presidential Pork Barrel", whistle-blowers alleged that" at
PDAF and VILP releases that were found to have been made least ₱900 Million from royalties in the operation of the Malampaya gas
nationwide during the audit period.102 Accordingly, the Co A‘s findings project off Palawan province intended for agrarian reform beneficiaries
contained in its Report No. 2012-03 (CoA Report), entitled "Priority has gone into a dummy NGO."104 According to incumbent CoA
Development Assistance Fund (PDAF) and Various Infrastructures Chairperson Maria Gracia Pulido Tan (CoA Chairperson), the CoA is, as
including Local Projects (VILP)," were made public, the highlights of of this writing, in the process of preparing "one consolidated report" on
which are as follows:103 the Malampaya Funds.105

● Amounts released for projects identified by a considerable number of V. The Procedural Antecedents.
legislators significantly exceeded their respective allocations. Spurred in large part by the findings contained in the CoA Report and
the Napoles controversy, several petitions were lodged before the
Court similarly seeking that the "Pork Barrel System" be declared or individuals, and all pertinent data thereto."108 Also, they pray for the
unconstitutional. To recount, the relevant procedural antecedents in "inclusion in budgetary deliberations with the Congress of all presently
these cases are as follows: off-budget, lump-sum, discretionary funds including, but not limited to,
proceeds from the Malampaya Funds and remittances from the
On August 28, 2013, petitioner Samson S. Alcantara (Alcantara), PAGCOR."109 The Belgica Petition was docketed as G.R. No. 208566.110
President of the Social Justice Society, filed a Petition for Prohibition of
even date under Rule 65 of the Rules of Court (Alcantara Petition), Lastly, on September 5, 2013, petitioner Pedrito M. Nepomuceno
seeking that the "Pork Barrel System" be declared unconstitutional, (Nepomuceno), filed a Petition dated August 23, 2012 (Nepomuceno
and a writ of prohibition be issued permanently restraining respondents Petition), seeking that the PDAF be declared unconstitutional, and a
Franklin M. Drilon and Feliciano S. Belmonte, Jr., in their respective cease and desist order be issued restraining President Benigno Simeon
capacities as the incumbent Senate President and Speaker of the S. Aquino III (President Aquino) and Secretary Abad from releasing such
House of Representatives, from further taking any steps to enact funds to Members of Congress and, instead, allow their release to fund
legislation appropriating funds for the "Pork Barrel System," in priority projects identified and approved by the Local Development
whatever form and by whatever name it may be called, and from Councils in consultation with the executive departments, such as the
approving further releases pursuant thereto.106 The Alcantara Petition DPWH, the Department of Tourism, the Department of Health, the
was docketed as G.R. No. 208493. Department of Transportation, and Communication and the National
Economic Development Authority.111 The Nepomuceno Petition was
On September 3, 2013, petitioners Greco Antonious Beda B. Belgica, docketed as UDK-14951.112
Jose L. Gonzalez, Reuben M. Abante, Quintin Paredes San Diego
(Belgica, et al.), and Jose M. Villegas, Jr. (Villegas) filed an Urgent On September 10, 2013, the Court issued a Resolution of even date (a)
Petition For Certiorari and Prohibition With Prayer For The Immediate consolidating all cases; (b) requiring public respondents to comment on
Issuance of Temporary Restraining Order (TRO) and/or Writ of the consolidated petitions; (c) issuing a TRO (September 10, 2013 TRO)
Preliminary Injunction dated August 27, 2013 under Rule 65 of the enjoining the DBM, National Treasurer, the Executive Secretary, or any
Rules of Court (Belgica Petition), seeking that the annual "Pork Barrel of the persons acting under their authority from releasing (1) the
System," presently embodied in the provisions of the GAA of 2013 remaining PDAF allocated to Members of Congress under the GAA of
which provided for the 2013 PDAF, and the Executive‘s lump-sum, 2013, and (2) Malampaya Funds under the phrase "for such other
discretionary funds, such as the Malampaya Funds and the Presidential purposes as may be hereafter directed by the President" pursuant to
Social Fund,107 be declared unconstitutional and null and void for being Section 8 of PD 910 but not for the purpose of "financing energy
acts constituting grave abuse of discretion. Also, they pray that the resource development and exploitation programs and projects of the
Court issue a TRO against respondents Paquito N. Ochoa, Jr., Florencio government‖ under the same provision; and (d) setting the
B. Abad (Secretary Abad) and Rosalia V. De Leon, in their respective consolidated cases for Oral Arguments on October 8, 2013.
capacities as the incumbent Executive Secretary, Secretary of the
Department of Budget and Management (DBM), and National On September 23, 2013, the Office of the Solicitor General (OSG) filed a
Treasurer, or their agents, for them to immediately cease any Consolidated Comment (Comment) of even date before the Court,
expenditure under the aforesaid funds. Further, they pray that the seeking the lifting, or in the alternative, the partial lifting with respect to
Court order the foregoing respondents to release to the CoA and to the educational and medical assistance purposes, of the Court‘s
public: (a) "the complete schedule/list of legislators who have availed of September 10, 2013 TRO, and that the consolidated petitions be
their PDAF and VILP from the years 2003 to 2013, specifying the use of dismissed for lack of merit.113
the funds, the project or activity and the recipient entities or individuals,
On September 24, 2013, the Court issued a Resolution of even date
and all pertinent data thereto"; and (b) "the use of the Executive‘s
directing petitioners to reply to the Comment.
lump-sum, discretionary funds, including the proceeds from the x x x
Malampaya Funds and remittances from the PAGCOR x x x from 2003 Petitioners, with the exception of Nepomuceno, filed their respective
to 2013, specifying the x x x project or activity and the recipient entities replies to the Comment: (a) on September 30, 2013, Villegas filed a
separate Reply dated September 27, 2013 (Villegas Reply); (b) on violate the principles of/constitutional provisions on (a) separation of
October 1, 2013, Belgica, et al. filed a Reply dated September 30, 2013 powers; (b) non-delegability of legislative power; (c) checks and
(Belgica Reply); and (c) on October 2, 2013, Alcantara filed a Reply balances; (d) accountability; (e) political dynasties; and (f) local
dated October 1, 2013. autonomy.

On October 1, 2013, the Court issued an Advisory providing for the III. Substantive Issues on the "Presidential Pork Barrel."
guidelines to be observed by the parties for the Oral Arguments
scheduled on October 8, 2013. In view of the technicality of the issues Whether or not the phrases (a) "and for such other purposes as may be
material to the present cases, incumbent Solicitor General Francis H. hereafter directed by the President" under Section 8 of PD
Jardeleza (Solicitor General) was directed to bring with him during the 910,116 relating to the Malampaya Funds, and (b) "to finance the
Oral Arguments representative/s from the DBM and Congress who priority infrastructure development projects and to finance the
would be able to competently and completely answer questions related restoration of damaged or destroyed facilities due to calamities, as
to, among others, the budgeting process and its implementation. may be directed and authorized by the Office of the President of the
Further, the CoA Chairperson was appointed as amicus curiae and Philippines" under Section 12 of PD 1869, as amended by PD 1993,
thereby requested to appear before the Court during the Oral relating to the Presidential Social Fund, are unconstitutional insofar as
Arguments. they constitute undue delegations of legislative power.

On October 8 and 10, 2013, the Oral Arguments were conducted. These main issues shall be resolved in the order that they have been
Thereafter, the Court directed the parties to submit their respective stated. In addition, the Court shall also tackle certain ancillary issues as
memoranda within a period of seven (7) days, or until October 17, prompted by the present cases.
2013, which the parties subsequently did.
The Court’s Ruling
The Issues Before the Court
The petitions are partly granted.
Based on the pleadings, and as refined during the Oral Arguments, the
I. Procedural Issues.
following are the main issues for the Court‘s resolution:
The prevailing rule in constitutional litigation is that no question
I. Procedural Issues.
involving the constitutionality or validity of a law or governmental act
Whether or not (a) the issues raised in the consolidated petitions may be heard and decided by the Court unless there is compliance
involve an actual and justiciable controversy; (b) the issues raised in with the legal requisites for judicial inquiry,117 namely: (a) there must
the consolidated petitions are matters of policy not subject to judicial be an actual case or controversy calling for the exercise of judicial
review; (c) petitioners have legal standing to sue; and (d) the Court‘s power; (b) the person challenging the act must have the standing to
Decision dated August 19, 1994 in G.R. Nos. 113105, 113174, 113766, question the validity of the subject act or issuance; (c) the question of
and 113888, entitled "Philippine Constitution Association v. constitutionality must be raised at the earliest opportunity ; and (d) the
Enriquez"114 (Philconsa) and Decision dated April 24, 2012 in G.R. No. issue of constitutionality must be the very lis mota of the case. 118 Of
164987, entitled "Lawyers Against Monopoly and Poverty v. Secretary these requisites, case law states that the first two are the most
of Budget and Management"115 (LAMP) bar the re-litigatio n of the issue important119 and, therefore, shall be discussed forthwith.
of constitutionality of the "Pork Barrel System" under the principles of
A. Existence of an Actual Case or Controversy.
res judicata and stare decisis.
By constitutional fiat, judicial power operates only when there is an
II. Substantive Issues on the "Congressional Pork Barrel."
actual case or controversy.120 This is embodied in Section 1, Article VIII
Whether or not the 2013 PDAF Article and all other Congressional Pork of the 1987 Constitution which pertinently states that "judicial power
Barrel Laws similar thereto are unconstitutional considering that they includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable x x x." render the issues on PDAF moot precisely because the Executive
Jurisprudence provides that an actual case or controversy is one which branch of government has no constitutional authority to nullify or annul
"involves a conflict of legal rights, an assertion of opposite legal claims, its legal existence. By constitutional design, the annulment or
susceptible of judicial resolution as distinguished from a hypothetical or nullification of a law may be done either by Congress, through the
abstract difference or dispute.121 In other words, "there must be a passage of a repealing law, or by the Court, through a declaration of
contrariety of legal rights that can be interpreted and enforced on the unconstitutionality. Instructive on this point is the following exchange
basis of existing law and jurisprudence."122 Related to the requirement between Associate Justice Antonio T. Carpio (Justice Carpio) and the
of an actual case or controversy is the requirement of "ripeness," Solicitor General during the Oral Arguments:126
meaning that the questions raised for constitutional scrutiny are
already ripe for adjudication. "A question is ripe for adjudication when Justice Carpio: The President has taken an oath to faithfully execute the
the act being challenged has had a direct adverse effect on the law,127 correct? Solicitor General Jardeleza: Yes, Your Honor.
individual challenging it. It is a prerequisite that something had then
Justice Carpio: And so the President cannot refuse to implement the
been accomplished or performed by either branch before a court may
General Appropriations Act, correct?
come into the picture, and the petitioner must allege the existence of
an immediate or threatened injury to itself as a result of the challenged Solicitor General Jardeleza: Well, that is our answer, Your Honor. In the
action."123 "Withal, courts will decline to pass upon constitutional issues case, for example of the PDAF, the President has a duty to execute the
through advisory opinions, bereft as they are of authority to resolve laws but in the face of the outrage over PDAF, the President was
hypothetical or moot questions."124 saying, "I am not sure that I will continue the release of the soft
projects," and that started, Your Honor. Now, whether or not that …
Based on these principles, the Court finds that there exists an actual
(interrupted)
and justiciable controversy in these cases.
Justice Carpio: Yeah. I will grant the President if there are anomalies in
The requirement of contrariety of legal rights is clearly satisfied by the
the project, he has the power to stop the releases in the meantime, to
antagonistic positions of the parties on the constitutionality of the "Pork
investigate, and that is Section 38 of Chapter 5 of Book 6 of the
Barrel System." Also, the questions in these consolidated cases are ripe
Revised Administrative Code128 x x x. So at most the President can
for adjudication since the challenged funds and the provisions allowing
suspend, now if the President believes that the PDAF is
for their utilization – such as the 2013 GAA for the PDAF, PD 910 for the
unconstitutional, can he just refuse to implement it?
Malampaya Funds and PD 1869, as amended by PD 1993, for the
Presidential Social Fund – are currently existing and operational; hence, Solicitor General Jardeleza: No, Your Honor, as we were trying to say in
there exists an immediate or threatened injury to petitioners as a result the specific case of the PDAF because of the CoA Report, because of
of the unconstitutional use of these public funds. the reported irregularities and this Court can take judicial notice, even
outside, outside of the COA Report, you have the report of the whistle-
As for the PDAF, the Court must dispel the notion that the issues
blowers, the President was just exercising precisely the duty ….
related thereto had been rendered moot and academic by the reforms
undertaken by respondents. A case becomes moot when there is no xxxx
more actual controversy between the parties or no useful purpose can
be served in passing upon the merits.125 Differing from this description, Justice Carpio: Yes, and that is correct. You‘ve seen the CoA Report,
the Court observes that respondents‘ proposed line-item budgeting there are anomalies, you stop and investigate, and prosecute, he has
scheme would not terminate the controversy nor diminish the useful done that. But, does that mean that PDAF has been repealed?
purpose for its resolution since said reform is geared towards the 2014
Solicitor General Jardeleza: No, Your Honor x x x.
budget, and not the 2013 PDAF Article which, being a distinct subject
matter, remains legally effective and existing. Neither will the xxxx
President‘s declaration that he had already "abolished the PDAF"
Justice Carpio: So that PDAF can be legally abolished only in two (2) disallowance of irregularly disbursed PDAF funds, it was emphasized
cases. Congress passes a law to repeal it, or this Court declares it that:
unconstitutional, correct?
The COA is endowed with enough latitude to determine, prevent, and
Solictor General Jardeleza: Yes, Your Honor. disallow irregular, unnecessary, excessive, extravagant or
unconscionable expenditures of government funds. It is tasked to be
Justice Carpio: The President has no power to legally abolish PDAF. vigilant and conscientious in safeguarding the proper use of the
(Emphases supplied) government's, and ultimately the people's, property. The exercise of its
general audit power is among the constitutional mechanisms that gives
Even on the assumption of mootness, jurisprudence, nevertheless,
life to the check and balance system inherent in our form of
dictates that "the moot and academic‘ principle is not a magical
government.
formula that can automatically dissuade the Court in resolving a case."
The Court will decide cases, otherwise moot, if: first, there is a grave It is the general policy of the Court to sustain the decisions of
violation of the Constitution; second, the exceptional character of the administrative authorities, especially one which is constitutionally-
situation and the paramount public interest is involved; third, when the created, such as the CoA, not only on the basis of the doctrine of
constitutional issue raised requires formulation of controlling principles separation of powers but also for their presumed expertise in the laws
to guide the bench, the bar, and the public; and fourth, the case is they are entrusted to enforce. Findings of administrative agencies are
capable of repetition yet evading review.129 accorded not only respect but also finality when the decision and order
are not tainted with unfairness or arbitrariness that would amount to
The applicability of the first exception is clear from the fundamental
grave abuse of discretion. It is only when the CoA has acted without or
posture of petitioners – they essentially allege grave violations of the
in excess of jurisdiction, or with grave abuse of discretion amounting to
Constitution with respect to, inter alia, the principles of separation of
lack or excess of jurisdiction, that this Court entertains a petition
powers, non-delegability of legislative power, checks and balances,
questioning its rulings. x x x. (Emphases supplied)
accountability and local autonomy.
Thus, if only for the purpose of validating the existence of an actual and
The applicability of the second exception is also apparent from the
justiciable controversy in these cases, the Court deems the findings
nature of the interests involved
under the CoA Report to be sufficient.
– the constitutionality of the very system within which significant
The Court also finds the third exception to be applicable largely due to
amounts of public funds have been and continue to be utilized and
the practical need for a definitive ruling on the system‘s
expended undoubtedly presents a situation of exceptional character as
constitutionality. As disclosed during the Oral Arguments, the CoA
well as a matter of paramount public interest. The present petitions, in
Chairperson estimates that thousands of notices of disallowances will
fact, have been lodged at a time when the system‘s flaws have never
be issued by her office in connection with the findings made in the CoA
before been magnified. To the Court‘s mind, the coalescence of the
Report. In this relation, Associate Justice Marvic Mario Victor F. Leonen
CoA Report, the accounts of numerous whistle-blowers, and the
(Justice Leonen) pointed out that all of these would eventually find their
government‘s own recognition that reforms are needed "to address the
way to the courts.132 Accordingly, there is a compelling need to
reported abuses of the PDAF"130 demonstrates a prima facie pattern of
formulate controlling principles relative to the issues raised herein in
abuse which only underscores the importance of the matter. It is also
order to guide the bench, the bar, and the public, not just for the
by this finding that the Court finds petitioners‘ claims as not merely
expeditious resolution of the anticipated disallowance cases, but more
theorized, speculative or hypothetical. Of note is the weight accorded
importantly, so that the government may be guided on how public
by the Court to the findings made by the CoA which is the
funds should be utilized in accordance with constitutional principles.
constitutionally-mandated audit arm of the government. In Delos
Santos v. CoA,131 a recent case wherein the Court upheld the CoA‘s Finally, the application of the fourth exception is called for by the
recognition that the preparation and passage of the national budget is,
by constitutional imprimatur, an affair of annual occurrence.133 The System" is not an issue dependent upon the wisdom of the political
relevance of the issues before the Court does not cease with the branches of government but rather a legal one which the Constitution
passage of a "PDAF -free budget for 2014." 134 The evolution of the itself has commanded the Court to act upon. Scrutinizing the contours
"Pork Barrel System," by its multifarious iterations throughout the of the system along constitutional lines is a task that the political
course of history, lends a semblance of truth to petitioners‘ claim that branches of government are incapable of rendering precisely because
"the same dog will just resurface wearing a different collar." 135 In it is an exercise of judicial power. More importantly, the present
Sanlakas v. Executive Secretary,136 the government had already Constitution has not only vested the Judiciary the right to exercise
backtracked on a previous course of action yet the Court used the judicial power but essentially makes it a duty to proceed therewith.
"capable of repetition but evading review" exception in order "to Section 1, Article VIII of the 1987 Constitution cannot be any clearer:
prevent similar questions from re- emerging."137 The situation similarly "The judicial power shall be vested in one Supreme Court and in such
holds true to these cases. Indeed, the myriad of issues underlying the lower courts as may be established by law. It includes the duty of the
manner in which certain public funds are spent, if not resolved at this courts of justice to settle actual controversies involving rights which are
most opportune time, are capable of repetition and hence, must not legally demandable and enforceable, and to determine whether or not
evade judicial review. there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the
B. Matters of Policy: the Political Question Doctrine. Government." In Estrada v. Desierto,142 the expanded concept of
judicial power under the 1987 Constitution and its effect on the political
The "limitation on the power of judicial review to actual cases and
question doctrine was explained as follows:143
controversies‖ carries the assurance that "the courts will not intrude
into areas committed to the other branches of To a great degree, the 1987 Constitution has narrowed the reach of the
government."138 Essentially, the foregoing limitation is a restatement of political question doctrine when it expanded the power of judicial
the political question doctrine which, under the classic formulation of review of this court not only to settle actual controversies involving
Baker v. Carr,139 applies when there is found, among others, "a rights which are legally demandable and enforceable but also to
textually demonstrable constitutional commitment of the issue to a determine whether or not there has been a grave abuse of discretion
coordinate political department," "a lack of judicially discoverable and amounting to lack or excess of jurisdiction on the part of any branch or
manageable standards for resolving it" or "the impossibility of deciding instrumentality of government. Heretofore, the judiciary has focused on
without an initial policy determination of a kind clearly for non- judicial the "thou shalt not's" of the Constitution directed against the exercise
discretion." Cast against this light, respondents submit that the "the of its jurisdiction. With the new provision, however, courts are given a
political branches are in the best position not only to perform budget- greater prerogative to determine what it can do to prevent grave
related reforms but also to do them in response to the specific abuse of discretion amounting to lack or excess of jurisdiction on the
demands of their constituents" and, as such, "urge the Court not to part of any branch or instrumentality of government. Clearly, the new
impose a solution at this stage."140 provision did not just grant the Court power of doing nothing. x x x
(Emphases supplied)
The Court must deny respondents‘ submission.
It must also be borne in mind that ― when the judiciary mediates to
Suffice it to state that the issues raised before the Court do not present
allocate constitutional boundaries, it does not assert any superiority
political but legal questions which are within its province to resolve. A
over the other departments; does not in reality nullify or invalidate an
political question refers to "those questions which, under the
act of the legislature or the executive, but only asserts the solemn and
Constitution, are to be decided by the people in their sovereign
sacred obligation assigned to it by the Constitution."144 To a great
capacity, or in regard to which full discretionary authority has been
extent, the Court is laudably cognizant of the reforms undertaken by its
delegated to the Legislature or executive branch of the Government. It
co-equal branches of government. But it is by constitutional force that
is concerned with issues dependent upon the wisdom, not legality, of a
the Court must faithfully perform its duty. Ultimately, it is the Court‘s
particular measure."141 The intrinsic constitutionality of the "Pork Barrel
avowed intention that a resolution of these cases would not arrest or in
any manner impede the endeavors of the two other branches but, in D. Res Judicata and Stare Decisis.
fact, help ensure that the pillars of change are erected on firm
constitutional grounds. After all, it is in the best interest of the people Res judicata (which means a "matter adjudged") and stare decisis non
that each great branch of government, within its own sphere, quieta et movere (or simply, stare decisis which means "follow past
contributes its share towards achieving a holistic and genuine solution precedents and do not disturb what has been settled") are general
to the problems of society. For all these reasons, the Court cannot heed procedural law principles which both deal with the effects of previous
respondents‘ plea for judicial restraint. but factually similar dispositions to subsequent cases. For the cases at
bar, the Court examines the applicability of these principles in relation
C. Locus Standi. to its prior rulings in Philconsa and LAMP.

"The gist of the question of standing is whether a party alleges such The focal point of res judicata is the judgment. The principle states that
personal stake in the outcome of the controversy as to assure that a judgment on the merits in a previous case rendered by a court of
concrete adverseness which sharpens the presentation of issues upon competent jurisdiction would bind a subsequent case if, between the
which the court depends for illumination of difficult constitutional first and second actions, there exists an identity of parties, of subject
questions. Unless a person is injuriously affected in any of his matter, and of causes of action. 151 This required identity is not,
constitutional rights by the operation of statute or ordinance, he has no however, attendant hereto since Philconsa and LAMP, respectively
standing."145 involved constitutional challenges against the 1994 CDF Article and
2004 PDAF Article, whereas the cases at bar call for a broader
Petitioners have come before the Court in their respective capacities as constitutional scrutiny of the entire "Pork Barrel System." Also, the
citizen-taxpayers and accordingly, assert that they "dutifully contribute ruling in LAMP is essentially a dismissal based on a procedural
to the coffers of the National Treasury."146 Clearly, as taxpayers, they technicality – and, thus, hardly a judgment on the merits – in that
possess the requisite standing to question the validity of the existing petitioners therein failed to present any "convincing proof x x x
"Pork Barrel System" under which the taxes they pay have been and showing that, indeed, there were direct releases of funds to the
continue to be utilized. It is undeniable that petitioners, as taxpayers, Members of Congress, who actually spend them according to their sole
are bound to suffer from the unconstitutional usage of public funds, if discretion" or "pertinent evidentiary support to demonstrate the illegal
the Court so rules. Invariably, taxpayers have been allowed to sue misuse of PDAF in the form of kickbacks and has become a common
where there is a claim that public funds are illegally disbursed or that exercise of unscrupulous Members of Congress." As such, the Court up
public money is being deflected to any improper purpose, or that public held, in view of the presumption of constitutionality accorded to every
funds are wasted through the enforcement of an invalid or law, the 2004 PDAF Article, and saw "no need to review or reverse the
unconstitutional law,147 as in these cases. standing pronouncements in the said case." Hence, for the foregoing
reasons, the res judicata principle, insofar as the Philconsa and LAMP
Moreover, as citizens, petitioners have equally fulfilled the standing
cases are concerned, cannot apply.
requirement given that the issues they have raised may be classified
as matters "of transcendental importance, of overreaching significance On the other hand, the focal point of stare decisis is the doctrine
to society, or of paramount public interest."148 The CoA Chairperson‘s created. The principle, entrenched under Article 8152 of the Civil Code,
statement during the Oral Arguments that the present controversy evokes the general rule that, for the sake of certainty, a conclusion
involves "not merely a systems failure" but a "complete breakdown of reached in one case should be doctrinally applied to those that follow if
controls"149 amplifies, in addition to the matters above-discussed, the the facts are substantially the same, even though the parties may be
seriousness of the issues involved herein. Indeed, of greater import different. It proceeds from the first principle of justice that, absent any
than the damage caused by the illegal expenditure of public funds is powerful countervailing considerations, like cases ought to be decided
the mortal wound inflicted upon the fundamental law by the alike. Thus, where the same questions relating to the same event have
enforcement of an invalid statute.150 All told, petitioners have sufficient been put forward by the parties similarly situated as in a previous case
locus standi to file the instant cases.
litigated and decided by a competent court, the rule of stare decisis is a power of appropriation is a form of legislative power thereby lodged in
bar to any attempt to re-litigate the same issue.153 Congress, then it follows that: (a) it is Congress which should exercise
such authority, and not its individual Members; (b) such authority must
Philconsa was the first case where a constitutional challenge against a be exercised within the prescribed procedure of law passage and,
Pork Barrel provision, i.e., the 1994 CDF Article, was resolved by the hence, should not be exercised after the GAA has already been passed;
Court. To properly understand its context, petitioners‘ posturing was and (c) such authority, as embodied in the GAA, has the force of law
that "the power given to the Members of Congress to propose and and, hence, cannot be merely recommendatory. Justice Vitug‘s
identify projects and activities to be funded by the CDF is an Concurring Opinion in the same case sums up the Philconsa quandary
encroachment by the legislature on executive power, since said power in this wise: "Neither would it be objectionable for Congress, by law, to
in an appropriation act is in implementation of the law" and that "the appropriate funds for such specific projects as it may be minded; to
proposal and identification of the projects do not involve the making of give that authority, however, to the individual members of Congress in
laws or the repeal and amendment thereof, the only function given to whatever guise, I am afraid, would be constitutionally impermissible."
the Congress by the Constitution."154 In deference to the foregoing As the Court now largely benefits from hindsight and current findings
submissions, the Court reached the following main conclusions: one, on the matter, among others, the CoA Report, the Court must partially
under the Constitution, the power of appropriation, or the "power of the abandon its previous ruling in Philconsa insofar as it validated the post-
purse," belongs to Congress; two, the power of appropriation carries enactment identification authority of Members of Congress on the
with it the power to specify the project or activity to be funded under guise that the same was merely recommendatory. This postulate
the appropriation law and it can be detailed and as broad as Congress raises serious constitutional inconsistencies which cannot be simply
wants it to be; and, three, the proposals and identifications made by excused on the ground that such mechanism is "imaginative as it is
Members of Congress are merely recommendatory. At once, it is innovative." Moreover, it must be pointed out that the recent case of
apparent that the Philconsa resolution was a limited response to a Abakada Guro Party List v. Purisima155 (Abakada) has effectively
separation of powers problem, specifically on the propriety of overturned Philconsa‘s allowance of post-enactment legislator
conferring post-enactment identification authority to Members of participation in view of the separation of powers principle. These
Congress. On the contrary, the present cases call for a more holistic constitutional inconsistencies and the Abakada rule will be discussed in
examination of (a) the inter-relation between the CDF and PDAF greater detail in the ensuing section of this Decision.
Articles with each other, formative as they are of the entire "Pork Barrel
System" as well as (b) the intra-relation of post-enactment measures As for LAMP, suffice it to restate that the said case was dismissed on a
contained within a particular CDF or PDAF Article, including not only procedural technicality and, hence, has not set any controlling doctrine
those related to the area of project identification but also to the areas susceptible of current application to the substantive issues in these
of fund release and realignment. The complexity of the issues and the cases. In fine, stare decisis would not apply.
broader legal analyses herein warranted may be, therefore, considered
as a powerful countervailing reason against a wholesale application of II. Substantive Issues.
the stare decisis principle.
A. Definition of Terms.
In addition, the Court observes that the Philconsa ruling was actually
Before the Court proceeds to resolve the substantive issues of these
riddled with inherent constitutional inconsistencies which similarly
cases, it must first define the terms "Pork Barrel System,"
countervail against a full resort to stare decisis. As may be deduced
"Congressional Pork Barrel," and "Presidential Pork Barrel" as they are
from the main conclusions of the case, Philconsa‘s fundamental
essential to the ensuing discourse.
premise in allowing Members of Congress to propose and identify of
projects would be that the said identification authority is but an aspect Petitioners define the term "Pork Barrel System" as the "collusion
of the power of appropriation which has been constitutionally lodged in between the Legislative and Executive branches of government to
Congress. From this premise, the contradictions may be easily seen. If accumulate lump-sum public funds in their offices with unchecked
the authority to identify projects is an aspect of appropriation and the discretionary powers to determine its distribution as political
largesse."156 They assert that the following elements make up the Pork B. Substantive Issues on the Congressional Pork Barrel.
Barrel System: (a) lump-sum funds are allocated through the
appropriations process to an individual officer; (b) the officer is given 1. Separation of Powers.
sole and broad discretion in determining how the funds will be used or
a. Statement of Principle.
expended; (c) the guidelines on how to spend or use the funds in the
appropriation are either vague, overbroad or inexistent; and (d) The principle of separation of powers refers to the constitutional
projects funded are intended to benefit a definite constituency in a demarcation of the three fundamental powers of government. In the
particular part of the country and to help the political careers of the celebrated words of Justice Laurel in Angara v. Electoral
disbursing official by yielding rich patronage benefits.157 They further Commission,162 it means that the "Constitution has blocked out with
state that the Pork Barrel System is comprised of two (2) kinds of deft strokes and in bold lines, allotment of power to the executive, the
discretionary public funds: first, the Congressional (or Legislative) Pork legislative and the judicial departments of the government."163 To the
Barrel, currently known as the PDAF; 158 and, second, the Presidential legislative branch of government, through Congress,164 belongs the
(or Executive) Pork Barrel, specifically, the Malampaya Funds under PD power to make laws; to the executive branch of government, through
910 and the Presidential Social Fund under PD 1869, as amended by the President,165 belongs the power to enforce laws; and to the judicial
PD 1993.159 branch of government, through the Court,166 belongs the power to
interpret laws. Because the three great powers have been, by
Considering petitioners‘ submission and in reference to its local
constitutional design, ordained in this respect, "each department of the
concept and legal history, the Court defines the Pork Barrel System as
government has exclusive cognizance of matters within its jurisdiction,
the collective body of rules and practices that govern the manner by
and is supreme within its own sphere."167 Thus, "the legislature has no
which lump-sum, discretionary funds, primarily intended for local
authority to execute or construe the law, the executive has no
projects, are utilized through the respective participations of the
authority to make or construe the law, and the judiciary has no power
Legislative and Executive branches of government, including its
to make or execute the law." 168 The principle of separation of powers
members. The Pork Barrel System involves two (2) kinds of lump-sum
and its concepts of autonomy and independence stem from the notion
discretionary funds:
that the powers of government must be divided to avoid concentration
First, there is the Congressional Pork Barrel which is herein defined as a of these powers in any one branch; the division, it is hoped, would
kind of lump-sum, discretionary fund wherein legislators, either avoid any single branch from lording its power over the other branches
individually or collectively organized into committees, are able to or the citizenry.169 To achieve this purpose, the divided power must be
effectively control certain aspects of the fund’s utilization through wielded by co-equal branches of government that are equally capable
various post-enactment measures and/or practices. In particular, of independent action in exercising their respective mandates. Lack of
petitioners consider the PDAF, as it appears under the 2013 GAA, as independence would result in the inability of one branch of government
Congressional Pork Barrel since it is, inter alia, a post-enactment to check the arbitrary or self-interest assertions of another or others.170
measure that allows individual legislators to wield a collective
Broadly speaking, there is a violation of the separation of powers
power;160 and
principle when one branch of government unduly encroaches on the
Second, there is the Presidential Pork Barrel which is herein defined as domain of another. US Supreme Court decisions instruct that the
a kind of lump-sum, discretionary fund which allows the President to principle of separation of powers may be violated in two (2) ways:
determine the manner of its utilization. For reasons earlier firstly, "one branch may interfere impermissibly with the other’s
stated,161 the Court shall delimit the use of such term to refer only to performance of its constitutionally assigned function";171 and
the Malampaya Funds and the Presidential Social Fund. "alternatively, the doctrine may be violated when one branch assumes
a function that more properly is entrusted to another."172 In other
With these definitions in mind, the Court shall now proceed to discuss words, there is a violation of the principle when there is impermissible
the substantive issues of these cases.
(a) interference with and/or (b) assumption of another department‘s function which is a mechanism of checks and balances that the
functions. Constitution itself allows. But it must be made clear that Congress‘ role
must be confined to mere oversight. Any post-enactment-measure
The enforcement of the national budget, as primarily contained in the allowing legislator participation beyond oversight is bereft of any
GAA, is indisputably a function both constitutionally assigned and constitutional basis and hence, tantamount to impermissible
properly entrusted to the Executive branch of government. In interference and/or assumption of executive functions. As the Court
Guingona, Jr. v. Hon. Carague173 (Guingona, Jr.), the Court explained ruled in Abakada:178
that the phase of budget execution "covers the various operational
aspects of budgeting" and accordingly includes "the evaluation of work Any post-enactment congressional measure x x x should be limited to
and financial plans for individual activities," the "regulation and release scrutiny and investigation.1âwphi1 In particular, congressional
of funds" as well as all "other related activities" that comprise the oversight must be confined to the following:
budget execution cycle.174 This is rooted in the principle that the
allocation of power in the three principal branches of government is a (1) scrutiny based primarily on Congress‘ power of appropriation and
grant of all powers inherent in them.175 Thus, unless the Constitution the budget hearings conducted in connection with it, its power to ask
provides otherwise, the Executive department should exclusively heads of departments to appear before and be heard by either of its
exercise all roles and prerogatives which go into the implementation of Houses on any matter pertaining to their departments and its power of
the national budget as provided under the GAA as well as any other confirmation; and
appropriation law.
(2) investigation and monitoring of the implementation of laws
In view of the foregoing, the Legislative branch of government, much pursuant to the power of Congress to conduct inquiries in aid of
more any of its members, should not cross over the field of legislation.
implementing the national budget since, as earlier stated, the same is
Any action or step beyond that will undermine the separation of powers
properly the domain of the Executive. Again, in Guingona, Jr., the Court
guaranteed by the Constitution. (Emphases supplied)
stated that "Congress enters the picture when it deliberates or acts on
the budget proposals of the President. Thereafter, Congress, "in the b. Application.
exercise of its own judgment and wisdom, formulates an appropriation
act precisely following the process established by the Constitution, In these cases, petitioners submit that the Congressional Pork Barrel –
which specifies that no money may be paid from the Treasury except among others, the 2013 PDAF Article – "wrecks the assignment of
in accordance with an appropriation made by law." Upon approval and responsibilities between the political branches" as it is designed to
passage of the GAA, Congress‘ law -making role necessarily comes to allow individual legislators to interfere "way past the time it should
an end and from there the Executive‘s role of implementing the have ceased" or, particularly, "after the GAA is passed."179 They state
national budget begins. So as not to blur the constitutional boundaries that the findings and recommendations in the CoA Report provide "an
between them, Congress must "not concern it self with details for illustration of how absolute and definitive the power of legislators wield
implementation by the Executive."176 over project implementation in complete violation of the constitutional
principle of separation of powers."180 Further, they point out that the
The foregoing cardinal postulates were definitively enunciated in Court in the Philconsa case only allowed the CDF to exist on the
Abakada where the Court held that "from the moment the law condition that individual legislators limited their role to recommending
becomes effective, any provision of law that empowers Congress or projects and not if they actually dictate their implementation.181
any of its members to play any role in the implementation or
enforcement of the law violates the principle of separation of powers For their part, respondents counter that the separations of powers
and is thus unconstitutional."177 It must be clarified, however, that since principle has not been violated since the President maintains "ultimate
the restriction only pertains to "any role in the implementation or authority to control the execution of the GAA‖ and that he "retains the
enforcement of the law," Congress may still exercise its oversight final discretion to reject" the legislators‘ proposals.182 They maintain
that the Court, in Philconsa, "upheld the constitutionality of the power realignment. Under the 2013 PDAF Article, the statutory authority of
of members of Congress to propose and identify projects so long as legislators to participate in the area of fund release through
such proposal and identification are recommendatory."183 As such, they congressional committees is contained in Special Provision 5 which
claim that "everything in the Special Provisions [of the 2013 PDAF explicitly states that "all request for release of funds shall be supported
Article follows the Philconsa framework, and hence, remains by the documents prescribed under Special Provision No. 1 and
constitutional."184 favorably endorsed by House Committee on Appropriations and the
Senate Committee on Finance, as the case may be"; while their
The Court rules in favor of petitioners. statutory authority to participate in the area of fund realignment is
contained in: first , paragraph 2, Special Provision 4 189 which explicitly
As may be observed from its legal history, the defining feature of all
state s, among others, that "any realignment of funds shall be
forms of Congressional Pork Barrel would be the authority of legislators
submitted to the House Committee on Appropriations and the Senate
to participate in the post-enactment phases of project implementation.
Committee on Finance for favorable endorsement to the DBM or the
At its core, legislators – may it be through project lists,185 prior implementing agency, as the case may be‖ ; and, second , paragraph
consultations186 or program menus187 – have been consistently 1, also of Special Provision 4 which authorizes the "Secretaries of
accorded post-enactment authority to identify the projects they desire Agriculture, Education, Energy, Interior and Local Government, Labor
to be funded through various Congressional Pork Barrel allocations. and Employment, Public Works and Highways, Social Welfare and
Under the 2013 PDAF Article, the statutory authority of legislators to Development and Trade and Industry190 x x x to approve realignment
identify projects post-GAA may be construed from the import of Special from one project/scope to another within the allotment received from
Provisions 1 to 3 as well as the second paragraph of Special Provision 4. this Fund, subject to among others (iii) the request is with the
To elucidate, Special Provision 1 embodies the program menu feature concurrence of the legislator concerned."
which, as evinced from past PDAF Articles, allows individual legislators
Clearly, these post-enactment measures which govern the areas of
to identify PDAF projects for as long as the identified project falls under
project identification, fund release and fund realignment are not related
a general program listed in the said menu. Relatedly, Special Provision
to functions of congressional oversight and, hence, allow legislators to
2 provides that the implementing agencies shall, within 90 days from
intervene and/or assume duties that properly belong to the sphere of
the GAA is passed, submit to Congress a more detailed priority list,
budget execution. Indeed, by virtue of the foregoing, legislators have
standard or design prepared and submitted by implementing agencies
been, in one form or another, authorized to participate in – as
from which the legislator may make his choice. The same provision
Guingona, Jr. puts it – "the various operational aspects of budgeting,"
further authorizes legislators to identify PDAF projects outside his
including "the evaluation of work and financial plans for individual
district for as long as the representative of the district concerned
activities" and the "regulation and release of funds" in violation of the
concurs in writing. Meanwhile, Special Provision 3 clarifies that PDAF
separation of powers principle. The fundamental rule, as categorically
projects refer to "projects to be identified by legislators"188 and
articulated in Abakada, cannot be overstated – from the moment the
thereunder provides the allocation limit for the total amount of projects
law becomes effective, any provision of law that empowers Congress
identified by each legislator. Finally, paragraph 2 of Special Provision 4
or any of its members to play any role in the implementation or
requires that any modification and revision of the project identification
enforcement of the law violates the principle of separation of powers
"shall be submitted to the House Committee on Appropriations and the
and is thus unconstitutional.191 That the said authority is treated as
Senate Committee on Finance for favorable endorsement to the DBM
merely recommendatory in nature does not alter its unconstitutional
or the implementing agency, as the case may be." From the foregoing
tenor since the prohibition, to repeat, covers any role in the
special provisions, it cannot be seriously doubted that legislators have
implementation or enforcement of the law. Towards this end, the Court
been accorded post-enactment authority to identify PDAF projects.
must therefore abandon its ruling in Philconsa which sanctioned the
Aside from the area of project identification, legislators have also been conduct of legislator identification on the guise that the same is merely
accorded post-enactment authority in the areas of fund release and
recommendatory and, as such, respondents‘ reliance on the same Solictor General Jardeleza: What we mean by mandatory, Your Honor,
falters altogether. is we were replying to a question, "How can a legislator make sure that
he is able to get PDAF Funds?" It is mandatory in the sense that he
Besides, it must be pointed out that respondents have nonetheless must identify, in that sense, Your Honor. Otherwise, if he does not
failed to substantiate their position that the identification authority of identify, he cannot avail of the PDAF Funds and his district would not be
legislators is only of recommendatory import. Quite the contrary, able to have PDAF Funds, only in that sense, Your Honor. (Emphases
respondents – through the statements of the Solicitor General during supplied)
the Oral Arguments – have admitted that the identification of the
legislator constitutes a mandatory requirement before his PDAF can be Thus, for all the foregoing reasons, the Court hereby declares the 2013
tapped as a funding source, thereby highlighting the indispensability of PDAF Article as well as all other provisions of law which similarly allow
the said act to the entire budget execution process:192 legislators to wield any form of post-enactment authority in the
implementation or enforcement of the budget, unrelated to
Justice Bernabe: Now, without the individual legislator’s identification of congressional oversight, as violative of the separation of powers
the project, can the PDAF of the legislator be utilized? principle and thus unconstitutional. Corollary thereto, informal
practices, through which legislators have effectively intruded into the
Solicitor General Jardeleza: No, Your Honor.
proper phases of budget execution, must be deemed as acts of grave
Justice Bernabe: It cannot? abuse of discretion amounting to lack or excess of jurisdiction and,
hence, accorded the same unconstitutional treatment. That such
Solicitor General Jardeleza: It cannot… (interrupted) informal practices do exist and have, in fact, been constantly observed
throughout the years has not been substantially disputed here. As
Justice Bernabe: So meaning you should have the identification of the
pointed out by Chief Justice Maria Lourdes P.A. Sereno (Chief Justice
project by the individual legislator?
Sereno) during the Oral Arguments of these cases: 193
Solicitor General Jardeleza: Yes, Your Honor. Chief Justice Sereno:

