1. China National Machinery and Equipment Corp. (Group) vs. Judge Santamaria, GR No. 185572, 7 February 2012 2. UP vs.

Dizon, GR No. 171182, August 23, 2012 3. Garcia vs. Executive Secretary, GR No. 198554, 30 July 2012 4. Province of North Cotabato vs. GRP Peace Panel, GR No. 183591, 14 October 2008 5. Gamboa vs. Sec. Teves, GR No. 176579, 9 October 2012 6. Romero II vs. Estrada, GR No. 174105, 02 April 2009 7. Lokin, Jr. vs. COMELEC, 22 June 2010 8. Aldaba vs. COMELEC, 25 January 2010 9. Jalosjos, Jr. vs. COMELEC, GR No. 192474, 26 June 2012 10. Abayon vs. COMELEC, 11 February 2010 11. Drilon vs. De Venecia, GR No. 180055, 31 July 2009 12. ABAKADA Guro vs. Purisima, GR No. 166715, 14 August 2008 13. PEZA vs. COA, GR No. 1897767, 3 July 2012 2. 1214. Kulayan vs. Tan, 3 July 2012 15. Ampong vs. CSC, GR No. 167916, 26 August 2008

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 176579 June 28, 2011

WILSON P. GAMBOA, Petitioner, vs. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P. SEVILLA, AND COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE COMMISSION, and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, Respondents. PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioners-in-Intervention. DECISION CARPIO, J.: The Case

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific). The Antecedents The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as follows:1 On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared by this Court to be owned by the Republic of the Philippines.2 In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding capital stock of PTIC. On 20 November 2006, the InterAgency Privatization Council (IPC) of the Philippine Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510 million. Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and instead, yielded its right to PTIC itself which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28 February 2007. Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or about 6.3 percent of the outstanding common shares of PLDT.With the sale, First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40 percent.3 On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the following relevant facts: On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263 PLDT common shares, or 13.847 percent of the total PLDT

outstanding common shares. PHI, on the other hand, was incorporated in 1977, and became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Courts decision4 which became final and executory on 8 August 2006. The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of stock of PLDT, and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG, as the disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8 December 2006. The extension was published in nine different newspapers. During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000. The government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first refusal in accordance with PTICs Articles of Incorporation. First Pacific announced its intention to match Parallaxs bid. On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the public hearing. The HR Committee Report No. 2270 concluded that: (a) the auction of the governments 111,415 PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and (b) First Pacifics intended acquisition of the governments 111,415 PTIC shares resulting in First Pacifics 100% ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC. Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First Pacific and its affiliates); (b) Parallax offered the highest bid amounting toP25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its shareholders granted in PTICs Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. Respondent Pangilinan denies the other allegations of facts of petitioner. On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacifics common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMos common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.6 Petitioner asserts: If and when the sale is completed, First Pacifics equity in PLDT will go up from 30.7 percent to 37.0 percent of its common or voting- stockholdings, x x x. Hence, the consummation of the sale will put

the two largest foreign investors in PLDT First Pacific and Japans NTT DoCoMo, which is the worlds largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDTs common equity. x x x x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x"7 Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse of discretion in allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility.8 On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention. Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by respondents of the 111,415 PTIC shares to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT subscribers, they have a "stake in the outcome of the controversy x x x where the Philippine Government is completing the sale of government owned assets in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution." The Issue This Court is not a trier of facts. Factual questions such as those raised by petitioner,9 which indisputably demand a thorough examination of the evidence of the parties, are generally beyond this Courts jurisdiction. Adhering to this well-settled principle, the Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term "capital" in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility. The Ruling of the Court The petition is partly meritorious. Petition for declaratory relief treated as petition for mandamus At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is within the original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the Court of Appeals. The actions for declaratory relief,10 injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme Court. On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition,11 the Court shall nevertheless refrain from discussing the grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. However, since the threshold and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national economy, the Court treats the petition for declaratory relief as one for mandamus.12 In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for mandamus considering the grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by a foreign tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the tourists dollar deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment, garnishment or any other order or process of any court, inapplicable due to the peculiar circumstances of the case. The Court held that "injustice would result especially to a citizen aggrieved by a foreign guest like accused x x x" that would "negate Article 10 of the Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail." The Court therefore required respondents Central Bank of the Philippines, the local bank, and the accused to comply with the writ of execution issued in the civil case for damages and to release the dollar deposit of the accused to satisfy the judgment. In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural infirmity of the petition for declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the question was: "Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or controlled corporations included among the four employers under Presidential Decree No. 851 which are required to pay their employees x x x a thirteenth (13th) month pay x x x ?" The Constitutional principle involved therein affected all government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the interpretation of the assailed presidential decree. In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching implications. As this Court held in Salvacion: The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.15 (Emphasis supplied) In the present case, petitioner seeks primarily the interpretation of the term "capital" in Section 11, Article XII of the Constitution. He prays that this Court declare that the term "capital" refers to common shares only, and that such shares constitute "the sole basis in determining foreign equity in a public utility." Petitioner further asks this Court to declare any ruling inconsistent with such interpretation unconstitutional. The interpretation of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own country. What is at stake here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a

legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this case. The Court first encountered the issue on the definition of the term "capital" in Section 11, Article XII of the Constitution in the case of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the same private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that the petition involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Courts Decision of 21 February 2003 via a petition for review under Rule 45. The Courts Resolution, denying the petition, became final on 21 December 2004. The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issuewhich is of transcendental importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The Court must forthwith seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in the words of the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos."18 Besides, in the light of vague and confusing positions taken by government agencies on this purely legal issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their participation in the capital of public utilities and other nationalized businesses. Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since the 1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the term "capital," which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and joint venture agreements for the development of our natural resources,19 in Section 7, Article XII on ownership of private lands,20 in Section 10, Article XII on the reservation of certain investments to Filipino citizens,21 in Section 4(2), Article XIV on the ownership of educational institutions,22 and in Section 11(2), Article XVI on the ownership of advertising companies.23 Petitioner has locus standi There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to violate the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a possibility that PLDTs franchise could be revoked, a dire consequence directly affecting petitioners interest as a stockholder. More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people, far outweighs any perceived impediment in the legal personality of the petitioner to bring this action. In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus: In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special

interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing, the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the land. Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general public which possesses the right. Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved. We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioners standing. (Emphasis supplied) Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the requisite locus standi. Definition of the Term "Capital" in Section 11, Article XII of the 1987 Constitution Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit: Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied) The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus: Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the

governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis supplied) The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz: Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires. (Emphasis supplied) Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention.25 The 1987 Constitution "provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of public utilities should be granted only to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens. The provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for national security."26 The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest.27 This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to "conserve and develop our patrimony"28 and ensure "a self-reliant and independent national economy effectively controlled by Filipinos."29 Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60 percent of its "capital" must be owned by Filipino citizens. The crux of the controversy is the definition of the term "capital." Does the term "capital" in Section 11, Article XII of the Constitution refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)? Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such shares are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term "capital" in Section 11, Article XII of the Constitution refers to "the ownership of common capital stock subscribed and outstanding, which class of shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of directors." It is undisputed that PLDTs non-voting preferred shares are held mostly by Filipino citizens.30 This arose from Presidential Decree No. 217,31 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting preferred shares to pay for the investment cost of installing the telephone line.32 Petitioners-in-intervention basically reiterate petitioners arguments and adopt petitioners definition of the term "capital."33 Petitioners-in-intervention allege that "the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least 63.54% of the total outstanding common stock," which means that foreigners exercise significant control over PLDT, patently violating the 40 percent foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term "capital" in Section 11, Article XII of the Constitution. More importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares of PLDT are held by foreigners. In particular, respondent Nazarenos Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition and the supposed violation of the due process rights of the "affected foreign common shareholders." Respondent Nazareno does not deny petitioners allegation of foreigners dominating the common shareholdings of PLDT. Nazareno stressed mainly that the petition "seeks to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership over their shares." Thus, "the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that they can be heard."34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders. While Nazareno does not introduce any definition of the term "capital," he states that "among the factual assertions that need to be established to counter petitioners allegations is the uniform interpretation by government agencies (such as the SEC), institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of including both preferred shares and common shares in "controlling interest" in view of testing compliance with the 40% constitutional limitation on foreign ownership in public utilities."35 Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in Section 11, Article XII of the Constitution. Neither does he refute petitioners claim of foreigners holding more than 40 percent of PLDTs common shares. Instead, respondent Pangilinan focuses on the procedural flaws of the petition and the alleged violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in his Memorandum (1) the absence of this Courts jurisdiction over the petition; (2) petitioners lack of standing; (3) mootness of the petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights. Moreover, respondent Pangilinan alleges that the issue should be whether "owners of shares in PLDT as well as owners of shares in companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law requiring them to surrender their shares and also without notice and trial." Respondent Pangilinan further asserts that "Section 11, [Article XII of the Constitution] imposes no nationality requirement on the shareholders of the utility company as a condition for keeping their shares in the utility company." According to him, "Section 11 does not authorize taking one persons property (the shareholders stock in the utility company) on the basis of another partys alleged failure to satisfy a requirement that is a condition only for that other partys retention of another piece of property (the utility company being at least 60% Filipino-owned to keep its franchise)."36 The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise silent on the definition of the term "capital." In its Memorandum37 dated 24 September 2007, the OSG also limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, noninclusion of interested parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term "capital" in Section 11, Article XII of the Constitution. The OSG contends that "the petition actually partakes of a collateral attack on PLDTs franchise as a public utility," which in effect requires a "full-blown trial where all the parties in interest are given their day in court."38

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not also define the term "capital" and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and timely disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market. In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended that the term "capital" in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus: The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Courts ruling upholding respondents arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Courts ruling adopting respondents arguments, the common shares can be owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the public utility corporation. xxxx Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest. xxxx Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution. Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning of the word "capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot prevail over the clear intent of the framers of the Constitution.

In the same vein, the SECs construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally determine what a law means.39 On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term "capital" in Section 11, Article XII of the Constitution includes preferred shares since the Constitution does not distinguish among classes of stock, thus: 16. The Constitution applies its foreign ownership limitation on the corporations "capital," without distinction as to classes of shares. x x x In this connection, the Corporation Code which was already in force at the time the present (1987) Constitution was drafted defined outstanding capital stock as follows: Section 137. Outstanding capital stock defined. The term "outstanding capital stock", as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in determining the outstanding capital stock (the "capital") of a corporation. Consequently, petitioners suggestion to reckon PLDTs foreign equity only on the basis of PLDTs outstanding common shares is without legal basis. The language of the Constitution should be understood in the sense it has in common use. xxxx 17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the Constitutional Commission (Vol. III) which petitioner misleadingly cited in the Petition x x x which supports petitioners view that only common shares should form the basis for computing a public utilitys foreign equity. xxxx 18. In addition, the SEC the government agency primarily responsible for implementing the Corporation Code, and which also has the responsibility of ensuring compliance with the Constitutions foreign equity restrictions as regards nationalized activities x x x has categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and the nationality composition thereof.40 We agree with petitioner and petitioners-in-intervention. The term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares,41 and not to the total outstanding capital stock comprising both common and non-voting preferred shares. The Corporation Code of the Philippines42 classifies shares as common or preferred, thus: Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or

"redeemable" shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The Board of Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange Commission. Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends. A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements. Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; 6. Merger or consolidation of the corporation with another corporation or other corporations; 7. Investment of corporate funds in another corporation or business in accordance with this Code; and 8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights. Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation.43 This is exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation.44 In the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in the corporation for income in the same manner as bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to vote.46 Common shares cannot be deprived of the right to vote in any corporate meeting, and any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid.47 Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term "capital" in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in the election of directors, then the term "capital" shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and management of public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting stock or controlling interest of a corporation, to wit: MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15. MR. VILLEGAS. That is right. MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee please enlighten me on this? MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock." MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote. MR. VILLEGAS. That is right. MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 6040 percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule? MR. VILLEGAS. Yes, that is the understanding of the Committee. MR. NOLLEDO. Therefore, we need additional Filipino capital? MR. VILLEGAS. Yes.48 xxxx MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee. MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest." MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens." MR. VILLEGAS. Yes. MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens. MR. VILLEGAS. That is right. MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where the corporation is controlled by foreigners despite being the minority because they have the voting capital. That is the anomaly that would result here. MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and 1935 Constitutions is that according to Commissioner Rodrigo, there are associations that do not have stocks. That is why we say "CAPITAL." MR. AZCUNA. We should not eliminate the phrase "controlling interest." MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied) Thus, 60 percent of the "capital" assumes, or should result in, "controlling interest" in the corporation. Reinforcing this interpretation of the term "capital," as referring to controlling interest or shares entitled to vote, is the definition of a "Philippine national" in the Foreign Investments Act of 1991,50 to wit: SEC. 3. Definitions. - As used in this Act: a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws

of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (Emphasis supplied) In explaining the definition of a "Philippine national," the Implementing Rules and Regulations of the Foreign Investments Act of 1991 provide: b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose. Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered. For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals. Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals. (Emphasis supplied) Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital" required in the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is "considered as non-Philippine national[s]." Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments." Thus,

in numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the "capital" of which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term "capital" in Section 11, Article XII of the Constitution is also used in the same context in numerous laws reserving certain areas of investments to Filipino citizens. To construe broadly the term "capital" as the total outstanding capital stock, including both common and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the "State shall develop a self-reliant and independent national economy effectively controlled by Filipinos." A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the public utility. We shall illustrate the glaring anomaly in giving a broad definition to the term "capital." Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having a par value of one peso (P1.00) per share. Under the broad definition of the term "capital," such corporation would be considered compliant with the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd. In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language of the Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an independent national economy effectively controlled by Filipinos. The example given is not theoretical but can be found in the real world, and in fact exists in the present case. Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDTs Articles of Incorporation expressly state that "the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of stockholders."51 On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDTs Articles of Incorporation52 state that "each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other purposes."53 In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control over PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control over PLDT. In fact, under PLDTs

Articles of Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred shares have no voting right for any purpose whatsoever. It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet (GIS),54 which is a document required to be submitted annually to the Securities and Exchange Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares.56 In other words, foreigners hold 64.27% of the total number of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution. Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC, shows that per share the SIP58preferred shares earn a pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at P70.00 per share, while the declared dividends for the preferred shares amounted to a measlyP1.00 per share.59 So the preferred shares not only cannot vote in the election of directors, they also have very little and obviously negligible dividend earning capacity compared to common shares. As shown in PLDTs 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%.62 This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required for the States grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public utility. In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the Constitution that "[n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x." To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the soleright to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDTs common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute

77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution. Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value ofP2,328.00 per share,64 while PLDT preferred shares with a par value of P10.00 per share have a current stock market value ranging from only P10.92 to P11.06 per share,65 is a glaring confirmation by the market that control and beneficial ownership of PLDT rest with the common shares, not with the preferred shares. Indisputably, construing the term "capital" in Section 11, Article XII of the Constitution to include both voting and non-voting shares will result in the abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the States constitutional duty to limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain areas of investment to Filipino citizens, such as the exploitation of natural resources as well as the ownership of land, educational institutions and advertising businesses. The Court should never open to foreign control what the Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos." Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinosspecific areas of investment, such as the development of natural resources and ownership of land, educational institutions and advertising business, is self-executing. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why these constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus: x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are selfexecuting. If the constitutional provisions are treated as requiring legislation instead of selfexecuting, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that . . . in case of doubt, the Constitution should be considered self-executing rather than non-selfexecuting. . . .Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied) In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that constitutional provisions are presumed to be self-executing. Justice Puno stated: Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative actions may give breath to constitutional rights but congressional inaction should not suffocate them.

Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use without just compensation. (Emphasis supplied) Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68this Court ruled: x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that should be allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy should be followed in cases of violations against the constitutional prohibition, courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution. x x x (Emphasis supplied) To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last 75 years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent of the "capital" of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities, the exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the ownership of educational institutions. All the legislatures that convened since 1935 also miserably failed to enact legislations to implement these vital constitutional provisions that determine who will effectively control the national economy, Filipinos or foreigners. This Court cannot allow such an absurd interpretation of the Constitution. This Court has held that the SEC "has both regulatory and adjudicative functions."69 Under its regulatory functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by law to investigate such violation.
1aw phi1

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution." Thus, the SEC is the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted to the SEC. Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the "power and function" to "suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided

by law." The SEC is mandated under Section 5(d) of the same Code with the "power and function" to "investigate x x x the activities of persons to ensure compliance" with the laws and regulations that SEC administers or enforces. The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of the ownership structure of PLDTs voting shares, as admitted by respondents and as stated in PLDTs 2010 GIS that PLDT submitted to SEC. WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of the term "capital" in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: RENATO C. CORONA Chief Justice PRESBITERO J. VELASCO, JR. Associate Justice ARTURO D. BRION Associate Justice LUCAS P. BERSAMIN Associate Justice ROBERTO A. ABAD Associate Justice JOSE PORTUGAL PEREZ Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice MARIANO C. DEL CASTILLO Associate Justice MARTIN S. VILLARAMA, JR. Associate Justice JOSE C. MENDOZA Associate Justice

MARIA LOURDES P. A. SERENO Associate Justice CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. RENATO C. CORONA Chief Justice

Footnotes
1

Rollo (Vol. I) , pp. 15-103, (Vol. II), pp. 762-768. See Cojuangco v. Sandiganbayan, G.R. No. 183278, 24 April 2009, 586 SCRA 790. Section 11, Article XII of the 1987 Constitution provides: ARTICLE XII NATIONAL ECONOMY AND PATRIMONY xxxx Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

Yuchengco v. Sandiganbayan, G.R. No. 149802, 20 January 2006, 479 SCRA 1. Rollo, (Vol. II), p. 806. Rollo (Vol. I), p. 23. Id. at 23-24, 26. Id. at 41. Id.

10

Governed by Rule 63 of the Rules of Court. Section 1, Rule 63 of the Rules of Court states:

RULE 63 Declaratory Relief and Similar Remedies Section 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. (Bar Matter No. 803, 17 February 1998)
11

Section 2, Rule 65 of the Rules of Court provides: SEC. 2. Petition for prohibition. When the proceedings of any tribunal, corporation, board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental relief as law and justice may require. xxxx

12

Section 3, Rule 65 of the Rules of Court states: SEC. 3. Petition for mandamus. When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent, immediately or at some other time to be specified by the court, to do the act required to be done to protect the rights of the petitioner and to pay the damages sustained by the petitioner by reason of the wrongful acts of the respondent. xxxx

13

343 Phil. 539 (1997).

14

209 Phil. 1 (1983), citing Nacionalista Party v. Angelo Bautista, 85 Phil. 101, and Aquino v. Commission on Elections, 62 SCRA 275.
15

Supra note 13.

Adverted to in respondent Nazarenos Memorandum dated 27 September 2007. Rollo, p. 929. Nazareno stated: "In fact, in Fernandez v. Cojuangco, which raised markedly similar
16

issues, the Honorable Court refused to entertain the Petition directly filed with it and dismissed the same for violating the principle of hierarchy of courts."
17

In a Resolution dated 9 June 2003. Section 19, Article II, Constitution.

18

19

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish- workers in rivers, lakes, bays, and lagoons. The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.
20

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
21

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.
22

Section 4(2), Article XIV of the 1987 Constitution provides: "Educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per centum of the capital of which is owned by such citizens. The Congress may, however, require increased Filipino equity participation in all educational institutions. The control and administration of educational institutions shall be vested in citizens of the Philippines. x x x x"
23

Section 11(2), Article XVI of the 1987 Constitution provides: "The advertising industry is impressed with public interest, and shall be regulated by law for the protection of consumers and the promotion of the general welfare. Only Filipino citizens or corporations or associations at least seventy per centum of the capital of which is owned by such citizens shall be allowed to engage in the advertising industry. The participation of foreign investors in the governing body of entities in such industry shall be limited to their proportionate share in the capital thereof, and all the executive and managing officers of such entities must be citizens of the Philippines.
24

G.R. No. 130716, 9 December 1998, 299 SCRA 744 cited in Chavez v. Public Estates Authority, 433 Phil. 506 (2002). See also David v. Macapagal-Arroyo, G.R. No. 171396, 3 May 2006, 489 SCRA 160; Santiago v. Commission on Elections, G.R. No. 127325, 19 March 1997, 270 SCRA 106; Kilosbayan, Inc. v. Guingona, Jr., G.R. No. 113375, 5 May 1994, 232 SCRA 110 (1994).
25

Bernas, The Constitution of the Republic of the Philippines, p. 452, citing Smith, Bell and Co. v. Natividad, 40 Phil. 136, 148 (1919); Luzon Stevedoring Corporation v. Anti-Dummy Board, 46 SCRA 474, 490 (1972).
26

Id.

27

De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed., p. 848.
28

Preamble, 1987 Constitution; De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed., p. 788.
29

Section 19, Article II, Constitution.

30

http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2. 10%29_final.pdf
31

ESTABLISHING BASIC POLICIES FOR THE TELEPHONE INDUSTRY, AMENDING FOR THE PURPOSE THE PERTINENT PROVISIONS OF COMMONWEALTH ACT NO. 146, AS

AMENDED, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED, AND ALL INCONSISTENT LEGISLATIVE AND MUNICIPAL FRANCHISE OF THE PHILIPPINE LONG DISTANCE TELEPHONE COMPANY UNDER ACT NO. 3436, AS AMENDED, AND ALL INCONSISTENT LEGISLATIVE AND MUNICIPAL FRANCHISES INCLUDING OTHER EXISTING LAWS.
32

Upon approval by the National Telecommunications Commission, this mandatory requirement to subscribe to non-voting preferred shares was made optional starting 22 April 2003. See PLDT 20- F 2005 filing with the United States Securities and Exchange Commission athttp://www.wikinvest.com/stock/Philippine_Long_Distance_Telephone Company_(PHI)/ Fili ng/20-F/25/F2923101. See also Philippine Consumers Foundation, Inc. v. NTC and PLDT, G.R. No. L-63318, 18 April 1984, on the origin and rationale of the SIP.
33

Rollo (Vol. I), pp. 414-451. Rollo (Vol. II), p. 991. Id. at 951. Id. at 838. Id. at 898-923. Rollo (Vol. II), p. 913. Rollo (G.R. No. 157360), pp. 55-62. Rollo (G.R. No. 157360), pp. 1577-1583. In PLDTs case, the preferred stock is non-voting, except as specifically provided by law. (http://www.pldt.com.ph/investor/Documents/a2d211230ec3436eab66b41d3d107cfc 4Q2004FSwithopinion.pdf)

34

35

36

37

38

39

40

41

42

Batas Pambansa Blg. 68. As stated in the Corporation Code. See http://www.congress.gov.ph/download/researches/rrb_0303_5.pdf See http://www.congress.gov.ph/download/researches/rrb_0303_5.pdf Section 6, BP Blg. 68 or The Corporation Code.

43

44

45

46

47

Agpalo, Ruben E., Comments on the Corporation Code of the Philippines, 2001 Second Edition, p. 36.
48

Record of the Constitutional Commission, Vol. III, pp. 255-256.

49

Id. at 360.

50

Republic Act No. 7042 entitled "AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES AND FOR OTHER PURPOSES."
51

Rollo (G.R. No. 157360), Vol. I, p. 348. It must be noted that under PLDTs Articles of Incorporation, the PLDT Board of Directors is expressly authorized to determine, among others, with respect to each series of Serial Preferred Stock: xxxx (b) the dividend rate, if any, on the shares of such series (which, if and to the extent the Board of Directors, in its sole discretion, shall deem appropriate under the circumstances, shall be fixed considering the rate of return on similar securities at the time of issuance of such shares), the terms and conditions upon which and the periods with respect to which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate; c. whether or not the shares of such series shall be redeemable, the limitations with respect to such redemption, the time or times when and the manner in which such shares shall be redeemable (including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed) and the price or prices at which such shares shall be redeemable, which may not be less than (i) the par value thereof plus (ii) accrued and unpaid dividends thereon, nor more than (i) 110% of the par value thereof plus (ii) accrued and unpaid dividends thereon; d. whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or non-cumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; (e) the rights to which the holders of shares of suchseries shall be entitled upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and if voluntary, may vary at different dates, provided, however, that the amount which the holders of shares of such series shall be entitled to receive in the event of any voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation Further, "the holders of Serial Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore, preferential cash dividends at the rate, under the terms and conditions, for the

periods and on the dates fixed by the resolution or resolutions of the Board of Directors, x x x and no more, before any dividends on the Common Capital Stock (other than dividends payable in Common Capital Stock) shall be paid or set apart for payment with respect to the same dividend period. All shares of Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and, when the stated dividends are not paid in full, the shares of all series of Serial Preferred Stock shall share ratably in the payment of dividends including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, provided, however, that any two or more series of Serial Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends as aforesaid."
52

Rollo (G.R. No. 157360), Vol. I, p. 339-355. Adopted on 21 November 1995 and approved on 18 February 1997.
53

The other rights, limitations and preferences of common capital stock are as follows: 1. After the requirements with respect to preferential dividends on the Serial Preferred Stock shall have been met and after the corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as purchase, retirement or sinking funds, then and not otherwise the holders of the Common Capital Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefor. 2. After distribution in full of the preferential amounts to be distributed to the holders of Serial Preferred Stock in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, the holders of the Common Capital Stock shall be entitled to receive all the remaining assets of the corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of the Common Capital Stock held by them, respectively. xxxx 4. The ownership of shares of Common Capital Stock shall not entitle the owner thereof to any right (other than such right, if any, as the Board of Directors in its discretion may from time to time grant) to subscribe for or to purchase or to have offered to him for subscription or purchase any shares of any class of preferred stock of the corporation.

54

http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2. 10%29_final.pdf
55

http://www.sec.gov.ph/index.htm?GIS_Download

56

http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2. 10%29_final.pdf

57

http://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update% 2012082009.pdf. See also http://www.pldt.com.ph/investor/Documents/disclosures_03-012011.pdf

58

Subscription Investment Plan. See PD No. 217.

59

This is the result of the preferred shares being denominated 10% preferred, which means each preferred share will earn an annual dividend equal to 10% of its par value of P10, which amounts to P1. Once this dividend is paid to holders of preferred shares, the rest of the retained earnings can be paid as dividends to the holders of common shares. Seehttp://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update %2012082009.pdf In 2011, PLDT declared dividends for the common shares at P78.00 per share. (http://www.pldt.com.ph/investor/Documents/disclosures_03-01-2011.pdf)
60

http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_(as%20of %207.2.10) _final.pdf Id. Based on PLDTs 2010 GIS, the paid-up capital of PLDT (as of Record Date 12 April 2010) consists of the following:
61

Filipino (preferred): 403,410,355 Foreigners (preferred): 2,287,207 Total: 405,697,562 Based on par value, as stated in PLDTs 2010 GIS sbumitted to the SEC. See http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of
62

%207.2.10%29_final.pdf (accessed 23 May 2011). Authorized capital stock of PLDT is broken down as follows: Common shares: 234,000,000 Preferred shares: 822,500,000 Total: 1,056,000,000
63

For the year 2009. http://www.pse.com.ph/ (accessed 31 May 2011)

64

65

http://www.pse.com.ph/html/Quotations/2011/stockQuotes_05272011.pdf (accessed 27 May 2011)

66

335 Phil. 82 (1997).

67

Krivenko v. Register of Deeds, 79 Phil. 461 (1947); Rellosa v. Gaw Chee Hun, 93 Phil. 827 (1953);Vasquez v. Li Seng Giap, 96 Phil. 447 (1955); Soriano v. Ong Hoo, 103 Phil. 829 (1958); Philippine Banking Corporation v. Lui She, 128 Phil. 53 (1967); Frenzel v. Catito, 453 Phil. 885 (2003).
68

Id.