xxxx Now, from the responses of the representative of both, the DBM and
two (2) Houses of Congress, if we enforces the initial thought that I
Justice Bernabe: In short, the act of identification is mandatory? have, after I had seen the extent of this research made by my staff,
that neither the Executive nor Congress frontally faced the question of
Solictor General Jardeleza: Yes, Your Honor. In the sense that if it is not constitutional compatibility of how they were engineering the budget
done and then there is no identification. process. In fact, the words you have been using, as the three lawyers of
xxxx the DBM, and both Houses of Congress has also been using is surprise;
surprised that all of these things are now surfacing. In fact, I thought
Justice Bernabe: Now, would you know of specific instances when a that what the 2013 PDAF provisions did was to codify in one section all
project was implemented without the identification by the individual the past practice that had been done since 1991. In a certain sense, we
legislator? should be thankful that they are all now in the PDAF Special Provisions.
x x x (Emphasis and underscoring supplied)
Solicitor General Jardeleza: I do not know, Your Honor; I do not think so
but I have no specific examples. I would doubt very much, Your Honor, Ultimately, legislators cannot exercise powers which they do not have,
because to implement, there is a need for a SARO and the NCA. And whether through formal measures written into the law or informal
the SARO and the NCA are triggered by an identification from the practices institutionalized in government agencies, else the Executive
legislator. department be deprived of what the Constitution has vested as its own.

xxxx 2. Non-delegability of Legislative Power.

a. Statement of Principle. into effect the law as it has been enacted. The power cannot be
extended to amending or expanding the statutory requirements or to
As an adjunct to the separation of powers principle, 194 legislative power embrace matters not covered by the statute. Rules that subvert the
shall be exclusively exercised by the body to which the Constitution statute cannot be sanctioned. (Emphases supplied)
has conferred the same. In particular, Section 1, Article VI of the 1987
Constitution states that such power shall be vested in the Congress of b. Application.
the Philippines which shall consist of a Senate and a House of
Representatives, except to the extent reserved to the people by the In the cases at bar, the Court observes that the 2013 PDAF Article,
provision on initiative and referendum.195 Based on this provision, it is insofar as it confers post-enactment identification authority to
clear that only Congress, acting as a bicameral body, and the people, individual legislators, violates the principle of non-delegability since said
through the process of initiative and referendum, may constitutionally legislators are effectively allowed to individually exercise the power of
wield legislative power and no other. This premise embodies the appropriation, which – as settled in Philconsa – is lodged in
principle of non-delegability of legislative power, and the only Congress.201 That the power to appropriate must be exercised only
recognized exceptions thereto would be: (a) delegated legislative through legislation is clear from Section 29(1), Article VI of the 1987
power to local governments which, by immemorial practice, are Constitution which states that: "No money shall be paid out of the
allowed to legislate on purely local matters; 196 and (b) constitutionally- Treasury except in pursuance of an appropriation made by law." To
grafted exceptions such as the authority of the President to, by law, understand what constitutes an act of appropriation, the Court, in
exercise powers necessary and proper to carry out a declared national Bengzon v. Secretary of Justice and Insular Auditor 202 (Bengzon), held
policy in times of war or other national emergency,197 or fix within that the power of appropriation involves (a) the setting apart by law of
specified limits, and subject to such limitations and restrictions as a certain sum from the public revenue for (b) a specified purpose.
Congress may impose, tariff rates, import and export quotas, tonnage Essentially, under the 2013 PDAF Article, individual legislators are given
and wharfage dues, and other duties or imposts within the framework a personal lump-sum fund from which they are able to dictate (a) how
of the national development program of the Government.198 much from such fund would go to (b) a specific project or beneficiary
that they themselves also determine. As these two (2) acts comprise
Notably, the principle of non-delegability should not be confused as a the exercise of the power of appropriation as described in Bengzon,
restriction to delegate rule-making authority to implementing agencies and given that the 2013 PDAF Article authorizes individual legislators to
for the limited purpose of either filling up the details of the law for its perform the same, undoubtedly, said legislators have been conferred
enforcement (supplementary rule-making) or ascertaining facts to the power to legislate which the Constitution does not, however, allow.
bring the law into actual operation (contingent rule-making).199 The Thus, keeping with the principle of non-delegability of legislative power,
conceptual treatment and limitations of delegated rule-making were the Court hereby declares the 2013 PDAF Article, as well as all other
explained in the case of People v. Maceren200 as follows: forms of Congressional Pork Barrel which contain the similar legislative
identification feature as herein discussed, as unconstitutional.
The grant of the rule-making power to administrative agencies is a
relaxation of the principle of separation of powers and is an exception 3. Checks and Balances.
to the nondelegation of legislative powers. Administrative regulations
or "subordinate legislation" calculated to promote the public interest a. Statement of Principle; Item-Veto Power.
are necessary because of "the growing complexity of modern life, the
The fact that the three great powers of government are intended to be
multiplication of the subjects of governmental regulations, and the
kept separate and distinct does not mean that they are absolutely
increased difficulty of administering the law."
unrestrained and independent of each other. The Constitution has also
xxxx provided for an elaborate system of checks and balances to secure
coordination in the workings of the various departments of the
Nevertheless, it must be emphasized that the rule-making power must government.203
be confined to details for regulating the mode or proceeding to carry
A prime example of a constitutional check and balance would be the will presume the constitutionality of an act as originally passed by the
President’s power to veto an item written into an appropriation, Legislature. (Emphases supplied)
revenue or tariff bill submitted to him by Congress for approval through
a process known as "bill presentment." The President‘s item-veto The justification for the President‘s item-veto power rests on a variety
power is found in Section 27(2), Article VI of the 1987 Constitution of policy goals such as to prevent log-rolling legislation, 207 impose fiscal
which reads as follows: restrictions on the legislature, as well as to fortify the executive
branch‘s role in the budgetary process.208 In Immigration and
Sec. 27. x x x. Naturalization Service v. Chadha, the US Supreme Court characterized
the President‘s item-power as "a salutary check upon the legislative
xxxx body, calculated to guard the community against the effects of
factions, precipitancy, or of any impulse unfriendly to the public good,
(2) The President shall have the power to veto any particular item or
which may happen to influence a majority of that body"; phrased
items in an appropriation, revenue, or tariff bill, but the veto shall not
differently, it is meant to "increase the chances in favor of the
affect the item or items to which he does not object.
community against the passing of bad laws, through haste,
The presentment of appropriation, revenue or tariff bills to the inadvertence, or design."209
President, wherein he may exercise his power of item-veto, forms part
For the President to exercise his item-veto power, it necessarily follows
of the "single, finely wrought and exhaustively considered, procedures"
that there exists a proper "item" which may be the object of the veto.
for law-passage as specified under the Constitution.204 As stated in
An item, as defined in the field of appropriations, pertains to "the
Abakada, the final step in the law-making process is the "submission of
particulars, the details, the distinct and severable parts of the
the bill to the President for approval. Once approved, it takes effect as
appropriation or of the bill." In the case of Bengzon v. Secretary of
law after the required publication."205
Justice of the Philippine Islands,210 the US Supreme Court characterized
Elaborating on the President‘s item-veto power and its relevance as a an item of appropriation as follows:
check on the legislature, the Court, in Bengzon, explained that:206
An item of an appropriation bill obviously means an item which, in
The former Organic Act and the present Constitution of the Philippines itself, is a specific appropriation of money, not some general provision
make the Chief Executive an integral part of the law-making power. His of law which happens to be put into an appropriation bill. (Emphases
disapproval of a bill, commonly known as a veto, is essentially a supplied)
legislative act. The questions presented to the mind of the Chief
On this premise, it may be concluded that an appropriation bill, to
Executive are precisely the same as those the legislature must
ensure that the President may be able to exercise his power of item
determine in passing a bill, except that his will be a broader point of
veto, must contain "specific appropriations of money" and not only
view.
"general provisions" which provide for parameters of appropriation.
The Constitution is a limitation upon the power of the legislative
Further, it is significant to point out that an item of appropriation must
department of the government, but in this respect it is a grant of power
be an item characterized by singular correspondence – meaning an
to the executive department. The Legislature has the affirmative power
allocation of a specified singular amount for a specified singular
to enact laws; the Chief Executive has the negative power by the
purpose, otherwise known as a "line-item."211 This treatment not only
constitutional exercise of which he may defeat the will of the
allows the item to be consistent with its definition as a "specific
Legislature. It follows that the Chief Executive must find his authority in
appropriation of money" but also ensures that the President may
the Constitution. But in exercising that authority he may not be
discernibly veto the same. Based on the foregoing formulation, the
confined to rules of strict construction or hampered by the unwise
existing Calamity Fund, Contingent Fund and the Intelligence Fund,
interference of the judiciary. The courts will indulge every intendment
being appropriations which state a specified amount for a specific
in favor of the constitutionality of a veto in the same manner as they
purpose, would then be considered as "line- item" appropriations which
are rightfully subject to item veto. Likewise, it must be observed that an authority would, in effect, be exercising legislative prerogatives in
appropriation may be validly apportioned into component percentages violation of the principle of non-delegability.
or values; however, it is crucial that each percentage or value must be
allocated for its own corresponding purpose for such component to be b. Application.
considered as a proper line-item. Moreover, as Justice Carpio correctly
In these cases, petitioners claim that "in the current x x x system where
pointed out, a valid appropriation may even have several related
the PDAF is a lump-sum appropriation, the legislator‘s identification of
purposes that are by accounting and budgeting practice considered as
the projects after the passage of the GAA denies the President the
one purpose, e.g., MOOE (maintenance and other operating expenses),
chance to veto that item later on."212 Accordingly, they submit that the
in which case the related purposes shall be deemed sufficiently specific
"item veto power of the President mandates that appropriations bills
for the exercise of the President‘s item veto power. Finally, special
adopt line-item budgeting" and that "Congress cannot choose a mode
purpose funds and discretionary funds would equally square with the
of budgeting which effectively renders the constitutionally-given power
constitutional mechanism of item-veto for as long as they follow the
of the President useless."213
rule on singular correspondence as herein discussed. Anent special
purpose funds, it must be added that Section 25(4), Article VI of the On the other hand, respondents maintain that the text of the
1987 Constitution requires that the "special appropriations bill shall Constitution envisions a process which is intended to meet the
specify the purpose for which it is intended, and shall be supported by demands of a modernizing economy and, as such, lump-sum
funds actually available as certified by the National Treasurer, or t o be appropriations are essential to financially address situations which are
raised by a corresponding revenue proposal therein." Meanwhile, with barely foreseen when a GAA is enacted. They argue that the decision
respect to discretionary funds, Section 2 5(6), Article VI of the 1987 of the Congress to create some lump-sum appropriations is
Constitution requires that said funds "shall be disbursed only for public constitutionally allowed and textually-grounded.214
purposes to be supported by appropriate vouchers and subject to such
guidelines as may be prescribed by law." The Court agrees with petitioners.

In contrast, what beckons constitutional infirmity are appropriations Under the 2013 PDAF Article, the amount of ₱24.79 Billion only appears
which merely provide for a singular lump-sum amount to be tapped as as a collective allocation limit since the said amount would be further
a source of funding for multiple purposes. Since such appropriation divided among individual legislators who would then receive personal
type necessitates the further determination of both the actual amount lump-sum allocations and could, after the GAA is passed, effectively
to be expended and the actual purpose of the appropriation which appropriate PDAF funds based on their own discretion. As these
must still be chosen from the multiple purposes stated in the law, it intermediate appropriations are made by legislators only after the GAA
cannot be said that the appropriation law already indicates a "specific is passed and hence, outside of the law, it necessarily means that the
appropriation of money‖ and hence, without a proper line-item which actual items of PDAF appropriation would not have been written into
the President may veto. As a practical result, the President would then the General Appropriations Bill and thus effectuated without veto
be faced with the predicament of either vetoing the entire consideration. This kind of lump-sum/post-enactment legislative
appropriation if he finds some of its purposes wasteful or undesirable, identification budgeting system fosters the creation of a budget within
or approving the entire appropriation so as not to hinder some of its a budget" which subverts the prescribed procedure of presentment
legitimate purposes. Finally, it may not be amiss to state that such and consequently impairs the President‘s power of item veto. As
arrangement also raises non-delegability issues considering that the petitioners aptly point out, the above-described system forces the
implementing authority would still have to determine, again, both the President to decide between (a) accepting the entire ₱24.79 Billion
actual amount to be expended and the actual purpose of the PDAF allocation without knowing the specific projects of the legislators,
appropriation. Since the foregoing determinations constitute the which may or may not be consistent with his national agenda and (b)
integral aspects of the power to appropriate, the implementing rejecting the whole PDAF to the detriment of all other legislators with
legitimate projects.215
Moreover, even without its post-enactment legislative identification The aphorism forged under Section 1, Article XI of the 1987
feature, the 2013 PDAF Article would remain constitutionally flawed Constitution, which states that "public office is a public trust," is an
since it would then operate as a prohibited form of lump-sum overarching reminder that every instrumentality of government should
appropriation above-characterized. In particular, the lump-sum amount exercise their official functions only in accordance with the principles of
of ₱24.79 Billion would be treated as a mere funding source allotted for the Constitution which embodies the parameters of the people‘s trust.
multiple purposes of spending, i.e., scholarships, medical missions, The notion of a public trust connotes accountability, 221 hence, the
assistance to indigents, preservation of historical materials, various mechanisms in the Constitution which are designed to exact
construction of roads, flood control, etc. This setup connotes that the accountability from public officers.
appropriation law leaves the actual amounts and purposes of the
appropriation for further determination and, therefore, does not readily Among others, an accountability mechanism with which the proper
indicate a discernible item which may be subject to the President‘s expenditure of public funds may be checked is the power of
power of item veto. congressional oversight. As mentioned in Abakada,222 congressional
oversight may be performed either through: (a) scrutiny based
In fact, on the accountability side, the same lump-sum budgeting primarily on Congress‘ power of appropriation and the budget hearings
scheme has, as the CoA Chairperson relays, "limited state auditors conducted in connection with it, its power to ask heads of departments
from obtaining relevant data and information that would aid in more to appear before and be heard by either of its Houses on any matter
stringently auditing the utilization of said Funds."216 Accordingly, she pertaining to their departments and its power of confirmation;223 or (b)
recommends the adoption of a "line by line budget or amount per investigation and monitoring of the implementation of laws pursuant to
proposed program, activity or project, and per implementing the power of Congress to conduct inquiries in aid of legislation.224
agency."217
The Court agrees with petitioners that certain features embedded in
Hence, in view of the reasons above-stated, the Court finds the 2013 some forms of Congressional Pork Barrel, among others the 2013 PDAF
PDAF Article, as well as all Congressional Pork Barrel Laws of similar Article, has an effect on congressional oversight. The fact that
operation, to be unconstitutional. That such budgeting system provides individual legislators are given post-enactment roles in the
for a greater degree of flexibility to account for future contingencies implementation of the budget makes it difficult for them to become
cannot be an excuse to defeat what the Constitution requires. Clearly, disinterested "observers" when scrutinizing, investigating or monitoring
the first and essential truth of the matter is that unconstitutional means the implementation of the appropriation law. To a certain extent, the
do not justify even commendable ends.218 conduct of oversight would be tainted as said legislators, who are
vested with post-enactment authority, would, in effect, be checking on
c. Accountability. activities in which they themselves participate. Also, it must be pointed
out that this very same concept of post-enactment authorization runs
Petitioners further relate that the system under which various forms of
afoul of Section 14, Article VI of the 1987 Constitution which provides
Congressional Pork Barrel operate defies public accountability as it
that:
renders Congress incapable of checking itself or its Members. In
particular, they point out that the Congressional Pork Barrel "gives each Sec. 14. No Senator or Member of the House of Representatives may
legislator a direct, financial interest in the smooth, speedy passing of personally appear as counsel before any court of justice or before the
the yearly budget" which turns them "from fiscalizers" into "financially- Electoral Tribunals, or quasi-judicial and other administrative bodies.
interested partners."219 They also claim that the system has an effect Neither shall he, directly or indirectly, be interested financially in any
on re- election as "the PDAF excels in self-perpetuation of elective contract with, or in any franchise or special privilege granted by the
officials." Finally, they add that the "PDAF impairs the power of Government, or any subdivision, agency, or instrumentality thereof,
impeachment" as such "funds are indeed quite useful, ‘to well, including any government-owned or controlled corporation, or its
accelerate the decisions of senators.‘"220 subsidiary, during his term of office. He shall not intervene in any
matter before any office of the Government for his pecuniary benefit or
The Court agrees in part.
where he may be called upon to act on account of his office. (Emphasis specifies guideline for legislative or executive action. 226 Therefore, since
supplied) there appears to be no standing law which crystallizes the policy on
political dynasties for enforcement, the Court must defer from ruling on
Clearly, allowing legislators to intervene in the various phases of project this issue.
implementation – a matter before another office of government –
renders them susceptible to taking undue advantage of their own In any event, the Court finds the above-stated argument on this score
office. to be largely speculative since it has not been properly demonstrated
how the Pork Barrel System would be able to propagate political
The Court, however, cannot completely agree that the same post- dynasties.
enactment authority and/or the individual legislator‘s control of his
PDAF per se would allow him to perpetuate himself in office. Indeed, 5. Local Autonomy.
while the Congressional Pork Barrel and a legislator‘s use thereof may
be linked to this area of interest, the use of his PDAF for re-election The State‘s policy on local autonomy is principally stated in Section 25,
purposes is a matter which must be analyzed based on particular facts Article II and Sections 2 and 3, Article X of the 1987 Constitution which
and on a case-to-case basis. read as follows:

Finally, while the Court accounts for the possibility that the close ARTICLE II
operational proximity between legislators and the Executive
Sec. 25. The State shall ensure the autonomy of local governments.
department, through the former‘s post-enactment participation, may
affect the process of impeachment, this matter largely borders on the ARTICLE X
domain of politics and does not strictly concern the Pork Barrel
System‘s intrinsic constitutionality. As such, it is an improper subject of Sec. 2. The territorial and political subdivisions shall enjoy local
judicial assessment. autonomy.