69

Securities and Exchange Commission v. Court of Appeals, et al., 316 Phil. 903 (1995). The Court ruled in this case: The Securities and Exchange Commission ("SEC") has both regulatory and adjudicative functions. Under its regulatory responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and associations (excluding cooperatives, homeowners associations, and labor unions); compel legal and regulatory compliances; conduct inspections; and impose fines or other penalties for violations of the Revised Securities Act, as well as implementing rules and directives of the SEC, such as may be warranted. Relative to its adjudicative authority, the SEC has original and exclusive jurisdiction to hear and decide controversies and cases involving a. Intra-corporate and partnership relations between or among the corporation, officers and stockholders and partners, including their elections or appointments; b. State and corporate affairs in relation to the legal existence of corporations, partnerships and associations or to their franchise; and c. Investors and corporate affairs particularly in respect of devices and schemes, such as fraudulent practices, employed by directors, officers, business associates, and/or other stockholders, partners, or members of registered firms; x x x x x x x (Emphasis supplied)
70

SEC. 17. Grounds when articles of incorporation or amendment may be rejected or disapproved. The Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the requirements of this Code: Provided, That the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the articles or amendment. The following are grounds for such rejection or disapproval: xxx (4) That the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution. (Emphasis supplied)
71

Republic Act No. 8799. Section 5 of R.A. No. 8799 provides:

Section 5. Powers and Functions of the Commission. 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: (a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government; xxx (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications; xxx (f) Impose sanctions for the violation of laws and the rules, regulations and orders, issued pursuant thereto; xxx (i) Issue cease and desist orders to prevent fraud or injury to the investing public; xxx (m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and (n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.

The Lawphil Project - Arellano Law Foundation

SEPARATE DISSENTING OPINION VELASCO, JR., J.: With due respect, I dissent. A summary of the pertinent facts is as follows:

Philippine Long Distance Telephone Company (PLDT), a Philippine-registered telecommunications firm, was granted an initial 50-year charter and the right to establish a telephone network by Act No. 3436 on November 28, 1928.1 In 1969, American-owned General Telephone and Electronics Corporation (GTE), a major shareholder of PLDT, sold 26% of PLDTs equity to Philippine Telecommunications Investment Corporation (PTIC).2 PTIC was incorporated on November 9, 1967 and is engaged in the business of investment holdings. It held 26,034,263 of PLDT shares, or 13.847% of the total outstanding common stocks of PLDT.3 In 1977, Prime Holdings Inc. (PHI) was incorporated and 100% owned by the Conjuangco group. Subsequently, PHI became the owner of 111,415 shares or 46.125% of PTIC by virtue of three (3) Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla.4 On May 9, 1986, the 111,415 PTIC shares held by PHI were sequestered by the Presidential Commission on Good Government (PCGG) pursuant to Executive Order No. 1.5 Later, this Court declared the said shares to be owned by the Republic of the Philippines.6 In 1999, First Pacific Company Limited (First Pacific), a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54% equity of PTIC.7 Thereafter, the government decided to sell its 46.1% stake in PTIC (equivalent to 6.4% indirect stake in PLDT), designating the Privatization Council of the Philippine Government as the disposition entity. On December 8, 2006, a public bidding was held where Singapore-based Parallax Capital Management LP (Parallax) emerged as the highest bidder with an offer of PhP 25,217,556,000.8 On January 31, 2007, the House of Representatives Committee on Good Government conducted a public hearing on the particulars of the impending sale. Finance Secretary Margarito Teves, Finance Undersecretary John Sevilla, PCGG Chairperson Camilo Sabio, Commissioners Narciso Nario and Nick Conti, Securities and Exchange Commission (SEC) General Counsel Vernette Umali-Paco, Philippine Stock Exchange (PSE) Chairperson Jose Vitug and President Francisco Ed Lim, Development Bank of the Philippines (DBP) President Reynaldo David and Director Miguel Romero all attended the hearing.9 In Report No. 2270, the House Committee on Good Government concluded that: (1) the auction of the governments PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and (2) First Pacifics intended acquisition of the governments PTIC shares resulting in its 100% ownership in PTIC will not violate the 40% constitutional limit on foreign ownership of a public utility since PTIC held only 13.847% of the total outstanding common stocks of PLDT.10 Subsequently, the government informed First Pacific of the results of the bidding and gave it until February 1, 2007 to exercise its right of first refusal as provided under PTICs Articles of Incorporation. Consequently, First Pacific announced that it would match Parallaxs bid.11 However, First Pacific failed to raise the money for the purchase by the February 1, 2007 deadline and, instead, yielded the right to PTIC itself. The deadline was then reset to March 2, 2007.12 On February 14, 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings Inc. (MPAH), entered into a Conditional Sale and Purchase Agreement with the government for the latters 46.1% stake in PTIC at the price of PhP 25,217,556,000.13 The acquisition was completed on February 28, 2007.

On the same date, Wilson Gamboa (Gamboa) filed the instant petition for prohibition, injunction, declaratory relief and declaration of nullity of sale of the 111,415 shares of PTIC. He argues that: (1) the consummation of the impending sale of 111,415 shares to First Pacific violates the constitutional limitation on foreign ownership of a public utility; (2) respondents committed grave abuse of discretion by allowing the sale of PTIC shares to First Pacific; (3) respondents have made a complete misrepresentation of the impending sale by saying that it does not breach the constitutional limitation on foreign ownership of a public utility; and (4) the sale of common shares to foreigners in excess of 40% of the entire subscribed common capital stock violates the 1987 Philippine Constitution.14 After a careful examination of the facts and law applicable to the case, I submit that the petition should be dismissed. At the outset, it is strikingly clear that the petition suffers from several jurisdictional and procedural defects. Petitioner Has No Locus Standi Petitioner Gamboa claims that he filed the petition in his capacity as a "nominal shareholder of PLDT and as [a] taxpayer."15 However, these claims do not clothe him with the requisite legal standing to bring this suit. The Rules of Court specifically requires that "[e]very action must be prosecuted or defended in the name of the real party in interest."16 A real party in interest is defined as the "party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit." Petitioner has failed to allege any interest in the 111,415 PTIC shares nor in any of the previous purchase contracts he now seeks to annul. He is neither a shareholder of PTIC nor of First Pacific. Also, he has not alleged that he was an interested bidder in the governments auction sale of the PTIC shares. Finally, he has not shown how, as a nominal shareholder of PLDT, he stands to benefit from the annulment of the sale of the 111,415 PTIC shares or of any of the sales of the PLDT common shares held by foreigners. In fine, petitioner has not shown any real interest substantial enough to give him the requisite locus standi to question the sale of the governments PTIC shares to First Pacific. Likewise, petitioners assertion that he has standing to bring the suit as a "taxpayer" must fail. In Gonzales v. Narvasa, We discussed that "a taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds have been disbursed in alleged contravention of the law or the Constitution."17 In this case, no public funds have been disbursed. In fact, the opposite has happenedthere is an inflow of funds into the government coffers. Evidently, petitioner Gamboa has no legal standing to bring the present petition before this Court. This Court Has No Jurisdiction Petitioner Gamboa filed four (4) different petitions before this Courtdeclaratory relief, annulment, prohibition and injunction. However, all of these actions are not within the exclusive and/or original jurisdiction of the Supreme Court. Article VII of the 1987 Constitution, particularly Section 5(1), in relation to Sec. 5(5), enumerates the instances where this Court exercises original jurisdiction:

Article VIII Section 5. The Supreme Court shall have the following powers: (1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. xxxx (5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the integrated bar, and legal assistance to the under-privileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court. Accordingly, this Court promulgated the Rules of Court, Sec. 1, Rule 56 of which states: RULE 56 Original Cases Section 1. Original cases cognizable. Only petitions for certiorari, prohibition, mandamus, quo warranto, habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting ambassadors, other public ministers and consuls may be filed originally in the Supreme Court. Based on the foregoing provisos, it is patently clear that petitions for declaratory relief, annulment of sale and injunction do not fall within the exclusive original jurisdiction of this Court. First, the court with the proper jurisdiction for declaratory relief is the Regional Trial Court (RTC). Sec. 1, Rule 63 of the Rules of Court stresses that an action for declaratory relief is within the exclusive original jurisdiction of the RTC, viz: Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. (Emphasis supplied.) An action for declaratory relief also requires the following: (1) a justiciable controversy between persons whose interests are adverse; (2) the party seeking the relief has a legal interest in the controversy; and (3) the issue is ripe for judicial determination.18 As previously discussed, petitioner lacks any real interest in this action; thus, no justiciable controversy between adverse interests exists. Further, the Rules of Court also requires that "[a]ll persons who have or claim any interest which would be affected by the declaration shall be made parties."19 The failure to implead all persons with a claim or interest in the subject matter of the petition for declaratory relief is a jurisdictional defect. 20 What is more, an action for declaratory relief requires that it be filed before "the breach or violation of the statute, deed, contract, etc. to which it refers. Where the law or contract has already been

contravened prior to the filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action."21 Here, petitioner himself points out the fact that, using the common stockholding basis, the 40% maximum foreign ownership limit on PLDT was already violated long before the sale of the PTIC shares by the government.22 In addition, the sale itself has already been consummated. This only means that an action for declaratory relief is no longer proper. Despite this, the ponencia decided to treat the petition for declaratory relief as one for mandamus, citing the rule that "where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus."23 However, such rule is not absolute. In Macasiano v. National Housing Authority,24 the Court explicitly stated that the exercise of such discretion, whether to treat a petition for declaratory relief as one for mandamus, presupposes that the petition is otherwise viable or meritorious. As I shall discuss subsequently in the substantive portion of this opinion, the petition in this case is clearly not viable or meritorious. Moreover, one of the reasons pointed out by the Court in Macasiono when it refused to treat the petition for declaratory relief as one for mandamus was that the petitioner lacked the proper standing to file the petition. Thus, the petition was subsequently dismissed. This is exactly similar to the instant case. As previously explained, petitioner has no legal standing to bring the present petition before this Court. He failed to show any real interest in the case substantial enough to give him the required legal standing to question the sale of the PTIC shares of the government to First Pacific. Further, a petition for mandamus is premature if there are administrative remedies available to petitioner.25 Under the doctrine of primary administrative jurisdiction, "courts cannot or will not determine a controversy where the issues for resolution demand the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact. In other words, if a case is such that its determination requires the expertise, specialized training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort to the courts is had even if the matter may well be within their proper jurisdiction."26 Along with this, the doctrine of exhaustion of administrative remedies also requires that where an administrative remedy is provided by statute relief must be sought by exhausting this remedy before the courts will act.27 In the instant case, the power and authority to determine compliance with the Constitution lies with the SEC. Under Section 17(4) of the Corporation Code, the SEC has the power to approve or reject the Articles of Incorporation of any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution." Similarly, under Section 5 of the Securities Regulation Code, the SEC is conferred with the power to suspend or revoke the franchise or certificate of registration of corporations upon any of the grounds provided by law.28 It bears stressing that the SEC also has the power to investigate violations of the Securities Regulation Code and its Amended Rules. With this, it is clear that petitioner failed to invoke the primary jurisdiction of the SEC with respect to this matter. Additionally, the petition contains numerous questions of fact which is not allowed in a petition for mandamus.29Hence, based on the foregoing, a petition for mandamus is evidently improper. Second, since an action for annulment of sale is an ordinary civil action incapable of pecuniary estimation,30 it also falls within the exclusive original jurisdiction of the RTC.31 Lastly, although this Court, the CA, and the RTC have "concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court forum."32 The doctrine of

hierarchy of courts dictates that when jurisdiction is shared concurrently with different courts, the proper suit should first be filed with the lower-ranking court. Failure to do so is sufficient cause for the dismissal of a petition.33 In Santiago v. Vasquez,34 the Court took the opportunity to explain why the blatant disregard of the hierarchy of courts is frowned upon, to wit: x x x We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the precious time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction. In the instant case, petitioner should have filed the petition for injunction and prohibition with the trial courts. Petitioner failed to show any exceptional or compelling circumstance to justify the exception to the rule of hierarchy of courts. Thus, absent such justification, the rule must be upheld. In fact, in Fernandez v. Cojuangco,35 which also involved a similar issue, questioning the issuance of PLDTs common shares to Smart and NTTs stockholders on the ground, among others, that such issuance of shares violated the 40% foreign ownership constitutional restriction for public utilities, this Court issued a Resolution dismissing the petition filed with it for disregarding the hierarchy of courts. More importantly, the function of a writ of prohibition is to prevent the performance of an act which is yet to be done. It is not intended to provide a remedy for acts already performed.36 The rationale behind this was discussed in Cabanero v. Torres,37 citing U.S. v. Hoffman,38 viz: The writ of prohibition, as its name imports, is one which commands the person to whom it is directed not to do something which, by the suggested to the relator, the court is informed he is about to do. If the thing be already done, it is manifest the writ of prohibition cannot undo it, for that would require an affirmative act; and the only effect to a writ of prohibition is to suspend all action, and to prevent any further proceeding in the prohibited direction. As previously pointed out, the sale by the government of the PTIC shares had already been completed. Thus, the Petition for Prohibition has become moot. As a result, this Court has no obligation to entertain the petition. Finally, it should be noted that the non-joinder of ordinary civil actions with special civil actions is elementary in remedial law. Sec. 5, Rule 2 of the Rules specifically prohibits the joining of special civil actions or actions governed by special rules with ordinary civil actions.39 In this case, petitioner violated this basic rule when he joined several special civil actions, prohibition and declaratory relief, and the ordinary civil actions for annulment and injunction. Violation of Due Process

It is a fundamental guarantee in the Constitution that "[n]o person shall be deprived of life, liberty or property without due process of law."40 Due process has two aspects: substantive and procedural. Substantive due process is a prohibition of arbitrary laws, while procedural due process is a guarantee of procedural fairness.41Here, what petitioner asks of this Court is a finding of a violation of both substantive and procedural due process. Sec. 11, Art. XII of the Constitution contemplates of two situations: first, where the applicant of a franchise is a natural person, he must be a Filipino citizen; and second, where the applicant is a juridical person, 60% of its capital must be owned by Filipino citizens. In the first scenario, only one person and one property is involved, i.e., the Filipino citizen and his or her franchise. In the second, two different property holders and two different properties are involved, i.e., the public utility company holding its franchise and the shareholders owning the capital of the utility company. However, in both situations, Sec. 11 imposes a qualification for the retention of property on just one property holder, the franchise holder, as a condition for keeping his or its franchise. It imposes no nationality qualification on the shareholders of the utility company as a condition for keeping their shares in the utility company. Thus, if a utility company or the franchise holder fails to maintain the nationality qualification, only its franchise should be revoked. In J.G. Summit Holdings, Inc. v. CA,42 this Court had the chance to rule on a similar set of facts. In that case, W e refused to annul the sale of the governments shares despite the petitioners claim that it would breach the maximum 40% foreign ownership limit found in the Constitution. According to the Court: x x x In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the shares which is adversely affected but the capacity of the corporation to own land that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. (Emphasis supplied.) Certainly, the Court has differentiated the two property owners and their properties. Confusing the two would result in "an unreasonable curtailment of property rights without due process of law."43 Furthermore, procedural due process requires that before any of the common shares in excess of the 40% maximum foreign ownership limit can be taken, all the shareholders have to be given notice and a trial should be held before their shares are taken. This means that petitioner should have impleaded all the foreign natural and juridical shareholders of PLDT so that they can be heard. The foreign shareholders are considered as an "indispensable party" or one who: has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest[;] a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward.44

At the same time, the Rules of Court explicitly requires the joinder of indispensable parties or "[p]arties in interest without whom no final determination can be had."45 This is mandatory. As held in Pepsico, Inc. v. Emerald Pizza, Inc.,46 their absence renders all actions of the court null and void, viz: x x x x Their presence is necessary to vest the court with jurisdiction, which is "the authority to hear and determine a cause, the right to act in a case." Thus, without their presence to a suit or proceeding, judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. (Emphasis supplied.) In this case, petitioner failed to implead all the indispensable parties. Accordingly, in the absence of such indispensable parties, this Court is wanting in authority to act or rule on the present petition. Ultimately, the present petition partakes of a collateral attack on PLDTs franchise as a public utility with petitioner pleading as ground PLDTs alleged breach of the 40% limit on foreign equity. Such is not allowed. As discussed in PLDT v. National Telecommunications Commission,47 a franchise is a property right that can only be questioned in a direct proceeding: x x x A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" x x x the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government. Hence, due process requires that for the revocation of franchise a petition for quo warranto be filed directly attacking the franchise itself. Evidently, the petition is patently flawed and the petitioner availed himself of the wrong remedies. These jurisdictional and procedural grounds, by themselves, are ample enough to warrant the dismissal of the petition. Granting arguendo that the petition is sufficient in substance and form, it will still suffer the same fate. The Proper Definition of "Capital" Petitioners main substantive issue revolves around the proper definition of the word "capital" found in Section 11, Article 12 of the Constitution. The said section reads: Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied.)

He argues that the framers of the Constitution intended the word "capital" to be limited to voting shares alone and not the total outstanding capital stock (combined total of voting and non-voting shares). Specifically, he contends that the term "capital" refers only to shares of stock that can vote in the election of the members of the Board of Directors. The question is, is this the proper definition? The ponencia resolved this in the affirmative and held that the term "capital" only refers to voting shares since these are the shares that "have voting rights which translate to control"48, i.e., the right to elect directors who ultimately control or manage the corporation. Generally, these are referred to as "common" shares. However, he clarified that if preferred shares also have the right to vote in the election of the members of the Board of Directors, then the term "capital" shall also include such preferred shares. Further, the ponencia maintains that "mere legal title is insufficient to meet the required Filipino equity," but that "full beneficial ownership of the stocks coupled with appropriate voting rights" is required.49 I beg to disagree with the ponencias resolution of this issue for the following reasons: First, contrary to pronouncement of the ponencia, the intent of the framers of the Constitution was not to limit the application of the word "capital" to voting or common shares alone. In fact, the Records of the Constitutional Commission reveal that even though the UP Law Center proposed the phrase "voting stock or controlling interest," the framers of the Constitution did not adopt this but instead used the word "capital," viz: MR. BENGZON. We would also like to indicate that perhaps the better term in order to avoid any conflict or misinterpretations would be the use of the phrase "capital stock." MR. NATIVIDAD. Capital stock? MR. SUAREZ. We will discuss that on the committee level because precisely, there were three criteria that were submitted. One of them is with reference to the authorized capital stock; the second would be with respect to the voting rights; and the third would be with respect to the management. And so, again, we would like to inform the members that the Committee is still trying to polish this particular provision.50 xxxx MR. FOZ. Mr. Vice-President, in Sections 3 and 9,51 the provision on equity is both 60 percent, but I notice that this is now different from the provision in the 1973 Constitution in that the basis for the equity provision is voting stock or controlling interest instead of the usual capital percentage as provided for in the 1973 Constitution. We would like to know what the difference would be between the previous and the proposed provisions regarding equity interest. MR. VILLEGAS. Commissioner Suarez will answer that. MR. SUAREZ. Thank you. As a matter of fact, this particular portion is still being reviewed by this Committee. In Section 1, Article XIII of the 1935 Constitution, the wording is that the percentage should be based on the capital which is owned by such citizens. In the proposed draft, this phrase was proposed: "voting stock or controlling interest." This was a plan submitted by the UP Law Center.

Three days ago, we had an early morning breakfast conference with the members of the UP Law Center and precisely, we were seeking clarification regarding the difference. We would have three criteria to go by: One would be based on capital, which is capital stock of the corporation, authorized, subscribed or paid up, as employed under the 1935 and the 1973 Constitution. The idea behind the introduction of the phrase "voting stock or controlling interest" was precisely to avoid the perpetration of dummies, Filipino dummies of multinationals. It is theoretically possible that a situation may develop where these multinational interests would not really be only 40 percent but will extend beyond that in the matter of voting because they could enter into what is known as a voting trust or voting agreement with the rest of the stockholders and, therefore, notwithstanding the fact that on record their capital extent is only up to 40-percent interest in the corporation, actually, they would be managing and controlling the entire company. That is why the UP Law Center members suggested that we utilize the words "voting interest" which would preclude multinational control in the matter of voting, independent of the capital structure of the corporation. And then they also added the phrase "controlling interest" which up to now they have not been able to successfully define the exact meaning of. x x x And as far as I am concerned, I am not speaking in behalf of the Committee, I would feel more comfortable if we go back to the wording of the 1935 and the 1973 Constitution, that is to say, the 60-40 percentage could be based on the capital stock of the corporation. MR. FOZ. I understand that that was the same view of Dean Carale who does not agree with the other on this panel at the UP Law Center regarding the percentage of the ratio. MR. Suarez. That is right. Dean Carale shares my sentiment about this matter. MR. BENGZON. I also share the sentiment of Commissioner Suarez in that respect. So there are already two in the Committee who want to go back to the wording of the 1935 and the 1973 Constitution.52 xxxx MR. TREAS. Madam President, may I propose an amendment on line 14 of Section 3 by deleting therefrom "whose voting stock and controlling interest." And in lieu thereof, insert the CAPITAL so the line should read: "associations at least sixty percent of the CAPITAL is owned by such citizens. MR. VILLEGAS. We accept the amendment. MR. TREAS. Thank you. THE PRESIDENT. The amendment of Commissioner Treas on line 14 has been accepted by the Committee. Is there any objection? (Silence) The Chair hears none; the amendment is approved.53 xxxx MR. VILLEGAS. Yes, Commissioner Davide has accepted the word "CAPITAL" in place of "voting stock or controlling interest." This is an amendment already accepted by the Committee.54 x x x x xxxx MR. NOLLEDO. Thank you, Madam President.

I would like to propound some questions to the chairman and members of the committee. I have here a copy of the approved provisions on Article on the National Economy and Patrimony. On page 2, the first two lines are with respect to the Filipino and foreign equity and I said: "At least sixty percent of whose capital or controlling interest is owned by such citizen." I notice that this provision was amended by Commissioner Davide by changing "voting stocks" to "CAPITAL," but I still notice that there appears the term "controlling interest" which seems to refer to associations other than corporations and it is merely 50 percent plus one percent which is less than 60 percent. Besides, the wordings may indicate that the 60 percent may be based not only on capital but also on controlling interest; it could mean 60 percent or 51 percent. Before I propound the final question, I would like to make a comment in relation to Section 15 since they are related to each other. I notice that in Section 15, there still appears the phrase "voting stock or controlling interest." The term "voting stocks" as the basis of the Filipino equity means that if 60 percent of the voting stocks belong to Filipinos, foreigners may not own more than 40 percent of the capital as long as the 40 percent or the excess thereof will cover nonvoting stock. This is aside from the fact that under the Corporation Code, even nonvoting shares can vote on certain instances. Control over investments may cover aspects of management and participation in the fruits of production or exploitation. So, I hope the committee will consider favorably my recommendation that instead of using "controlling interests," we just use "CAPITAL" uniformly in cases where foreign equity is permitted by law, because the purpose is really to help the Filipinos in the exploitation of natural resources and in the operation of public utilities. I know the committee, at its own instance, can make the amendment. What does the committee say? MR. VILLEGAS. We completely agree with the Commissioners views. Actually, it was really an oversight. We did decide on the word "CAPITAL." I think it was the opinion of the majority that the phrase "controlling interest" is ambiguous. So, we do accept the Commissioners proposal to eliminate the phrase "or controlling interest" in all the provisions that talk about foreign participation. (Emphasis supplied.) MR. NOLLEDO. Not only in Section 3, but also with respect to Section 15. Thank you very much.55 Undoubtedly, the framers of the Constitution decided to use the word "capital" in all provisions that talk about foreign participation and intentionally left out the phrase "voting stocks" or "controlling interest." Cassus Omissus Pro Omisso Habendus Esta person, object or thing omitted must have been omitted intentionally. In this case, the intention of the framers of the Constitution is very clear to omit the phrases "voting stock" and "controlling interest." Evidently, the framers of the Constitution were more comfortable with going back to the wording of the 1935 and 1973 Constitutions, which is to use the 60-40 percentage for the basis of the capital stock of the corporation. Additionally, the phrases "voting stock or controlling interest" were also initially used in Secs. 256 and 10,57 Article XII of the 1987 Constitution. These provisions involve the development of natural resources and certain investments. However, after much debate, they were also replaced with the word "capital" alone. All of these were very evident in the aforementioned deliberations.

Much more significant is the fact that a comprehensive examination of the constitutional deliberations in their entirety will reveal that the framers of the Constitution themselves understood that the word capital includes both voting and non-voting shares and still decided to use "capital" alone, to wit: MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee. MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest." MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens." MR. VILLEGAS. Yes. MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens? MR. VILLEGAS. That is right. xxxx MR. AZCUNA. Yes, but what I mean is that the control should be with the Filipinos. MR. BENGZON. Yes, that is understood. MR. AZCUNA. Yes, because if we just say "sixty percent of whose capital is owned by the Filipinos," the capital may be voting or non-voting. MR. BENGZON. That is correct.58 xxxx MR. GARCIA. Thank you very much, Madam President. I would like to propose the following amendment on Section 3, line 14 on page 2. I propose to change the word "sixty" to SEVENTY-FIVE. So, this will read: "or it may enter into co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations at least SEVENTY-FIVE percent of whose CAPITAL stock or controlling interest is owned by such citizens." MR. VILLEGAS. This is just a correction. I think Commissioner Azcuna is not insisting on the retention of the phrase "controlling interest," so we will retain "CAPITAL" to go back really to the 1935 and 1973 formulations.59(Emphasis supplied.) To emphasize, by using the word "capital," the framers of the Constitution adopted the definition or interpretation that includes all types of shares, whether voting or non-voting. The fundamental principle in the construction of constitutional provisions is "to give the intent to the framers of the organic law and the people adopting it. The intention to which force is to be given is

that which is embodied and expressed in the constitutional provisions themselves."60 Generally, "in construing constitutional provisions which are ambiguous or of doubtful meaning, the courts may consider the debates in the constitutional convention as throwing light on the intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the understanding of the convention as to what was meant by the terms of the constitutional provision which was the subject of the deliberation, goes a long way toward explaining the understanding of the people when they ratified it."61 Second, the ponencia also points to the provisions of the Foreign Investments Act of 1991 (FIA),62 as a reinforcement of the interpretation of the word "capital" as only referring to those shares entitled to vote. However, a careful examination of its provisions would reveal otherwise. Section 3(a) of the FIA, as amended, defines the term "Philippine national" as: SEC. 3. Definitions. - As used in this Act: a. The term "Philippine national" shall mean a citizen of the Philippines; of a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (Emphasis supplied.) The ponencia failed to see the fact that the FIA specifically has the phrase "entitled to vote" after the phrase "total outstanding capital stock." Logically, this means that interpreting the phrase "total outstanding capital stock" alone connotes the inclusion of all types of shares under the term "capital" and not just those that are entitled to vote. By adding the phrase "entitled to vote," the FIA sought to distinguish between the shares that can vote and those that cannot. Thus, it is very clear that even the FIA itself supports the definition of the term "capital" as including all types of shares. As a matter of fact, in the Senate deliberations of the FIA, Senator Angara pointed out that the word "capital," as used in the 1987 Constitution, includes all types of shares: Senator Angara. x x x x Before I leave that point, Mr. President, as we know, the constitutional test is capital. That means, equity investment, not control. Would this control test then now become an additional requirement to the constitutional requirement? Senator Paterno. Well, this is an amplification of the constitutional stipulation, Mr. President. It is a definition, by law, of what is contained in the Constitution.

Senator Angara. No, Mr. President, because the Constitution requires 60 percent of capital. That means, whether voting or nonvoting, 60 percent of that must belong to Filipinos. Whereas, under this proposed definition, it is only the voting shares that we require to be 60 percent owned. Senator Paterno. Yes. Senator Angara. So, my question is: Would this requirement of control be in addition to what the Constitution imposes? Senator Paterno. No, this would be the definition of what the Constitution requires. We are saying that it is the capital stock outstanding and entitled to vote. It is the definition of capital as maintained by the Constitution. Senator Angara. On the contrary, I am saying that the constitutional test is capital, which is distinguished from capital stock entitled to vote. Capital means equity which can be voting or nonvoting, common or preferred. That is the constitutional test.63 x x x (Emphasis supplied.) Moreover, it is a well-settled rule of statutory construction that a statute should be construed whenever possible in a manner that will avoid conflict with the Constitution.64 Where a statute is reasonably susceptible of two constructions, one constitutional and the other unconstitutional, the construction in favor of its constitutionality should be adopted. In this case, the FIA should be read in harmony with the Constitution. Since the Constitution only provides for a single requirement for the operation of a public utility under Sec. 11, i.e., 60% capital must be Filipino-owned, a mere statute cannot add another requirement. Otherwise, such statute may be considered unconstitutional. Accordingly, the phrase "entitled to vote" should not be interpreted to be limited to common shares alone or those shares entitled to vote in the election of members of the Board of Directors. It should also include those deemed non-voting because they also have voting rights. Sec. 6 of the Corporation Code65 grants voting rights to holders of shares of a corporation on certain key fundamental corporate matters despite being classified as non-voting in the articles of incorporation. These are: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; 6. Merger or consolidation of the corporation with another corporation or other corporations; 7. Investment of corporate funds in another corporation or business in accordance with this Code; and 8. Dissolution of the corporation.