In sum, insofar as its post-enactment features dilute congressional Sec. 3. The Congress shall enact a local government code which shall
oversight and violate Section 14, Article VI of the 1987 Constitution, provide for a more responsive and accountable local government
thus impairing public accountability, the 2013 PDAF Article and other structure instituted through a system of decentralization with effective
forms of Congressional Pork Barrel of similar nature are deemed as mechanisms of recall, initiative, and referendum, allocate among the
unconstitutional. different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and
4. Political Dynasties. removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and
One of the petitioners submits that the Pork Barrel System enables
operation of the local units.
politicians who are members of political dynasties to accumulate funds
to perpetuate themselves in power, in contravention of Section 26, Pursuant thereto, Congress enacted RA 7160,227 otherwise known as
Article II of the 1987 Constitution225 which states that: the "Local Government Code of 1991" (LGC), wherein the policy on
local autonomy had been more specifically explicated as follows:
Sec. 26. The State shall guarantee equal access to opportunities for
public service, and prohibit political dynasties as may be defined by Sec. 2. Declaration of Policy. – (a) It is hereby declared the policy of the
law. (Emphasis and underscoring supplied) State that the territorial and political subdivisions of the State shall
enjoy genuine and meaningful local autonomy to enable them to attain
At the outset, suffice it to state that the foregoing provision is
their fullest development as self-reliant communities and make them
considered as not self-executing due to the qualifying phrase "as may
more effective partners in the attainment of national goals. Toward this
be defined by law." In this respect, said provision does not, by and of
end, the State shall provide for a more responsive and accountable
itself, provide a judicially enforceable constitutional right but merely
local government structure instituted through a system of Congress, far more than the President and their congressional
decentralization whereby local government units shall be given more colleagues, are likely to be knowledgeable about the needs of their
powers, authority, responsibilities, and resources. The process of respective constituents and the priority to be given each
decentralization shall proceed from the National Government to the project."231 Drawing strength from this pronouncement, previous
local government units. legislators justified its existence by stating that "the relatively small
projects implemented under the Congressional Pork Barrel
xxxx complement and link the national development goals to the
countryside and grassroots as well as to depressed areas which are
(c) It is likewise the policy of the State to require all national agencies
overlooked by central agencies which are preoccupied with mega-
and offices to conduct periodic consultations with appropriate local
projects.232 Similarly, in his August 23, 2013 speech on the "abolition"
government units, nongovernmental and people‘s organizations, and
of PDAF and budgetary reforms, President Aquino mentioned that the
other concerned sectors of the community before any project or
Congressional Pork Barrel was originally established for a worthy goal,
program is implemented in their respective jurisdictions. (Emphases
which is to enable the representatives to identify projects for
and underscoring supplied)
communities that the LGU concerned cannot afford.233
The above-quoted provisions of the Constitution and the LGC reveal
Notwithstanding these declarations, the Court, however, finds an
the policy of the State to empower local government units (LGUs) to
inherent defect in the system which actually belies the avowed
develop and ultimately, become self-sustaining and effective
intention of "making equal the unequal." In particular, the Court
contributors to the national economy. As explained by the Court in
observes that the gauge of PDAF and CDF allocation/division is based
Philippine Gamefowl Commission v. Intermediate Appellate Court:228
solely on the fact of office, without taking into account the specific
This is as good an occasion as any to stress the commitment of the interests and peculiarities of the district the legislator represents. In this
Constitution to the policy of local autonomy which is intended to regard, the allocation/division limits are clearly not based on genuine
provide the needed impetus and encouragement to the development parameters of equality, wherein economic or geographic indicators
of our local political subdivisions as "self - reliant communities." In the have been taken into consideration. As a result, a district
words of Jefferson, "Municipal corporations are the small republics from representative of a highly-urbanized metropolis gets the same amount
which the great one derives its strength." The vitalization of local of funding as a district representative of a far-flung rural province which
governments will enable their inhabitants to fully exploit their resources would be relatively "underdeveloped" compared to the former. To add,
and more important, imbue them with a deepened sense of what rouses graver scrutiny is that even Senators and Party-List
involvement in public affairs as members of the body politic. This Representatives – and in some years, even the Vice-President – who do
objective could be blunted by undue interference by the national not represent any locality, receive funding from the Congressional Pork
government in purely local affairs which are best resolved by the Barrel as well. These certainly are anathema to the Congressional Pork
officials and inhabitants of such political units. The decision we reach Barrel‘s original intent which is "to make equal the unequal."
today conforms not only to the letter of the pertinent laws but also to Ultimately, the PDAF and CDF had become personal funds under the
the spirit of the Constitution.229 (Emphases and underscoring supplied) effective control of each legislator and given unto them on the sole
account of their office.
In the cases at bar, petitioners contend that the Congressional Pork
Barrel goes against the constitutional principles on local autonomy The Court also observes that this concept of legislator control
since it allows district representatives, who are national officers, to underlying the CDF and PDAF conflicts with the functions of the various
substitute their judgments in utilizing public funds for local Local Development Councils (LDCs) which are already legally
development.230 The Court agrees with petitioners. mandated to "assist the corresponding sanggunian in setting the
direction of economic and social development, and coordinating
Philconsa described the 1994 CDF as an attempt "to make equal the development efforts within its territorial jurisdiction." 234 Considering
unequal" and that "it is also a recognition that individual members of that LDCs are instrumentalities whose functions are essentially geared
towards managing local affairs,235 their programs, policies and states that: "No money shall be paid out of the Treasury except in
resolutions should not be overridden nor duplicated by individual pursuance of an appropriation made by law."239
legislators, who are national officers that have no law-making authority
except only when acting as a body. The undermining effect on local The Court disagrees.
autonomy caused by the post-enactment authority conferred to the
"An appropriation made by law‖ under the contemplation of Section
latter was succinctly put by petitioners in the following wise:236
29(1), Article VI of the 1987 Constitution exists when a provision of law
With PDAF, a Congressman can simply bypass the local development (a) sets apart a determinate or determinable240 amount of money and
council and initiate projects on his own, and even take sole credit for its (b) allocates the same for a particular public purpose. These two
execution. Indeed, this type of personality-driven project identification minimum designations of amount and purpose stem from the very
has not only contributed little to the overall development of the district, definition of the word "appropriation," which means "to allot, assign, set
but has even contributed to "further weakening infrastructure planning apart or apply to a particular use or purpose," and hence, if written into
and coordination efforts of the government." the law, demonstrate that the legislative intent to appropriate exists. As
the Constitution "does not provide or prescribe any particular form of
Thus, insofar as individual legislators are authorized to intervene in words or religious recitals in which an authorization or appropriation by
purely local matters and thereby subvert genuine local autonomy, the Congress shall be made, except that it be ‘made by law,‘" an
2013 PDAF Article as well as all other similar forms of Congressional appropriation law may – according to Philconsa – be "detailed and as
Pork Barrel is deemed unconstitutional. broad as Congress wants it to be" for as long as the intent to
appropriate may be gleaned from the same. As held in the case of
With this final issue on the Congressional Pork Barrel resolved, the Guingona, Jr.:241
Court now turns to the substantive issues involving the Presidential
Pork Barrel. There is no provision in our Constitution that provides or prescribes any
particular form of words or religious recitals in which an authorization or
C. Substantive Issues on the Presidential Pork Barrel. appropriation by Congress shall be made, except that it be "made by
law," such as precisely the authorization or appropriation under the
1. Validity of Appropriation.
questioned presidential decrees. In other words, in terms of time
Petitioners preliminarily assail Section 8 of PD 910 and Section 12 of horizons, an appropriation may be made impliedly (as by past but
PD1869 (now, amended by PD 1993), which respectively provide for subsisting legislations) as well as expressly for the current fiscal year
the Malampaya Funds and the Presidential Social Fund, as invalid (as by enactment of laws by the present Congress), just as said
appropriations laws since they do not have the "primary and specific" appropriation may be made in general as well as in specific terms. The
purpose of authorizing the release of public funds from the National Congressional authorization may be embodied in annual laws, such as
Treasury. Petitioners submit that Section 8 of PD 910 is not an a general appropriations act or in special provisions of laws of general
appropriation law since the "primary and specific‖ purpose of PD 910 is or special application which appropriate public funds for specific public
the creation of an Energy Development Board and Section 8 thereof purposes, such as the questioned decrees. An appropriation measure is
only created a Special Fund incidental thereto. 237 In similar regard, sufficient if the legislative intention clearly and certainly appears from
petitioners argue that Section 12 of PD 1869 is neither a valid the language employed (In re Continuing Appropriations, 32 P. 272),
appropriations law since the allocation of the Presidential Social Fund is whether in the past or in the present. (Emphases and underscoring
merely incidental to the "primary and specific" purpose of PD 1869 supplied)
which is the amendment of the Franchise and Powers of PAGCOR.238 In
Likewise, as ruled by the US Supreme Court in State of Nevada v. La
view of the foregoing, petitioners suppose that such funds are being
Grave:242
used without any valid law allowing for their proper appropriation in
violation of Section 29(1), Article VI of the 1987 Constitution which To constitute an appropriation there must be money placed in a fund
applicable to the designated purpose. The word appropriate means to
allot, assign, set apart or apply to a particular use or purpose. An Analyzing the legal text vis-à-vis the above-mentioned principles, it
appropriation in the sense of the constitution means the setting apart a may then be concluded that (a) Section 8 of PD 910, which creates a
portion of the public funds for a public purpose. No particular form of Special Fund comprised of "all fees, revenues, and receipts of the
words is necessary for the purpose, if the intention to appropriate is Energy Development Board from any and all sources" (a determinable
plainly manifested. (Emphases supplied) amount) "to be used to finance energy resource development and
exploitation programs and projects of the government and for such
Thus, based on the foregoing, the Court cannot sustain the argument other purposes as may be hereafter directed by the President" (a
that the appropriation must be the "primary and specific" purpose of specified public purpose), and (b) Section 12 of PD 1869, as amended
the law in order for a valid appropriation law to exist. To reiterate, if a by PD 1993, which similarly sets aside, "after deducting five (5%)
legal provision designates a determinate or determinable amount of percent as Franchise Tax, the Fifty (50%) percent share of the
money and allocates the same for a particular public purpose, then the Government in the aggregate gross earnings of PAGCOR, or 60%, if the
legislative intent to appropriate becomes apparent and, hence, already aggregate gross earnings be less than ₱150,000,000.00" (also a
sufficient to satisfy the requirement of an "appropriation made by law" determinable amount) "to finance the priority infrastructure
under contemplation of the Constitution. development projects and x x x the restoration of damaged or
destroyed facilities due to calamities, as may be directed and
Section 8 of PD 910 pertinently provides:
authorized by the Office of the President of the Philippines" (also a
Section 8. Appropriations. x x x specified public purpose), are legal appropriations under Section 29(1),
Article VI of the 1987 Constitution.
All fees, revenues and receipts of the Board from any and all sources
including receipts from service contracts and agreements such as In this relation, it is apropos to note that the 2013 PDAF Article cannot
application and processing fees, signature bonus, discovery bonus, be properly deemed as a legal appropriation under the said
production bonus; all money collected from concessionaires, constitutional provision precisely because, as earlier stated, it contains
representing unspent work obligations, fines and penalties under the post-enactment measures which effectively create a system of
Petroleum Act of 1949; as well as the government share representing intermediate appropriations. These intermediate appropriations are the
royalties, rentals, production share on service contracts and similar actual appropriations meant for enforcement and since they are made
payments on the exploration, development and exploitation of energy by individual legislators after the GAA is passed, they occur outside the
resources, shall form part of a Special Fund to be used to finance law. As such, the Court observes that the real appropriation made
energy resource development and exploitation programs and projects under the 2013 PDAF Article is not the ₱24.79 Billion allocated for the
of the government and for such other purposes as may be hereafter entire PDAF, but rather the post-enactment determinations made by
directed by the President. (Emphases supplied) the individual legislators which are, to repeat, occurrences outside of
the law. Irrefragably, the 2013 PDAF Article does not constitute an
Whereas Section 12 of PD 1869, as amended by PD 1993, reads: "appropriation made by law" since it, in its truest sense, only authorizes
individual legislators to appropriate in violation of the non-delegability
Sec. 12. Special Condition of Franchise. — After deducting five (5%)
principle as afore-discussed.
percent as Franchise Tax, the Fifty (50%) percent share of the
Government in the aggregate gross earnings of the Corporation from 2. Undue Delegation.
this Franchise, or 60% if the aggregate gross earnings be less than
₱150,000,000.00 shall be set aside and shall accrue to the General On a related matter, petitioners contend that Section 8 of PD 910
Fund to finance the priority infrastructure development projects and to constitutes an undue delegation of legislative power since the phrase
finance the restoration of damaged or destroyed facilities due to "and for such other purposes as may be hereafter directed by the
calamities, as may be directed and authorized by the Office of the President" gives the President "unbridled discretion to determine for
President of the Philippines. (Emphases supplied) what purpose the funds will be used."243 Respondents, on the other
hand, urged the Court to apply the principle of ejusdem generis to the
same section and thus, construe the phrase "and for such other exploitation programs and projects of the government" states a
purposes as may be hereafter directed by the President" to refer only singular and general class and hence, cannot be treated as a statutory
to other purposes related "to energy resource development and reference of specific things from which the general phrase "for such
exploitation programs and projects of the government."244 other purposes" may be limited; second, the said phrase also exhausts
the class it represents, namely energy development programs of the
The Court agrees with petitioners‘ submissions. government;250 and, third, the Executive department has, in fact, used
the Malampaya Funds for non-energy related purposes under the
While the designation of a determinate or determinable amount for a
subject phrase, thereby contradicting respondents‘ own position that it
particular public purpose is sufficient for a legal appropriation to exist,
is limited only to "energy resource development and exploitation
the appropriation law must contain adequate legislative guidelines if
programs and projects of the government."251 Thus, while Section 8 of
the same law delegates rule-making authority to the
PD 910 may have passed the completeness test since the policy of
Executive245 either for the purpose of (a) filling up the details of the law
energy development is clearly deducible from its text, the phrase "and
for its enforcement, known as supplementary rule-making, or (b)
for such other purposes as may be hereafter directed by the President"
ascertaining facts to bring the law into actual operation, referred to as
under the same provision of law should nonetheless be stricken down
contingent rule-making.246 There are two (2) fundamental tests to
as unconstitutional as it lies independently unfettered by any sufficient
ensure that the legislative guidelines for delegated rule-making are
standard of the delegating law. This notwithstanding, it must be
indeed adequate. The first test is called the "completeness test." Case
underscored that the rest of Section 8, insofar as it allows for the use of
law states that a law is complete when it sets forth therein the policy to
the Malampaya Funds "to finance energy resource development and
be executed, carried out, or implemented by the delegate. On the
exploitation programs and projects of the government," remains legally
other hand, the second test is called the "sufficient standard test."
effective and subsisting. Truth be told, the declared unconstitutionality
Jurisprudence holds that a law lays down a sufficient standard when it
of the aforementioned phrase is but an assurance that the Malampaya
provides adequate guidelines or limitations in the law to map out the
Funds would be used – as it should be used – only in accordance with
boundaries of the delegate‘s authority and prevent the delegation from
the avowed purpose and intention of PD 910.
running riot.247 To be sufficient, the standard must specify the limits of
the delegate‘s authority, announce the legislative policy, and identify As for the Presidential Social Fund, the Court takes judicial notice of the
the conditions under which it is to be implemented.248 fact that Section 12 of PD 1869 has already been amended by PD 1993
which thus moots the parties‘ submissions on the
In view of the foregoing, the Court agrees with petitioners that the
same.252 Nevertheless, since the amendatory provision may be readily
phrase "and for such other purposes as may be hereafter directed by
examined under the current parameters of discussion, the Court
the President" under Section 8 of PD 910 constitutes an undue
proceeds to resolve its constitutionality.
delegation of legislative power insofar as it does not lay down a
sufficient standard to adequately determine the limits of the President‘s Primarily, Section 12 of PD 1869, as amended by PD 1993, indicates
authority with respect to the purpose for which the Malampaya Funds that the Presidential Social Fund may be used "to first, finance the
may be used. As it reads, the said phrase gives the President wide priority infrastructure development projects and second, to finance the
latitude to use the Malampaya Funds for any other purpose he may restoration of damaged or destroyed facilities due to calamities, as
direct and, in effect, allows him to unilaterally appropriate public funds may be directed and authorized by the Office of the President of the
beyond the purview of the law. That the subject phrase may be Philippines." The Court finds that while the second indicated purpose
confined only to "energy resource development and exploitation adequately curtails the authority of the President to spend the
programs and projects of the government" under the principle of Presidential Social Fund only for restoration purposes which arise from
ejusdem generis, meaning that the general word or phrase is to be calamities, the first indicated purpose, however, gives him carte
construed to include – or be restricted to – things akin to, resembling, or blanche authority to use the same fund for any infrastructure project
of the same kind or class as those specifically mentioned,249 is belied by he may so determine as a "priority". Verily, the law does not supply a
three (3) reasons: first, the phrase "energy resource development and definition of "priority in frastructure development projects" and hence,
leaves the President without any guideline to construe the same. To The right of the people to information on matters of public concern
note, the delimitation of a project as one of "infrastructure" is too broad shall be recognized. Access to official records, and to documents and
of a classification since the said term could pertain to any kind of papers pertaining to official acts, transactions, or decisions, as well as
facility. This may be deduced from its lexicographic definition as to government research data used as basis for policy development,
follows: "the underlying framework of a system, especially public shall be afforded the citizen, subject to such limitations as may be
services and facilities (such as highways, schools, bridges, sewers, and provided by law.
water-systems) needed to support commerce as well as economic and
residential development."253 In fine, the phrase "to finance the priority The Court denies petitioners‘ submission.
infrastructure development projects" must be stricken down as
Case law instructs that the proper remedy to invoke the right to
unconstitutional since – similar to the above-assailed provision under
information is to file a petition for mandamus. As explained in the case
Section 8 of PD 910 – it lies independently unfettered by any sufficient
of Legaspi v. Civil Service Commission:256
standard of the delegating law. As they are severable, all other
provisions of Section 12 of PD 1869, as amended by PD 1993, remains While the manner of examining public records may be subject to
legally effective and subsisting. reasonable regulation by the government agency in custody thereof,
the duty to disclose the information of public concern, and to afford
D. Ancillary Prayers. 1.
access to public records cannot be discretionary on the part of said
Petitioners’ Prayer to be Furnished Lists and Detailed Reports. agencies. Certainly, its performance cannot be made contingent upon
the discretion of such agencies. Otherwise, the enjoyment of the
Aside from seeking the Court to declare the Pork Barrel System constitutional right may be rendered nugatory by any whimsical
unconstitutional – as the Court did so in the context of its exercise of agency discretion. The constitutional duty, not being
pronouncements made in this Decision – petitioners equally pray that discretionary, its performance may be compelled by a writ of
the Executive Secretary and/or the DBM be ordered to release to the mandamus in a proper case.
CoA and to the public: (a) "the complete schedule/list of legislators who
have availed of their PDAF and VILP from the years 2003 to 2013, But what is a proper case for Mandamus to issue? In the case before
specifying the use of the funds, the project or activity and the recipient Us, the public right to be enforced and the concomitant duty of the
entities or individuals, and all pertinent data thereto" (PDAF Use State are unequivocably set forth in the Constitution.
Schedule/List);254 and (b) "the use of the Executive‘s lump-sum,
The decisive question on the propriety of the issuance of the writ of
discretionary funds, including the proceeds from the x x x Malampaya
mandamus in this case is, whether the information sought by the
Funds and remittances from the PAGCOR x x x from 2003 to 2013,
petitioner is within the ambit of the constitutional guarantee.
specifying the x x x project or activity and the recipient entities or
(Emphases supplied)
individuals, and all pertinent data thereto"255 (Presidential Pork Use
Report). Petitioners‘ prayer is grounded on Section 28, Article II and Corollarily, in the case of Valmonte v. Belmonte Jr.257 (Valmonte), it has
Section 7, Article III of the 1987 Constitution which read as follows: been clarified that the right to information does not include the right to
compel the preparation of "lists, abstracts, summaries and the like." In
ARTICLE II
the same case, it was stressed that it is essential that the "applicant
Sec. 28. Subject to reasonable conditions prescribed by law, the State has a well -defined, clear and certain legal right to the thing demanded
adopts and implements a policy of full public disclosure of all its and that it is the imperative duty of defendant to perform the act
transactions involving public interest. required." Hence, without the foregoing substantiations, the Court
cannot grant a particular request for information. The pertinent
ARTICLE III Sec. 7. portions of Valmonte are hereunder quoted:258
Although citizens are afforded the right to information and, pursuant access to these documents should not be proscribed. Thus, in
thereto, are entitled to "access to official records," the Constitution Valmonte, while the Court denied the application for mandamus
does not accord them a right to compel custodians of official records to towards the preparation of the list requested by petitioners therein, it
prepare lists, abstracts, summaries and the like in their desire to nonetheless allowed access to the documents sought for by the latter,
acquire information on matters of public concern. subject, however, to the custodian‘s reasonable regulations,viz.:259

It must be stressed that it is essential for a writ of mandamus to issue In fine, petitioners are entitled to access to the documents evidencing
that the applicant has a well-defined, clear and certain legal right to the loans granted by the GSIS, subject to reasonable regulations that the
thing demanded and that it is the imperative duty of defendant to latter may promulgate relating to the manner and hours of
perform the act required. The corresponding duty of the respondent to examination, to the end that damage to or loss of the records may be
perform the required act must be clear and specific Lemi v. Valencia, avoided, that undue interference with the duties of the custodian of the
G.R. No. L-20768, November 29,1968,126 SCRA 203; Ocampo v. records may be prevented and that the right of other persons entitled
Subido, G.R. No. L-28344, August 27, 1976, 72 SCRA 443. to inspect the records may be insured Legaspi v. Civil Service
Commission, supra at p. 538, quoting Subido v. Ozaeta, 80 Phil. 383,
The request of the petitioners fails to meet this standard, there being 387. The petition, as to the second and third alternative acts sought to
no duty on the part of respondent to prepare the list requested. be done by petitioners, is meritorious.
(Emphases supplied)
However, the same cannot be said with regard to the first act sought
In these cases, aside from the fact that none of the petitions are in the by petitioners, i.e.,
nature of mandamus actions, the Court finds that petitioners have
failed to establish a "a well-defined, clear and certain legal right" to be "to furnish petitioners the list of the names of the Batasang Pambansa
furnished by the Executive Secretary and/or the DBM of their requested members belonging to the UNIDO and PDP-Laban who were able to
PDAF Use Schedule/List and Presidential Pork Use Report. Neither did secure clean loans immediately before the February 7 election thru the
petitioners assert any law or administrative issuance which would form intercession/marginal note of the then First Lady Imelda Marcos."
the bases of the latter‘s duty to furnish them with the documents
requested. While petitioners pray that said information be equally The Court, therefore, applies the same treatment here.
released to the CoA, it must be pointed out that the CoA has not been
2. Petitioners’ Prayer to Include Matters in Congressional Deliberations.
impleaded as a party to these cases nor has it filed any petition before
the Court to be allowed access to or to compel the release of any Petitioners further seek that the Court "order the inclusion in budgetary
official document relevant to the conduct of its audit investigations. deliberations with the Congress of all presently, off-budget, lump sum,
While the Court recognizes that the information requested is a matter discretionary funds including but not limited to, proceeds from the x x x
of significant public concern, however, if only to ensure that the Malampaya Fund, remittances from the PAGCOR and the PCSO or the
parameters of disclosure are properly foisted and so as not to unduly Executive‘s Social Funds."260
hamper the equally important interests of the government, it is
constrained to deny petitioners‘ prayer on this score, without prejudice Suffice it to state that the above-stated relief sought by petitioners
to a proper mandamus case which they, or even the CoA, may choose covers a matter which is generally left to the prerogative of the political
to pursue through a separate petition. branches of government. Hence, lest the Court itself overreach, it must
equally deny their prayer on this score.
It bears clarification that the Court‘s denial herein should only cover
petitioners‘ plea to be furnished with such schedule/list and report and 3. Respondents’ Prayer to Lift TRO; Consequential Effects of Decision.
not in any way deny them, or the general public, access to official
The final issue to be resolved stems from the interpretation accorded
documents which are already existing and of public record. Subject to
by the DBM to the concept of released funds. In response to the Court‘s
reasonable regulation and absent any valid statutory prohibition,
September 10, 2013 TRO that enjoined the release of the remaining
PDAF allocated for the year 2013, the DBM issued Circular Letter No. the time this Decision is promulgated, may still be disbursed following
2013-8 dated September 27, 2013 (DBM Circular 2013-8) which the DBM‘s interpretation in DBM Circular 2013-8.
pertinently reads as follows:
On this score, the Court agrees with petitioners‘ posturing for the
3.0 Nonetheless, PDAF projects funded under the FY 2013 GAA, where fundamental reason that funds covered by an obligated SARO are yet
a Special Allotment Release Order (SARO) has been issued by the DBM to be "released" under legal contemplation. A SARO, as defined by the
and such SARO has been obligated by the implementing agencies prior DBM itself in its website, is "aspecific authority issued to identified
to the issuance of the TRO, may continually be implemented and agencies to incur obligations not exceeding a given amount during a
disbursements thereto effected by the agencies concerned. specified period for the purpose indicated. It shall cover expenditures
the release of which is subject to compliance with specific laws or
Based on the text of the foregoing, the DBM authorized the continued regulations, or is subject to separate approval or clearance by
implementation and disbursement of PDAF funds as long as they are: competent authority."263
first, covered by a SARO; and, second, that said SARO had been
obligated by the implementing agency concerned prior to the issuance Based on this definition, it may be gleaned that a SARO only evinces
of the Court‘s September 10, 2013 TRO. the existence of an obligation and not the directive to pay. Practically
speaking, the SARO does not have the direct and immediate effect of
Petitioners take issue with the foregoing circular, arguing that "the placing public funds beyond the control of the disbursing authority. In
issuance of the SARO does not yet involve the release of funds under fact, a SARO may even be withdrawn under certain circumstances
the PDAF, as release is only triggered by the issuance of a Notice of which will prevent the actual release of funds. On the other hand, the
Cash Allocation [(NCA)]."261 As such, PDAF disbursements, even if actual release of funds is brought about by the issuance of the
covered by an obligated SARO, should remain enjoined. NCA,264 which is subsequent to the issuance of a SARO. As may be
determined from the statements of the DBM representative during the
For their part, respondents espouse that the subject TRO only covers
Oral Arguments:265
"unreleased and unobligated allotments." They explain that once a
SARO has been issued and obligated by the implementing agency Justice Bernabe: Is the notice of allocation issued simultaneously with
concerned, the PDAF funds covered by the same are already "beyond the SARO?
the reach of the TRO because they cannot be considered as ‘remaining
PDAF.‘" They conclude that this is a reasonable interpretation of the xxxx
TRO by the DBM.262
Atty. Ruiz: It comes after. The SARO, Your Honor, is only the go signal
The Court agrees with petitioners in part. for the agencies to obligate or to enter into commitments. The NCA,
Your Honor, is already the go signal to the treasury for us to be able to
At the outset, it must be observed that the issue of whether or not the pay or to liquidate the amounts obligated in the SARO; so it comes
Court‘s September 10, 2013 TRO should be lifted is a matter rendered after. x x x The NCA, Your Honor, is the go signal for the MDS for the
moot by the present Decision. The unconstitutionality of the 2013 PDAF authorized government-disbursing banks to, therefore, pay the payees
Article as declared herein has the consequential effect of converting depending on the projects or projects covered by the SARO and the
the temporary injunction into a permanent one. Hence, from the NCA.
promulgation of this Decision, the release of the remaining PDAF funds
for 2013, among others, is now permanently enjoined. Justice Bernabe: Are there instances that SAROs are cancelled or
revoked?
The propriety of the DBM‘s interpretation of the concept of "release"
must, nevertheless, be resolved as it has a practical impact on the Atty. Ruiz: Your Honor, I would like to instead submit that there are
execution of the current Decision. In particular, the Court must resolve instances that the SAROs issued are withdrawn by the DBM.
the issue of whether or not PDAF funds covered by obligated SAROs, at
Justice Bernabe: They are withdrawn?
Atty. Ruiz: Yes, Your Honor x x x. (Emphases and underscoring Commissioner of Internal Revenue v. San Roque Power
supplied) Corporation,266 the doctrine merely "reflects awareness that precisely
because the judiciary is the governmental organ which has the final
Thus, unless an NCA has been issued, public funds should not be say on whether or not a legislative or executive measure is valid, a
treated as funds which have been "released." In this respect, therefore, period of time may have elapsed before it can exercise the power of
the disbursement of 2013 PDAF funds which are only covered by judicial review that may lead to a declaration of nullity. It would be to
obligated SAROs, and without any corresponding NCAs issued, must, at deprive the law of its quality of fairness and justice then, if there be no
the time of this Decision’s promulgation, be enjoined and consequently recognition of what had transpired prior to such adjudication."267 "In the
reverted to the unappropriated surplus of the general fund. Verily, in language of an American Supreme Court decision: ‘The actual
view of the declared unconstitutionality of the 2013 PDAF Article, the existence of a statute, prior to such a determination of
funds appropriated pursuant thereto cannot be disbursed even though unconstitutionality, is an operative fact and may have consequences
already obligated, else the Court sanctions the dealing of funds coming which cannot justly be ignored.‘"268
from an unconstitutional source.
For these reasons, this Decision should be heretofore applied
This same pronouncement must be equally applied to (a) the prospectively.
Malampaya Funds which have been obligated but not released –
meaning, those merely covered by a SARO – under the phrase "and for Conclusion
such other purposes as may be hereafter directed by the President"
pursuant to Section 8 of PD 910; and (b) funds sourced from the The Court renders this Decision to rectify an error which has persisted
Presidential Social Fund under the phrase "to finance the priority in the chronicles of our history. In the final analysis, the Court must
infrastructure development projects" pursuant to Section 12 of PD strike down the Pork Barrel System as unconstitutional in view of the
1869, as amended by PD 1993, which were altogether declared by the inherent defects in the rules within which it operates. To recount,
Court as unconstitutional. However, these funds should not be reverted insofar as it has allowed legislators to wield, in varying gradations, non-
to the general fund as afore-stated but instead, respectively remain oversight, post-enactment authority in vital areas of budget execution,
under the Malampaya Funds and the Presidential Social Fund to be the system has violated the principle of separation of powers; insofar
utilized for their corresponding special purposes not otherwise declared as it has conferred unto legislators the power of appropriation by giving
as unconstitutional. them personal, discretionary funds from which they are able to fund
specific projects which they themselves determine, it has similarly
E. Consequential Effects of Decision. violated the principle of non-delegability of legislative power ; insofar as
it has created a system of budgeting wherein items are not textualized
As a final point, it must be stressed that the Court‘s pronouncement into the appropriations bill, it has flouted the prescribed procedure of
anent the unconstitutionality of (a) the 2013 PDAF Article and its presentment and, in the process, denied the President the power to
Special Provisions, (b) all other Congressional Pork Barrel provisions veto items ; insofar as it has diluted the effectiveness of congressional
similar thereto, and (c) the phrases (1) "and for such other purposes as oversight by giving legislators a stake in the affairs of budget
may be hereafter directed by the President" under Section 8 of PD 910, execution, an aspect of governance which they may be called to
and (2) "to finance the priority infrastructure development projects" monitor and scrutinize, the system has equally impaired public
under Section 12 of PD 1869, as amended by PD 1993, must only be accountability ; insofar as it has authorized legislators, who are national
treated as prospective in effect in view of the operative fact doctrine. officers, to intervene in affairs of purely local nature, despite the
existence of capable local institutions, it has likewise subverted
To explain, the operative fact doctrine exhorts the recognition that until
genuine local autonomy ; and again, insofar as it has conferred to the
the judiciary, in an appropriate case, declares the invalidity of a certain
President the power to appropriate funds intended by law for energy-
legislative or executive act, such act is presumed constitutional and
related purposes only to other purposes he may deem fit as well as
thus, entitled to obedience and respect and should be properly
other public funds under the broad classification of "priority
enforced and complied with. As explained in the recent case of
infrastructure development projects," it has once more transgressed Accordingly, the Court‘s temporary injunction dated September 10,
the principle of non-delegability. 2013 is hereby declared to be PERMANENT. Thus, the
disbursement/release of the remaining PDAF funds allocated for the
For as long as this nation adheres to the rule of law, any of the year 2013, as well as for all previous years, and the funds sourced from
multifarious unconstitutional methods and mechanisms the Court has (1) the Malampaya Funds under the phrase "and for such other
herein pointed out should never again be adopted in any system of purposes as may be hereafter directed by the President" pursuant to
governance, by any name or form, by any semblance or similarity, by Section 8 of Presidential Decree No. 910, and (2) the Presidential Social
any influence or effect. Disconcerting as it is to think that a system so Fund under the phrase "to finance the priority infrastructure
constitutionally unsound has monumentally endured, the Court urges development projects" pursuant to Section 12 of Presidential Decree
the people and its co-stewards in government to look forward with the No. 1869, as amended by Presidential Decree No. 1993, which are, at
optimism of change and the awareness of the past. At a time of great the time this Decision is promulgated, not covered by Notice of Cash
civic unrest and vociferous public debate, the Court fervently hopes Allocations (NCAs) but only by Special Allotment Release Orders
that its Decision today, while it may not purge all the wrongs of society (SAROs), whether obligated or not, are hereby ENJOINED. The
nor bring back what has been lost, guides this nation to the path forged remaining PDAF funds covered by this permanent injunction shall not
by the Constitution so that no one may heretofore detract from its be disbursed/released but instead reverted to the unappropriated
cause nor stray from its course. After all, this is the Court‘s bounden surplus of the general fund, while the funds under the Malampaya
duty and no other‘s. Funds and the Presidential Social Fund shall remain therein to be
utilized for their respective special purposes not otherwise declared as
WHEREFORE, the petitions are PARTLY GRANTED. In view of the
unconstitutional.
constitutional violations discussed in this Decision, the Court hereby
declares as UNCONSTITUTIONAL: (a) the entire 2013 PDAF Article; (b) On the other hand, due to improper recourse and lack of proper
all legal provisions of past and present Congressional Pork Barrel Laws, substantiation, the Court hereby DENIES petitioners‘ prayer seeking
such as the previous PDAF and CDF Articles and the various that the Executive Secretary and/or the Department of Budget and
Congressional Insertions, which authorize/d legislators – whether Management be ordered to provide the public and the Commission on
individually or collectively organized into committees – to intervene, Audit complete lists/schedules or detailed reports related to the
assume or participate in any of the various post-enactment stages of availments and utilization of the funds subject of these cases.
the budget execution, such as but not limited to the areas of project Petitioners‘ access to official documents already available and of public
identification, modification and revision of project identification, fund record which are related to these funds must, however, not be
release and/or fund realignment, unrelated to the power of prohibited but merely subjected to the custodian‘s reasonable
congressional oversight; (c) all legal provisions of past and present regulations or any valid statutory prohibition on the same. This denial is
Congressional Pork Barrel Laws, such as the previous PDAF and CDF without prejudice to a proper mandamus case which they or the
Articles and the various Congressional Insertions, which confer/red Commission on Audit may choose to pursue through a separate
personal, lump-sum allocations to legislators from which they are able petition.
to fund specific projects which they themselves determine; (d) all
informal practices of similar import and effect, which the Court similarly The Court also DENIES petitioners prayer to order the inclusion of the
deems to be acts of grave abuse of discretion amounting to lack or funds subject of these cases in the budgetary deliberations of Congress
excess of jurisdiction; and (e) the phrases (1) "and for such other as the same is a matter left to the prerogative of the political branches
purposes as may be hereafter directed by the President" under Section of government.
8 of Presidential Decree No. 910 and (2) "to finance the priority
infrastructure development projects" under Section 12 of Presidential Finally, the Court hereby DIRECTS all prosecutorial organs of the
Decree No. 1869, as amended by Presidential Decree No. 1993, for government to, within the bounds of reasonable dispatch, investigate
both failing the sufficient standard test in violation of the principle of and accordingly prosecute all government officials and/or private
non-delegability of legislative power. individuals for possible criminal offenses related to the irregular,
improper and/or unlawful disbursement/utilization of all funds under
the Pork Barrel System.