Clearly, the shares classified as non-voting are also entitled to vote under these circumstances. In fact, the FIA did not say "entitled to vote in the management affairs of the corporation" or "entitled to vote in the election of the members of the Board of Directors." Verily, where the law does not distinguish, neither should We. Hence, the proper interpretation of the phrase "entitled to vote" under the FIA should be that it applies to all shares, whether classified as voting or non-voting shares. Such construction is in fact in harmony with the fundamental law of the land. Stockholders, whether holding voting or non-voting stocks, have all the rights, powers and privileges of ownership over their stocks. This necessarily includes the right to vote because such is inherent in and incidental to the ownership of corporate stocks, and as such is a property right.66 Additionally, control is another inherent right of ownership.67 The circumstances enumerated in Sec. 6 of the Corporation Code clearly evince this. It gives voting rights to the stocks deemed as nonvoting as to fundamental and major corporate changes. Thus, the issue should not only dwell on the daily management affairs of the corporation but also on the equally important fundamental changes that may need to be voted on. On this, the "non-voting" shares also exercise control, together with the voting shares. Consequently, the fact that only holders of common shares can elect a corporations board of directors does not mean that only such holders exercise control over the corporation. Particularly, the control exercised by the board of directors over the corporation, by virtue of the corporate entity doctrine, is totally distinct from the corporations stockholders and any power stockholders have over the corporation as owners. It is settled that when the activity or business of a corporation falls within any of the partly nationalized provisions of the Constitution or a special law, the "control test" must also be applied to determine the nationality of a corporation on the basis of the nationality of the stockholders who control its equity. The control test was laid down by the Department of Justice (DOJ) in its Opinion No. 18 dated January 19, 1989. It determines the nationality of a corporation with alien equity based on the percentage of capital owned by Filipino citizens. It reads: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60% only the number of shares corresponding to such percentage shall be counted as of Philippine nationality.68 In a catena of opinions, the SEC, "the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities,"69 has consistently applied the control test.70 The FIA likewise adheres to the control test. This intent is evident in the May 21, 1991 deliberations of the Bicameral Conference Committee (Committees on Economic Affairs of the Senate and House of Representatives), to wit: CHAIRMAN TEVES. x x x On definition of terms, Ronnie, would you like anything to say here on the definition of terms of Philippine national?

HON. RONALDO B. ZAMORA. I think weve we have already agreed that we are adopting here the control test. Wasnt that the result of the CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it clear that the Senate was not able to make a decision for or against the grandfather rule and the control test, because we had gone into caucus and we had voted but later on the agreement was rebutted and so we had to go back to adopting the wording in the present law which is not clearly, by its language, a control test formulation. HON. ANGARA. Well, I dont know. Maybe I was absent, Ting, when that happened but my recollection is that we went into caucus, we debated [the] pros and cons of the control versus the grandfather rule and by actual vote the control test bloc won. I dont know when subsequent rejection took place, but anyway even if the we are adopting the present language of the law I think by interpretation, administrative interpretation, while there may be some differences at the beginning, the current interpretation of this is the control test. It amounts to the control test. CHAIRMAN TEVES. Thats what I understood, that we could manifest our decision on the control test formula even if we adopt the wordings here by the Senate version. xxxx CHAIRMAN PATERNO. The most we can do is to say that we have explained is to say that although the House Panel wanted to adopt language which would make clear that the control test is the guiding philosophy in the definition of [a] Philippine national, we explained to them the situation in the Senate and said that we would be was asked them to adopt the present wording of the law cognizant of the fact that the present administrative interpretation is the control test interpretation. But, you know, we cannot go beyond that.71 MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee. MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest." This intent is even more apparent in the Implementing Rules and Regulations (IRR) of the FIA. In defining a "Philippine national," Section 1(b) of the IRR of the FIA categorically states that for the purposes of determining the nationality of a corporation the control test should be applied.72 The cardinal rule in the interpretation of laws is to ascertain and give effect to the intention of the legislator.73Therefore, the legislative intent to apply the control test in the determination of nationality must be given effect. Significantly, in applying the control test, the SEC has consistently ruled that the determination of the nationality of the corporation must be based on the entire outstanding capital stock, which includes both voting and non-voting shares. One such ruling can be found in an Opinion dated November 21, 1989 addressed to Atty. Reynaldo G. Geronimo, to wit: As to the basis of computation of the 60-40 percentage nationality requirement under existing laws (whether it should be based on the number of shares or the aggregate amount in pesos of the par value of the shares), the following definitions of corporate terms are worth mentioning.

"The term capital stock signifies the aggregate of the shares actually subscribed". (11 Fletcher, Cyc. Corps. (1971 Rev. Vol.) sec. 5082, citing Goodnow v. American Writing Paper Co., 73 NJ Eq. 692, 69 A 1014 aff'g 72 NJ Eq. 645, 66 A, 607). "Capital stock means the capital subscribed (the share capital)". (Ibid., emphasis supplied). "In its primary sense a share of stock is simply one of the proportionate integers or units, the sum of which constitutes the capital stock of corporation. (Fletcher, sec. 5083). The equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the extent of his interest is described by the term shares. The expression shares of stock when qualified by words indicating number and ownership expresses the extent of the owner's interest in the corporate property (Ibid, Sec. 5083, emphasis supplied). Likewise, in all provisions of the Corporation Code the stockholders right to vote and receive dividends is always determined and based on the "outstanding capital stock", defined as follows: "SECTION 137. Outstanding capital stock defined. The term "outstanding capital stock" as used in this Code, means the total shares of stock issued to subscribers or stockholders, whether or not fully or partially paid (as long as there is a binding subscription agreement, except treasury shares." The computation, therefore, should be based on the total outstanding capital stock, irrespective of the amount of the par value of the shares. Again in SEC Opinion dated December 22, 2004 addressed to Atty. Priscilla B. Valer, the SEC reiterated the application of the control test to the total outstanding capital stock irrespective of the amount of the par value of shares, viz: "Under the control concept, the nationality of the corporation depends on the nationality of the controlling stockholders. In determining the nationality of a corporation under the control test, the following ruling was adopted by the Commission: xxxx Hence, we confirm your view that the test for compliance with the nationality requirement is based on the total outstanding capital stock irrespective of the amount of the par value of shares.74 (Emphasis supplied.) More importantly, the SEC defined "capital" as to include both voting and non-voting in the determination of the nationality of a corporation, to wit: In view of the foregoing, it is opined that the term "capital" denotes the sum total of the shares subscribed and paid by the shareholders, or secured to be paid, irrespective of their nomenclature to be issued by the corporation in the conduct of its operation. Hence, non-voting preferred shares are considered in the computation of the 60-40% Filipino-alien equity requirement of certain economic activities under the Constitution.75 (Emphasis supplied.) In fact, the issue in the present case was already answered by the SEC in its Opinion dated February 15, 1988. The opinion was issued as an answer to the query"Would it be legal for foreigners to own more than 40% of the common shares but not more than 40% of the total

outstanding capital stock which would include both common and non-voting preferred shares?" This is exactly the question in this case. The SEC ruled in the affirmative and stated: The pertinent provision of the Philippine Constitution under Article XII, Section 7, reads in part thus: "No franchise, certificate, or any form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines, or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens. . ." x x x The issue raised on your letter zeroes in on the meaning of the word "capital" as used in the above constitutional provision. Anent thereto, please be informed that the term "capital" as applied to corporations, refers to the money, property or means contributed by stockholders as the form or basis for the business or enterprise for which the corporation was formed and generally implies that such money or property or means have been contributed in payment for stock issued to the contributors. (United Grocers, Ltd. v. United States F. Supp. 834, cited in 11 Fletcher, Cyc. Corp., 1986, rev. vol., sec. 5080 at 18). As further ruled by the court, "capital of a corporation is the fund or other property, actually or potentially in its possession, derived or to be derived from the sale by it of shares of its stock or his exchange by it for property other than money. This fund includes not only money or other property received by the corporation for shares of stock but all balances of purchase money, or installments, due the corporation for shares of stock sold by it, and all unpaid subscriptions for shares." (Williams v. Brownstein, 1F. 2d 470, cited in 11 Fletcher, Cyc. Corp., 1058 rev. vol., sec. 5080, p. 21). The term "capital" is also used synonymously with the words "capital stock", as meaning the amount subscribed and paid-in and upon which the corporation is to conduct its operation. (11 Fletcher, Cyc. Corp. 1986, rev. vol., sec. 5080 at 15). And, as held by the court in Haggard v. Lexington Utilities Co., (260 Ky 251, 84 SW 2d 84, cited in 11 Fletcher, Cyc. Corp., 1958 rev. vol., sec. 5079 at 17), "The capital stock of a corporation is the amount paid-in by its stockholders in money, property or services with which it is to conduct its business, and it is immaterial how the stock is classified, whether as common or preferred." The Commission, in a previous opinion, ruled that the term capital denotes the sum total of the shares subscribed and paid by the shareholders or served to be paid, irrespective of their nomenclature. (Letter to Supreme Technotronics Corporation, dated April 14, 1987). Hence, your query is answered in the affirmative.76 (Emphasis supplied.) This opinion was reiterated in another Opinion dated July 16, 1996 addressed to Mr. Mitsuhiro Otsuki: Relative to the second issue, "In the absence of special provisions the holders of preferred stock in a corporation are in precisely the same position, both with respect to the corporation itself and with respect to the creditors of the corporation, as the holders of common stock, except only that they are entitled to receive dividends on their shares, to the extent guaranteed or agreed upon, before any dividends can be paid to the holders of common stock. x x x. Accordingly, as a general rule, they are considered in the computation of the 60-40% Filipino-alien equity percentage requirement, unless the law covering the type of business to be undertaken provides otherwise. (Emphasis supplied.) In Opinion No. 32-03 dated June 2, 2003 addressed to Commissioner Armi Jane R. Borje, the SEC likewise held that the word "capital" as used in Sec. 11, Art. XII of the 1987 Constitution refers to the entire outstanding capital stock, regardless of its share classification, viz:

Please note that Article XII, Section 11 of the Philippine Constitution provides: "No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens" The legal capacity of the corporation to acquire franchise, certificate, or authority for the operation of a public utility is regulated by the aforequoted Constitutional provision, which requires that at least sixty per centum (60%) of the capital of such corporation be owned by citizens of the Philippines. However, such provision does not qualify whether the required ownership of "capital" shall be that of the voting or non-voting, common or preferred. Hence, it should be interpreted to refer to the sum total of the outstanding capital stock, irrespective of the nomenclature or classification as common, preferred, voting or non-voting. (Emphasis supplied.) In the same way, the SEC has also adopted the same interpretation of the word "capital" to various laws or statutes imposing a minimum on Filipino ownership. In an Opinion dated November 11, 1988 addressed to Mr. Nito Doria, which involved Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, the SEC stated: For permitted and permissible investments, the maximum percentage of control allowable to foreign investors is found in Sections 46 and 47 of the Omnibus Investments Code of 1987, copy enclosed. In relation thereto, "Outstanding capital stock" refers to the total shares issued to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. (Section 137, Corporation Code of the Philippines), and it is immaterial how the stock is classified, whether as common or preferred, (SEC Opinions, dated June 13, 1988, April 14, 1987, and February 15, 1988). Again, in an Opinion dated October 16, 1981 addressed to Atty. Jose A. Baez which involved Republic Act No. 1180, otherwise known as the Retail Trade Nationalization Law, the SEC opined that the issuance of preferred shares to a foreigner will disqualify the corporation from engaging in retail trade, because the law provides that "no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business."77 The SEC held: Your client will lose its character of being one hundred percent (100%) Filipino-owned if said Japanese entity is allowed to subscribe to its preferred shares. The issuance of shares to an alien will reduce the ownership of Filipino citizens to less than the required percentage based on the outstanding capital stock of the corporation, regardless of the fact that said shares are non-voting and non-convertible. Please be advised that under the Retail Trade Nationalization Law (R.A. 1180), "No association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business." Notably, the foregoing Opinion was rendered before the promulgation of the 1987 Constitution. Thus, it must be assumed that the framers of the Constitution were aware of the administrative interpretation of the word "capital" and that they also adhered to the same interpretation when they re-adopted it in the 1987 Constitution from the 1935 and 1973 Constitutions. As held in Laxamana v. Baltazar, "[w]here a statute has received a contemporaneous and practical interpretation and the statute as interpreted is re-enacted, the practical interpretation is accorded greater weight than it ordinarily receives, and is regarded as presumptively the correct interpretation of the law. The rule here is based upon the theory that the legislature is acquainted with the contemporaneous interpretation of a statute, especially when made by an administrative body or executive officers