This Decision is immediately executory but prospective in effect.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice
 G.R. No. 168056 September 1, 2005 business under the name and style of "NTE GASOLINE & SERVICE
STATION"; JULIAN CESAR P. POSADAS doing business under the name
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS and style of "STARCARGA ENTERPRISES"; ADORACION MAÑEBO doing
SAMSON S. ALCANTARA and ED VINCENT S. business under the name and style of "CMA MOTORISTS CENTER";
ALBANO, Petitioners, SUSAN M. ENTRATA doing business under the name and style of
vs. "LEONA’S GASOLINE STATION and SERVICE CENTER"; CARMELITA
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; BALDONADO doing business under the name and style of "FIRST
HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CHOICE SERVICE CENTER"; MERCEDITAS A. GARCIA doing business
CESAR PURISIMA; and HONORABLE COMMISSIONER OF under the name and style of "LORPED SERVICE CENTER"; RHEAMAR A.
INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent. RAMOS doing business under the name and style of "RJRAM PTT GAS
STATION"; MA. ISABEL VIOLAGO doing business under the name and
x-------------------------x
style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS’ HEART
G.R. No. 168207 CORPORATION represented by its Vice-President for Operations,
JOSELITO F. FLORDELIZA; MOTORISTS’ HARVARD CORPORATION
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. represented by its Vice-President for Operations, JOSELITO F.
ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S. FLORDELIZA; MOTORISTS’ HERITAGE CORPORATION represented by
MADRIGAL, AND SERGIO R. OSMEÑA III, Petitioners, its Vice-President for Operations, JOSELITO F. FLORDELIZA; PHILIPPINE
vs. STANDARD OIL CORPORATION represented by its Vice-President for
EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing business
PURISIMA, SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, under the name and style of "ROMMAN GASOLINE STATION";
JR., COMMISSIONER OF THE BUREAU OF INTERNAL ANTHONY ALBERT CRUZ III doing business under the name and style of
REVENUE, Respondent. "TRUE SERVICE STATION", Petitioners,
vs.
x-------------------------x
CESAR V. PURISIMA, in his capacity as Secretary of the
G.R. No. 168461 Department of Finance and GUILLERMO L. PARAYNO, JR., in
his capacity as Commissioner of Internal Revenue, Respondent.
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its
President, ROSARIO ANTONIO; PETRON DEALERS’ ASSOCIATION x-------------------------x
represented by its President, RUTH E. BARBIBI; ASSOCIATION OF
G.R. No. 168463
CALTEX DEALERS’ OF THE PHILIPPINES represented by its President,
MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL
name and style of "ANB NORTH SHELL SERVICE STATION"; LOURDES JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINO-
MARTINEZ doing business under the name and style of "SHELL GATE – CUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN
N. DOMINGO"; BETHZAIDA TAN doing business under the name and EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G.
style of "ADVANCE SHELL STATION"; REYNALDO P. MONTOYA doing NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A.
business under the name and style of "NEW LAMUAN SHELL SERVICE SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ,
STATION"; EFREN SOTTO doing business under the name and style of RODOLFO Q. AGBAYANI and TEODORO A. CASIÑO, Petitioners,
"RED FIELD SHELL SERVICE STATION"; DONICA CORPORATION vs.
represented by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing CESAR V. PURISIMA, in his capacity as Secretary of Finance,
business under the name and style of "R&R PETRON STATION"; PETER GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner
M. UNGSON doing business under the name and style of "CLASSIC of Internal Revenue, and EDUARDO R. ERMITA, in his capacity
STAR GASOLINE SERVICE STATION"; MARIAN SHEILA A. LEE doing as Executive Secretary, Respondent.
 x-------------------------x substitution of House Bill No. 1468, which Representative (Rep.) Eric D.
Singson introduced on August 8, 2004. The President certified the bill
G.R. No. 168730 on January 7, 2005 for immediate enactment. On January 27, 2005, the
House of Representatives approved the bill on second and third
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,
reading.
vs.
HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; House Bill No. 37053 on the other hand, substituted House Bill No.
HON. MARGARITO TEVES, in his capacity as Secretary of Finance; HON. 3105 introduced by Rep. Salacnib F. Baterina, and House Bill No. 3381
JOSE MARIO BUNAG, in his capacity as the OIC Commissioner of the introduced by Rep. Jacinto V. Paras. Its "mother bill" is House Bill No.
Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his 3555. The House Committee on Ways and Means approved the bill on
capacity as the OIC Commissioner of the Bureau of Customs, February 2, 2005. The President also certified it as urgent on February
Respondent. 8, 2005. The House of Representatives approved the bill on second and
third reading on February 28, 2005.
DECISION
Meanwhile, the Senate Committee on Ways and Means
AUSTRIA-MARTINEZ, J.:
approved Senate Bill No. 19504 on March 7, 2005, "in substitution of
The expenses of government, having for their object the interest of all, Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House
should be borne by everyone, and the more man enjoys the Bill Nos. 3555 and 3705." Senator Ralph G. Recto sponsored Senate Bill
advantages of society, the more he ought to hold himself honored in No. 1337, while Senate Bill Nos. 1838 and 1873 were both sponsored
contributing to those expenses. by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N. Pangilinan.
The President certified the bill on March 11, 2005, and was approved
-Anne Robert Jacques Turgot (1727-1781) by the Senate on second and third reading on April 13, 2005.
French statesman and economist On the same date, April 13, 2005, the Senate agreed to the request of
the House of Representatives for a committee conference on the
Mounting budget deficit, revenue generation, inadequate fiscal
disagreeing provisions of the proposed bills.
allocation for education, increased emoluments for health workers, and
wider coverage for full value-added tax benefits … these are the Before long, the Conference Committee on the Disagreeing Provisions
reasons why Republic Act No. 9337 (R.A. No. 9337) 1 was enacted. of House Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950,
Reasons, the wisdom of which, the Court even with its extensive "after having met and discussed in full free and conference,"
constitutional power of review, cannot probe. The petitioners in these recommended the approval of its report, which the Senate did on May
cases, however, question not only the wisdom of the law, but also 10, 2005, and with the House of Representatives agreeing thereto the
perceived constitutional infirmities in its passage. next day, May 11, 2005.
Every law enjoys in its favor the presumption of constitutionality. Their On May 23, 2005, the enrolled copy of the consolidated House and
arguments notwithstanding, petitioners failed to justify their call for the Senate version was transmitted to the President, who signed the same
invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional. into law on May 24, 2005. Thus, came R.A. No. 9337.
LEGISLATIVE HISTORY July 1, 2005 is the effectivity date of R.A. No. 9337. 5 When said date
came, the Court issued a temporary restraining order, effective
R.A. No. 9337 is a consolidation of three legislative bills namely, House
immediately and continuing until further orders, enjoining respondents
Bill Nos. 3555 and 3705, and Senate Bill No. 1950.
from enforcing and implementing the law.
House Bill No. 35552 was introduced on first reading on January 7,
2005. The House Committee on Ways and Means approved the bill, in
Oral arguments were held on July 14, 2005. Significantly, during the neighborhood of 7%? We are not going into exact figures I am just
hearing, the Court speaking through Mr. Justice Artemio V. Panganiban, trying to deliver a point that different industries, different products,
voiced the rationale for its issuance of the temporary restraining order different services are hit differently. So it’s not correct to say that all
on July 1, 2005, to wit: prices must go up by 10%.

J. PANGANIBAN : . . . But before I go into the details of your ATTY. BANIQUED : You’re right, Your Honor.
presentation, let me just tell you a little background. You know when
the law took effect on July 1, 2005, the Court issued a TRO at about 5 J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr.
o’clock in the afternoon. But before that, there was a lot of complaints Counsel, are at present imposed a Sales Tax of 3%. When this E-Vat
aired on television and on radio. Some people in a gas station were law took effect the Sales Tax was also removed as a mitigating
complaining that the gas prices went up by 10%. Some people were measure. So, therefore, there is no justification to increase the fares by
complaining that their electric bill will go up by 10%. Other times 10% at best 7%, correct?
people riding in domestic air carrier were complaining that the prices
ATTY. BANIQUED : I guess so, Your Honor, yes.
that they’ll have to pay would have to go up by 10%. While all that was
being aired, per your presentation and per our own understanding of J. PANGANIBAN : There are other products that the people were
the law, that’s not true. It’s not true that the e-vat law necessarily complaining on that first day, were being increased arbitrarily by 10%.
increased prices by 10% uniformly isn’t it? And that’s one reason among many others this Court had to issue TRO
because of the confusion in the implementation. That’s why we added
ATTY. BANIQUED : No, Your Honor.
as an issue in this case, even if it’s tangentially taken up by the
J. PANGANIBAN : It is not? pleadings of the parties, the confusion in the implementation of the E-
vat. Our people were subjected to the mercy of that confusion of an
ATTY. BANIQUED : It’s not, because, Your Honor, there is an Executive across the board increase of 10%, which you yourself now admit and I
Order that granted the Petroleum companies some subsidy . . . think even the Government will admit is incorrect. In some cases, it
interrupted should be 3% only, in some cases it should be 6% depending on these
mitigating measures and the location and situation of each product, of
J. PANGANIBAN : That’s correct . . . each service, of each company, isn’t it?
ATTY. BANIQUED : . . . and therefore that was meant to temper the ATTY. BANIQUED : Yes, Your Honor.
impact . . . interrupted
J. PANGANIBAN : Alright. So that’s one reason why we had to issue a
J. PANGANIBAN : . . . mitigating measures . . . TRO pending the clarification of all these and we wish the government
will take time to clarify all these by means of a more detailed
ATTY. BANIQUED : Yes, Your Honor.
implementing rules, in case the law is upheld by this Court. . . .6
J. PANGANIBAN : As a matter of fact a part of the mitigating measures
The Court also directed the parties to file their respective Memoranda.
would be the elimination of the Excise Tax and the import duties. That
is why, it is not correct to say that the VAT as to petroleum dealers G.R. No. 168056
increased prices by 10%.
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party
ATTY. BANIQUED : Yes, Your Honor. List, et al., filed a petition for prohibition on May 27, 2005. They
question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337,
J. PANGANIBAN : And therefore, there is no justification for increasing
amending Sections 106, 107 and 108, respectively, of the National
the retail price by 10% to cover the E-Vat tax. If you consider the excise
Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of
tax and the import duties, the Net Tax would probably be in the
goods and properties, Section 5 imposes a 10% VAT on importation of
goods, and Section 6 imposes a 10% VAT on sale of services and use or Petitioners further claim that the inclusion of a stand-by
lease of properties. These questioned provisions contain a authority granted to the President by the Bicameral Conference
uniform proviso authorizing the President, upon recommendation of Committee is a violation of the "no-amendment rule" upon last reading
the Secretary of Finance, to raise the VAT rate to 12%, effective of a bill laid down in Article VI, Section 26(2) of the Constitution.
January 1, 2006, after any of the following conditions have been
satisfied, to wit: G.R. No. 168461

. . . That the President, upon the recommendation of the Secretary of Thereafter, a petition for prohibition was filed on June 29, 2005, by the
Finance, shall, effective January 1, 2006, raise the rate of value-added Association of Pilipinas Shell Dealers, Inc., et al., assailing the following
tax to twelve percent (12%), after any of the following conditions has provisions of R.A. No. 9337:
been satisfied:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that
(i) Value-added tax collection as a percentage of Gross Domestic the input tax on depreciable goods shall be amortized over a 60-month
Product (GDP) of the previous year exceeds two and four-fifth percent period, if the acquisition, excluding the VAT components, exceeds One
(2 4/5%); or Million Pesos (₱1, 000,000.00);

(ii) National government deficit as a percentage of GDP of the previous 2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70%
year exceeds one and one-half percent (1 ½%). limit on the amount of input tax to be credited against the output tax;
and
Petitioners argue that the law is unconstitutional, as it constitutes
abandonment by Congress of its exclusive authority to fix the rate of 3) Section 12, amending Section 114 (c) of the NIRC, authorizing the
taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. Government or any of its political subdivisions, instrumentalities or
agencies, including GOCCs, to deduct a 5% final withholding tax on
G.R. No. 168207 gross payments of goods and services, which are subject to 10% VAT
under Sections 106 (sale of goods and properties) and 108 (sale of
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition services and use or lease of properties) of the NIRC.
for certiorari likewise assailing the constitutionality of Sections 4, 5 and
6 of R.A. No. 9337. Petitioners contend that these provisions are unconstitutional for being
arbitrary, oppressive, excessive, and confiscatory.
Aside from questioning the so-called stand-by authority of the
President to increase the VAT rate to 12%, on the ground that it Petitioners’ argument is premised on the constitutional right of non-
amounts to an undue delegation of legislative power, petitioners also deprivation of life, liberty or property without due process of law under
contend that the increase in the VAT rate to 12% contingent on any of Article III, Section 1 of the Constitution. According to petitioners, the
the two conditions being satisfied violates the due process clause contested sections impose limitations on the amount of input tax that
embodied in Article III, Section 1 of the Constitution, as it imposes an may be claimed. Petitioners also argue that the input tax partakes the
unfair and additional tax burden on the people, in that: (1) the 12% nature of a property that may not be confiscated, appropriated, or
increase is ambiguous because it does not state if the rate would be limited without due process of law. Petitioners further contend that like
returned to the original 10% if the conditions are no longer satisfied; (2) any other property or property right, the input tax credit may be
the rate is unfair and unreasonable, as the people are unsure of the transferred or disposed of, and that by limiting the same, the
applicable VAT rate from year to year; and (3) the increase in the VAT government gets to tax a profit or value-added even if there is no profit
rate, which is supposed to be an incentive to the President to raise the or value-added.
VAT collection to at least 2 4/5 of the GDP of the previous year, should
only be based on fiscal adequacy. Petitioners also believe that these provisions violate the constitutional
guarantee of equal protection of the law under Article III, Section 1 of
the Constitution, as the limitation on the creditable input tax if: (1) the
entity has a high ratio of input tax; or (2) invests in capital equipment; The Office of the Solicitor General (OSG) filed a Comment in behalf of
or (3) has several transactions with the government, is not based on respondents. Preliminarily, respondents contend that R.A. No. 9337
real and substantial differences to meet a valid classification. enjoys the presumption of constitutionality and petitioners failed to cast
doubt on its validity.
Lastly, petitioners contend that the 70% limit is anything but
progressive, violative of Article VI, Section 28(1) of the Constitution, and Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
that it is the smaller businesses with higher input tax to output tax ratio
that will suffer the consequences thereof for it wipes out whatever 630 (1994), respondents argue that the procedural issues raised by
meager margins the petitioners make. petitioners, i.e., legality of the bicameral proceedings, exclusive
origination of revenue measures and the power of the Senate
G.R. No. 168463 concomitant thereto, have already been settled. With regard to the
issue of undue delegation of legislative power to the President,
Several members of the House of Representatives led by Rep. Francis respondents contend that the law is complete and leaves no discretion
Joseph G. Escudero filed this petition for certiorari on June 30, 2005. to the President but to increase the rate to 12% once any of the two
They question the constitutionality of R.A. No. 9337 on the following conditions provided therein arise.
grounds:
Respondents also refute petitioners’ argument that the increase to
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation 12%, as well as the 70% limitation on the creditable input tax, the 60-
of legislative power, in violation of Article VI, Section 28(2) of the month amortization on the purchase or importation of capital goods
Constitution; exceeding ₱1,000,000.00, and the 5% final withholding tax by
government agencies, is arbitrary, oppressive, and confiscatory, and
2) The Bicameral Conference Committee acted without jurisdiction in
that it violates the constitutional principle on progressive taxation,
deleting the no pass on provisions present in Senate Bill No. 1950 and
among others.
House Bill No. 3705; and
Finally, respondents manifest that R.A. No. 9337 is the anchor of the
3) Insertion by the Bicameral Conference Committee of Sections 27,
government’s fiscal reform agenda. A reform in the value-added
28, 34, 116, 117, 119, 121, 125,7 148, 151, 236, 237 and 288, which
system of taxation is the core revenue measure that will tilt the balance
were present in Senate Bill No. 1950, violates Article VI, Section 24(1) of
towards a sustainable macroeconomic environment necessary for
the Constitution, which provides that all appropriation, revenue or tariff
economic growth.
bills shall originate exclusively in the House of Representatives
ISSUES
G.R. No. 168730
The Court defined the issues, as follows:
On the eleventh hour, Governor Enrique T. Garcia filed a petition
for certiorari and prohibition on July 20, 2005, alleging PROCEDURAL ISSUE
unconstitutionality of the law on the ground that the limitation on the
creditable input tax in effect allows VAT-registered establishments to Whether R.A. No. 9337 violates the following provisions of the
retain a portion of the taxes they collect, thus violating the principle Constitution:
that tax collection and revenue should be solely allocated for public
purposes and expenditures. Petitioner Garcia further claims that a. Article VI, Section 24, and
allowing these establishments to pass on the tax to the consumers is
b. Article VI, Section 26(2)
inequitable, in violation of Article VI, Section 28(1) of the Constitution.
SUBSTANTIVE ISSUES
RESPONDENTS’ COMMENT
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections It was only in 1987, when President Corazon C. Aquino issued
106, 107 and 108 of the NIRC, violate the following provisions of the Executive Order No. 273, that the VAT system was rationalized by
Constitution: imposing a multi-stage tax rate of 0% or 10% on all sales using the "tax
credit method."15
a. Article VI, Section 28(1), and
E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT
b. Article VI, Section 28(2) Law,16 R.A. No. 8241 or the Improved VAT Law,17 R.A. No. 8424 or the
Tax Reform Act of 1997,18 and finally, the presently beleaguered R.A.
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2)
No. 9337, also referred to by respondents as the VAT Reform Act.
and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending
Section 114(C) of the NIRC, violate the following provisions of the The Court will now discuss the issues in logical sequence.
Constitution:
PROCEDURAL ISSUE
a. Article VI, Section 28(1), and
I.
b. Article III, Section 1
Whether R.A. No. 9337 violates the following provisions of the
RULING OF THE COURT Constitution:
As a prelude, the Court deems it apt to restate the general principles a. Article VI, Section 24, and
and concepts of value-added tax (VAT), as the confusion and
inevitably, litigation, breeds from a fallacious notion of its nature. b. Article VI, Section 26(2)

The VAT is a tax on spending or consumption. It is levied on the sale, A. The Bicameral Conference Committee
barter, exchange or lease of goods or properties and services. 8 Being
an indirect tax on expenditure, the seller of goods or services may pass Petitioners Escudero, et al., and Pimentel, et al., allege that the
on the amount of tax paid to the buyer,9 with the seller acting merely Bicameral Conference Committee exceeded its authority by:
as a tax collector.10 The burden of VAT is intended to fall on the
1) Inserting the stand-by authority in favor of the President in Sections
immediate buyers and ultimately, the end-consumers.
4, 5, and 6 of R.A. No. 9337;
In contrast, a direct tax is a tax for which a taxpayer is directly liable on
2) Deleting entirely the no pass-on provisions found in both the House
the transaction or business it engages in, without transferring the
and Senate bills;
burden to someone else.11 Examples are individual and corporate
income taxes, transfer taxes, and residence taxes.12 3) Inserting the provision imposing a 70% limit on the amount of input
tax to be credited against the output tax; and
In the Philippines, the value-added system of sales taxation has long
been in existence, albeit in a different mode. Prior to 1978, the system 4) Including the amendments introduced only by Senate Bill No. 1950
was a single-stage tax computed under the "cost deduction method" regarding other kinds of taxes in addition to the value-added tax.
and was payable only by the original sellers. The single-stage system
was subsequently modified, and a mixture of the "cost deduction Petitioners now beseech the Court to define the powers of the
method" and "tax credit method" was used to determine the value- Bicameral Conference Committee.
added tax payable.13 Under the "tax credit method," an entity can
It should be borne in mind that the power of internal regulation and
credit against or subtract from the VAT charged on its sales or outputs
discipline are intrinsic in any legislative body for, as unerringly
the VAT paid on its purchases, inputs and imports.14
elucidated by Justice Story, "[i]f the power did not exist, it would
be utterly impracticable to transact the business of the nation,
either at all, or at least with decency, deliberation, and subject measure, and shall be signed by a majority of the members of
order."19 Thus, Article VI, Section 16 (3) of the Constitution provides each House panel, voting separately.
that "each House may determine the rules of its proceedings."
Pursuant to this inherent constitutional power to promulgate and A comparative presentation of the conflicting House and Senate
implement its own rules of procedure, the respective rules of each provisions and a reconciled version thereof with the explanatory
house of Congress provided for the creation of a Bicameral Conference statement of the conference committee shall be attached to the report.
Committee.
...
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of
The creation of such conference committee was apparently in response
Representatives provides as follows:
to a problem, not addressed by any constitutional provision, where the
Sec. 88. Conference Committee. – In the event that the House does two houses of Congress find themselves in disagreement over changes
not agree with the Senate on the amendment to any bill or joint or amendments introduced by the other house in a legislative bill.
resolution, the differences may be settled by the conference Given that one of the most basic powers of the legislative branch is to
committees of both chambers. formulate and implement its own rules of proceedings and to discipline
its members, may the Court then delve into the details of how
In resolving the differences with the Senate, the House panel shall, as Congress complies with its internal rules or how it conducts its business
much as possible, adhere to and support the House Bill. If the of passing legislation? Note that in the present petitions, the issue is not
differences with the Senate are so substantial that they materially whether provisions of the rules of both houses creating the bicameral
impair the House Bill, the panel shall report such fact to the House for conference committee are unconstitutional, but whether the
the latter’s appropriate action. bicameral conference committee has strictly complied with
the rules of both houses, thereby remaining within the
Sec. 89. Conference Committee Reports. – . . . Each report shall contain jurisdiction conferred upon it by Congress.
a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure. In the recent case of Fariñas vs. The Executive Secretary,20 the
Court En Banc, unanimously reiterated and emphasized its
... adherence to the "enrolled bill doctrine," thus, declining therein
petitioners’ plea for the Court to go behind the enrolled copy of the bill.
The Chairman of the House panel may be interpellated on the
Assailed in said case was Congress’s creation of two sets of bicameral
Conference Committee Report prior to the voting thereon. The House
conference committees, the lack of records of said committees’
shall vote on the Conference Committee Report in the same manner
proceedings, the alleged violation of said committees of the rules of
and procedure as it votes on a bill on third and final reading.
both houses, and the disappearance or deletion of one of the provisions
Rule XII, Section 35 of the Rules of the Senate states: in the compromise bill submitted by the bicameral conference
committee. It was argued that such irregularities in the passage of the
Sec. 35. In the event that the Senate does not agree with the House of law nullified R.A. No. 9006, or the Fair Election Act.
Representatives on the provision of any bill or joint resolution, the
differences shall be settled by a conference committee of both Houses Striking down such argument, the Court held thus:
which shall meet within ten (10) days after their composition. The
Under the "enrolled bill doctrine," the signing of a bill by the Speaker of
President shall designate the members of the Senate Panel in the
the House and the Senate President and the certification of the
conference committee with the approval of the Senate.
Secretaries of both Houses of Congress that it was passed are
Each Conference Committee Report shall contain a detailed and conclusive of its due enactment. A review of cases reveals the Court’s
sufficiently explicit statement of the changes in, or amendments to the consistent adherence to the rule. The Court finds no reason to
deviate from the salutary rule in this case where the
irregularities alleged by the petitioners mostly involved the Congress, thus, the Court is wont to deny a review of the internal
internal rules of Congress, e.g., creation of the 2nd or proceedings of a co-equal branch of government.
3rd Bicameral Conference Committee by the House. This Court
is not the proper forum for the enforcement of these internal Moreover, as far back as 1994 or more than ten years ago, in the case
rules of Congress, whether House or Senate. Parliamentary of Tolentino vs. Secretary of Finance,23 the Court already made the
rules are merely procedural and with their observance the pronouncement that "[i]f a change is desired in the practice [of
courts have no concern. Whatever doubts there may be as to the Bicameral Conference Committee] it must be sought in
the formal validity of Rep. Act No. 9006 must be resolved in its Congress since this question is not covered by any
favor. The Court reiterates its ruling in Arroyo vs. De Venecia, viz.: constitutional provision but is only an internal rule of each
house." 24 To date, Congress has not seen it fit to make such changes
But the cases, both here and abroad, in varying forms of adverted to by the Court. It seems, therefore, that Congress finds the
expression, all deny to the courts the power to inquire into practices of the bicameral conference committee to be very useful for
allegations that, in enacting a law, a House of Congress failed purposes of prompt and efficient legislative action.
to comply with its own rules, in the absence of showing that
there was a violation of a constitutional provision or the rights Nevertheless, just to put minds at ease that no blatant irregularities
of private individuals. In Osmeña v. Pendatun, it was held: "At any tainted the proceedings of the bicameral conference committees, the
rate, courts have declared that ‘the rules adopted by deliberative Court deems it necessary to dwell on the issue. The Court observes
bodies are subject to revocation, modification or waiver at the pleasure that there was a necessity for a conference committee because a
of the body adopting them.’ And it has been said that comparison of the provisions of House Bill Nos. 3555 and 3705 on one
"Parliamentary rules are merely procedural, and with their hand, and Senate Bill No. 1950 on the other, reveals that there were
observance, the courts have no concern. They may be waived indeed disagreements. As pointed out in the petitions, said
or disregarded by the legislative body." Consequently, "mere disagreements were as follows:
failure to conform to parliamentary usage will not invalidate
House Bill No. House Bill No.3705 Senate Bill No.
the action (taken by a deliberative body) when the requisite
3555 1950
number of members have agreed to a particular
measure."21 (Emphasis supplied) With regard to "Stand-By Authority" in favor of President
The foregoing declaration is exactly in point with the present cases,
Provides for 12% Provides for 12% VAT Provides for a single
where petitioners allege irregularities committed by the conference
VAT on every sale in general on sales of rate of 10% VAT on
committee in introducing changes or deleting provisions in the House
of goods or goods or properties sale of goods or
and Senate bills. Akin to the Fariñas case,22 the present petitions also
properties and reduced rates for properties
raise an issue regarding the actions taken by the conference
(amending Sec. 106 sale of certain locally (amending Sec. 106
committee on matters regarding Congress’ compliance with its own
of NIRC); 12% VAT manufactured goods of NIRC), 10% VAT
internal rules. As stated earlier, one of the most basic and inherent
on importation of and petroleum on sale of services
power of the legislature is the power to formulate rules for its
goods (amending products and raw including sale of
proceedings and the discipline of its members. Congress is the best
Sec. 107 of NIRC); materials to be used in electricity by
judge of how it should conduct its own business expeditiously and in
and 12% VAT on the manufacture generation
the most orderly manner. It is also the sole
sale of services and thereof (amending companies,
concern of Congress to instill discipline among the members of its use or lease of Sec. 106 of NIRC); 12% transmission and
conference committee if it believes that said members violated any of properties VAT on importation of distribution
its rules of proceedings. Even the expanded jurisdiction of this Court (amending Sec. 108 goods and reduced companies, and use
cannot apply to questions regarding only the internal operation of of NIRC) rates for certain or lease of properties
 imported products (amending Sec. 108 been paid shall be been paid shall be
including petroleum of NIRC) equally distributed equally distributed
products (amending over 5 years or the over 5 years or the
Sec. 107 of NIRC); and depreciable life of depreciable life of
12% VAT on sale of such capital goods; such capital goods;
services and use or the input tax credit the input tax credit
lease of properties and for goods and for goods and
a reduced rate for services other than services other than
certain services capital goods shall capital goods shall
including power not exceed 5% of not exceed 90% of
generation (amending the total amount of the output VAT.
Sec. 108 of NIRC) such goods and
services; and for
With regard to the "no pass-on" provision persons engaged in
retail trading of
No similar provision Provides that the VAT Provides that the goods, the
imposed on power VAT imposed on allowable input tax
generation and on the sales of electricity by credit shall not
sale of petroleum generation exceed 11% of the
products shall be companies and total amount of
absorbed by services of goods purchased.
generation companies transmission
or sellers, respectively, companies and With regard to amendments to be made to NIRC provisions regarding income
and shall not be distribution and excise taxes
passed on to companies, as well
consumers as those of franchise No similar provision No similar provision Provided for amendments
grantees of electric to several NIRC provisions
utilities shall not regarding corporate
apply to residential income, percentage,
franchise and excise taxes
end-users. VAT shall
be absorbed by The disagreements between the provisions in the House bills and the
generation, Senate bill were with regard to (1) what rate of VAT is to be imposed;
transmission, and (2) whether only the VAT imposed on electricity generation,
distribution transmission and distribution companies should not be passed on to
companies. consumers, as proposed in the Senate bill, or both the VAT imposed on
electricity generation, transmission and distribution companies and the
With regard to 70% limit on input tax credit VAT imposed on sale of petroleum products should not be passed on to
consumers, as proposed in the House bill; (3) in what manner input tax
Provides that the No similar provision Provides that the credits should be limited; (4) and whether the NIRC provisions on
input tax credit for input tax credit for corporate income taxes, percentage, franchise and excise taxes should
capital goods on capital goods on be amended.
which a VAT has which a VAT has
There being differences and/or disagreements on the foregoing acquisition cost for such goods, excluding the VAT component thereof,
provisions of the House and Senate bills, the Bicameral Conference exceeds one million Pesos (₱1,000,000.00): PROVIDED, however, that
Committee was mandated by the rules of both houses of Congress to if the estimated useful life of the capital good is less than five (5) years,
act on the same by settling said differences and/or disagreements. The as used for depreciation purposes, then the input VAT shall be spread
Bicameral Conference Committee acted on the disagreeing provisions over such shorter period: . . .
by making the following changes:
(B) Excess Output or Input Tax. – If at the end of any taxable quarter
1. With regard to the disagreement on the rate of VAT to be imposed, it the output tax exceeds the input tax, the excess shall be paid by the
would appear from the Conference Committee Report that the VAT-registered person. If the input tax exceeds the output tax, the
Bicameral Conference Committee tried to bridge the gap in the excess shall be carried over to the succeeding quarter or quarters:
difference between the 10% VAT rate proposed by the Senate, and the PROVIDED that the input tax inclusive of input VAT carried over from
various rates with 12% as the highest VAT rate proposed by the House, the previous quarter that may be credited in every quarter shall not
by striking a compromise whereby the present 10% VAT rate would be exceed seventy percent (70%) of the output VAT: PROVIDED,
retained until certain conditions arise, i.e., the value-added tax HOWEVER, THAT any input tax attributable to zero-rated sales by a
collection as a percentage of gross domestic product (GDP) of the VAT-registered person may at his option be refunded or credited
previous year exceeds 2 4/5%, or National Government deficit as a against other internal revenue taxes, . . .
percentage of GDP of the previous year exceeds 1½%, when the
President, upon recommendation of the Secretary of Finance shall raise 4. With regard to the amendments to other provisions of the NIRC on
the rate of VAT to 12% effective January 1, 2006. corporate income tax, franchise, percentage and excise taxes, the
conference committee decided to include such amendments and
2. With regard to the disagreement on whether only the VAT imposed basically adopted the provisions found in Senate Bill No. 1950, with
on electricity generation, transmission and distribution companies some changes as to the rate of the tax to be imposed.
should not be passed on to consumers or whether both the VAT
imposed on electricity generation, transmission and distribution Under the provisions of both the Rules of the House of Representatives
companies and the VAT imposed on sale of petroleum products may and Senate Rules, the Bicameral Conference Committee is mandated
be passed on to consumers, the Bicameral Conference Committee to settle the differences between the disagreeing provisions in the
chose to settle such disagreement by altogether deleting from its House bill and the Senate bill. The term "settle" is synonymous to
Report any no pass-on provision. "reconcile" and "harmonize."25 To reconcile or harmonize disagreeing
provisions, the Bicameral Conference Committee may then (a) adopt
3. With regard to the disagreement on whether input tax credits should the specific provisions of either the House bill or Senate bill, (b) decide
be limited or not, the Bicameral Conference Committee decided to that neither provisions in the House bill or the provisions in the Senate
adopt the position of the House by putting a limitation on the amount bill would
of input tax that may be credited against the output tax, although it
crafted its own language as to the amount of the limitation on input tax be carried into the final form of the bill, and/or (c) try to arrive at a
credits and the manner of computing the same by providing thus: compromise between the disagreeing provisions.

(A) Creditable Input Tax. – . . . In the present case, the changes introduced by the Bicameral
Conference Committee on disagreeing provisions were meant only to
... reconcile and harmonize the disagreeing provisions for it did not inject
any idea or intent that is wholly foreign to the subject embraced by the
Provided, The input tax on goods purchased or imported in a calendar original provisions.
month for use in trade or business for which deduction for depreciation
is allowed under this Code, shall be spread evenly over the month of The so-called stand-by authority in favor of the President, whereby the
acquisition and the fifty-nine (59) succeeding months if the aggregate rate of 10% VAT wanted by the Senate is retained until such time that
certain conditions arise when the 12% VAT wanted by the House shall Thus, all the changes or modifications made by the Bicameral
be imposed, appears to be a compromise to try to bridge the difference Conference Committee were germane to subjects of the provisions
in the rate of VAT proposed by the two houses of Congress. referred
Nevertheless, such compromise is still totally within the subject of what
rate of VAT should be imposed on taxpayers. to it for reconciliation. Such being the case, the Court does not see any
grave abuse of discretion amounting to lack or excess of jurisdiction
The no pass-on provision was deleted altogether. In the transcripts of committed by the Bicameral Conference Committee. In the earlier
the proceedings of the Bicameral Conference Committee held on May cases of Philippine Judges Association vs. Prado29 and Tolentino vs.
10, 2005, Sen. Ralph Recto, Chairman of the Senate Panel, explained Secretary of Finance,30 the Court recognized the long-standing
the reason for deleting the no pass-on provision in this wise: legislative practice of giving said conference committee ample latitude
for compromising differences between the Senate and the House.
. . . the thinking was just to keep the VAT law or the VAT bill simple. And Thus, in the Tolentino case, it was held that:
we were thinking that no sector should be a beneficiary of legislative
grace, neither should any sector be discriminated on. The VAT is an . . . it is within the power of a conference committee to include in its
indirect tax. It is a pass on-tax. And let’s keep it plain and simple. report an entirely new provision that is not found either in the House bill
Let’s not confuse the bill and put a no pass-on provision. Two-thirds of or in the Senate bill. If the committee can propose an amendment
the world have a VAT system and in this two-thirds of the globe, I have consisting of one or two provisions, there is no reason why it cannot
yet to see a VAT with a no pass-though provision. So, the thinking of propose several provisions, collectively considered as an "amendment
the Senate is basically simple, let’s keep the VAT simple. 26 (Emphasis in the nature of a substitute," so long as such amendment is germane
supplied) to the subject of the bills before the committee. After all, its report was
not final but needed the approval of both houses of Congress to
Rep. Teodoro Locsin further made the manifestation that the no pass- become valid as an act of the legislative department. The charge
on provision "never really enjoyed the support of either House."27 that in this case the Conference Committee acted as a third
legislative chamber is thus without any basis.31 (Emphasis
With regard to the amount of input tax to be credited against output
supplied)
tax, the Bicameral Conference Committee came to a compromise on
the percentage rate of the limitation or cap on such input tax credit, but B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the
again, the change introduced by the Bicameral Conference Committee Constitution on the "No-Amendment Rule"
was totally within the intent of both houses to put a cap on input tax
that may be Article VI, Sec. 26 (2) of the Constitution, states:

credited against the output tax. From the inception of the subject No bill passed by either House shall become a law unless it has passed
revenue bill in the House of Representatives, one of the major three readings on separate days, and printed copies thereof in its final
objectives was to "plug a glaring loophole in the tax policy and form have been distributed to its Members three days before its
administration by creating vital restrictions on the claiming of input VAT passage, except when the President certifies to the necessity of its
tax credits . . ." and "[b]y introducing limitations on the claiming of tax immediate enactment to meet a public calamity or emergency. Upon
credit, we are capping a major leakage that has placed our collection the last reading of a bill, no amendment thereto shall be allowed, and
efforts at an apparent disadvantage."28 the vote thereon shall be taken immediately thereafter, and the yeas
and nays entered in the Journal.
As to the amendments to NIRC provisions on taxes other than the
value-added tax proposed in Senate Bill No. 1950, since said provisions Petitioners’ argument that the practice where a bicameral conference
were among those referred to it, the conference committee had to act committee is allowed to add or delete provisions in the House bill and
on the same and it basically adopted the version of the Senate. the Senate bill after these had passed three readings is in effect a
circumvention of the "no amendment rule" (Sec. 26 (2), Art. VI of the
1987 Constitution), fails to convince the Court to deviate from its ruling
in the Tolentino case that:
119 Tax on franchises
Nor is there any reason for requiring that the Committee’s Report in
these cases must have undergone three readings in each of the two 121 Tax on banks and Non-Bank Financial Intermediaries
houses. If that be the case, there would be no end to negotiation since
each house may seek modification of the compromise bill. . . . 148 Excise Tax on manufactured oils and other fuels

Art. VI. § 26 (2) must, therefore, be construed as referring only 151 Excise Tax on mineral products
to bills introduced for the first time in either house of
Congress, not to the conference committee report. 32 (Emphasis 236 Registration requirements
supplied)
237 Issuance of receipts or sales or commercial invoices
The Court reiterates here that the "no-amendment rule" refers
only to the procedure to be followed by each house of 288 Disposition of Incremental Revenue
Congress with regard to bills initiated in each of said
Petitioners claim that the amendments to these provisions of the NIRC
respective houses, before said bill is transmitted to the other
did not at all originate from the House. They aver that House Bill No.
house for its concurrence or amendment. Verily, to construe said
3555 proposed amendments only regarding Sections 106, 107, 108,
provision in a way as to proscribe any further changes to a bill after one
110 and 114 of the NIRC, while House Bill No. 3705 proposed
house has voted on it would lead to absurdity as this would mean that
amendments only to Sections 106, 107,108, 109, 110 and 111 of the
the other house of Congress would be deprived of its constitutional
NIRC; thus, the other sections of the NIRC which the Senate amended
power to amend or introduce changes to said bill. Thus, Art. VI, Sec. 26
but which amendments were not found in the House bills are not
(2) of the Constitution cannot be taken to mean that the introduction
intended to be amended by the House of Representatives. Hence, they
by the Bicameral Conference Committee of amendments and
argue that since the proposed amendments did not originate from the
modifications to disagreeing provisions in bills that have been acted
House, such amendments are a violation of Article VI, Section 24 of the
upon by both houses of Congress is prohibited.
Constitution.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the
The argument does not hold water.
Constitution on Exclusive Origination of Revenue Bills
Article VI, Section 24 of the Constitution reads:
Coming to the issue of the validity of the amendments made regarding
the NIRC provisions on corporate income taxes and percentage, excise Sec. 24. All appropriation, revenue or tariff bills, bills authorizing
taxes. Petitioners refer to the following provisions, to wit: increase of the public debt, bills of local application, and private bills
shall originate exclusively in the House of Representatives but the
Section 27 Rates of Income Tax on Domestic Corporation
Senate may propose or concur with amendments.
28(A)(1) Tax on Resident Foreign Corporation
In the present cases, petitioners admit that it was indeed House Bill
Nos. 3555 and 3705 that initiated the move for amending provisions of
28(B)(1) Inter-corporate Dividends
the NIRC dealing mainly with the value-added tax. Upon transmittal of
34(B)(1) Inter-corporate Dividends said House bills to the Senate, the Senate came out with Senate Bill No.
1950 proposing amendments not only to NIRC provisions on the value-
116 Tax on Persons Exempt from VAT added tax but also amendments to NIRC provisions on other kinds of
taxes. Is the introduction by the Senate of provisions not dealing
117 Percentage Tax on domestic carriers and keepers of Garage directly with the value- added tax, which is the only kind of tax being
amended in the House bills, still within the purview of the constitutional constitutional power to introduce amendments to the House bill when it
provision authorizing the Senate to propose or concur with included provisions in Senate Bill No. 1950 amending corporate income
amendments to a revenue bill that originated from the House? taxes, percentage, excise and franchise taxes. Verily, Article VI, Section
24 of the Constitution does not contain any prohibition or limitation on
The foregoing question had been squarely answered in the extent of the amendments that may be introduced by the Senate
the Tolentino case, wherein the Court held, thus: to the House revenue bill.
. . . To begin with, it is not the law – but the revenue bill – which is Furthermore, the amendments introduced by the Senate to the NIRC
required by the Constitution to "originate exclusively" in the House of provisions that had not been touched in the House bills are still in
Representatives. It is important to emphasize this, because a bill furtherance of the intent of the House in initiating the subject revenue
originating in the House may undergo such extensive changes in the bills. The Explanatory Note of House Bill No. 1468, the very first House
Senate that the result may be a rewriting of the whole. . . . At this point, bill introduced on the floor, which was later substituted by House Bill
what is important to note is that, as a result of the Senate action, a No. 3555, stated:
distinct bill may be produced. To insist that a revenue statute –
and not only the bill which initiated the legislative process One of the challenges faced by the present administration is the urgent
culminating in the enactment of the law – must substantially and daunting task of solving the country’s serious financial problems.
be the same as the House bill would be to deny the Senate’s To do this, government expenditures must be strictly monitored and
power not only to "concur with amendments" but also to controlled and revenues must be significantly increased. This may be
"propose amendments." It would be to violate the coequality of easier said than done, but our fiscal authorities are still optimistic the
legislative power of the two houses of Congress and in fact make the government will be operating on a balanced budget by the year 2009.
House superior to the Senate. In fact, several measures that will result to significant expenditure
savings have been identified by the administration. It is supported
… with a credible package of revenue measures that include
measures to improve tax administration and control the
…Given, then, the power of the Senate to propose
leakages in revenues from income taxes and the value-added
amendments, the Senate can propose its own version even
tax (VAT). (Emphasis supplied)
with respect to bills which are required by the Constitution to
originate in the House. Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555,
declared that:
...
In the budget message of our President in the year 2005, she
Indeed, what the Constitution simply means is that the initiative for
reiterated that we all acknowledged that on top of our agenda must be
filing revenue, tariff or tax bills, bills authorizing an increase of the
the restoration of the health of our fiscal system.
public debt, private bills and bills of local application must come from
the House of Representatives on the theory that, elected as they are In order to considerably lower the consolidated public sector deficit and
from the districts, the members of the House can be expected to eventually achieve a balanced budget by the year 2009, we need to
be more sensitive to the local needs and problems. On the seize windows of opportunities which might seem poignant in
other hand, the senators, who are elected at large, are the beginning, but in the long run prove effective and
expected to approach the same problems from the national beneficial to the overall status of our economy. One such
perspective. Both views are thereby made to bear on the opportunity is a review of existing tax rates, evaluating the
enactment of such laws.33 (Emphasis supplied) relevance given our present conditions.34 (Emphasis supplied)
Since there is no question that the revenue bill exclusively originated in
the House of Representatives, the Senate was acting within its
Notably therefore, the main purpose of the bills emanating from the As the Court has said, the Senate can propose amendments and in
House of Representatives is to bring in sizeable revenues for the fact, the amendments made on provisions in the tax on income of
government corporations are germane to the purpose of the house bills which is to
raise revenues for the government.
to supplement our country’s serious financial problems, and improve
tax administration and control of the leakages in revenues from income Likewise, the Court finds the sections referring to other percentage and
taxes and value-added taxes. As these house bills were transmitted to excise taxes germane to the reforms to the VAT system, as these
the Senate, the latter, approaching the measures from the point of sections would cushion the effects of VAT on consumers. Considering
national perspective, can introduce amendments within the purposes that certain goods and services which were subject to percentage tax
of those bills. It can provide for ways that would soften the impact of and excise tax would no longer be VAT-exempt, the consumer would
the VAT measure on the consumer, i.e., by distributing the burden be burdened more as they would be paying the VAT in addition to
across all sectors instead of putting it entirely on the shoulders of the these taxes. Thus, there is a need to amend these sections to soften
consumers. The sponsorship speech of Sen. Ralph Recto on why the the impact of VAT. Again, in his sponsorship speech, Sen. Recto said:
provisions on income tax on corporation were included is worth
quoting: However, for power plants that run on oil, we will reduce to zero the
present excise tax on bunker fuel, to lessen the effect of a VAT on this
All in all, the proposal of the Senate Committee on Ways and Means will product.
raise ₱64.3 billion in additional revenues annually even while by
mitigating prices of power, services and petroleum products. For electric utilities like Meralco, we will wipe out the franchise tax in
exchange for a VAT.
However, not all of this will be wrung out of VAT. In fact, only ₱48.7
billion amount is from the VAT on twelve goods and services. The rest And in the case of petroleum, while we will levy the VAT on oil products,
of the tab – ₱10.5 billion- will be picked by corporations. so as not to destroy the VAT chain, we will however bring down the
excise tax on socially sensitive products such as diesel, bunker, fuel
What we therefore prescribe is a burden sharing between corporate and kerosene.
Philippines and the consumer. Why should the latter bear all the pain?
Why should the fiscal salvation be only on the burden of the consumer? ...

The corporate world’s equity is in form of the increase in the corporate What do all these exercises point to? These are not contortions of
income tax from 32 to 35 percent, but up to 2008 only. This will raise giving to the left hand what was taken from the right. Rather, these
₱10.5 billion a year. After that, the rate will slide back, not to its old rate sprang from our concern of softening the impact of VAT, so that the
of 32 percent, but two notches lower, to 30 percent. people can cushion the blow of higher prices they will have to pay as a
result of VAT.36
Clearly, we are telling those with the capacity to pay, corporations, to
bear with this emergency provision that will be in effect for 1,200 days, The other sections amended by the Senate pertained to matters of tax
while we put our fiscal house in order. This fiscal medicine will have an administration which are necessary for the implementation of the
expiry date. changes in the VAT system.

For their assistance, a reward of tax reduction awaits them. We intend To reiterate, the sections introduced by the Senate are germane to the
to keep the length of their sacrifice brief. We would like to assure them subject matter and purposes of the house bills, which is to supplement
that not because there is a light at the end of the tunnel, this our country’s fiscal deficit, among others. Thus, the Senate acted within
government will keep on making the tunnel long. its power to propose those amendments.

The responsibility will not rest solely on the weary shoulders of the SUBSTANTIVE ISSUES
small man. Big business will be there to share the burden.35
I. SEC. 107. Value-Added Tax on Importation of Goods. –

Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, (A) In General. – There shall be levied, assessed and collected on every
107 and 108 of the NIRC, violate the following provisions of the importation of goods a value-added tax equivalent to ten percent
Constitution: (10%) based on the total value used by the Bureau of Customs in
determining tariff and customs duties, plus customs duties, excise
a. Article VI, Section 28(1), and taxes, if any, and other charges, such tax to be paid by the importer
prior to the release of such goods from customs custody: Provided,
b. Article VI, Section 28(2)
That where the customs duties are determined on the basis of the
A. No Undue Delegation of Legislative Power quantity or volume of the goods, the value-added tax shall be based on
the landed cost plus excise taxes, if any: provided, further, that the
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and President, upon the recommendation of the Secretary of
Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A. Finance, shall, effective January 1, 2006, raise the rate of
No. 9337, amending Sections 106, 107 and 108, respectively, of the value-added tax to twelve percent (12%) after any of the
NIRC giving the President the stand-by authority to raise the VAT rate following conditions has been satisfied.
from 10% to 12% when a certain condition is met, constitutes undue
delegation of the legislative power to tax. (i) value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and
The assailed provisions read as follows: four-fifth percent (2 4/5%) or
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further (ii) national government deficit as a percentage of GDP of the
amended to read as follows: previous year exceeds one and one-half percent (1 ½%).
SEC. 106. Value-Added Tax on Sale of Goods or Properties. – SEC. 6. Section 108 of the same Code, as amended, is hereby further
amended to read as follows:
(A) Rate and Base of Tax. – There shall be levied, assessed and
collected on every sale, barter or exchange of goods or properties, a SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
value-added tax equivalent to ten percent (10%) of the gross selling Properties –
price or gross value in money of the goods or properties sold, bartered
or exchanged, such tax to be paid by the seller or (A) Rate and Base of Tax. – There shall be levied, assessed and
transferor: provided, that the President, upon the collected, a value-added tax equivalent to ten percent (10%) of gross
recommendation of the Secretary of Finance, shall, effective receipts derived from the sale or exchange of services: provided,
January 1, 2006, raise the rate of value-added tax to twelve that the President, upon the recommendation of the Secretary
percent (12%), after any of the following conditions has been of Finance, shall, effective January 1, 2006, raise the rate of
satisfied. value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and (i) value-added tax collection as a percentage of Gross
four-fifth percent (2 4/5%) or Domestic Product (GDP) of the previous year exceeds two and
four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the
previous year exceeds one and one-half percent (1 ½%). (ii) national government deficit as a percentage of GDP of the
previous year exceeds one and one-half percent (1 ½
SEC. 5. Section 107 of the same Code, as amended, is hereby further %). (Emphasis supplied)
amended to read as follows:
Petitioners allege that the grant of the stand-by authority to the such that, ultimately, it is the President who decides whether to impose
President to increase the VAT rate is a virtual abdication by Congress of the increased tax rate or not.
its exclusive power to tax because such delegation is not within the
purview of Section 28 (2), Article VI of the Constitution, which provides: A brief discourse on the principle of non-delegation of powers is
instructive.
The Congress may, by law, authorize the President to fix within
specified limits, and may impose, tariff rates, import and export quotas, The principle of separation of powers ordains that each of the three
tonnage and wharfage dues, and other duties or imposts within the great branches of government has exclusive cognizance of and is
framework of the national development program of the government. supreme in matters falling within its own constitutionally allocated
sphere.37 A logical
They argue that the VAT is a tax levied on the sale, barter or exchange
of goods and properties as well as on the sale or exchange of services, corollary to the doctrine of separation of powers is the principle of non-
which cannot be included within the purview of tariffs under the delegation of powers, as expressed in the Latin maxim: potestas
exempted delegation as the latter refers to customs duties, tolls or delegata non delegari potest which means "what has been delegated,
tribute payable upon merchandise to the government and usually cannot be delegated."38 This doctrine is based on the ethical principle
imposed on goods or merchandise imported or exported. that such as delegated power constitutes not only a right but a duty to
be performed by the delegate through the instrumentality of his own
Petitioners ABAKADA GURO Party List, et al., further contend that judgment and not through the intervening mind of another.39
delegating to the President the legislative power to tax is contrary to
republicanism. They insist that accountability, responsibility and With respect to the Legislature, Section 1 of Article VI of the
transparency should dictate the actions of Congress and they should Constitution provides that "the Legislative power shall be vested in the
not pass to the President the decision to impose taxes. They also argue Congress of the Philippines which shall consist of a Senate and a House
that the law also effectively nullified the President’s power of control, of Representatives." The powers which Congress is prohibited from
which includes the authority to set aside and nullify the acts of her delegating are those which are strictly, or inherently and exclusively,
subordinates like the Secretary of Finance, by mandating the fixing of legislative. Purely legislative power, which can never be delegated, has
the tax rate by the President upon the recommendation of the been described as the authority to make a complete law –
Secretary of Finance. complete as to the time when it shall take effect and as to
whom it shall be applicable – and to determine the expediency
Petitioners Pimentel, et al. aver that the President has ample powers to of its enactment.40 Thus, the rule is that in order that a court may be
cause, influence or create the conditions provided by the law to bring justified in holding a statute unconstitutional as a delegation of
about either or both the conditions precedent. legislative power, it must appear that the power involved is purely
legislative in nature – that is, one appertaining exclusively to the
On the other hand, petitioners Escudero, et al. find bizarre and legislative department. It is the nature of the power, and not the liability
revolting the situation that the imposition of the 12% rate would be of its use or the manner of its exercise, which determines the validity of
subject to the whim of the Secretary of Finance, an unelected its delegation.
bureaucrat, contrary to the principle of no taxation without
representation. They submit that the Secretary of Finance is not Nonetheless, the general rule barring delegation of legislative powers is
mandated to give a favorable recommendation and he may not even subject to the following recognized limitations or exceptions:
give his recommendation. Moreover, they allege that no guiding
standards are provided in the law on what basis and as to how he will (1) Delegation of tariff powers to the President under Section 28 (2) of
make his recommendation. They claim, nonetheless, that any Article VI of the Constitution;
recommendation of the Secretary of Finance can easily be brushed
(2) Delegation of emergency powers to the President under Section 23
aside by the President since the former is a mere alter ego of the latter,
(2) of Article VI of the Constitution;
(3) Delegation to the people at large; particular community. In Wayman vs. Southard, the Supreme Court of
the United States ruled that the legislature may delegate a power not
(4) Delegation to local governments; and legislative which it may itself rightfully exercise. The power to
ascertain facts is such a power which may be delegated. There
(5) Delegation to administrative bodies.
is nothing essentially legislative in ascertaining the existence
In every case of permissible delegation, there must be a showing that of facts or conditions as the basis of the taking into effect of a
the delegation itself is valid. It is valid only if the law (a) is complete in law. That is a mental process common to all branches of the
itself, setting forth therein the policy to be executed, carried out, or government. Notwithstanding the apparent tendency, however, to
implemented by the delegate;41 and (b) fixes a standard — the limits of relax the rule prohibiting delegation of legislative authority on account
which are sufficiently determinate and determinable — to which the of the complexity arising from social and economic forces at work in
delegate must conform in the performance of his functions.42 A this modern industrial age, the orthodox pronouncement of Judge
sufficient standard is one which defines legislative policy, marks its Cooley in his work on Constitutional Limitations finds restatement in
limits, maps out its boundaries and specifies the public agency to apply Prof. Willoughby's treatise on the Constitution of the United States in
it. It indicates the circumstances under which the legislative command the following language — speaking of declaration of legislative power
is to be effected.43 Both tests are intended to prevent a total to administrative agencies: The principle which permits the
transference of legislative authority to the delegate, who is not allowed legislature to provide that the administrative agent may
to step into the shoes of the legislature and exercise a power determine when the circumstances are such as require the
essentially legislative.44 application of a law is defended upon the ground that at the
time this authority is granted, the rule of public policy, which
In People vs. Vera,45 the Court, through eminent Justice Jose P. Laurel, is the essence of the legislative act, is determined by the
expounded on the concept and extent of delegation of power in this legislature. In other words, the legislature, as it is its duty to
wise: do, determines that, under given circumstances, certain
executive or administrative action is to be taken, and that,
In testing whether a statute constitutes an undue delegation of
under other circumstances, different or no action at all is to be
legislative power or not, it is usual to inquire whether the statute was
taken. What is thus left to the administrative official is not the
complete in all its terms and provisions when it left the hands of the
legislative determination of what public policy demands, but
legislature so that nothing was left to the judgment of any other
simply the ascertainment of what the facts of the case require
appointee or delegate of the legislature.
to be done according to the terms of the law by which he is
... governed. The efficiency of an Act as a declaration of
legislative will must, of course, come from Congress, but the
‘The true distinction’, says Judge Ranney, ‘is between the ascertainment of the contingency upon which the Act shall
delegation of power to make the law, which necessarily take effect may be left to such agencies as it may designate.
involves a discretion as to what it shall be, and conferring an The legislature, then, may provide that a law shall take effect
authority or discretion as to its execution, to be exercised upon the happening of future specified contingencies leaving
under and in pursuance of the law. The first cannot be done; to some other person or body the power to determine when
to the latter no valid objection can be made.’ the specified contingency has arisen. (Emphasis supplied).46

... In Edu vs. Ericta,47 the Court reiterated:

It is contended, however, that a legislative act may be made to the What cannot be delegated is the authority under the Constitution to
effect as law after it leaves the hands of the legislature. It is true that make laws and to alter and repeal them; the test is the completeness
laws may be made effective on certain contingencies, as by of the statute in all its terms and provisions when it leaves the hands of
proclamation of the executive or the adoption by the people of a the legislature. To determine whether or not there is an undue
delegation of legislative power, the inquiry must be directed to the In the present case, the challenged section of R.A. No. 9337 is the
scope and definiteness of the measure enacted. The legislative does common proviso in Sections 4, 5 and 6 which reads as follows:
not abdicate its functions when it describes what job must be
done, who is to do it, and what is the scope of his That the President, upon the recommendation of the Secretary of
authority. For a complex economy, that may be the only way in Finance, shall, effective January 1, 2006, raise the rate of value-added
which the legislative process can go forward. A distinction has tax to twelve percent (12%), after any of the following conditions has
rightfully been made between delegation of power to make been satisfied:
the laws which necessarily involves a discretion as to what it
(i) Value-added tax collection as a percentage of Gross Domestic
shall be, which constitutionally may not be done, and
Product (GDP) of the previous year exceeds two and four-fifth percent
delegation of authority or discretion as to its execution to be
(2 4/5%); or
exercised under and in pursuance of the law, to which no valid
objection can be made. The Constitution is thus not to be regarded (ii) National government deficit as a percentage of GDP of the previous
as denying the legislature the necessary resources of flexibility and year exceeds one and one-half percent (1 ½%).
practicability. (Emphasis supplied).48
The case before the Court is not a delegation of legislative power. It is
Clearly, the legislature may delegate to executive officers or bodies the simply a delegation of ascertainment of facts upon which enforcement
power to determine certain facts or conditions, or the happening of and administration of the increase rate under the law is contingent. The
contingencies, on which the operation of a statute is, by its terms, legislature has made the operation of the 12% rate effective January 1,
made to depend, but the legislature must prescribe sufficient 2006, contingent upon a specified fact or condition. It leaves the entire
standards, policies or limitations on their authority.49 While the power operation or non-operation of the 12% rate upon factual matters
to tax cannot be delegated to executive agencies, details as to the outside of the control of the executive.
enforcement and administration of an exercise of such power may be
left to them, including the power to determine the existence of facts on No discretion would be exercised by the President. Highlighting the
which its operation depends.50 absence of discretion is the fact that the word shall is used in the
common proviso. The use of the word shall connotes a mandatory
The rationale for this is that the preliminary ascertainment of facts as order. Its use in a statute denotes an imperative obligation and is
basis for the enactment of legislation is not of itself a legislative inconsistent with the idea of discretion. 53 Where the law is clear and
function, but is simply ancillary to legislation. Thus, the duty of unambiguous, it must be taken to mean exactly what it says, and
correlating information and making recommendations is the kind of courts have no choice but to see to it that the mandate is obeyed.54
subsidiary activity which the legislature may perform through its
members, or which it may delegate to others to perform. Intelligent Thus, it is the ministerial duty of the President to immediately impose
legislation on the complicated problems of modern society is the 12% rate upon the existence of any of the conditions specified by
impossible in the absence of accurate information on the part of the Congress. This is a duty which cannot be evaded by the President.
legislators, and any reasonable method of securing such information is Inasmuch as the law specifically uses the word shall, the exercise of
proper.51 The Constitution as a continuously operative charter of discretion by the President does not come into play. It is a clear
government does not require that Congress find for itself directive to impose the 12% VAT rate when the specified conditions are
present. The time of taking into effect of the 12% VAT rate is based on
every fact upon which it desires to base legislative action or that it the happening of a certain specified contingency, or upon the
make for itself detailed determinations which it has declared to be ascertainment of certain facts or conditions by a person or body other
prerequisite to application of legislative policy to particular facts and than the legislature itself.
circumstances impossible for Congress itself properly to investigate.52
The Court finds no merit to the contention of petitioners ABAKADA
GURO Party List, et al. that the law effectively nullified the President’s
power of control over the Secretary of Finance by mandating the fixing Congress simply granted the Secretary of Finance the authority to
of the tax rate by the President upon the recommendation of the ascertain the existence of a fact, namely, whether by December 31,
Secretary of Finance. The Court cannot also subscribe to the position of 2005, the value-added tax collection as a percentage of Gross
petitioners Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (24/5%) or the national government deficit as a percentage of
Pimentel, et al. that the word shall should be interpreted to GDP of the previous year exceeds one and one-half percent (1½%). If
mean may in view of the phrase "upon the recommendation of the either of these two instances has occurred, the Secretary of Finance, by
Secretary of Finance." Neither does the Court find persuasive the legislative mandate, must submit such information to the President.
submission of petitioners Escudero, et al. that any recommendation by Then the 12% VAT rate must be imposed by the President effective
the Secretary of Finance can easily be brushed aside by the President January 1, 2006. There is no undue delegation of legislative
since the former is a mere alter ego of the latter. power but only of the discretion as to the execution of a law.
This is constitutionally permissible.57 Congress does not abdicate
When one speaks of the Secretary of Finance as the alter ego of the
its functions or unduly delegate power when it describes what job must
President, it simply means that as head of the Department of Finance
be done, who must do it, and what is the scope of his authority; in our
he is the assistant and agent of the Chief Executive. The multifarious
complex economy that is frequently the only way in which the
executive and administrative functions of the Chief Executive are
legislative process can go forward.58
performed by and through the executive departments, and the acts of
the secretaries of such departments, such as the Department of As to the argument of petitioners ABAKADA GURO Party List, et
Finance, performed and promulgated in the regular course of business, al. that delegating to the President the legislative power to tax is
are, unless disapproved or reprobated by the Chief Executive, contrary to the principle of republicanism, the same deserves scant
presumptively the acts of the Chief Executive. The Secretary of consideration. Congress did not delegate the power to tax but the
Finance, as such, occupies a political position and holds office in an mere implementation of the law. The intent and will to increase the
advisory capacity, and, in the language of Thomas Jefferson, "should be VAT rate to 12% came from Congress and the task of the President is
of the President's bosom confidence" and, in the language of Attorney- to simply execute the legislative policy. That Congress chose to do so in
General Cushing, is "subject to the direction of the President."55 such a manner is not within the province of the Court to inquire into, its
task being to interpret the law.59
In the present case, in making his recommendation to the President on
the existence of either of the two conditions, the Secretary of Finance is The insinuation by petitioners Pimentel, et al. that the President has
not acting as the alter ego of the President or even her subordinate. In ample powers to cause, influence or create the conditions to bring
such instance, he is not subject to the power of control and direction of about either or both the conditions precedent does not deserve any
the President. He is acting as the agent of the legislative department, merit as this argument is highly speculative. The Court does not rule on
to determine and declare the event upon which its expressed will is to allegations which are manifestly conjectural, as these may not exist at
take effect.56 The Secretary of Finance becomes the means or tool by all. The Court deals with facts, not fancies; on realities, not
which legislative policy is determined and implemented, considering appearances. When the Court acts on appearances instead of realities,
that he possesses all the facilities to gather data and information and justice and law will be short-lived.
has a much broader perspective to properly evaluate them. His
function is to gather and collate statistical data and other pertinent B. The 12% Increase VAT Rate Does Not Impose an Unfair and
information and verify if any of the two conditions laid out by Congress Unnecessary Additional Tax Burden
is present. His personality in such instance is in reality but a projection
of that of Congress. Thus, being the agent of Congress and not of the Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate
President, the President cannot alter or modify or nullify, or set aside imposes an unfair and additional tax burden on the people. Petitioners
the findings of the Secretary of Finance and to substitute the judgment also argue that the 12% increase, dependent on any of the 2 conditions
of the former for that of the latter. set forth in the contested provisions, is ambiguous because it does not
state if the VAT rate would be returned to the original 10% if the rates The condition set for increasing VAT rate to 12% have economic or
are no longer satisfied. Petitioners also argue that such rate is unfair fiscal meaning. If VAT/GDP is less than 2.8%, it means that government
and unreasonable, as the people are unsure of the applicable VAT rate has weak or no capability of implementing the VAT or that VAT is not
from year to year. effective in the function of the tax collection. Therefore, there is no
value to increase it to 12% because such action will also be ineffectual.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if
any of the two conditions set forth therein are satisfied, the President 2. Nat’l Gov’t Deficit/GDP >1.5%
shall increase the VAT rate to 12%. The provisions of the law are clear.
It does not provide for a return to the 10% rate nor does it empower The condition set for increasing VAT when deficit/GDP is 1.5% or less
the President to so revert if, after the rate is increased to 12%, the VAT means the fiscal condition of government has reached a relatively
collection goes below the 24/5 of the GDP of the previous year or that sound position or is towards the direction of a balanced budget
the national government deficit as a percentage of GDP of the previous position. Therefore, there is no need to increase the VAT rate since the
year does not exceed 1½%. fiscal house is in a relatively healthy position. Otherwise stated, if the
ratio is more than 1.5%, there is indeed a need to increase the VAT
Therefore, no statutory construction or interpretation is needed. rate.62
Neither can conditions or limitations be introduced where none is
provided for. Rewriting the law is a forbidden ground that only That the first condition amounts to an incentive to the President to
Congress may tread upon.60 increase the VAT collection does not render it unconstitutional so long
as there is a public purpose for which the law was passed, which in this
Thus, in the absence of any provision providing for a return to the 10% case, is mainly to raise revenue. In fact, fiscal adequacy dictated the
rate, which in this case the Court finds none, petitioners’ argument is, need for a raise in revenue.
at best, purely speculative. There is no basis for petitioners’ fear of a
fluctuating VAT rate because the law itself does not provide that the The principle of fiscal adequacy as a characteristic of a sound tax
rate should go back to 10% if the conditions provided in Sections 4, 5 system was originally stated by Adam Smith in his Canons of
and 6 are no longer present. The rule is that where the provision of the Taxation (1776), as:
law is clear and unambiguous, so that there is no occasion for the
IV. Every tax ought to be so contrived as both to take out and to keep
court's seeking the legislative intent, the law must be taken as it is,
out of the pockets of the people as little as possible over and above
devoid of judicial addition or subtraction.61
what it brings into the public treasury of the state.63
Petitioners also contend that the increase in the VAT rate, which was
It simply means that sources of revenues must be adequate to meet
allegedly an incentive to the President to raise the VAT collection to at
government expenditures and their variations.64
least 2 4/5 of the GDP of the previous year, should be based on fiscal
adequacy. The dire need for revenue cannot be ignored. Our country is in a
quagmire of financial woe. During the Bicameral Conference
Petitioners obviously overlooked that increase in VAT collection is not
Committee hearing, then Finance Secretary Purisima bluntly depicted
the only condition. There is another condition, i.e., the national
the country’s gloomy state of economic affairs, thus:
government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%). First, let me explain the position that the Philippines finds itself in right
now. We are in a position where 90 percent of our revenue is used for
Respondents explained the philosophy behind these alternative
debt service. So, for every peso of revenue that we currently raise, 90
conditions:
goes to debt service. That’s interest plus amortization of our debt. So
1. VAT/GDP Ratio > 2.8% clearly, this is not a sustainable situation. That’s the first fact.
The second fact is that our debt to GDP level is way out of line to judge. In the Fariñas case, the Court refused to consider the various
compared to other peer countries that borrow money from that arguments raised therein that dwelt on the wisdom of Section 14 of
international financial markets. Our debt to GDP is approximately equal R.A. No. 9006 (The Fair Election Act), pronouncing that:
to our GDP. Again, that shows you that this is not a sustainable
situation. . . . policy matters are not the concern of the Court. Government policy
is within the exclusive dominion of the political branches of the
The third thing that I’d like to point out is the environment that we are government. It is not for this Court to look into the wisdom or propriety
presently operating in is not as benign as what it used to be the past of legislative determination. Indeed, whether an enactment is wise or
five years. unwise, whether it is based on sound economic theory, whether it is
the best means to achieve the desired results, whether, in short, the
What do I mean by that? legislative discretion within its prescribed limits should be exercised in a
particular manner are matters for the judgment of the legislature, and
In the past five years, we’ve been lucky because we were operating in
the serious conflict of opinions does not suffice to bring them within the
a period of basically global growth and low interest rates. The past few
range of judicial cognizance.66
months, we have seen an inching up, in fact, a rapid increase in the
interest rates in the leading economies of the world. And, therefore, our In the same vein, the Court in this case will not dawdle on the purpose
ability to borrow at reasonable prices is going to be challenged. In fact, of Congress or the executive policy, given that it is not for the judiciary
ultimately, the question is our ability to access the financial markets. to "pass upon questions of wisdom, justice or expediency of
legislation."67
When the President made her speech in July last year, the environment
was not as bad as it is now, at least based on the forecast of most II.
financial institutions. So, we were assuming that raising 80 billion would
put us in a position where we can then convince them to improve our Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and
ability to borrow at lower rates. But conditions have changed on us 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section
because the interest rates have gone up. In fact, just within this room, 114(C) of the NIRC, violate the following provisions of the Constitution:
we tried to access the market for a billion dollars because for this year
alone, the Philippines will have to borrow 4 billion dollars. Of that a. Article VI, Section 28(1), and
amount, we have borrowed 1.5 billion. We issued last January a 25-
b. Article III, Section 1
year bond at 9.7 percent cost. We were trying to access last week and
the market was not as favorable and up to now we have not accessed A. Due Process and Equal Protection Clauses
and we might pull back because the conditions are not very good.
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that
So given this situation, we at the Department of Finance believe that Section 8 of R.A. No. 9337, amending Sections 110 (A)(2), 110 (B), and
we really need to front-end our deficit reduction. Because it is deficit Section 12 of R.A. No. 9337, amending Section 114 (C) of the NIRC are
that is causing the increase of the debt and we are in what we call a arbitrary, oppressive, excessive and confiscatory. Their argument is
debt spiral. The more debt you have, the more deficit you have premised on the constitutional right against deprivation of life, liberty of
because interest and debt service eats and eats more of your revenue. property without due process of law, as embodied in Article III, Section
We need to get out of this debt spiral. And the only way, I think, we can 1 of the Constitution.
get out of this debt spiral is really have a front-end adjustment in our
revenue base.65 Petitioners also contend that these provisions violate the constitutional
guarantee of equal protection of the law.
The image portrayed is chilling. Congress passed the law hoping for
rescue from an inevitable catastrophe. Whether the law is indeed The doctrine is that where the due process and equal protection
sufficient to answer the state’s economic dilemma is not for the Court clauses are invoked, considering that they are not fixed rules but rather
broad standards, there is a need for proof of such persuasive character at the net effect that there will be unapplied/unutilized inputs VAT for a
as would lead to such a conclusion. Absent such a showing, the given quarter. It does not proceed further to the fact that such
presumption of validity must prevail.68 unapplied/unutilized input tax may be credited in the subsequent
periods as allowed by the carry-over provision of Section 110(B) or that
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC it may later on be refunded through a tax credit certificate under
imposes a limitation on the amount of input tax that may be credited Section 112(B).
against the output tax. It states, in part: "[P]rovided, that the input tax
inclusive of the input VAT carried over from the previous quarter that Therefore, petitioners’ argument must be rejected.
may be credited in every quarter shall not exceed seventy percent
(70%) of the output VAT: …" On the other hand, it appears that petitioner Garcia failed to
comprehend the operation of the 70% limitation on the input tax.
Input Tax is defined under Section 110(A) of the NIRC, as amended, as According to petitioner, the limitation on the creditable input tax in
the value-added tax due from or paid by a VAT-registered person on effect allows VAT-registered establishments to retain a portion of the
the importation of goods or local purchase of good and services, taxes they collect, which violates the principle that tax collection and
including lease or use of property, in the course of trade or business, revenue should be for public purposes and expenditures
from a VAT-registered person, and Output Tax is the value-added
tax due on the sale or lease of taxable goods or properties or services As earlier stated, the input tax is the tax paid by a person, passed on to
by any person registered or required to register under the law. him by the seller, when he buys goods. Output tax meanwhile is the
tax due to the person when he sells goods. In computing the VAT
Petitioners claim that the contested sections impose limitations on the payable, three possible scenarios may arise:
amount of input tax that may be claimed. In effect, a portion of the
input tax that has already been paid cannot now be credited against First, if at the end of a taxable quarter the output taxes charged by the
the output tax. seller are equal to the input taxes that he paid and passed on by the
suppliers, then no payment is required;
Petitioners’ argument is not absolute. It assumes that the input tax
exceeds 70% of the output tax, and therefore, the input tax in excess Second, when the output taxes exceed the input taxes, the person
of 70% remains uncredited. However, to the extent that the input tax is shall be liable for the excess, which has to be paid to the Bureau of
less than 70% of the output tax, then 100% of such input tax is still Internal Revenue (BIR);69 and
creditable.
Third, if the input taxes exceed the output taxes, the excess shall be
More importantly, the excess input tax, if any, is retained in a carried over to the succeeding quarter or quarters. Should the input
business’s books of accounts and remains creditable in the succeeding taxes result from zero-rated or effectively zero-rated transactions, any
quarter/s. This is explicitly allowed by Section 110(B), which provides excess over the output taxes shall instead be refunded to the taxpayer
that "if the input tax exceeds the output tax, the excess shall be carried or credited against other internal revenue taxes, at the taxpayer’s
over to the succeeding quarter or quarters." In addition, Section 112(B) option.70
allows a VAT-registered person to apply for the issuance of a tax credit
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the
certificate or refund for any unused input taxes, to the extent that such
input tax. Thus, a person can credit his input tax only up to the extent
input taxes have not been applied against the output taxes. Such
of 70% of the output tax. In layman’s term, the value-added taxes that
unused input tax may be used in payment of his other internal revenue
a person/taxpayer paid and passed on to him by a seller can only be
taxes.
credited up to 70% of the value-added taxes that is due to him on a
The non-application of the unutilized input tax in a given quarter is taxable transaction. There is no retention of any tax collection because
not ad infinitum, as petitioners exaggeratedly contend. Their analysis the person/taxpayer has already previously paid the input tax to a
of the effect of the 70% limitation is incomplete and one-sided. It ends seller, and the seller will subsequently remit such input tax to the BIR.
The party directly liable for the payment of the tax is the seller.71 What (₱1,000,000.00): Provided, however, That if the estimated useful life of
only needs to be done is for the person/taxpayer to apply or credit the capital goods is less than five (5) years, as used for depreciation
these input taxes, as evidenced by receipts, against his output taxes. purposes, then the input VAT shall be spread over such a shorter
period: Provided, finally, That in the case of purchase of services, lease
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue or use of properties, the input tax shall be creditable to the purchaser,
that the input tax partakes the nature of a property that may not be lessee or license upon payment of the compensation, rental, royalty or
confiscated, appropriated, or limited without due process of law. fee.
The input tax is not a property or a property right within the The foregoing section imposes a 60-month period within which to
constitutional purview of the due process clause. A VAT-registered amortize the creditable input tax on purchase or importation of capital
person’s entitlement to the creditable input tax is a mere statutory goods with acquisition cost of ₱1 Million pesos, exclusive of the VAT
privilege. component. Such spread out only poses a delay in the crediting of the
input tax. Petitioners’ argument is without basis because the taxpayer
The distinction between statutory privileges and vested rights must be
is not permanently deprived of his privilege to credit the input tax.
borne in mind for persons have no vested rights in statutory privileges.
The state may change or take away rights, which were created by the It is worth mentioning that Congress admitted that the spread-out of
law of the state, although it may not take away property, which was the creditable input tax in this case amounts to a 4-year interest-free
vested by virtue of such rights.72 loan to the government.76 In the same breath, Congress also justified
its move by saying that the provision was designed to raise an annual
Under the previous system of single-stage taxation, taxes paid at every
revenue of 22.6 billion.77 The legislature also dispelled the fear that the
level of distribution are not recoverable from the taxes payable,
provision will fend off foreign investments, saying that foreign investors
although it becomes part of the cost, which is deductible from the gross
have other tax incentives provided by law, and citing the case of China,
revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-
where despite a 17.5% non-creditable VAT, foreign investments were
stage tax on all sales, it was then that the crediting of the input tax paid
not deterred.78 Again, for whatever is the purpose of the 60-month
on purchase or importation of goods and services by VAT-registered
amortization, this involves executive economic policy and legislative
persons against the output tax was introduced.73 This was adopted by
wisdom in which the Court cannot intervene.
the Expanded VAT Law (R.A. No. 7716), 74 and The Tax Reform Act of
1997 (R.A. No. 8424).75 The right to credit input tax as against the With regard to the 5% creditable withholding tax imposed on payments
output tax is clearly a privilege created by law, a privilege that also the made by the government for taxable transactions, Section 12 of R.A.
law can remove, or in this case, limit. No. 9337, which amended Section 114 of the NIRC, reads:
Petitioners also contest as arbitrary, oppressive, excessive and SEC. 114. Return and Payment of Value-added Tax. –
confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A) of
the NIRC, which provides: (C) Withholding of Value-added Tax. – The Government or any of its
political subdivisions, instrumentalities or agencies, including
SEC. 110. Tax Credits. – government-owned or controlled corporations (GOCCs) shall, before
making payment on account of each purchase of goods and services
(A) Creditable Input Tax. – …
which are subject to the value-added tax imposed in Sections 106 and
Provided, That the input tax on goods purchased or imported in a 108 of this Code, deduct and withhold a final value-added tax at the
calendar month for use in trade or business for which deduction for rate of five percent (5%) of the gross payment thereof: Provided, That
depreciation is allowed under this Code, shall be spread evenly over the payment for lease or use of properties or property rights to
the month of acquisition and the fifty-nine (59) succeeding months if nonresident owners shall be subject to ten percent (10%) withholding
the aggregate acquisition cost for such goods, excluding the VAT tax at the time of payment. For purposes of this Section, the payor or
component thereof, exceeds One million pesos
person in control of the payment shall be considered as the withholding withholding tax (referred to in Sec. 2.57.2 of these regulations) and
agent. compensation income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature.
The value-added tax withheld under this Section shall be remitted
within ten (10) days following the end of the month the withholding As applied to value-added tax, this means that taxable transactions
was made. with the government are subject to a 5% rate, which constitutes as full
payment of the tax payable on the transaction. This represents the net
Section 114(C) merely provides a method of collection, or as stated by VAT payable of the seller. The other 5% effectively accounts for the
respondents, a more simplified VAT withholding system. The standard input VAT (deemed input VAT), in lieu of the actual input VAT
government in this case is constituted as a withholding agent with directly or attributable to the taxable transaction.79
respect to their payments for goods and services.
The Court need not explore the rationale behind the provision. It is
Prior to its amendment, Section 114(C) provided for different rates of clear that Congress intended to treat differently taxable transactions
value-added taxes to be withheld -- 3% on gross payments for with the government.80 This is supported by the fact that under the old
purchases of goods; 6% on gross payments for services supplied by provision, the 5% tax withheld by the government remains creditable
contractors other than by public works contractors; 8.5% on gross against the tax liability of the seller or contractor, to wit:
payments for services supplied by public work contractors; or 10% on
payment for the lease or use of properties or property rights to SEC. 114. Return and Payment of Value-added Tax. –
nonresident owners. Under the present Section 114(C), these different
rates, except for the 10% on lease or property rights payment to (C) Withholding of Creditable Value-added Tax. – The
nonresidents, were deleted, and a uniform rate of 5% is applied. Government or any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled corporations
The Court observes, however, that the law the used the word final. In (GOCCs) shall, before making payment on account of each purchase of
tax usage, final, as opposed to creditable, means full. Thus, it is goods from sellers and services rendered by contractors which are
provided in Section 114(C): "final value-added tax at the rate of five subject to the value-added tax imposed in Sections 106 and 108 of this
percent (5%)." Code, deduct and withhold the value-added tax due at the rate of three
percent (3%) of the gross payment for the purchase of goods and six
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The percent (6%) on gross receipts for services rendered by contractors on
Tax Reform Act of 1997), the concept of final withholding tax on every sale or installment payment which shall be creditable against
income was explained, to wit: the value-added tax liability of the seller or contractor:
Provided, however, That in the case of government public works
SECTION 2.57. Withholding of Tax at Source
contractors, the withholding rate shall be eight and one-half percent
(A) Final Withholding Tax. – Under the final withholding tax system the (8.5%): Provided, further, That the payment for lease or use of
amount of income tax withheld by the withholding agent is constituted properties or property rights to nonresident owners shall be subject to
as full and final payment of the income tax due from the payee on ten percent (10%) withholding tax at the time of payment. For this
the said income. The liability for payment of the tax rests primarily on purpose, the payor or person in control of the payment shall be
the payor as a withholding agent. Thus, in case of his failure to withhold considered as the withholding agent.
the tax or in case of underwithholding, the deficiency tax shall be
The valued-added tax withheld under this Section shall be remitted
collected from the payor/withholding agent. …
within ten (10) days following the end of the month the withholding
(B) Creditable Withholding Tax. – Under the creditable withholding tax was made. (Emphasis supplied)
system, taxes withheld on certain income payments are intended to
As amended, the use of the word final and the deletion of the
equal or at least approximate the tax due of the payee on said income.
word creditable exhibits Congress’s intention to treat transactions with
… Taxes withheld on income payments covered by the expanded
the government differently. Since it has not been shown that the class has several transactions with the government, is not based on real and
subject to the 5% final withholding tax has been unreasonably substantial differences to meet a valid classification.
narrowed, there is no reason to invalidate the provision. Petitioners, as
petroleum dealers, are not the only ones subjected to the 5% final The argument is pedantic, if not outright baseless. The law does not
withholding tax. It applies to all those who deal with the government. make any classification in the subject of taxation, the kind of property,
the rates to be levied or the amounts to be raised, the methods of
Moreover, the actual input tax is not totally lost or uncreditable, as assessment, valuation and collection. Petitioners’ alleged distinctions
petitioners believe. Revenue Regulations No. 14-2005 or the are based on variables that bear different consequences. While the
Consolidated Value-Added Tax Regulations 2005 issued by the BIR, implementation of the law may yield varying end results depending on
provides that should the actual input tax exceed 5% of gross one’s profit margin and value-added, the Court cannot go beyond what
payments, the excess may form part of the cost. Equally, should the the legislature has laid down and interfere with the affairs of business.
actual input tax be less than 5%, the difference is treated as income.81
The equal protection clause does not require the universal application
Petitioners also argue that by imposing a limitation on the creditable of the laws on all persons or things without distinction. This might in
input tax, the government gets to tax a profit or value-added even if fact sometimes result in unequal protection. What the clause requires
there is no profit or value-added. is equality among equals as determined according to a valid
classification. By classification is meant the grouping of persons or
Petitioners’ stance is purely hypothetical, argumentative, and again, things similar to each other in certain particulars and different from all
one-sided. The Court will not engage in a legal joust where premises others in these same particulars.85
are what ifs, arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as Shakespeare Petitioners brought to the Court’s attention the introduction of Senate
describes life in Macbeth,82 "full of sound and fury, signifying nothing." Bill No. 2038 by Sens. S.R. Osmeña III and Ma. Ana Consuelo A.S. –
Madrigal on June 6, 2005, and House Bill No. 4493 by Rep. Eric D.
What’s more, petitioners’ contention assumes the proposition that Singson. The proposed legislation seeks to amend the 70% limitation
there is no profit or value-added. It need not take an astute by increasing the same to 90%. This, according to petitioners, supports
businessman to know that it is a matter of exception that a business their stance that the 70% limitation is arbitrary and confiscatory. On
will sell goods or services without profit or value-added. It cannot be this score, suffice it to say that these are still proposed legislations. Until
overstressed that a business is created precisely for profit. Congress amends the law, and absent any unequivocal basis for its
unconstitutionality, the 70% limitation stays.
The equal protection clause under the Constitution means that "no
person or class of persons shall be deprived of the same protection of B. Uniformity and Equitability of Taxation
laws which is enjoyed by other persons or other classes in the same
place and in like circumstances."83 Article VI, Section 28(1) of the Constitution reads:

The power of the State to make reasonable and natural classifications The rule of taxation shall be uniform and equitable. The Congress shall
for the purposes of taxation has long been established. Whether it evolve a progressive system of taxation.
relates to the subject of taxation, the kind of property, the rates to be
levied, or the amounts to be raised, the methods of assessment, Uniformity in taxation means that all taxable articles or kinds of
valuation and collection, the State’s power is entitled to presumption of property of the same class shall be taxed at the same rate. Different
validity. As a rule, the judiciary will not interfere with such power absent articles may be taxed at different amounts provided that the rate is
a clear showing of unreasonableness, discrimination, or arbitrariness.84 uniform on the same class everywhere with all people at all times.86

Petitioners point out that the limitation on the creditable input tax if the In this case, the tax law is uniform as it provides a standard rate of 0%
entity has a high ratio of input tax, or invests in capital equipment, or or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the
NIRC, provide for a rate of 10% (or 12%) on sale of goods and Percentage tax on domestic carriers was removed. 93 Power producers
properties, importation of goods, and sale of services and use or lease are now exempt from paying franchise tax.94
of properties. These same sections also provide for a 0% rate on
certain sales and transaction. Aside from these, Congress also increased the income tax rates of
corporations, in order to distribute the burden of taxation. Domestic,
Neither does the law make any distinction as to the type of industry or foreign, and non-resident corporations are now subject to a 35%
trade that will bear the 70% limitation on the creditable input tax, 5- income tax rate, from a previous 32%. 95 Intercorporate dividends of
year amortization of input tax paid on purchase of capital goods or the non-resident foreign corporations are still subject to 15% final
5% final withholding tax by the government. It must be stressed that withholding tax but the tax credit allowed on the corporation’s domicile
the rule of uniform taxation does not deprive Congress of the power to was increased to 20%.96 The Philippine Amusement and Gaming
classify subjects of taxation, and only demands uniformity within the Corporation (PAGCOR) is not exempt from income taxes
particular class.87 anymore.97 Even the sale by an artist of his works or services
performed for the production of such works was not spared.
R.A. No. 9337 is also equitable. The law is equipped with a threshold
margin. The VAT rate of 0% or 10% (or 12%) does not apply to sales of All these were designed to ease, as well as spread out, the burden of
goods or services with gross annual sales or receipts not exceeding taxation, which would otherwise rest largely on the consumers. It
₱1,500,000.00.88 Also, basic marine and agricultural food products in cannot therefore be gainsaid that R.A. No. 9337 is equitable.
their original state are still not subject to the tax, 89 thus ensuring that
prices at the grassroots level will remain accessible. As was stated C. Progressivity of Taxation
in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs.
Lastly, petitioners contend that the limitation on the creditable input
Tan:90
tax is anything but regressive. It is the smaller business with higher
The disputed sales tax is also equitable. It is imposed only on sales of input tax-output tax ratio that will suffer the consequences.
goods or services by persons engaged in business with an aggregate
Progressive taxation is built on the principle of the taxpayer’s ability to
gross annual sales exceeding ₱200,000.00. Small corner sari-
pay. This principle was also lifted from Adam Smith’s Canons of
sari stores are consequently exempt from its application. Likewise
Taxation, and it states:
exempt from the tax are sales of farm and marine products, so that the
costs of basic food and other necessities, spared as they are from the I. The subjects of every state ought to contribute towards the support
incidence of the VAT, are expected to be relatively lower and within the of the government, as nearly as possible, in proportion to their
reach of the general public. respective abilities; that is, in proportion to the revenue which they
respectively enjoy under the protection of the state.
It is admitted that R.A. No. 9337 puts a premium on businesses with
low profit margins, and unduly favors those with high profit margins. Taxation is progressive when its rate goes up depending on the
Congress was not oblivious to this. Thus, to equalize the weighty resources of the person affected.98
burden the law entails, the law, under Section 116, imposed a 3%
percentage tax on VAT-exempt persons under Section 109(v), i.e., The VAT is an antithesis of progressive taxation. By its very nature, it is
transactions with gross annual sales and/or receipts not exceeding regressive. The principle of progressive taxation has no relation with
₱1.5 Million. This acts as a equalizer because in effect, bigger the VAT system inasmuch as the VAT paid by the consumer or
businesses that qualify for VAT coverage and VAT-exempt taxpayers business for every goods bought or services enjoyed is the same
stand on equal-footing. regardless of income. In

Moreover, Congress provided mitigating measures to cushion the other words, the VAT paid eats the same portion of an income, whether
impact of the imposition of the tax on those previously exempt. Excise big or small. The disparity lies in the income earned by a person or
taxes on petroleum products91 and natural gas92 were reduced. profit margin marked by a business, such that the higher the income or
profit margin, the smaller the portion of the income or profit that is There are undoubtedly many wrongs the judicature may not correct,
eaten by VAT. A converso, the lower the income or profit margin, the for instance, those involving political questions. . . .
bigger the part that the VAT eats away. At the end of the day, it is really
the lower income group or businesses with low-profit margins that is Let us likewise disabuse our minds from the notion that the judiciary is
always hardest hit. the repository of remedies for all political or social ills; We should not
forget that the Constitution has judiciously allocated the powers of
Nevertheless, the Constitution does not really prohibit the imposition of government to three distinct and separate compartments; and that
indirect taxes, like the VAT. What it simply provides is that Congress judicial interpretation has tended to the preservation of the
shall "evolve a progressive system of taxation." The Court stated in independence of the three, and a zealous regard of the prerogatives of
the Tolentino case, thus: each, knowing full well that one is not the guardian of the others and
that, for official wrong-doing, each may be brought to account, either
The Constitution does not really prohibit the imposition of indirect taxes by impeachment, trial or by the ballot box.100
which, like the VAT, are regressive. What it simply provides is that
Congress shall ‘evolve a progressive system of taxation.’ The The words of the Court in Vera vs. Avelino101 holds true then, as it still
constitutional provision has been interpreted to mean simply that holds true now. All things considered, there is no raison d'être for the
‘direct taxes are . . . to be preferred [and] as much as possible, indirect unconstitutionality of R.A. No. 9337.
taxes should be minimized.’ (E. FERNANDO, THE CONSTITUTION OF
THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to WHEREFORE, Republic Act No. 9337 not being unconstitutional, the
Congress is not to prescribe, but to evolve, a progressive tax system. petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730,
Otherwise, sales taxes, which perhaps are the oldest form of indirect are hereby DISMISSED.
taxes, would have been prohibited with the proclamation of Art. VIII,
There being no constitutional impediment to the full enforcement and
§17 (1) of the 1973 Constitution from which the present Art. VI, §28 (1)
implementation of R.A. No. 9337, the temporary restraining order
was taken. Sales taxes are also regressive.
issued by the Court on July 1, 2005 is LIFTED upon finality of herein
Resort to indirect taxes should be minimized but not avoided entirely decision.
because it is difficult, if not impossible, to avoid them by imposing such
SO ORDERED.
taxes according to the taxpayers' ability to pay. In the case of the VAT,
the law minimizes the regressive effects of this imposition by providing
for zero rating of certain transactions (R.A. No. 7716, §3, amending
§102 (b) of the NIRC), while granting exemptions to other transactions.
(R.A. No. 7716, §4 amending §103 of the NIRC)99

CONCLUSION

It has been said that taxes are the lifeblood of the government. In this
case, it is just an enema, a first-aid measure to resuscitate an economy
in distress. The Court is neither blind nor is it turning a deaf ear on the
plight of the masses. But it does not have the panacea for the malady
that the law seeks to remedy. As in other cases, the Court cannot strike
down a law as unconstitutional simply because of its yokes.

Let us not be overly influenced by the plea that for every wrong there is
a remedy, and that the judiciary should stand ready to afford relief.
 G.R. No. 181381 July 20, 2015 Thereafter, URPHI failed again to comply with the same reportorial
requirements.
SECURITIES and EXCHANGE COMMISSION, Petitioner,
vs. In a Notice of Hearing dated June 25, 2004, the SEC directed URPHI to
UNIVERSAL RIGHTFIELD PROPERTY HOLDINGS, show cause why its Registration of Securities and Certificate of Permit
INC., Respondent. to Sell Securities to the Public should not be suspended for failure to
submit the said requirements. Pertinent portion of the notice reads:
DECISION Records show that the corporation has failed to submit the following
reports in violation of SRC Rule 17.1:
PERALTA, J.:
(1) 2003 Annual Report (SEC Form 17-A); and
Before the Court is a petition for review under Rule 45 of the Rules of
Court, which seeks to reverse and set aside the Decision1 dated (2) 2004 1st Quarter Report (SEC Form 17-Q)
January 21, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 93337,
the dispositive portion of which reads: The company has been allowed a non-extendible period until May 31,
2004 within which to file its 2003 Annual Report but to date the said
WHEREFORE, in view of the foregoing, the petition is GRANTED. The report has not been submitted.
assailed Resolution, dated December 15, 2005, of the Securities and
Exchange Commission, as well as its Order of Revocation dated In view of the foregoing and considering the inadequate information
December 8, 2004, are hereby SET ASIDE. available to the public, the corporation is hereby directed to show
cause why the Registration of its Securities and Certificate of Permit to
SO ORDERED.2 Sell Securities should not be suspended, in a hearing scheduled before
Atty. Francia A. Tiuseco-Manlapaz on July 6, 2004, at the Securities
The facts are as follows:
Registration Division, Corporation Finance Department of the
Respondent Universal Rightfield Property Holdings, Inc. (URPHI) is a Commission, 6th Floor, SEC Building, EDA, Greenhills, Mandaluyong,
corporation duly registered and existing under the Philippine Laws, and Metro Manila at 10:00 o'clock in the morning. Failure of the company to
is engaged in the business of providing residential and leisure-related appear, through its representative, at the said hearing shall be deemed
needs and wants of the middle and upper middle-income market. a waiver on its part to be heard with regard to the suspension of its
Certificate of Permit to Sell Securities to the Public.
On May 29, 2003, petitioner Securities and Exchange Commission
(SEC), through its Corporate Finance Department, issued an Order SO ORDERED.4
revoking URPHI's Registration of Securities and Permit to Sell Securities
During the scheduled hearing on July 6, 2004, URPHI, through its Chief
to the Public for its failure to timely file its Year 2001 Annual Report and
Accountant, Rhodora Lahaylahay, informed the SEC why it failed to
Year 2002 1st, 2nd and 3rd Quarterly Reports pursuant to Section
submit the reportorial requirements, viz.: (1) it was constrained to
173 of the Securities Regulation Code (SRC), Republic Act No. 8799.
reduce its accounting staff due to cost-cutting measures; thus, some of
On October 16, 2003, URPHI filed with the SEC a Manifestation/Urgent the audit requirements were not completed within the original
Motion to Set Aside Revocation Order and Reinstate Registration after timetable; and (2) its audited financial statements for the period ending
complying with its reportorial requirements. December 31, 2003 could not be finalized by reason of the delay in the
completion of some of its audit requirements.
On October 24, 2003, the SEC granted URPHI's motion to lift the
revocation order, considering the current economic situation, URPHI's In an Order dated July 27, 2004, the SEC suspended URPHI's
belated filing of the required annual and quarterly reports, and its Registration of Securities and Permit to Sell Securities to the Public for
payment of the reduced fine of ₱82,000.00. failure to submit its reportorial requirements despite the lapse of the
extension period, and due to lack of sufficient justification for its In an Order of Revocation7 dated December 8, 2004, the SEC revoked
inability to comply with the said requirements. URPHI's Registration of Securities and Permit to Sell Securities to the
Public for its failure to submit its reportorial requirements within the
On August 23, 2004, the SEC, through its Corporation Finance final extension period.
Department, informed URPHI that it failed to submit its 2004 2nd
Quarter Report (SEC Form 17-Q) in violation of the Amended On December 9, 10, and 14, 2004, URPHI finally submitted to the SEC
Implementing Rules and Regulations of the SRC Rule 17 .1(1)(A)(ii).5 It its 1st Quarterly Report for 2004, 2nd Quarterly Report for 2004, and
also directed URPHI to file the said report, and to show cause why it 3rd Quarterly Report for 2004, respectively. Meantime, URPHI appealed
should not be held liable for violation of the said rule. the SEC Order of Revocation dated December 8, 2004 by filing a Notice
of Appeal and a Memorandum both dated January 3, 2005.
In a letter dated September 28, 2004, URPHI requested for a final
extension, or until November 15, 2004, within which to submit its In a Resolution dated December 15, 2005, the SEC denied URPHI's
reportorial requirements. Pertinent portions of the letter read: appeal, thus: WHEREFORE, premises considered, the Memorandum
dated 03 January 2005 of Universal Rightfield Property Holdings, Inc.
We refer to your Order dated 27 July 2004, wherein the Commission praying for the reversal of the Order of Revocation dated 08 December
resolved to SUSPEND the Corporation's Registration of Securities and 2004 is DENIED for lack of merit.
Permit to Sell Securities to the Public due to non-filing of the
Corporation's reportorial requirements under SRC Rule 17 effective for SO ORDERED.8
sixty (60) days or until the reporting requirements are complied [with];
otherwise, the Commission shall proceed with the revocation of the Aggrieved, URPHI filed a petition for review with the CA.
Corporation's registration [of] securities. To date, the Corporation has
In a Decision dated January 21, 2008, the CA granted the petition and
not filed with the Commission its 2003 Annual Report in SEC Form 17-A
set aside the SEC Order of Revocation after finding that URPHI was not
and 2004 1st and 2°d Quarterly reports in SEC Form 17-Q. The non-
afforded due process because no due notice was given and no hearing
submission of these reportorial requirements, as we have already
was conducted before its registration of securities and permit to sell
disclosed to you per our letter dated 13 September 2004, was due to
them to the public was revoked. The CA noted that the hearing
the non-finalization of the Corporation's audited financial statement for
conducted on July 6, 2004 was only for the purpose of determining
the fiscal year ended December 31, 2003.
whether URPHI's registration and permit to sell should be suspended
During our meeting with our external auditor, SGV & Co. last 8 and not whether said registration should be revoked.
September 2004, SGV agreed to facilitate the finalization of our
The CA ruled that based on how Sections 5.1 (m) 9 and 13.110 of the
financial statements within two (2) weeks. Notwithstanding the same,
SRC are worded, suspension and revocation of URPHI's registration of
the Corporation foresees the impossibility of complying with its
securities each requires separate notices and hearings. It also held that
submission until the end of the month, as the partners of SGV are still
the Ruling11 in Globe Telecom, Inc. v. The National Telecommunications
reviewing the final draft of the financial statements. The Corporation
Commission12 (Globe Telecom, Inc.) applies squarely to this case since
intends to comply with its reportorial requirements. However, due to
the Section 13.1 of the SRC itself provides that due notice and hearing
the foregoing circumstances, the finalization of our financial statement
are required before revocation may be ordered by the SEC. In view of
has again been delayed. In this regard, may we request for the last
such specific mandate of the SRC in cases of revocation, the CA
time until November 15, 2004 within which to submit said reportorial
rejected the SEC's argument that the hearing conducted for the
requirements.6
suspension of URPHI's registration can already be considered as the
On December 1, 2004, URPHI filed with the SEC its 2003 Annual hearing for revocation.
Report.
The CA also held that the SEC cannot brush aside the specific mandate
of Section 13 .1 of the SRC by merely invoking the doctrine that
administrative due process is satisfied when the party is given the submit the required reports, and was given more than enough time to
opportunity to explain one's side or the opportunity to seek a comply before the Order of Revocation was issued. The SEC adds that
reconsideration of the action or ruling taken. Citing Globe Telecom, a hearing was conducted on July 6, 2004 as to URPHI's repeated failure
Inc.13 the CA explained that while such doctrine remains valid and has to submit the reportorial requirements as mandated by the SRC and its
been applied in numerous instances, it must give way in instances implementing rules and regulations, which was the basis in issuing the
when the statute itself, such as Section 13 .1, demands prior notice and said Order.
hearing. It added that the imperativeness for a hearing in cases of
revocation of registration of securities assumes greater significance, On the other hand, URPHI insists that the CA was correct in ruling that
considering that revocation is a measure punitive in character the SRC requires separate notices and hearings for revocation and
undertaken by an administrative agency in the exercise of its quasi- suspension of registration of securities and permit to sell them to the
judicial functions. Dissatisfied with the CA Decision, the SEC filed the public. It then asserts that the warning contained in the SEC's
instant petition for review on certiorari, raising the sole issue that: suspension Order dated July 27, 2004 does not meet the requirement
of notice under the SRC. It stresses that while the SEC issued a
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE separate notice of hearing for such suspension, no similar notice was
WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING issued as regards such revocation. It also notes that the July 6, 2004
JURISPRUDENCE.14 hearing was with regard to the suspension of its registration of
securities, and that no hearing was ever conducted for purposes of
On the one hand, the SEC contends that URPHI was accorded all the revocation of such registration.
opportunity to be heard and comply with all the reportorial
requirements before the Order of Revocation was issued. Specifically, On the SEC's claim that URPHI was afforded due process because it
in the Order dated July 27, 2004 suspending URPHI's registration of was already given the opportunity to seek a reconsideration of the
securities for 60 days, the SEC expressly warned that such registration Order of Revocation by filing its Notice of Appeal and Memorandum,
would be revoked should it persistently fail to comply with the said URPHI argues that the filing of such appeal did not cure the violation of
requirements. Still, URPHI continuously failed to submit the required its right to due process. In support of its argument, URPHI cites the
reports. On August 23, 2004, the SEC directed again URPHI to submit Globe Telecom, Inc.16 ruling that notice and hearing are indispensable
the required report and to show cause why it should not be held liable when an administrative agency exercises quasi-judicial functions and
for violation of the law. Instead of submitting the required reports, that such requirements become even more imperative if the statute
URPHI requested for a final extension, or until November 15, 2004, itself demands it.
within which to comply with its reportorial requirements. For URPHI's
failure to submit the said reports, the SEC issued the Order of URPHI further cites the ruling17 in BLTB, Co. v. Cadiao, et al.,18 to
Revocation dated December 8, 2004. URPHI immediately filed a support its view that a motion for reconsideration is curative of a defect
motion for reconsideration thereof through a Notice of Appeal and a in procedural due process only if a party is given sufficient opportunity
Memorandum both dated January 3, 2005, which the SEC later denied to explain his side of the controversy. It claims that the controversy
in the Resolution dated December 15, 2005. Hence, URPHI was amply referred to is the underlying substantive controversy of which the
accorded its guaranteed right to due process. procedural due process controversy is but an offshoot. Noting that the
only issue raised in its appeal was procedural, i.e., whether it was
The SEC also submits that the factual milieu of Globe Telecom, denied prior notice and hearing under the SRC, URPHI contends that it
Inc.15 cited by the CA in its Decision is starkly different from this case. cannot be said that by appealing to the SEC, it had the opportunity to
Unlike in the former case where the Court ruled that the fine imposed explain its side on substantive controversy which pertains to its alleged
by the National Telecommunications Commission without notice and violation of the SRC and failure to comply with the reportorial
hearing, was null and void due to the denial of petitioner's right to due requirements that prompted the SEC to issue the Order of Revocation.
process, the SEC points out that URPHI was duly notified of its violations Hence, such appeal cannot be considered curative of the defect in
and the corresponding penalty that may be imposed should it fail to procedural due process which attended the issuance of the said Order.
URPHI further submits that the prior revocation of its registration on which the issuer has notice in connection with the offering for which a
May 29, 2003 did not cure the lack of due process which attended the registration statement has been filed;21
revocation of its registration on December 8, 2004. Since the SEC
deemed it proper to lift the prior revocation, such can no longer be xxxx
used to sustain another revocation order, much less one issued without
54.1. If, after due notice and hearing, the Commission finds that: (a)
prior notice and hearing. Granted that it was accorded due process,
There is a violation of this Code, its rules, or its orders; (b) Any
URPHI asserts that the revocation of its registration of securities and
registered broker or dealer, associated person thereof has failed
permit to sell them to the public is inequitable under the
reasonably to supervise, with a view to preventing violations, another
circumstances. It calls attention to the severe and certain
person subject to supervision who commits any such violation; ( c) Any
consequences of such revocation, i.e., termination of the public offering
registrant or other person has, in a registration statement or in other
of its securities, return of payments received from purchasers thereof,
reports, applications, accounts, records or documents required by law
and its delisting from the PSE, which will cause financial ruin and
or rules to be filed with the Commission, made any untrue statement of
jeopardize its efforts to recover from its current financial distress.
a material fact, or omitted to state any material fact required to be
Claiming that it exerted best effort and exercised good faith in
stated therein or necessary to make the statements therein not
complying with the reportorial requirements, URPHI avers that the
misleading; or, in the case of an underwriter, has failed to conduct an
interest of the investing public will be better served if, instead of
inquiry with reasonable diligence to insure that a registration statement
revoking its registration of securities, the SEC will merely impose
is accurate and complete in all material respects; or ( d) Any person
penalties and allow it to continue as a going concern in the hope that it
has refused to permit any lawful examinations into its affairs, it shall, in
may later return to profitability.
its discretion, and subject only to the limitations hereinafter prescribed,
The petition is meritorious. impose any or all of the following sanctions as may be appropriate in
light of the facts and circumstances:
There is no dispute that violation of the reportorial requirements under
Section 17.119 of the Amended Implementing Rules and Regulation20 of (i) Suspension, or revocation of any registration for the offering of
the SRC is a ground for suspension or revocation of registration of securities;22
securities pursuant to Sections 13.1 and 54.1 of the SRC. However,
The Court has consistently held that the essence of due process is
contrary to the CA ruling that separate notices and hearings for
simply an opportunity to be heard, or as applied to administrative
suspension and revocation of registration of securities and permit to
proceedings, an opportunity to explain one's side or an opportunity to
sell them to the public are required, Sections 13 .1 and 54.1 of the SRC
seek a reconsideration of the action or ruling complained of. 23 Any
expressly provide that the SEC may suspend or revoke such
seeming defect in its observance is cured by the filing of a motion for
registration only after due notice and hearing, to wit:
reconsideration, and denial of due process cannot be successfully
13.1. The Commission may reject a registration statement and refuse invoked by a party who has had the opportunity to be heard on such
registration of the security thereunder, or revoke the effectivity of a motion.24 What the law prohibits is not the absence of previous notice,
registration statement and the registration of the security thereunder but the absolute absence thereof and the lack of opportunity to be
after due notice and hearing by issuing an order to such effect, setting heard.25
forth its findings in respect thereto, if it finds that:
In the present case, due notice of revocation was given to URPHI
a) The issuer: through the SEC Order dated July 27, 2004 which reads:

xxxx Considering that the company is under rehabilitation, the request was
granted and it was given a non-extendible period until May 31, 2004
(ii) Has violated any of the provisions of this Code, the rules within which to comply.
promulgated pursuant thereto, or any order of the Commission of
Despite the extension[,] however, it failed to submit said reports. failed to submit the required reports, despite the lapse of the final
Hence, a hearing was held on July 6, 2004 wherein the company's extension requested.
representative, its Chief Accountant and a Researcher appeared. No
sufficient reason or justification for the company's inability to comply In A.Z. Arnaiz, Realty, Inc. v. Office of the President, 28 the Court held
with its reporting obligation was presented. that due process, as a constitutional precept, does not always, and in
all situations, require a trial-type proceeding. Litigants may be heard
In view thereof, the Commission[,] in its meeting held on July 22, 2004, through pleadings, written explanations, position papers, memoranda
resolved to SUSPEND the Registration of Securities and Permit to Sell or oral arguments. The standard of due process that must be met in
Securities to the Public issued to UNIVERSAL RIGHTFIELD PROPERTY administrative tribunals allows a certain degree of latitude as long as
HOLDINGS, INC., in accordance with Section 54 of the Securities fairness is not ignored. It is, therefore, not legally objectionable for
Regulation Code. being violative of due process for an administrative agency to resolve a
case based solely on position papers, affidavits or documentary
This said Suspension shall be effective for sixty (60) days or until the evidence submitted by the parties. Guided by the foregoing principle,
reporting requirements are complied [with,] otherwise the Commission the Court rules that URPHI was afforded opportunity to be heard when
shall proceed with the revocation of the company's registration of the SEC took into account in its Order of Revocation URPHI's
securities. September 13 and 28, 2004 letters, explaining its failure to submit the
reportorial requirements, as well as its request for final extension within
Let this Order be published in a newspaper of general circulation in the
which to comply. Pertinent portions of the said Order read:
Philippines or on the Commission's web page.
The Commission in its meeting held on July 22, 2004 resolved to
SO ORDERED.26
suspend its Registration of Securities and Permit to Sell Securities to
Contrary to the view that a separate notice of hearing to revoke is the Public. The Order of Suspension stated that it was to be effective for
necessary to initiate the revocation proceeding, the Court holds that sixty (60) days or until the reporting requirements were complied with
such notice would be a superfluity since the Order dated July 27, 2004 by the company; otherwise, the Commission shall proceed with the
already states that such proceeding shall ensue if URPHI would still fail revocation of the company's registration of securities.
to submit the reportorial requirements after the lapse of the 60-day
The sixty (60)-day period had elapsed on September 25, 2004 but the
suspension period. After all, "due notice" simply means the information
Commission received a letter on September 29, 2004 from the
that must be given or made to a particular person or to the public
President of the company, Mr. Jose L. Merin. In the said letter, it was
within a legally mandated period of time so that its recipient will have
admitted that the corporation had failed to submit its 2003 Annual
the opportunity to respond to a situation or to allegations that affect
Report (SEC Form 17-A) and its 2004 1st and 2nd Quarterly Reports
the individual's or public's legal rights or duties.27
(SEC Form 17-Q) but explained that the reason for its inability to submit
Granted that no formal hearing was held before the issuance of the said reports was due to the non-finalization of the company's audited
Order of Revocation, the Court finds that there was substantial financial statements for the fiscal year ended December 31, 2003. It
compliance with the requirements of due process when URPHI was further stated that during its meeting with its external auditor, SGV &
given opportunity to be heard. Upon receipt of the SEC Order dated July Co., last September 8, 2004, SGV agreed to facilitate the finalization of
27, 2004, URPHI filed the letters dated September 13 and 28, 2004, its financial statements within two (2) weeks. The corporation foresaw
seeking a final extension to submit the reportorial requirements, and the impossibility of complying with its submission until the end of the
admitting that its failure to submit its 2nd Quarterly Report for 2004 month as the partners of SGV were still reviewing the final draft of the
was due to the same reasons that it was unable to submit its 2003 financial statements, thus, the request for extension FOR THE LAST
Annual Report and 1st Quarterly Report for 2004. Notably, in its Order TIME until November 15, 2004 within which to comply.
of Revocation, the SEC considered URPHI's letters and stated that it still
SEC Form 17-A (for 2003) was finally submitted on December 1, 2004.
IN VIEW THEREOF, the Commission, in its meeting held on December In Gamboa v. Finance Secretary,32 the Court has held that the SEC has
2, 2004, resolved to REVOKE the Registration of Securities and Permit both regulatory and adjudicative functions, thus:
to Sell Securities to the Public issued to UNIVERSAL RIGHTFIELD
PROPERTY HOLDINGS, INC.29 Under its regulatory responsibilities, the SEC may pass upon
applications for, or may suspend or revoke (after due notice and
Aside from having been given the opportunity to be heard before the hearing), certificates of registration of corporations, partnerships and
SEC issued the Order of Revocation, URPHI was likewise able to seek associations (excluding cooperatives, homeowners associations, and
reconsideration of such action complained of. After the issuance of the labor unions); compel legal and regulatory compliances; conduct
said Order, URPHI filed a Notice of Appeal and a Memorandum, inspections; and impose fines or other penalties for violations of the
asserting that it was issued without due notice and hearing, and that Revised Securities Act, as well as implementing rules and directives of
the revocation is inequitable under the circumstances. In the the SEC, such as may be warranted.
Resolution dated December 15, 2004, the SEC denied URPHI's appeal
in this wise: Relative to its adjudicative authority, the SEC has original and exclusive
jurisdiction to hear and decide controversies and cases involving
In the instant case, URPHI was accorded due process when its Chief
Financial Officer gave its side on the imputed violation and informed –
the Commission that it will not be able to submit its Annual Report (SEC
a. Intra-corporate and partnership relations between or among the
Form 17-A) for the fiscal year ending on 31 December 2003 and
corporation, officers and stockholders and partners, including their
requested for additional time to comply with the said requirements.
elections or appointments;
The Commission granted URPHI a non-extendible period of forty-seven
(47) calendar days or until 15 November 2004 within which to comply. b. State and corporate affairs in relation to the legal existence of
corporations, partnerships and associations or to their franchises; and
In spite of the extension of time given, URPHI still failed to submit the
said reports. During the 06 July 2004 hearing where the Chief c. Investors and corporate affairs particularly in respect of devices and
Accountant and researcher of URPHI were present, both failed to schemes, such as fraudulent practices, employed by directors, officers,
present sufficient justifications for URPHI's inability to comply with its business associates, and/or other stockholders, partners, or members
reporting obligations. of registered firms; x x x
It is also noteworthy to mention that URPHI's Registration of Securities As can be gleaned from the aforequoted ruling, the revocation of
and Permit to Sell Securities to the Public had been revoked on several registration of securities and permit to sell them to the public is not an
occasions on account of the same deficiency. URPHI is aware of the exercise of the SEC's quasi-judicial power, but of its regulatory power. A
SRC Rules and must suffer the consequences of its reported "quasi-judicial function" is a term which applies to the action, discretion,
violations.30 etc., of public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and
Verily, URPHI was given the opportunity to be heard before the Order of
draw conclusions from them, as a basis for their official action and to
Revocation was issued, as well as the opportunity to seek the
exercise discretion of a judicial nature.33 Although Section 13.1 of the
reconsideration of such order.
SRC requires due notice and hearing before issuing an order of
Meanwhile, the Court disagrees with URPHI's claim that the Globe revocation, the SEC does not perform such quasi-judicial functions and
Telecom, Inc.31 ruling - that notice and hearing are indispensable when exercise discretion of a judicial nature in the exercise of such regulatory
an administrative agency exercises quasi-judicial functions and that power. It neither settles actual controversies involving rights which are
such requirements become even more imperative if the statute itself legally demandable and enforceable, nor adjudicates private rights and
demands it -is applicable to the present case. obligations in cases of adversarial nature. Rather, when the SEC
exercises its incidental power to conduct administrative hearings and
 make decisions, it does so in the course of the performance of its Permit to Sell Securities to the Public for its failure to timely file its Year
regulatory and law enforcement function. 2001 Annual Report and Year 2002 1st, 2nd and 3rd Quarterly Reports.
Then, on October 24, 2003, the SEC granted URPHI's petition to lift the
Significantly, unlike in Globe Telecom, Inc.34 where the Court ruled that revocation, considering the current economic situation, its belated filing
the fine imposed by the NTC without notice and hearing, was null and of the required annual and quarterly reports, and its payment of the
void due to the denial of petitioner's right to due process, the reduced fine of ₱82,000.00. Despite the foregoing, URPHI failed again
revocation of URPHI's registration of securities and permit to sell them to submit its 2003 Annual Report, and Year 2004 1st, 2nd and 3rd
to the public cannot be considered a penalty but a withdrawal of a Quarterly Reports within the requested extension periods.
privilege, which regulatory power the SEC validly exercised after giving
it due notice and opportunity to be heard. Therefore, notwithstanding the belated filing of the said reports, as well
as the claim that public interest would be better served if the SEC will
While URPHI correctly relied in BLTB Co., Inc. v. Cadiao35 to support its merely impose penalties and allow it to continue in order to become
view that a motion for reconsideration is curative of a defect in profitable again, the SEC cannot be faulted for revoking once again
procedural due process only if a party is given sufficient opportunity to URPHI's registration of securities and permit to sell them to the public
explain his side of the controversy, the Court rejects URPHI's claim that due to its repeated failure to timely submit such reports. Needless to
it did not have the opportunity to explain the substantive controversy state, such continuing reportorial requirements are pursuant to the
of its violation of the SRC reportorial requirements.36 Contrary to the state policies declared in Section 238 of the SRC of protecting investors
claim that only the issue of procedural due process was raised in its and ensuring full and fair disclosure of information about securities and
appeal with the SEC, URPHI also raised in its Memorandum dated their issuer.
January 3, 2005 the reasons why it failed to comply with the said
requirements, and why revocation is inequitable under the All told, the CA erred in ruling that the SEC revoked URPHI's registration
circumstances.37 of securities and permit to sell them to the public without due process
of law.1âwphi1 Quite the contrary, the requirements of due notice and
For the late filing of annual report and quarterly report, SEC hearing under Sections 13 .1 and 54.1 of the SRC were substantially
Memorandum Circular No. 6, Series of 2005, the Consolidated Scale of complied with. Due notice was made through the Order dated July 27,
Fines in effect at the time the offenses were committed, provides for 2004 stating that revocation proceeding shall ensue if URPHI would still
the following administrative penalties: fail to submit the reportorial requirements after the lapse of the 60-day
suspension period. Though no formal hearing was held, URPHI was still
SRC/IRR Description First Offense Second Offense Third Offense given an opportunity to be heard through the letters dated September
Provisions 13 and 18, 2004 before the Order of Revocation was issued, as well as
through its Notice of Appeal and Memorandum when it moved to
Section Late Filing of Reprimand/Warning ₱50,000.00 plus ₱60,000.00 plus
reconsider the said order.
17.1; Quarterly Report ₱300.00 per day of ₱600.00 per day of
SRC Rule (SEC Form 17-Q) delay delay WHEREFORE, the petition is GRANTED and the Decision dated January
17.1 21, 2008 of the Court of Appeals in CA-G.R. SP No. 93337, is REVERSED
and SET ASIDE. In lieu thereof, the Resolution dated December 15,
Late Filing of Reprimand/Warning ₱100,000.00 plus ₱200,000.00 plus
2005 of the Securities and Exchange Commission and its Order of
Annual Report ₱500.00 per day of ₱1000.00 per day
Revocation dated December 8, 2004 are REINSTATED.
(SEC Form 17-A) delay of delay
SO ORDERED.
It bears emphasis that URPHI had committed several offenses for
failure to comply with the reportorial requirements for which it was DIOSDADO M. PERALTA
fined and its registration of securities revoked. On May 29, 2003, the Associate Justice
SEC issued an Order revoking URPHI's Registration of Securities and
 G.R. No. 149164-73 December 10, 2003 Ubod, before the proper Regional Trial Court of Cavite for violation of
Section 261 (a) and (b) of the Omnibus Election Code; and to authorize
COMMISSION ON ELECTIONS, petitioner, the Director IV of the Law Department to designate a COMELEC
vs. prosecutor to handle the prosecution of the case until termination
HON. DOLORES L. ESPAÑOL, Presiding Judge, Regional Trial thereof, with the duty to submit periodic report after every hearing of
Court, Branch 90, Imus, Cavite, respondents. the case; and (b) to file a Motion before the Court for the preventive
suspension for a period of ninety (90) days of respondents Mayor
DECISION
Bienvenido Pobre, Vice-Mayor Reynaldo Aguinaldo and Sangguniang
CALLEJO, SR., J.: Bayan members Leonardo Llave, Diosdado del Rosario, Angelito
Peregrino, Mario Espiritu, Salvador Olaes and Pedro Paterno, Jr., while
This is a petition for certiorari and mandamus under Rule 65 of the the case is pending pursuant to Section 60 Chapter IV of Republic Act
Rules of Court, as amended, filed by the Commission on Elections No. 7160, otherwise known as the Local Government Code of 1991
(COMELEC) for the nullification of the Order of the respondent judge specifically on the ground of commission of an offense involving moral
dated February 20, 2001, denying the "Omnibus Motion to Dismiss" turpitude.1
filed by the petitioner in Criminal Case Nos. 7960-00 to 7969-00, and
the Order dated May 16, 2001, denying the petitioner’s motion for The petitioner, through its Law Department, filed an Information
reconsideration. against the respondents with the Regional Trial Court of Cavite,
docketed as Criminal Case No. 7034-99, raffled to Branch 90, presided
The Antecedents by the respondent judge. On May 10, 1999, the court issued an order
directing the Law Department of the petitioner to conduct a
During the elections on May 11, 1998, Florentino A. Bautista was the
reinvestigation of the case, citing the ruling of this Court in Lozano vs.
official candidate of the Lakas for the position of Municipal Mayor of
Yorac2 and Nolasco vs. Commission on Elections.3
Kawit, Cavite. He executed an Affidavit-Complaint charging the
incumbent Municipal Mayor Atty. Federico "Hit" Poblete, Vice-Mayor In the meantime, Gerardo Macapagal and Inocencio Rodelas filed a
Reynaldo Aguinaldo, Bienvenido Pobre, Arturo Ganibe, Leonardo Llave, criminal complaint for violation of Section 261(a) of the Omnibus
Diosdado del Rosario, Manuel Ubod, Angelito Peregrino, Mario Espiritu, Election Code (vote selling) against the witnesses of Florentino A.
Salvador Olaes and Pedro Paterno, Jr. of violation of paragraphs (a) and Bautista in Criminal Case No. 7034-99. The complaint was docketed as
(b) of Section 261 of the Omnibus Election Code (vote buying) and filed I.S. No. 1-99-1080. The Office of the Cavite Provincial Prosecutor
the same with the Law Department of the COMELEC. The complaint conducted a preliminary investigation of the complaint, in his capacity
was entitled Florentino A. Bautista vs. Federico A. Poblete, et al., and as a deputy of the petitioner. On April 10, 2000, the Office of the Cavite
docketed as EO Case No. 98-219. Of the 77 persons offered by the Provincial Prosecutor issued a resolution in I.S. No. 1-99-1080 finding
complainant to prove the charges, 44 executed their respective probable cause against the respondents for violations of Section 261(a)
affidavits and swore and subscribed to the truth thereof, on the vote- and (b) of the Omnibus Election Code, and filed separate Informations
buying of the respondents. The Law Department of the petitioner against them with the RTC of Cavite. The dispositive portion of the
conducted the requisite preliminary investigation, after which it Resolution reads:
submitted its comments and recommendations to the COMELEC En
Banc. On February 25, 1999, the COMELEC En Banc issued Resolution WHEREFORE, in the light of the preceding premises, let separate
No. 99-0346, the dispositive portion of which reads: Informations for "vote-selling" penalized under Section 261 (a) (b) of
the Omnibus Election Code be immediately filed against all
RESOLVED: (a) to file the necessary information against respondents respondents, thirteen of whom were deemed to have waived their right
Federico A. Poblete, Bienvenido C. Pobre, Reynaldo B. Aguinaldo, to present evidence in their behalf during the preliminary
Leonardo Llave, Diosdado del Rosario, Angelito Peregrino, Mario investigation.4
Espiritu, Salvador Olaes, Pedro Paterno, Jr., Arturo Ganibe and Manuel
The cases were raffled and assigned to the RTC branches as follows: 7981-00." The respondents-appellants also filed a Manifestation with
Urgent Motion to Set for Hearing Re: Appeal from the Resolution of the
Criminal Case No. Branch Number Provincial Prosecutor of Resolution No. I.S. No. 1-99-1080. On
September 7, 2000, the COMELEC approved Resolution No. 00-1826,
7940-00 to 7949-00 and 7981- thus:
Branch 22
00
The Commission, after due deliberation, RESOLVED as it hereby
RESOLVES to defer action on the aforesaid matter. Meanwhile, to refer
7973-00 to 7979-00 and 7970- the same to the Law Department for comment and recommendation.
Branch 21
00
Let the Law Department implement this resolution.6
7950-00 to 7959-00 and 7980-
Branch 20 On October 24, 2000, the Law Department of the petitioner filed a
00
motion before Branches 20, 21, 22 and 90, praying for the suspension
of the proceedings against all the accused until the petitioner shall
7960-00 to 7969-00 Branch 90 have resolved the incidents before it. The public prosecutor did not
object to the motion. On October 25, 2000, RTC, Branch 22, issued an
On June 15, 2000, the respondents in I.S. No. 1-99-1080 received Order granting the motion in the criminal cases before it.
copies of the Resolution of the Provincial Prosecutor, and on June 23,
2000 appealed the same to the petitioner, contending that: Meanwhile, acting on the appeal of the respondents-appellants in I.S.
No. 1-99-1080, Atty. Michael L. Valdez submitted his recommendation
Violation of Section 261 (a)(2) of the Omnibus Election Code is an in behalf of the COMELEC’s Law Department, Investigation and
election offense under Article XXII of the same code. Under Section 265 Prosecution Division on November 13, 2000. It was recommended that
of the Code, it is this Honorable Commission which has the exclusive the petitioner nullify the Resolution of the Office of the Cavite Provincial
power to conduct (the) preliminary investigation thereof, and to Prosecutor in I.S. No. 1-99-1080, for the reason that the respondents-
prosecute the same. As such, it is also this Honorable Commission appellants are exempt, under Section 28(4) of Republic Act No. 6646,
which has the "exclusive power" to review, motu proprio or through an from prosecution for violation of Section 261(a)(b) of the Omnibus
appeal, the "recommendation or resolution of investigating officers" in Election Code:
the preliminary investigation.
WHEREFORE, premises considered, the Law Department
This appeal is, therefore, made pursuant to this Honorable RECOMMENDS to declare as null and void the Resolution of the Office
Commission’s "exclusive power to conduct preliminary investigation of of the Provincial Fiscal (Prosecutor) of Cavite in I.S. No. 1-99-1080,
all election offenses xxx and to prosecute the same" and to review the entitled "Gerardo Macapagal, et al. vs. Celerino Villarosa, et al., finding
recommendation or resolution of investigating officers, "like the" chief the existence of a probable cause against the respondents for being a
state prosecutor and/or provincial/city prosecutors" in preliminary violation of Section 28 (4) of Rep. Act No. 6646, and to exempt them
investigations thereof under Section 265 of the Omnibus Election Code from criminal prosecution, accused: Celerino Villarosa, Felisa Villarosa,
and Section 10, Rule 34 of the COMELEC Rules of Procedure.5 Leonardo Collano, Azucena Collano, Jonathan Francisco, Berna
Francisco, David Zablan, Teresita Zablan, Rowel Del Rosario, Reynaldo
On July 6, 2000, the petitioner came out with Minute Resolution No. 00-
Morales, Lolita Morales, Sherlita Borejon, Leonardo Mabiliran, Virgilio
1378 denying the appeal of the respondents-appellants therein for lack
Duco, Marina Duco, Bencio Planzar, Rudy Solomon, Nenita Viajador,
of jurisdiction. But on the same day, the respondents-appellants filed
Antonio De la Cruz, Guinata Agarao, Luis Cantiza, Ramilo Pinote, Miriam
an "Urgent Motion to Withdraw or Revoke the Delegated Authority of
Pinote, Wilfredo/Fredo Rodriguez, Marlene/Marlyn Rodriguez, Rodelio
the Law Department to Direct the Said Office to Suspend or Move for
Pinote, Saludia Pinote, Ronel Escalante, Alejandrino Duco, Dominga
the Suspension of the Prosecution of Criminal Cases Nos. 7940-00 to
Duco, Joel De la Rosa, Shirley De la Rosa, Ernesto Del Rosario, Nilda Del
Rosario, Rodger Pinote, Ma. Theresa Pinote, Wilfredo Del Rosario, no longer subject to review by the petitioner; and (c) the review of the
Roberto Pinote, Jocelyn Pinote, Norma De la Rosa, Lita Montad and Provincial Prosecutor’s resolution made by the petitioner was a re-
Nacy Daiz, whose cases are pending before Branches Nos. 20, 21, 22, investigation of the case, and was done without prior authority of the
and 90, Regional Trial Court, Imus, Cavite, and who are witnesses of Court.
the prosecution in Crim. Case No. 7034-99, Regional Trial Court, Branch
90, Imus, Cavite, and to direct the Law Department to file the On February 20, 2001, the trial court issued an Order denying the
necessary motion before the court to dismiss their cases, by citing Omnibus Motion of the petitioner. The petitioner filed a Motion for
Section 28 (4) of Rep. Act No. 6646.7 Reconsideration of the said order on March 31, 2000. The Provincial
Prosecutor opposed the motion. On May 16, 2001, the trial court issued
During the regular meeting of the COMELEC En Banc on November 23, an Order denying the said motion holding that the petitioner had no
2000, the Chairman and two other commissioners were on official absolute power to grant exemptions under Section 28 of Republic Act
leave. The remaining four commissioners met and issued Resolution No. 6648. The trial court also held that the issue of whether or not the
No. 00-2453 approving the foregoing recommendation, to wit: accused are exempt from prosecution and consequent conviction for
vote-buying is a matter addressed to the Court and not to the
The Commission RESOLVED, as it hereby RESOLVES, to approve the petitioner.
recommendation of the Law Department as follows:
In its petition at bar, the petitioner raises the following issues for
1. to declare the Resolution of the Office of the Provincial Prosecutor of resolution, viz:
Cavite in I.S. No. 1-99-1080 (Gerardo Macapagal, et al. vs. Celerino
Villarosa, et al.) as null and void, and to exempt the aforementioned (1) WHETHER THE ACCUSED ARE EXEMPT FROM CRIMINAL
accused from criminal prosecution pursuant to Section 28 (4) of R.A. PROSECUTION PURSUANT TO SECTION 28 (4) OF R.A. No. 6646.
No. 6646; and
(2) WHETHER THERE IS NO NEED FOR AN EN BANC RESOLUTION
2. to direct the Law Department to file the necessary motion to dismiss REVOKING THE AUTHORITY OF THE PROVINCIAL PROSECUTOR FROM
before the proper court the cases against the herein-named accused. HANDLING THE CASES FILED IN COURT SINCE THE COMELEC EN BANC
ALREADY DIRECTED THE LAW DEPARTMENT TO FILE A MOTION TO
Let the Law Department implement this resolution. DISMISS THESE CASES; 9
SO ORDERED.8 On the first issue, the petitioner contends that the complainants-
appellees in I.S. No. 1-99-1080 failed to file any motion for the
In compliance with the Resolution of the COMELEC En Banc, its Law
reconsideration of the petitioner’s Resolution No. 00-2453 reversing
Department, through Attys. Jose P. Balbuena and Michael Valdez, filed
Resolution No. 00-1378 which, in turn, dismissed the respondents-
with the RTC, Branch 90, an Omnibus Motion (1) Motion for
appellants’ appeal. Neither did the said complainants-appellees file a
Reconsideration Re: Order of this Court dated November 22, 2000; (2)
petition for certiorari under Rule 65 of the Rules of Court from its
Motion for Leave to Reiterate Urgent Motion to Suspend Proceedings;
Resolution No. 00-2453. Consequently, Resolution No. 00-2453 has
and (3) Motion to Dismiss filed on January 8, 2001. The Public
become final and executory; hence, is binding and conclusive on the
Prosecutor opposed the petitioner’s motion to dismiss on the following
complainants-appellees, the Office of the Provincial Prosecutor and the
grounds: (a) the exemption under the last paragraph of Section 28 of
herein respondent judge. The petitioner further asserts that the
Republic Act No. 6646 applies only to the offense of vote-buying, as the
respondents-appellants’ motion for reconsideration in I.S. No. 1-99-
accused in Criminal Case No. 7034-99 in which the respondents-
1080 of COMELEC Resolution No. 00-1378 is not a prohibited pleading
appellants gave their sworn statements was for vote-buying; this
under Rule 13, Section 1, paragraph (d) of the COMELEC Rules of
exemption will not apply to the charge for vote-selling which was the
Procedure.
crime charged in I.S. No. 1-99-1080; (b) the July 6, 2000 Resolution No.
00-1378 of the petitioner had become final and executory; hence, it is
According to the petitioner, the prosecution of election offenses is by the petitioner or its duly authorized representatives.13 The
under its sole control. Any delegation of its authority to the Provincial or respondent’s assertion that Section 2, Rule 34, of the COMELEC Rules
City Prosecutor to prosecute election cases may be revoked or of Procedure is a violation of Section 265 of the Omnibus Election Code
withdrawn by it, expressly or impliedly, at any stage of the proceedings has been laid to rest by this Court in Margarejo vs. Escoses,14 wherein
in the RTC. The petitioner, through Atty. Michael Valdez of its Law this Court ruled that until revoked, the continuing authority of the
Department, had already entered his appearance for the petitioner as Provincial or City Prosecutors stays.
public prosecutor before the respondent judge. The Provincial
Prosecutor was, thus, ipso facto divested of his authority, as deputized The deputation of the Provincial and City Prosecutors is necessitated by
prosecutor, to represent the petitioner on the motion to dismiss and to the need for prompt investigation and dispensation of election cases as
prosecute the cases before the respondent judge. an indispensable part of the task of securing fine, orderly, honest,
peaceful and credible elections. Enfeebled by lack of funds and the
The respondent judge, for her part, avers that COMELEC Resolution No. magnitude of its workload, the petitioner does not have a sufficient
00-2453 was approved only by four of the seven members of the number of legal officers to conduct such investigation and to prosecute
petitioner sitting en banc, and as such, could not have validly revoked such cases. The prosecutors deputized by the petitioner are subject to
Resolution No. 00-1378 which was, in turn, approved by unanimous its authority, control and supervision in respect of the particular
vote of the Commission Members sitting en banc. It behooved the functions covered by such deputation. The acts of such deputies within
petitioner to conduct a joint reinvestigation in I.S. No. 1-99-1080 and the lawful scope of their delegated authority are, in legal
EO No. 98-219 to ascertain whether the respondents-appellants in I.S. contemplation, the acts of the petitioner itself. 15 Such authority may be
No. 1-99-1080 were exempt from prosecution for vote-selling. revoked or withdrawn any time by the petitioner, either expressly or
impliedly, when in its judgment such revocation or withdrawal is
Finally, according to the respondent judge, Section 2, Rule 34 of the necessary to protect the integrity of the process to promote the
COMELEC Rules of Procedure is contrary to Section 265 of the Omnibus common good, or where it believes that successful prosecution of the
Election Code, which does not allow the petitioner to withdraw its case can be done by the petitioner. Moreover, being mere deputies or
deputation of Provincial or City Prosecutors. agents of the petitioner, provincial or city prosecutors deputized by the
petitioner are expected to act in accord with and not contrary to or in
We agree with the petitioner.
derogation of the resolutions, directives or orders of the petitioner in
Under Article IX, Section 2(b) of the Constitution, 10 the petitioner is relation to election cases such prosecutors are deputized to investigate
empowered to investigate and, when appropriate, prosecute election and prosecute. Otherwise, the only option of such provincial or city
offenses. The grant by the Constitution to the petitioner of the express prosecutor is to seek relief from the petitioner as its deputy.
power to investigate and prosecute election offenses is intended to
The withdrawal by the petitioner of its deputation of the provincial or
enable the petitioner to assure the people of a fine, orderly, honest,
city prosecutors may not be interfered with or overruled by the trial
peaceful and credible election.11 Under Section 265 of the Omnibus
court. In this case, the petitioner had resolved to approve the
Election Code, the petitioner, through its duly authorized legal officers,
recommendation of its Law Department and nullified the Resolution of
has the exclusive power to conduct preliminary investigation of all
the Provincial Prosecutor in I.S. No. 1-99-1080, and directed its Law
election offenses punishable under the Omnibus Election Code, and to
Department, not the Provincial Prosecutor, to implement the said
prosecute the same. The petitioner may avail of the assistance of the
resolution and file the necessary motion to dismiss Criminal Cases Nos.
prosecuting arms of the government.12 In Section 2, Rule 34 of the
7960-00 to 7969-00 pending with the respondent judge. The Law
COMELEC Rules of Procedure, all Provincial and City Prosecutors and/or
Department did file before the respondent a "Motion to Dismiss" the
their respective assistants are given continuing authority as its
said cases and a motion for the respondent to, in the meantime,
deputies to conduct preliminary investigation of complaints involving
suspend the proceedings. Atty. Michael L. Valdez, a legal officer of the
election offenses under election laws and to prosecute the same. The
petitioner’s Law Department, entered his appearance for the petitioner.
complaints may be filed directly with them or may be indorsed to them
The Provincial Prosecutor was thereby relieved of his deputation to
represent the petitioner in connection with the said motion. However, believe that the accused is guilty of the offense charged and, therefore,
the Provincial Prosecutor refused to give way to the Legal Officer of the should be subjected to trial is the function of the petitioner.18 The Court
petitioner and even opposed the said motion. The act of the Provincial will not even interfere with the finding of the petitioner absent a clear
Prosecutor constituted a defiance of the resolution of the petitioner and showing of grave abuse of discretion. Neither should the respondent.
should have been ignored by the respondent judge. This principle emanates from the COMELEC’s exclusive power to
conduct preliminary investigation of all election offenses and to
It bears stressing that when the Provincial Prosecutor conducted the prosecute the same except as may otherwise be provided by law.
preliminary investigation of I.S. No. 1-99-1080, and filed the Information While it is the duty of the petitioner to prosecute those committing
in Criminal Cases Nos. 7960-00 to 7969-00, he did so because he had election offenses, it is equally its duty not to prosecute those offenses
been duly deputized by the petitioner. He did not do so under the sole where no probable cause exists. The exclusion and inclusion of persons
authority of his office.16 The resolution of the Provincial Prosecutor in I.S. in Informations for election offenses is a prerogative granted by the law
No. 1-99-1080 was subject to appeal by the aggrieved party to the and the Constitution to the petitioner.19 The petitioner may not be
petitioner and may be reversed by the petitioner in the exercise of its compelled to charge a person or include the latter in an Information
supervision and control of its deputies/subordinates.17 when it believes that under the law and on the basis of the evidence in
its possession, such person should not be charged at all.
While it is the true that the petitioner initially dismissed the appeal of
the respondents-appellants from the resolution of the Provincial On the second issue, the petitioner contends that respondents-
Prosecutor in I.S. No. 1-99-1080, the petitioner later gave due course appellants in I.S. No. 1-99-1080, who were its witnesses in Criminal
and granted the appeal, and nullified the resolution of the Provincial Case No. 7034-99, had been granted exemptions from prosecution and
Prosecutor. Contrary to the latter’s claim, the petitioner did not conduct punishment for the offense of vote-buying, pursuant to Section 28(4) of
a reinvestigation of I.S. No. 1-99-1080. It merely acted on the appeal of Republic Act No. 6848. The petitioner avers that the respondents-
the respondents-appellants. appellants in I.S. No. 1-99-1080, are also exempt from criminal liability
for the offense of vote-selling; hence, should not be charged with the
The respondent has failed to cite any COMELEC rule which requires the
latter offense. Thus, Criminal Cases Nos. 7960-00 to 7969-00 should be
unanimous votes of all its Commissioners sitting en banc for the
dismissed. The petitioner avers that the witnesses had executed their
reversal or revocation of a prior resolution approved by unanimous
respective affidavits as to where and how the accused in Criminal Case
vote. On the other hand, Section 5, Rule 2 of the COMELEC Rules of
No. 7034-99 committed the crimes of vote-buying. The petitioner also
Procedure provides that:
contends that the charges of vote-selling filed against the said
SEC. 5. Quorum; Votes Required.— (a) When sitting en banc, four (4) witnesses in Criminal Cases Nos. 7960-00 to 7969-00 were designed to
Members of the Commission shall constitute a quorum for the purpose frighten and discourage them from testifying against the vote buyers,
of transacting business. The concurrence of a majority of the Members who are the accused in Criminal Case No. 7034-99. The respondent,
of the Commission shall be necessary for the pronouncement of a thus, committed a grave abuse of discretion amounting to excess or
decision, resolution, order or ruling. lack of jurisdiction in denying its motion to dismiss Criminal Cases Nos.
7960-00 to 7969-00 grounded on the exemption of the accused
In this case, COMELEC Resolution No. 00-2453 was approved by four of therein.
the seven Commissioners of the petitioner, three of whom were on
official leave. Irrefragably, the said resolution of the petitioner giving For her part, the respondent avers that under Section 265 of the
due course to the appeal of the respondents-appellants in I.S. No. 1-99- Omnibus Election Code, both the vote-buyer and the vote-seller must
1087 was a valid reversal of COMELEC Resolution No. 00-1378 which be charged, investigated and prosecuted by the petitioner for violation
initially denied the said appeal of the respondents-appellants. of Section 261(a)(b) of Republic Act No. 6648, as provided for in Section
28 of Rep. Act No. 6698. She cites the ruling of the Court in Lozano vs.
The conduct of a preliminary investigation of election offenses for the Yorac, et al.,20 to support her stand. She contends that vote-buyers
purpose of determining whether or not there is probable cause to cannot be exempt from criminal liability for vote-buying because there
can be no vote-buying without someone selling his vote. Preliminary leaders or sympathizers of a candidate, shall be sufficient basis for an
investigations of the charges for vote-buying and vote-selling must be investigation to be immediately conducted by the Commission, directly
jointly conducted. This is to enable the COMELEC’s Law Department to or through its duly authorized legal officers, under Section 68 or Section
determine whether the witnesses in Criminal Case No. 7034-99 had 265 of said Batas Pambansa Blg. 881.
voluntarily presented themselves to give information on the vote-
buying of the accused in Criminal Cases Nos. 7960-00 to 7969-00. Under the last paragraph of the said provision, any person guilty of
Based on the records, the witnesses in Criminal Case No. 7034-99 vote-buying and vote-selling who voluntarily gives information and
executed their sworn statements only after the preliminary willingly testifies on violations of paragraphs (a) and (b) of Section 261
investigation of EO No. 98-219; hence, the Law Department of the of the Omnibus Election Code shall be exempt from prosecution and
petitioner could not have intelligently determined whether the said punishment for the offense with reference to which their information
witnesses were exempt from prosecution or not. and testimony were given, without prejudice to their liability for perjury
and false testimony, thus:
We agree with the petitioner.
SEC. 265. Prosecution.— . . .
Section 261(a)(b) of the Omnibus Election Code penalizes vote-buying
and vote-selling and conspiracy to bribe voters. ...