charged with the duty of administering or enforcing the law, and therefore impliedly adopts the interpretation upon re-enactment."78 Without a doubt, the SECs definition of the word "capital" has been consistently applied to include the entire outstanding capital stock of a corporation, irregardless of whether it is common or preferred or voting or non-voting. This contemporaneous construction of the SEC is entitled to great respect and weight especially since it is consistent with the Constitutional Commissions intention to use the term "capital" as applying to all shares, whether common or preferred. It is well to reiterate the principle of contemporaneous construction and the reason why it is entitled to great respect, viz: x x x As far back as In re Allen, (2 Phil. 630) a 1903 decision, Justice McDonough, as ponente, cited this excerpt from the leading American case of Pennoyer v. McConnaughy, decided in 1891: "The principle that the contemporaneous construction of a statute by the executive officers of the government, whose duty it is to execute it, is entitled to great respect, and should ordinarily control the construction of the statute by the courts, is so firmly embedded in our jurisprudence that no authorities need be cited to support it. (Ibid, 640. Pennoyer v. McConnaughly is cited in 140 US 1. The excerpt is on p. 23 thereof. Cf. Government v. Municipality of Binalonan, 32 Phil, 634 [1915]) There was a paraphrase by Justice Malcolm of such a pronouncement in Molina v. Rafferty, (37 Phil. 545) a 1918 decision:" Courts will and should respect the contemporaneous construction placed upon a statute by the executive officers whose duty it is to enforce it, and unless such interpretation is clearly erroneous will ordinarily be controlled thereby. (Ibid, 555) Since then, such a doctrine has been reiterated in numerous decisions.79 (Emphasis supplied.) Similarly, the Corporation Code defines "outstanding capital stock" as the "total shares of stock issued."80 It does not distinguish between common and preferred shares. It includes all types of shares. Since foreigners hold 64.27% of to the total number of PLDTs common shares which are entitled to select the Board of Directors, the ponencia claims foreigners will elect the majority of the Board of Director in PLDT and, hence, have control over the company. This is incorrect. First of all, it has been established that the word "capital" in the phrase "corporation or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens" under Sec. 11, Art. XII of the 1987 Constitution means both common or preferred shares or voting or non-voting shares. This phrase is qualified by the last sentence of Sec. 11, which reads: x x x x The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied.) The aforequoted constitutional provision is unequivocalit limits the participation of the foreign investors in the governing body to their proportionate share in the capital of the corporation. Participation is "the act of taking part in something."81 Accordingly, it includes the right to elect or vote for in the election of the members of the Board of Directors. However, this right to participate in the election is restricted by the first sentence of Sec. 11 such that their right cannot exceed their proportionate share in the capital, i.e., 40%. In other words, the right of foreign investors to elect the members of the Board of Directors cannot exceed the voting rights of the 40% of the common

shares, even though their ownership of common shares may exceed 40%. Thus, since they can only vote up to 40% of the common shares of the corporation, they will never be in a position to elect majority of the members of the Board of Directors. Consequently, control over the membership of the Board of Directors will always be in the hands of Filipino stockholders although they actually own less than 50% of the common shares. Let Us apply the foregoing principles to the situation of PLDT. Granting without admitting that foreigners own 64.27% of PLDTs common shares and say they own 40% of the total number of common and preferred shares, still they can only vote up to 40% of the common shares of PLDT since their participation in the election of the Board of Directors (the governing body of the corporation) is limited by the 40% ownership of the capital under the first sentence of Sec. 11, Art. XII of the Constitution. The foreigners can only elect members of the Board of Directors based on their 40% ownership of the common shares and their directors will only constitute the minority. In no instance can the foreigners obtain the majority seats in the Board of Directors. Further, the 2010 General Information Sheet (GIS) of PLDT reveals that among the thirteen (13) members of the Board of Directors, only two (2) are foreigners. It also reveals that the foreign investors only own 13.71% of the capital of PLDT.82 Obviously, the nomination and election committee of PLDT uses the 40% cap on the foreign ownership of the capital which explains why the foreigners only have two (2) members in the Board of Directors. It is apparent that the 64.27% ownership by foreigners of the common shares cannot be used to elect the majority of the Board of Directors. The fact that the proportionate share of the foreigners in the capital (voting and non-voting shares or common and preferred shares) is even less than 40%, then they are only entitled to voting rights equivalent to the said proportionate share in the capital and in the process elect only a smaller number of directors. This is the reality in the instant case. Hence, the majority control of Filipinos over the management of PLDT is, at all times, assured. This intent to limit the participation of the foreign investors in the governing body of the corporation was solidified in Commonwealth Act No. 108, otherwise known as the Anti-Dummy Law. Sec. 2-A of the aforementioned law, as amended, provides in part: x x x Provided, finally, that the election of aliens as members of the Board of Directors of governing body of corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their allowable participation or share in the capital of such entities. The view that the definition of the word "capital" is limited to common or voting shares alone would certainly have the effect of removing the 60-40% nationality requirement on the non-voting shares. This would then give rise to a situation wherein foreign interest would not really be limited to only 40% but may even extend beyond that because foreigners could also own the entire 100% of the preferred or non-voting shares. As a result, Filipinos will no longer have effective ownership of the corporate assets which may include lands. This is because the actual Filipino equity constitutes only a minority of the entire outstanding capital stock. Therefore, the company would then be technically owned by foreigners since the actual ownership of at least 60% of the entire outstanding capital stock would be left to the hands of the foreigners. Allowing this to happen would violate and circumvent the purpose for which the provision in the Constitution was created.83 This situation was the subject matter of the Opinion dated December 27, 1995 addressed to Mr. George Lavidia where the SEC opined that for the computation of the required minimum 60% Filipino ownership in a land owning corporation, both voting and preferred non-voting shares must be included, to wit:

The [law] does not qualify whether the required ownership of "capital stock" are voting or non-voting. Hence, it should be interpreted to mean the sum total of the capital stock subscribed, irrespective of their nomenclature and whether or not they are voting or non-voting. The use of the phrase "capital stock belongs" connotes that in order to comply with the Filipino nationality requirement for land ownership, it is necessary that the criterion of "beneficial ownership" should be met, not merely the control of the corporation. To construe the 60-40% equity requirement is merely based on the voting shares, disregarding the preferred non-voting shares, not on the total outstanding subscribed capital stock, would give rise to a situation where the actual foreign interest would not really be only 40% but may extend beyond that because they could also own even the entire preferred non-voting shares. In this situation, Filipinos may have the control in the operation of the corporation by way of voting rights, but have no effective ownership of the corporate assets which include lands, because the actual Filipino equity constitutes only a minority of the entire outstanding capital stock. Therefore, in essence, the company, although controlled by Filipinos, is beneficially owned by foreigners since the actual ownership of at least 60% of the entire outstanding capital stocks would be in the hands of foreigners. Allowing this situation would open the floodgates to circumvention of the intent of the law to make the Filipinos the principal beneficiaries in the ownership of Philippine alienable lands. xxxx Thus, for purpose of "land ownership", non-voting preferred shares should be included in the computation of the statutory 60-40% Filipino-alien equity requirement. To rule otherwise would result in the emergence of foreign beneficial ownership of land, thereby defeating the purpose of the law. On the other hand, to view the equity ratio as determined on the basis of the entire outstanding capital stock would be to uphold the unequivocal purpose of the above-cited law of ensuring Filipino rightful domination of land ownership. (Emphasis supplied.) Clearly, applying the ponencias definition of the word "capital" will give rise to a greater anomaly because it will result in the foreigners obtaining beneficial ownership over the corporation, which is contrary to the provisions of the Constitution; whereas interpreting "capital" to include both voting and non-voting shares will result in giving both legal and beneficial ownership of the corporation to the Filipinos. In the event that the word "capital" is construed as limited to common or voting shares only, it should not have any retroactive effect. Reliance in good faith on the opinions issued by the SEC, the regulating body in charged with the duty to enforce the nationality required by the Constitution, should not prejudice any one, especially not the foreign investors. Giving such interpretation retroactive effect is tantamount to violation of due process and would impact negatively on the various foreign investments already present in the country. Accordingly, such construction should only be applied prospectively. In sum, the Constitution requires that 60% of the capital be owned by Filipinos. It further requires that the foreign ownership of capital be limited to 40%, as well as its participation in the governing body of the public utility corporation be limited to its proportionate share in the capital which cannot exceed 40% thereof. As a result, control over the Board of Directors and full beneficial ownership of 60% of the capital stock of the corporation are secured in the hands of the Filipinos. I, therefore, vote to DISMISS the petition.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 174105 April 2, 2009

REGHIS M. ROMERO II, EDMOND Q. SESE, LEOPOLDO T. SANCHEZ, REGHIS M. ROMERO III, MICHAEL L. ROMERO, NATHANIEL L. ROMERO, and JEROME R. CANLAS, Petitioners, vs. SENATOR JINGGOY E. ESTRADA and SENATE COMMITTEE ON LABOR, EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT,Respondents. DECISION VELASCO, JR., J.: At issue once again is Section 21, Article VI of the 1987 Constitution which provides: The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by such inquiries shall be respected. The Case This is a petition for prohibition with application for temporary restraining order (TRO) and preliminary injunction under Rule 65, assailing the constitutionality of the invitations and other compulsory processes issued by the Senate Committee on Labor, Employment, and Human Resources Development (Committee) in connection with its investigation on the investment of Overseas Workers Welfare Administration (OWWA) funds in the Smokey Mountain project. The Facts On August 15, 2006, petitioner Reghis Romero II, as owner of R-II Builders, Inc., received from the Committee an invitation,1 signed by the Legislative Committee Secretary, which pertinently reads as follows: Dear Mr. Romero: Pursuant to P.S. Resolution No. 537, entitled: "RESOLUTION DIRECTING THE LABOR COMMITTEE TO INVESTIGATE, IN AID OF LEGISLATION, THE LIABILITY FOR PLUNDER OF THE FORMER PRESIDENT RAMOS AND OTHERS, FOR THE ILLEGAL INVESTMENT OF OWWA FUNDS IN THE SMOKEY MOUNTAIN PROJECT, CAUSING A LOSS TO OWWA OF P550.86 MILLION" and P.S. Resolution No. 543, entitled: "RESOLUTION DIRECTING THE COMMITTEE ON LABOR AND EMPLOYMENT, IN ITS ONGOING INQUIRY IN AID OF LEGISLATION, ON THE ALLEGED OWWA LOSS OF P480 MILLION TO FOCUS ON THE CULPABILITY OF THEN PRESIDENT FIDEL RAMOS, THEN OWWA ADMINISTRATOR WILHELM SORIANO, AND R-II BUILDERS OWNER REGHIS ROMERO II," x x x the Committee on Labor, Employment and Human Resources Development chaired by Sen. Jinggoy Ejercito Estrada will

conduct a public hearing at 1:00 p.m. on the 23rd day of August 2006 at the Sen. G.T. Pecson Room, 2nd floor, Senate of the Philippines, Pasay City. The inquiry/investigation is specifically intended to aid the Senate in the review and possible amendments to the pertinent provisions of R.A. 8042, "the Migrant Workers Act" and to craft a much needed legislation relative to the stated subject matter and purpose of the aforementioned Resolutions. By virtue of the power vested in Congress by Section 21, Article VI of 1987 Constitution regarding inquiries in aid of legislation, may we have the privilege of inviting you to the said hearing to shed light on any matter, within your knowledge and competence, covered by the subject matter and purpose of the inquiry. Rest assured that your rights, when properly invoked and not unfounded, will be duly respected. (Emphasis in the original.) In his letter-reply2 dated August 18, 2006, petitioner Romero II requested to be excused from appearing and testifying before the Committee at its scheduled hearings of the subject matter and purpose of Philippine Senate (PS) Resolution Nos. 537 and 543. He predicated his request on grounds he would later substantially reiterate in this petition for prohibition. On August 28, 2006, the Committee sent petitioner Romero II a letter informing him that his request, being unmeritorious, was denied.3 On the same date, invitations were sent to each of the other six petitioners, then members of the Board of Directors of R-II Builders, Inc., requesting them to attend the September 4, 2006 Committee hearing. The following day, Senator Jinggoy Estrada, as Chairperson of the Committee, caused the service of a subpoena ad testificandum4 on petitioner Romero II directing him to appear and testify before the Committee at its hearing on September 4, 2006 relative to the aforesaid Senate resolutions. The Committer later issued separate subpoenas5 to other petitioners, albeit for a different hearing date. On August 30, 2006, petitioners filed the instant petition, docketed as G.R. No. 174105, seeking to bar the Committee from continuing with its inquiry and to enjoin it from compelling petitioners to appear before it pursuant to the invitations thus issued. Failing to secure the desired TRO sought in the petition, petitioner Romero II appeared at the September 4, 2006 Committee investigation. Two days after, petitioner Romero II filed a Manifestation with Urgent Plea for a TRO6 alleging, among others, that: (1) he answered questions concerning the investments of OWWA funds in the Smokey Mountain project and how much of OWWAs original investment had already been paid; (2) when Senator Estrada called on Atty. Francisco I. Chavez, as resource person, the latter spoke of the facts and issues he raised with the Court in Chavez v. National Housing Authority,7 none of which were related to the subject of the inquiry; and (3) when Senator Estrada adjourned the investigation, he asked petitioners Romero II and Canlas to return at the resumption of the investigation. The manifestation was followed by the filing on September 19, 2006 of another urgent motion for a TRO in which petitioners imputed to the Committee the intention to harass them as, except for petitioner Romero II, none of them had even been mentioned in relation to the subject of the investigation. Meanwhile, respondents, in compliance with our September 5, 2006 Resolution that ordered them to submit a comment on the original plea for a TRO, interposed an opposition,8 observing that the Senates motives in calling for an investigation in aid of legislation were a political question. They

also averred that the pendency of Chavez "is not sufficient ground to divest the respondents of their jurisdiction to conduct an inquiry into the matters alleged in the petition." In this petition, petitioners in gist claim that: (1) the subject matter of the investigation is sub judice owing to the pendency of the Chavez petition; (2) since the investigation has been intended to ascertain petitioners criminal liability for plunder, it is not in aid of legislation; (3) the inquiry compelled them to appear and testify in violation of their rights against self-incrimination; and (4) unless the Court immediately issues a TRO, some or all of petitioners would be in danger of being arrested, detained, and forced to give testimony against their will, before the Court could resolve the issues raised in G.R. No. 164527. In their Comment dated October 17, 2006,9 respondents made a distinction between the issues raised in Chavez and the subject matter of the Senate resolutions, nixing the notion of sub judice that petitioners raised at every possible turn. Respondents averred that the subject matter of the investigation focused on the alleged dissipation of OWWA funds and the purpose of the probe was to aid the Senate determine the propriety of amending Republic Act No. 8042 or The Migrant Workers Act of 1995 and enacting laws to protect OWWA funds in the future. They likewise raised the following main arguments: (1) the proposed resolutions were a proper subject of legislative inquiry; and (2) petitioners right against self-incrimination was well-protected and could be invoked when incriminating questions were propounded. On December 28, 2006, petitioners filed their Reply10 reiterating the arguments stated in their petition, first and foremost of which is: Whether or not the subject matter of the Committees inquiry is sub judice. The Courts Ruling The Court resolves to dismiss the instant petition. The Subject Matter of the Senate Inquiry Is no Longer Sub Judice Petitioners contend that the subject matter of the legislative inquiry is sub judice in view of the Chavez petition. The sub judice rule restricts comments and disclosures pertaining to judicial proceedings to avoid prejudging the issue, influencing the court, or obstructing the administration of justice. A violation of the sub judice rule may render one liable for indirect contempt under Sec. 3(d), Rule 71 of the Rules of Court.11 The rationale for the rule adverted to is set out in Nestle Philippines v. Sanchez: [I]t is a traditional conviction of civilized society everywhere that courts and juries, in the decision of issues of fact and law should be immune from every extraneous influence; that facts should be decided upon evidence produced in court; and that the determination of such facts should be uninfluenced by bias, prejudice or sympathies.12 Chavez, assuming for argument that it involves issues subject of the respondent Committees assailed investigation, is no longer sub judice or "before a court or judge for consideration."13 For by an en banc Resolution dated July 1, 2008, the Court, in G.R. No. 164527, denied with finality the motion of Chavez, as the petitioner in Chavez, for reconsideration of the Decision of the Court dated August 15, 2007. In fine, it will not avail petitioners any to invoke the sub judice effect of Chavez and resist, on that ground, the assailed congressional invitations and subpoenas. The sub judice issue has been rendered moot and academic by the supervening issuance of the en banc Resolution of July 1, 2008 in G.R. No. 164527. An issue or a case becomes moot and academic when it ceases to

present a justiciable controversy, so that a determination of the issue would be without practical use and value. In such cases, there is no actual substantial relief to which the petitioner would be entitled and which would be negated by the dismissal of the petition.14 Courts decline jurisdiction over such cases or dismiss them on the ground of mootness, save in certain exceptional instances,15 none of which, however, obtains under the premises. Thus, there is no more legal obstacleon the ground of sub judice, assuming it is invocableto the continuation of the Committees investigation challenged in this proceeding. At any rate, even assuming hypothetically that Chavez is still pending final adjudication by the Court, still, such circumstance would not bar the continuance of the committee investigation. What we said in Sabio v. Gordon suggests as much: The same directors and officers contend that the Senate is barred from inquiring into the same issues being litigated before the Court of Appeals and the Sandiganbayan. Suffice it to state that the Senate Rules of Procedure Governing Inquiries in Aid of Legislation provide that the filing or pendency of any prosecution or administrative action should not stop or abate any inquiry to carry out a legislative purpose.16 A legislative investigation in aid of legislation and court proceedings has different purposes. On one hand, courts conduct hearings or like adjudicative procedures to settle, through the application of a law, actual controversies arising between adverse litigants and involving demandable rights. On the other hand, inquiries in aid of legislation are, inter alia, undertaken as tools to enable the legislative body to gather information and, thus, legislate wisely and effectively;17 and to determine whether there is a need to improve existing laws or enact new or remedial legislation,18 albeit the inquiry need not result in any potential legislation. On-going judicial proceedings do not preclude congressional hearings in aid of legislation. Standard Chartered Bank (Philippine Branch) v. Senate Committee on Banks, Financial Institutions and Currencies (Standard Chartered Bank) provides the following reason: [T]he mere filing of a criminal or an administrative complaint before a court or quasi-judicial body should not automatically bar the conduct of legislative investigation. Otherwise, it would be extremely easy to subvert any intended inquiry by Congress through the convenient ploy of instituting a criminal or an administrative complaint. Surely, the exercise of sovereign legislative authority, of which the power of legislative inquiry is an essential component, cannot be made subordinate to a criminal or administrative investigation.
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As succinctly stated in x x x Arnault v. Nazareno [T]he power of inquirywith process to enforce itis an essential and appropriate auxiliary to the legislative function. A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite informationwhich is not infrequently true recourse must be had to others who possess it.19 While Sabio and Standard Chartered Bank advert only to pending criminal and administrative cases before lower courts as not posing a bar to the continuation of a legislative inquiry, there is no rhyme or reason that these cases doctrinal pronouncement and their rationale cannot be extended to appealed cases and special civil actions awaiting final disposition before this Court. The foregoing consideration is not all. The denial of the instant recourse is still indicated for another compelling reason. As may be noted, PS Resolution Nos. 537 and 543 were passed in 2006 and the

letter-invitations and subpoenas directing the petitioners to appear and testify in connection with the twin resolutions were sent out in the month of August 2006 or in the past Congress. On the postulate that the Senate of each Congress acts separately and independently of the Senate before and after it, the aforesaid invitations and subpoenas are considered functos oficio and the related legislative inquiry conducted is, for all intents and purposes, terminated. In this regard, the Court draws attention to its pronouncements embodied in its Resolution of September 4, 2008 in G.R. No. 180643 entitled Neri v. Senate Committee on Accountability of Public Officers and Investigations: Certainly, x x x the Senate as an institution is "continuing," as it is not dissolved as an entity with each national election or change in the composition of its members. However, in the conduct of its day-to-day business, the Senate of each Congress acts separately and independently of the Senate before it. The Rules of the Senate itself confirms this when it states: xxxx SEC. 123. Unfinished business at the end of the session shall be taken up at the next session in the same status. All pending matters and proceedings shall terminate upon the expiration of one (1) Congress, but may be taken by the succeeding Congress as if present[ed] for the first time. Undeniably from the foregoing, all pending matters and proceedings, i.e., unpassed bills and even legislative investigations, of the Senate of a particular Congress are considered terminated upon the expiration of that Congress and it is merely optional on the Senate of the succeeding Congress to take up such unfinished matters, not in the same status, but as if presented for the first time. The logic and practicality of such rule is readily apparent considering that the Senate of the succeeding Congress (which will typically have a different composition as that of the previous Congress) should not be bound by the acts and deliberations of the Senate of which they had no part. x x x (Emphasis added.) Following the lessons of Neri, as reiterated in Garcillano v. The House of Representatives Committees on Public Information, Public Order and Safety, et al.,20 it can very well be stated that the termination of the assailed investigations has veritably mooted the instant petition. This disposition becomes all the more impeccable, considering that the Senate of the present Congress has not, per available records, opted to take up anew, as an unfinished matter, its inquiry into the investment of OWWA funds in the Smokey Mountain project. With the foregoing disquisition, the Court need not belabor the other issues raised in this recourse. Suffice it to state that when the Committee issued invitations and subpoenas to petitioners to appear before it in connection with its investigation of the aforementioned investments, it did so pursuant to its authority to conduct inquiries in aid of legislation. This is clearly provided in Art. VI, Sec. 21 of the Constitution, which was quoted at the outset. And the Court has no authority to prohibit a Senate committee from requiring persons to appear and testify before it in connection with an inquiry in aid of legislation in accordance with its duly published rules of procedure.21Sabio emphasizes the importance of the duty of those subpoenaed to appear before the legislature, even if incidentally incriminating questions are expected to be asked: Anent the right against self-incrimination, it must be emphasized that ["this right may be] invoked by the said directors and officers of Philcomsat x x x only when the incriminating question is being asked, since they have no way of knowing in advance the nature or effect of the questions to be asked of them."http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2006.zip%

3E528,df%7C2006/OCT2006/174340.htm - _ftn That this right may possibly be violated or abused is no ground for denying respondent Senate Committees their power of inquiry. The consolation is that when this power is abused, such issue may be presented before the courts. xxxx Let it be stressed at this point that so long as the constitutional rights of witnesses x x x will be respected by respondent Senate Committees, it [is] their duty to cooperate with them in their efforts to obtain the facts needed for intelligent legislative action. The unremitting obligation of every citizen is to respond to subpoenae, to respect the dignity of the Congress and its Committees, and to testify fully with respect to matters within the realm of proper investigation.22 (Emphasis supplied.) As a matter of long and sound practice, the Court refrains from touching on the issue of constitutionality except when it is unavoidable and is the very lis mota23 of the controversy. So it must be here. Indeed, the matter of the constitutionality of the assailed Committee invitations and subpoenas issued vis--vis the investigation conducted pursuant to PS Resolution Nos. 537 and 543 has ceased to be a justiciable controversy, having been rendered moot and academic by supervening events heretofore indicated. In short, there is no more investigation to be continued by virtue of said resolutions; there is no more investigation the constitutionality of which is subject to a challenge. WHEREFORE, the petition is DENIED. No pronouncement as to costs. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate Justice ANTONIO T. CARPIO Associate Justice RENATO C. CORONA Associate Justice DANTE O. TINGA Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice CONSUELO YNARES-SANTIAGO Associate Justice MA. ALICIA AUSTRIA-MARTINEZ Associate Justice CONCHITA CARPIO MORALES Associate Justice MINITA V. CHICO-NAZARIO Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice

ARTURO D. BRION Associate Justice

DIOSDADO M. PERALTA Associate Justice CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice Republic of the Philippines SUPREME COURT Manila EN BANC G.R No. 188078 January 25, 2010

VICTORINO B. ALDABA, CARLO JOLETTE S. FAJARDO, JULIO G. MORADA, and MINERVA ALDABA MORADA, Petitioners, vs. COMMISSION ON ELECTIONS, Respondent. DECISION CARPIO, J.: The Case This is an original action for Prohibition to declare unconstitutional Republic Act No. 9591 (RA 9591), creating a legislative district for the city of Malolos, Bulacan, for violating the minimum population requirement for the creation of a legislative district in a city. Antecedents Before 1 May 2009, the province of Bulacan was represented in Congress through four legislative districts. The First Legislative District comprised of the city of Malolos1 and the municipalities of Hagonoy, Calumpit, Pulilan, Bulacan, and Paombong. On 1 May 2009, RA 9591 lapsed into law, amending Malolos City Charter,2 by creating a separate legislative district for the city. At the time the legislative bills for RA 9591 were filed in Congress in 2007, namely, House Bill No. 3162 (later converted to House Bill No. 3693) and Senate Bill No. 1986, the population of Malolos City was 223,069. The population of Malolos City on 1 May 2009 is a contested fact but there is no dispute that House Bill No. 3693 relied on an undated certification issued by a Regional Director of the National Statistics Office (NSO) that "the projected population of the Municipality of Malolos will be 254,030 by the year 2010 using the population growth rate of 3.78 between 1995 to 2000."3 Petitioners, taxpayers, registered voters and residents of Malolos City, filed this petition contending that RA 9591 is unconstitutional for failing to meet the minimum population threshold of 250,000 for

a city to merit representation in Congress as provided under Section 5(3), Article VI of the 1987 Constitution and Section 3 of the Ordinance appended to the 1987 Constitution. In its Comment to the petition, the Office of the Solicitor General (OSG) contended that Congress use of projected population is non-justiciable as it involves a determination on the "wisdom of the standard adopted by the legislature to determine compliance with [a constitutional requirement]."4 The Ruling of the Court We grant the petition and declare RA 9591 unconstitutional for being violative of Section 5(3), Article VI of the 1987 Constitution and Section 3 of the Ordinance appended to the 1987 Constitution The 1987 Constitution requires that for a city to have a legislative district, the city must have "a population of at least two hundred fifty thousand."5 The only issue here is whether the City of Malolos has a population of at least 250,000, whether actual or projected, for the purpose of creating a legislative district for the City of Malolos in time for the 10 May 2010 elections. If not, then RA 9591 creating a legislative district in the City of Malolos is unconstitutional. House Bill No. 3693 cites the undated Certification of Regional Director Alberto N. Miranda of Region III of the National Statistics Office (NSO) as authority that the population of the City of Malolos "will be 254,030 by the year 2010." The Certification states that the population of "Malolos, Bulacan as of May 1, 2000 is 175,291." The Certification further states that it was "issued upon the request of Mayor Danilo A. Domingo of the City of Malolos in connection with the proposed creation of Malolos City as a lone congressional district of the Province of Bulacan."6 The Certification of Regional Director Miranda, which is based on demographic projections, is without legal effect because Regional Director Miranda has no basis and no authority to issue the Certification. The Certification is also void on its face because based on its own growth rate assumption, the population of Malolos will be less than 250,000 in the year 2010. In addition, intercensal demographic projections cannot be made for the entire year. In any event, a city whose population has increased to 250,000 is entitled to have a legislative district only in the "immediately following election"7 after the attainment of the 250,000 population. First, certifications on demographic projections can be issued only if such projections are declared official by the National Statistics Coordination Board (NSCB). Second, certifications based on demographic projections can be issued only by the NSO Administrator or his designated certifying officer. Third, intercensal population projections must be as of the middle of every year. Section 6 of Executive Order No. 1358 dated 6 November 1993 issued by President Fidel V. Ramos provides: SECTION 6. Guidelines on the Issuance of Certification of Population sizes Pursuant to Section 7, 386, 442, 450, 452, and 461 of the New Local Government Code. (a) The National Statistics Office shall issue certification on data that it has collected and processed as well as on statistics that it has estimated. (b) For census years, certification on population size will be based on actual population census counts; while for the intercensal years, the certification will be made on the basis of a set of demographic projections or estimates declared official by the National Statistical Coordination Board (NSCB).