(a) Vote-buying and vote-selling.— (1) Any person who gives, offers or The giver, offerer, and promisor as well as the solicitor, acceptor,
promises money or anything of value, gives or promises any office or recipient and conspirator referred to in paragraphs (a) and (b) of
employment, franchise or grant, public or private, or makes or offers to Section 261 of Batas Pambansa Blg. 881 shall be liable as principals:
make an expenditure, directly or indirectly, or cause an expenditure to Provided, That any person, otherwise guilty under said paragraphs who
be made to any person, association, corporation, entity, or community voluntarily gives information and willingly testifies on any violation
in order to induce anyone or the public in general to vote for or against thereof in any official investigation or proceeding shall be exempt from
any candidate or withhold his vote in the election, or to vote for or prosecution and punishment for the offenses with reference to which
against any aspirant for the nomination or choice of a candidate in a his information and and testimony were given: Provided, further, That
convention or similar election process of a political party. nothing herein shall exempt such person from criminal prosecution for
perjury or false testimony.
...
Under Section 265 of the Omnibus Election Code, the petitioner is
(b) Conspiracy to bribe voters.— Two or more persons, whether mandated to conduct a preliminary investigation of all election offenses
candidates or not, who come to an agreement concerning the and to prosecute the same. The general rule is that the petitioner must
commission of any violation of paragraph (a) of this section and decide investigate, charge and prosecute all those committing election
to commit it. offenses without any discrimination to ensure a clean, orderly and
speedy elections. A joint preliminary investigation thereof must be
Not only principals but also accomplices and accessories are criminally conducted and the appropriate Information filed in court against all the
liable for election offenses.21 Section 28 of Republic Act No. 6648 offenders. To enable the petitioner to comply with its mandate to
governs the prosecution of the crimes of vote-buying and vote-selling, investigate and prosecute those committing election offenses, it has
thus: been vested with authority under the last paragraph of Section 28 of
Republic Act No. 6648 to exempt those who have committed election
SECTION 28. Prosecution of Vote-buying and Vote-selling.— The
offenses under Section 261 (a) and (b) but volunteer to give
presentation of a complaint for violations of paragraph (a) or (b) of
informations and testify on any violation of said law in any official
Section 261 of Batas Pambansa Blg. 881 supported by affidavits of
investigation or proceeding with reference to which his information and
complaining witnesses attesting to the offer or promise by or of the
testimony is given. The law is an immunity statute which grants
voter’s acceptance of money or other consideration from the relatives,
transactional immunity to volunteers from investigation and
prosecution for violation of Section 261 (a) and (b) of the Omnibus interfered with by the trial court. Neither may this Court interfere with
Election Code.22 The immunity statute seeks a rational accommodation the petitioner’s exercise of its discretion in denying or granting
between the imperatives of the privilege against self-incrimination and exemptions under the law, unless the petitioner commits a grave
the legitimate demands of government to encourage citizens, including abuse of its discretion amounting to excess or lack of jurisdiction.
law violators themselves, to testify against law violators. The statute
operates as a complete pardon for the offenses to which the There is no showing in the record that the petitioner committed abuse
information was given. The execution of those statutes reflects the of discretion in granting immunity to the witnesses in Criminal Case No.
importance of the testimony therefor, and the fact that many offenses 7034-99 and in nullifying the Resolution of the Provincial Prosecutor in
are of such character that the only persons capable of giving useful I.S. No. 1-99-1080.
testimony are those implicated in the crimes. Indeed, their origins were
It cannot be over-emphasized that the authority given to the petitioner
in the context of such offenses and their primary use has been to
to grant exemptions should be used to achieve and further its mandate
investigate and prosecute such offenses.23 Immunity from suit is the
to insure clean, honest, peaceful and orderly elections.
only consequence flowing from a violation of one’s constitutional right
to be protected from unreasonable search and seizure, his right to The respondents’ reliance on the ruling of this Court in Lozano v. Yorac
counsel and his right not to be coerced into confessing.24 By voluntarily is misplaced. The issue of the application of the immunity statute was
offering to give information on violations of Section 261(a) and (b) and not raised in that case.
testify against the culprits, one opens himself to investigation and
prosecution if he himself is a party to any violation of the law. In In sum then, the Court finds that the respondent committed a grave
exchange for his testimony, the law gives him immunity from abuse of discretion amounting to excess or lack of jurisdiction in
investigation and prosecution for any offense in Section 261(a) and (b) denying the petitioner’s motion to dismiss Criminal Cases Nos. 7960-00
with reference to which his information is given. He is, therefore, to 7969-00 before it and the motion for reconsideration of the said
assured that his testimony cannot be used by the prosecutors and any denial.
authorities in any respect, and that his testimony cannot lead to the
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
infliction of criminal penalties on him. 25 The testimony of a voluntary
assailed Orders dated February 20, 2001 and May 16, 2001 are SET
witness in accord with his sworn statement operates as a pardon for
ASIDE. Respondent Judge Dolores Español, RTC, Imus, Cavite, Branch
the criminal charges to which it relates.26
90, is directed to dismiss Criminal Cases Nos. 7960-00 to 7969-00. No
It bears stressing that one may voluntarily give information on costs.
violations of Section 261(a) and (b) and execute an affidavit before a
SO ORDERED.
complaint is filed with the petitioner, or any provincial or city
prosecutor. This may be done even during the preliminary investigation Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago,
or even after an Information is filed, on the condition that his testimony Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
must be in accord with or based on his affidavit. If such witness later Azcuna, and Tinga, JJ., concur.
refuses to testify or testifies but contrary to his affidavit, he loses his
immunity from suit, and may be prosecuted for violations of Section
261(a) and (b) of the Omnibus Election Code, perjury under Article 183
of the Revised Penal Code, or false testimony under Article 180 of the
same Code.

The power to grant exemptions is vested solely on the

petitioner.1âwphi1 This power is concomitant with its authority to
enforce election laws, investigate election offenses and prosecute
those committing the same. The exercise of such power should not be
 G.R. No. 205136 December 2, 2014 The Commission RESOLVED, as it hereby RESOLVES, to approve the
foregoing recommendation of Director Esmeralda-AmoraLadra, Law
OLIVIA DA SILVA CERAFICA, Petitioner, Department, as follows:
vs.
COMMISSION ON ELECTIONS, Respondent. 1. To cancelthe Certificate of Candidacy (COC) of aspirant Kimberly Da
Silva Cerafica without prejudice to any civil, criminal or administrative
DECISION liability that she may have incurred pursuant to Section 14 of COMELEC
Resolution 9518; and
PEREZ, J.:
2. To deny the substitution of Kimberly Da Silva Cerafica by Olivia Da
For the consideration of the Court is the Special Civil Action for
Silva Cerafica as an effect of the cancellation of the COC of Kimberly.
Certiorari under Rule 64 of the Revised Rules of Court, assailing the
ruling of respondent Commission on Elections (Comelec) which Let the Law Department implement this resolution.
cancelled the Certificate of Candidacy (COC) of Kimberly Da Silva
Cerafica (Kimberly) and denied the substitution of Kimberly by SO ORDERED.
petitioner Olivia Da Silva Cerafica (Olivia).
Olivia then filed the present petition for certiorari with Prayer for the
On 1 October 2012, Kimberly filed her COC for Councilor, City of Taguig Issuance of a Temporary Restraining Order, Status Quo AnteOrder,
for the 2013 Elections. Her COC stated that she was born on 29 and/or Writ of Preliminary Mandatory Injunction, raising the following
October 1992, or that she will be twenty (20) years of age on the day of issues:7
the elections,1 in contravention of the requirement that one must be at
least twenty-three (23) years of age on the day of the elections as set I.
out in Sec. 9 (c) of Republic Act (R.A.) No. 8487 (Charter of the City of
WHETHER PUBLIC RESPONDENT COMMISSION ON ELECTIONS ACTED
Taguig).2 As such, Kimberly was summoned to a clarificatory hearing
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
due to the age qualification.
EXCESS OF JURISDICTION AND CONTRARY TO LAW AND
Instead of attending the hearing,Kimberly opted to file a sworn JURISPRUDENCE IN ISSUING THE ASSAILED MINUTE RESOLUTION
Statement of Withdrawal of COC on 17 December RESULTING IN THE CANCELLATION OF THE CERTIFICATE OF
2012.3 Simultaneously, Olivia filed her own COC as a substitute of CANDIDACY (COC) OF ASPIRANT KIMBERLY DA SILVA CERAFICA AND
Kimberly. Owing to these events, the clarificatory hearing no longer THE DENIAL OF THE SUBSTITUTION OF KIMBERLY DA SILVA CERAFICA
pushed through. BY OLIVIA DA SILVA CERAFICA AS AN EFFECT OF THE CANCELLATION
OF THE COC OF KIMBERLY.
In a Memorandum dated 18 December 2012, Director Esmeralda
Amora-Ladra (Director Amora-Ladra) of the Comelec Law Department II.
recommended the cancellation of Kimberly’s COC, and consequently,
WHETHER PUBLIC RESPONDENT COMMISSION ON ELECTIONS ACTED
the denial of the substitution of Kimberly by Olivia. Relying on Comelec
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
Resolution No. 9551,4 Director Amora-Ladra opined that it is as if no
EXCESS OF JURISDICTION AND CONTRARY TO LAW AND
COC was filed by Kimberly; thus, she cannot be substituted.
JURISPRUDENCE WHEN IT RULED THAT THERE WAS NO VALID
In a Special En Banc Meeting of the Comelec on 3 January 2013, 5 the SUBSTITUTION BY PETITIONER FOR KIMBERLY RESULTING IN THE
Comelec adopted the recommendation of Director Amora-Ladra, MOTU PROPRIO DENIAL OF PETITIONER’S CERTIFICATE OF
cancelled Kimberly’s COC, and denied the substitution of Kimberly by CANDIDACY.
Olivia as an effect of the cancellation of Kimberly’s COC, viz:6
III.
WHETHER PUBLIC RESPONDENT COMMISSION ON ELECTIONS ACTED rendering the resolution of the same of no practical use or value.
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR Nonetheless, courts will decide a question otherwise moot and
EXCESS OF JURISDICTION AND CONTRARY TO LAW AND academic if it is capable of repetition, yet evading review. In this case,
JURISPRUDENCE IN ISSUING THE ASSAILED RESOLUTION WITHOUT we find it necessary to resolve the issues raised in the petition in order
GIVING PETITIONER AN OPPORTUNITY TO BE HEARD, THEREBY to prevent a repetition thereof and, thus, enhance free, orderly, and
RESULTING IN THE MOTU PROPRIODENIAL OF THE SUBSTITUTION OF peaceful elections.
KIMBERLY DA SILVA CERAFICA BY OLIVIA DA SILVA CERAFICA.
VALID SUBSTITUTION
In its Comment8 filed on 22 April 2013, respondent Comelec argued
that Olivia cannot substitute Kimberly as the latter was never an official In declaring that Kimberly, being under age, could not be considered to
candidate because she was not eligible for the post by reason of her have filed a valid COC and, thus, could not be validly substituted by
age, and that, moreover, the COC that Kimberly filed was invalid Olivia, we find that the Comelec gravely abused its discretion.
because it contained a material misrepresentation relating to her
Firstly, subject to its authority over nuisance candidates18 and its power
eligibility for the office she seeks to be elected to.9 The Comelec further
to deny due course to or cancel COCs under Sec. 78, Batas Pambansa
averred that it can cancel Kimberly’s COC motu proprioas it may look
(B.P.) Blg. 881, the Comelec has the ministerial duty to receive and
into patent defects in the COCs, such as Kimberly’s failure to comply
acknowledge receipt of COCs.19
with the age requirement.10
In Cipriano v. Comelec,20 we ruled that the Comelec has no discretion
In her Reply11 filed on 10 May 2013, Oliviacountered that although
to give or not to give due couse to COCs. We emphasized that the duty
Kimberly may not be qualified to run for election because of her age, it
of the Comelec to give due course to COCs filed in due form is
cannot be denied that she still filed a valid COC and was, thus, an
ministerial in character, and that whilethe Comelec may look into
official candidate who may be substituted.12 Olivia also claimed that
patent defects in the COCs, it may not go into matters not appearing
there was no ground to cancel or deny Kimberly’s COC on the ground
on their face. The question of eligibility or ineligibility of a candidate is
of lack of qualification and material misrepresentation because she did
thus beyond the usual and proper cognizance of the Comelec.
not misrepresent her birth dateto qualify for the position of councilor,
and as there was no deliberate attempt to mislead the electorate, Section 77 of the Omnibus Election Code (B.P. Blg. 881) provides for
which is precisely why she withdrew her COC upon learning that she the procedure of substitution of candidates, to wit:
was not qualified.13
Sec. 77. Candidates in case of death, disqualification or withdrawal of
At the outset, we note that a verification with the Comelec database another. – If after the last day for the filing of certificates of candidacy,
yields the finding that Olivia was not among the official candidates14 for an official candidate of a registered or accredited political party dies,
the 2013 Elections and, thus, was not voted for. 15 As such, a ruling on withdraws or is disqualified for any cause, only a person belonging to,
the present petition would no longer be of practical use or value. Even and certified by, the same political party may file a certificate of
if we were to resolve the petition for the purpose of determining Olivia’s candidacy to replace the candidate who died, withdrew or was
legal status as a legitimate and qualified candidate for public office, disqualified. The substitute candidate nominated by the political party
such purpose has been rendered inconsequential as a result of the concerned may file his certificate of candidacy for the office affected in
proclamation of the winning councilors for the 2013 elections.16 accordance with the preceding sections not later than mid-day of
election day of the election.
Be that as it may, the Court deems it opportune to address the merits
of the case, if only to caution the Comelec against the precipitate If the death, withdrawal or disqualification should occur between the
cancellation of COCs. day before the election and mid-day of election day, said certificate
may be filed with any board of election inspectors in the political
In Albaña v. Comelec,17 we held that where the issues have become
moot and academic, there is no justiciable controversy, thereby
subdivision where he is candidate or, in case of candidates to be voted On 15 January 2004, Hans Roger withdrew his certificate of candidacy.
for by the entire electorate of the country, with the Commission. The Election Code allows a person who has filed a certificate of
candidacy to withdraw the same prior to the election by submitting a
Under the express provision of Sec. 77 of B. P. Blg. 881, not just any written declaration under oath. There is no provision of law which
person, but only "an official candidate of a registered or accredited prevents a candidate from withdrawing his certificate of candidacy
political party" may be substituted.21 In the case at bar, Kimberly was before the election.
an official nominee of the Liberal Party;22 thus, she can be validly
substituted. On the same date, Luna filed her certificate of candidacy as substitute
for Hans Roger. Section 77 of the Election Code prescribes the rules on
The next question then is whether Olivia complied with all of the substitution of an official candidate of a registered political party who
requirements for a valid substitution; we answer in the affirmative. dies, withdraws, or is disqualified for any cause after the last day for the
First, there was a valid withdrawal of Kimberly’s COC after the last day filing of certificate of candidacy. Section 77 of the Election Code
for the filing of COCs; second, Olivia belongs to and is certified to by the provides:
same political party to which Kimberly belongs;23 and third, Olivia filed
her COC not later than mid-day of election day.24 Sec. 77. Candidates in case of death, disqualification or withdrawal of
25
another. – If after the last day for the filing of certificates of candidacy,
In Luna v. Comelec, where the candidate, who was also under age, an official candidate of a registered or accredited politicalparty dies,
withdrew his COC before election day and was substituted by a withdraws or is disqualified for any cause, only a person belonging to,
qualified candidate, we declared that suchsubstitution was valid. The and certified by, the same political party may file a certificate of
Court eloquently explained: candidacy to replace the candidate who died, withdrew or was
disqualified. The substitute candidate nominated by the political party
Substitution of Luna for Hans Roger was Valid
concerned may file his certificate of candidacy for the office affected in
Luna contends that Hans Roger filed a valid certificate of candidacy accordance with the preceding sections not later thanmid-day of
and, subsequently, upon Hans Roger’s withdrawal of his certificate of election day of the election. If the death, withdrawal or disqualification
candidacy, there was a valid substitution by Luna. On the other hand, should occur between the day before the election and midday of
the COMELEC ruled that Hans Roger, being under age, could not be election day, said certificate may be filed with any board of election
considered tohave filed a valid certificate of candidacy and, therefore, inspectors in the political subdivision where he is candidate or, in case
is not a valid candidate who could be substituted by Luna. of candidates to be voted for by the entire electorate of the country,
with the Commission.
When a candidate files his certificate of candidacy, the COMELEC has a
ministerial duty to receive and acknowledge its receipt. Section 76 of Since Hans Roger withdrew his certificate of candidacy and the
the Omnibus Election Code(Election Code) provides: COMELEC found that Luna complied with all the procedural
requirements for a valid substitution, Luna can validly substitute for
Sec. 76. Ministerial duty of receiving and acknowledging receipt. – The Hans Roger.
Commission, provincial election supervisor, election registrar or officer
designated by the Commission or the board of election inspectors The COMELEC acted with grave abuse of discretion amounting to lack
under the succeeding section shall have the ministerial duty to receive or excess of jurisdiction in declaring that Hans Roger, being under age,
and acknowledge receipt of the certificate of candidacy. could not be considered to have filed a valid certificate of candidacy
and, thus, could not be validly substituted by Luna. The COMELEC may
In this case, when Hans Roger filed his certificate of candidacy on 5 not, by itself, without the proper proceedings, deny due course to or
January 2004, the COMELEC had the ministerial duty to receive and cancel a certificate of candidacy filed in due form. In Sanchez vs. Del
acknowledge receipt of Hans Roger’s certificate of candidacy. Thus, the Rosario, the Court ruled that the question of eligibility or ineligibility of a
COMELEC had the ministerial duty to give due course to Hans Rogers
certificate of candidacy.
candidate for non-age is beyond the usual and proper cognizance of by Olivia, and absent any petition to deny due course to or cancel said
the COMELEC. COC, the Court finds that the Comelec once more gravely abused its
discretion. The Court reminds the Comelec that, inthe exercise of it
Section 74 of the Election Code provides that the certificate of adjudicatory or quasi-judicial powers, the Constitution27 mandates it to
candidacy shall state, among others, the date of birth of the person hear and decide cases first by Division and, upon motion for
filing the certificate. Section 78 of the Election Code provides that in reconsideration, by the En Banc.
case a person filing a certificate of candidacy has committed false
material representation, a verified petition to deny due course to or Where a power rests in judgment or discretion, so that it is of judicial
cancel the certificate of candidacy of said person may be filed at any nature or character, but does not involve the exercise of functions of a
time not later than 25 days from the time of filing of the certificate of judge, or is conferred upon an officer other than a judicial officer, it is
candidacy. deemed quasi-judicial.28 As cancellation proceedings involve the
exercise of quasi judicial functions of the Comelec, the Comelec in
If Hans Roger made a material misrepresentation as to his date of birth Division should have first decided this case.
or age in his certificate of candidacy, his eligibility may only be
impugned through a verified petition to deny due course to or cancel In Bautista v. Comelec, et al.,29 where the Comelec Law Department
such certificate of candidacy under Section 78 of the Election Code. recommended the cancellation of a candidate’s COC for lack of
qualification, and which recommendation was affirmed by the Comelec
In this case, there was no petition to deny due course to or cancel the En Banc, the Court held that the Comelec En Banc cannot short cut the
certificate of candidacyof Hans Roger. The COMELEC only declared that proceedings by acting on the case without a prior action by a division
Hans Roger did not file a valid certificate of candidacy and, thus, was because it denies due process to the candidate. The Court held:
not a valid candidate in the petition to deny due course to or cancel
Luna’s certificate of candidacy. In effect, the COMELEC, without the A division of the COMELEC should have first heard this case. The
proper proceedings, cancelled Hans Roger’s certificate of candidacy COMELEC en banc can only act on the case if there is a motion for
and declared the substitution by Luna invalid. reconsideration of the decision of the COMELEC division. Hence, the
COMELEC en banc acted without jurisdiction when it ordered the
It would have been different if there was a petition to deny due course cancellation of Bautista’s certificate of candidacy without first referring
to or cancel Hans Roger’s certificate of candidacy.1âwphi1 For if the the case to a division for summary hearing.
COMELEC cancelled Hans Roger’s certificate of candidacy after the
proper proceedings, then he is no candidate at all and there can be no xxxx
substitution of a person whose certificate of candidacy has been
cancelled and denied due course. However, Hans Roger’s certificate of Under Section 3, Rule 23 of the 1993 COMELEC Rules of Procedure, a
candidacy was never cancelled or denied due course by the COMELEC. petition for the denial or cancellation of a certificate of candidacy must
be heard summarily after due notice. It isthus clear that cancellation
Moreover, Hans Roger already withdrew his certificate of candidacy proceedings involve the exercise of the quasi-judicial functions of the
before the COMELEC declared that he was not a valid candidate. COMELEC which the COMELEC in divisionshould first decide. More so in
Therefore, unless Hans Roger’s certificate of candidacy was denied due this case where the cancellation proceedings originated not from a
course or cancelled in accordance with Section 78 of the Election Code, petition but from a report of the election officer regarding the lack of
Hans Roger’s certificate of candidacy was valid and he may be validly qualification of the candidate in the barangay election. The COMELEC
substituted by Luna.26 (Emphases supplied.) en bane cannot short cut the proceedings by acting on the case
without a prior action by a division because it denies due process to the
LACK OF DUE PROCESS candidate.30 (Emphasis supplied.)
Moreover, in simply relying on the Memorandum of Director Amora The determination of whether a candidate is eligible for the position he
Ladra in cancelling Kimberly’s COC and denying the latter’s substitution is seeking involves a determination of fact where parties must be
allowed to adduce evidence in support of their contentions.31 We thus
caution the Comelec against its practice of impetuous cancellation of
COCs via minute resolutions adopting the recommendations of its Law
Department when the situation properly calls for the case's referral to a
Division for summary hearing.

WHEREFORE, premises considered, with the cautionary counsel that

cancellation of certificate of candidacy is a quasi-judicial process, and
accordingly is heard by the Commission on Elections in Division and En
Banc on appeal, we DISMISS the present petition for being moot and
academic.

SO ORDERED.