(c) Certification of population census counts will be made as of the census reference date, such as May 1, 1990, while those of intercensal population estimates will be as of middle of every year. (d) Certification of population size based on projections may specify the range within which the true count is deemed likely to fall. The range will correspond to the official low and high population projections. (e) The smallest geographic area for which a certification on population size may be issued will be the barangay for census population counts, and the city or municipality for intercensal estimates. If an LGU wants to conduct its own population census, during offcensus years, approval must be sought from the NSCB and the conduct must be under the technical supervision of NSO from planning to data processing. (f) Certifications of population size based on published census results shall be issued by the Provincial Census Officers or by the Regional Census Officers. Certifications based on projections or estimates, however, will be issued by the NSO Administrator or his designated certifying officer. (Emphasis supplied) The Certification of Regional Director Miranda does not state that the demographic projections he certified have been declared official by the NSCB. The records of this case do not also show that the Certification of Regional Director Miranda is based on demographic projections declared official by the NSCB. The Certification, which states that the population of Malolos "will be 254,030 by the year 2010," violates the requirement that intercensal demographic projections shall be "as of the middle of every year." In addition, there is no showing that Regional Director Miranda has been designated by the NSO Administrator as a certifying officer for demographic projections in Region III. In the absence of such official designation, only the certification of the NSO Administrator can be given credence by this Court. Moreover, the Certification states that "the total population of Malolos, Bulacan as of May 1, 2000 is 175,291." The Certification also states that the population growth rate of Malolos is 3.78% per year between 1995 and 2000. Based on a growth rate of 3.78% per year, the population of Malolos of 175,291 in 2000 will grow to only 241,550 in 2010. Also, the 2007 Census places the population of Malolos at 223,069 as of 1 August 2007.9 Based on a growth rate of 3.78%, the population of Malolos will grow to only 248,365 as of 1 August 2010. Even if the growth rate is compounded yearly, the population of Malolos of 223,069 as of 1 August 2007 will grow to only 249,333 as of 1 August 2010.10 All these conflict with what the Certification states that the population of Malolos "will be 254,030 by the year 2010." Based on the Certifications own growth rate assumption, the population of Malolos will be less than 250,000 before the 10 May 2010 elections. Incidentally, the NSO has no published population projections for individual municipalities or cities but only for entire regions and provinces.11 Executive Order No. 135 cannot simply be brushed aside. The OSG, representing respondent Commission on Elections, invoked Executive Order No. 135 in its Comment, thus: Here, based on the NSO projection, "the population of the Municipality of Malolos will be 254,030 by the year 2010 using the population growth rate of 3.78 between 1995-2000." This projection issued by the authority of the NSO Administrator is recognized under Executive Order No. 135 (The Guidelines on the Issuance of Certification of Population Sizes), which states:

xxx (d) Certification of population size based on projections may specify the range within which the true count is deemed likely to fall. The range will correspond to the official low and high population projections. xxx (f) Certifications of population size based on published census results shall be issued by the Provincial Census Officers or by the Regional Census Officers. Certifications based on projections or estimates, however, will be issued by the NSO Administrator or his designated certifying officer.12 (Emphasis supplied) Any population projection forming the basis for the creation of a legislative district must be based on an official and credible source. That is why the OSG cited Executive Order No. 135, otherwise the population projection would be unreliable or speculative. Section 3 of the Ordinance appended to the 1987 Constitution provides: Any province that may be created, or any city whose population may hereafter increase to more than two hundred fifty thousand shall be entitled in the immediately following election to at least one Member or such number of members as it may be entitled to on the basis of the number of its inhabitants and according to the standards set forth in paragraph (3), Section 5 of Article VI of the Constitution. xxx. (Emphasis supplied) A city that has attained a population of 250,000 is entitled to a legislative district only in the "immediately following election." In short, a city must first attain the 250,000 population, and thereafter, in the immediately following election, such city shall have a district representative. There is no showing in the present case that the City of Malolos has attained or will attain a population of 250,000, whether actual or projected, before the 10 May 2010 elections. Clearly, there is no official record that the population of the City of Malolos will be at least 250,000, actual or projected, prior to the 10 May 2010 elections, the immediately following election after the supposed attainment of such population. Thus, the City of Malolos is not qualified to have a legislative district of its own under Section 5(3), Article VI of the 1987 Constitution and Section 3 of the Ordinance appended to the 1987 Constitution. On the OSGs contention that Congress choice of means to comply with the population requirement in the creation of a legislative district is non-justiciable, suffice it to say that questions calling for judicial determination of compliance with constitutional standards by other branches of the government are fundamentally justiciable. The resolution of such questions falls within the checking function of this Court under the 1987 Constitution to determine whether there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.13 Even under the 1935 Constitution, this Court had already ruled, "The overwhelming weight of authority is that district apportionment laws are subject to review by the courts."14 Compliance with constitutional standards on the creation of legislative districts is important because the "aim of legislative apportionment is to equalize population and voting power among districts."15

WHEREFORE, we GRANT the petition. We DECLARE Republic Act No. 9591 UNCONSTITUTIONAL for being violative of Section 5(3), Article VI of the 1987 Constitution and Section 3 of the Ordinance appended to the 1987 Constitution. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice RENATO C. CORONA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice MARIANO C. DEL CASTILLO Associate Justice MARTIN S. VILLARAMA, JR. Associate Justice JOSE C. MENDOZA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice CONCHITA CARPIO MORALES Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice ARTURO D. BRION Associate Justice LUCAS P. BERSAMIN Associate Justice ROBERTO A. ABAD Associate Justice JOSE P. PEREZ Associate Justice

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. 179431-32 June 22, 2010

LUIS K. LOKIN, JR., as the second nominee of CITIZENS BATTLE AGAINST CORRUPTION (CIBAC),Petitioner, vs. COMMISSION ON ELECTIONS and the HOUSE OF REPRESENTATIVES, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 180443 LUIS K. LOKIN, JR., Petitioner, vs. COMMISSION ON ELECTIONS (COMELEC), EMMANUEL JOEL J. VILLANUEVA, CINCHONA C. GONZALES and ARMI JANE R. BORJE, Respondents. DECISION BERSAMIN, J.: The principal question posed in these consolidated special civil actions for certiorari and mandamus is whether the Commission on Elections (COMELEC) can issue implementing rules and regulations (IRRs) that provide a ground for the substitution of a party-list nominee not written in Republic Act (R.A.) No. 7941,1 otherwise known as the Party-List System Act, the law that the COMELEC thereby implements. Common Antecedents The Citizens Battle Against Corruption (CIBAC) was one of the organized groups duly registered under the party-list system of representation that manifested their intent to participate in the May 14, 2007 synchronized national and local elections. Together with its manifestation of intent to participate,2 CIBAC, through its president, Emmanuel Joel J. Villanueva, submitted a list of five nominees from which its representatives would be chosen should CIBAC obtain the required number of qualifying votes. The nominees, in the order that their names

appeared in the certificate of nomination dated March 29, 2007,3 were: (1) Emmanuel Joel J. Villanueva; (2) herein petitioner Luis K. Lokin, Jr.; (3) Cinchona C. Cruz-Gonzales; (4) Sherwin Tugna; and (5) Emil L. Galang. The nominees certificates of acceptance were attached to the certificate of nomination filed by CIBAC. The list of nominees was later published in two newspapers of general circulation, The Philippine Star News4 (sic) and The Philippine Daily Inquirer.5 Prior to the elections, however, CIBAC, still through Villanueva, filed a certificate of nomination, substitution and amendment of the list of nominees dated May 7, 2007,6 whereby it withdrew the nominations of Lokin, Tugna and Galang and substituted Armi Jane R. Borje as one of the nominees. The amended list of nominees of CIBAC thus included: (1) Villanueva, (2) Cruz-Gonzales, and (3) Borje. Following the close of the polls, or on June 20, 2007, Villanueva sent a letter to COMELEC Chairperson Benjamin Abalos,7 transmitting therewith the signed petitions of more than 81% of the CIBAC members, in order to confirm the withdrawal of the nomination of Lokin, Tugna and Galang and the substitution of Borje. In their petitions, the members of CIBAC averred that Lokin and Tugna were not among the nominees presented and proclaimed by CIBAC in its proclamation rally held in May 2007; and that Galang had signified his desire to focus on his family life. On June 26, 2007, CIBAC, supposedly through its counsel, filed with the COMELEC en banc sitting as the National Board of Canvassers a motion seeking the proclamation of Lokin as its second nominee.8 The right of CIBAC to a second seat as well as the right of Lokin to be thus proclaimed were purportedly based on Party-List Canvass Report No. 26, which showed CIBAC to have garnered a grand total of 744,674 votes. Using all relevant formulas, the motion asserted that CIBAC was clearly entitled to a second seat and Lokin to a proclamation. The motion was opposed by Villanueva and Cruz-Gonzales. Notwithstanding Villanuevas filing of the certificate of nomination, substitution and amendment of the list of nominees and the petitions of more than 81% of CIBAC members, the COMELEC failed to act on the matter, prompting Villanueva to file a petition to confirm the certificate of nomination, substitution and amendment of the list of nominees of CIBAC on June 28, 2007.9 On July 6, 2007, the COMELEC issued Resolution No. 8219,10 whereby it resolved to set the matter pertaining to the validity of the withdrawal of the

nominations of Lokin, Tugna and Galang and the substitution of Borje for proper disposition and hearing. The case was docketed as E.M. No. 07-054. In the meantime, the COMELEC en banc, sitting as the National Board of Canvassers, issued National Board of Canvassers (NBC) Resolution No. 07-60 dated July 9, 200711 to partially proclaim the following parties, organizations and coalitions participating under the Party-List System as having won in the May 14, 2007 elections, namely: Buhay Hayaan Yumabong, Bayan Muna, CIBAC, Gabriela Women's Party, Association of Philippine Electric Cooperatives, Advocacy for Teacher Empowerment Through Action, Cooperation and Harmony Towards Educational Reforms, Inc., Akbayan! Citizen's Action Party, Alagad, Luzon Farmers Party, Cooperative-Natco Network Party, Anak Pawis, Alliance of Rural Concerns and Abono; and to defer the proclamation of the nominees of the parties, organizations and coalitions with pending disputes until final resolution of their respective cases. The COMELEC en banc issued another resolution, NBC Resolution No. 07-72 dated July 18, 2007,12 proclaiming Buhay Hayaan Yumabong as entitled to 2 additional seats and Bayan Muna, CIBAC, Gabriela Women's Party, and Association of Philippine Electric Cooperatives to an additional seat each; and holding in abeyance the proclamation of the nominees of said parties, organizations and coalitions with pending disputes until the final resolution of their respective cases. With the formal declaration that CIBAC was entitled to an additional seat, Ricardo de los Santos, purportedly as secretary general of CIBAC, informed Roberto P. Nazareno, Secretary General of the House of Representatives, of the promulgation of NBC Resolution No. 07-72 and requested that Lokin be formally sworn in by Speaker Jose de Venecia, Jr. to enable him to assume office. Nazareno replied, however, that the request of Delos Santos could not be granted because COMELEC Law Director Alioden D. Dalaig had notified him of the pendency of E.M. 07-054. On September 14, 2007, the COMELEC en banc resolved E.M. No. 0705413 thuswise: WHEREFORE, considering the above discussion, the Commission hereby approves the withdrawal of the nomination of Atty. Luis K. Lokin, Sherwin N. Tugna and Emil Galang as second, third and fourth nominees respectively and the substitution thereby with Atty. Cinchona C. Cruz-Gonzales as second nominee and Atty. Armi Jane R. Borje as third nominee for the party list CIBAC. The new order of CIBAC's nominees therefore shall be:

1. Emmanuel Joel J. Villanueva 2. Cinchona C. Cruz-Gonzales 3. Armi Jane R. Borje SO ORDERED. The COMELEC en banc explained that the actions of Villanueva in his capacity as the president of CIBAC were presumed to be within the scope of his authority as such; that the president was charged by Section 1 of Article IV of the CIBAC By-Laws to oversee and direct the corporate activities, which included the act of submitting the party's manifestation of intent to participate in the May 14, 2007 elections as well as its certificate of nominees; that from all indications, Villanueva as the president of CIBAC had always been provided the leeway to act as the party's representative and that his actions had always been considered as valid; that the act of withdrawal, although done without any written Board approval, was accomplished with the Boards acquiescence or at least understanding; and that the intent of the party should be given paramount consideration in the selection of the nominees. As a result, the COMELEC en banc proclaimed Cruz-Gonzales as the official second nominee of CIBAC.14 Cruz-Gonzales took her oath of office as a Party-List Representative of CIBAC on September 17, 2007.15 Precs of the Consolidated Cases In G.R. No. 179431 and G.R. No. 179432, Lokin seeks through mandamus to compel respondent COMELEC to proclaim him as the official second nominee of CIBAC. In G.R. No. 180443, Lokin assails Section 13 of Resolution No. 7804 promulgated on January 12, 2007;16 and the resolution dated September 14, 2007 issued in E.M. No. 07-054 (approving CIBACs withdrawal of the nominations of Lokin, Tugna and Galang as CIBACs second, third and fourth nominees, respectively, and the substitution by Cruz-Gonzales and Borje in their stead, based on the right of CIBAC to change its nominees under Section 13 of Resolution No. 7804).17 He alleges that Section 13 of Resolution No. 7804 expanded Section 8 of R.A. No. 7941.18 the law that the COMELEC seeks to thereby implement.

In its comment, the COMELEC asserts that a petition for certiorari is an inappropriate recourse in law due to the proclamation of Cruz-Gonzales as Representative and her assumption of that office; that Lokins proper recourse was an electoral protest filed in the House of Representatives Electoral Tribunal (HRET); and that, therefore, the Court has no jurisdiction over the matter being raised by Lokin. For its part, CIBAC posits that Lokin is guilty of forum shopping for filing a petition for mandamus and a petition for certiorari, considering that both petitions ultimately seek to have him proclaimed as the second nominee of CIBAC. Issues The issues are the following: (a) Whether or not the Court has jurisdiction over the controversy; (b) Whether or not Lokin is guilty of forum shopping; (c) Whether or not Section 13 of Resolution No. 7804 is unconstitutional and violates the Party-List System Act; and (d) Whether or not the COMELEC committed grave abuse of discretion amounting to lack or excess of jurisdiction in approving the withdrawal of the nominees of CIBAC and allowing the amendment of the list of nominees of CIBAC without any basis in fact or law and after the close of the polls, and in ruling on matters that were intra-corporate in nature. Ruling The petitions are granted. A The Court has jurisdiction over the case The COMELEC posits that once the proclamation of the winning party-list organization has been done and its nominee has assumed office, any question relating to the election, returns and qualifications of the candidates to the House of Representatives falls under the jurisdiction of the HRET pursuant to Section 17, Article VI of the 1987 Constitution. Thus, Lokin should raise the question he poses herein either in an election protest or in a special civil action for quo warranto in the HRET, not in a special civil action for certiorari in this Court. We do not agree.

An election protest proposes to oust the winning candidate from office. It is strictly a contest between the defeated and the winning candidates, based on the grounds of electoral frauds and irregularities, to determine who between them has actually obtained the majority of the legal votes cast and is entitled to hold the office. It can only be filed by a candidate who has duly filed a certificate of candidacy and has been voted for in the preceding elections. A special civil action for quo warranto refers to questions of disloyalty to the State, or of ineligibility of the winning candidate. The objective of the action is to unseat the ineligible person from the office, but not to install the petitioner in his place. Any voter may initiate the action, which is, strictly speaking, not a contest where the parties strive for supremacy because the petitioner will not be seated even if the respondent may be unseated. The controversy involving Lokin is neither an election protest nor an action for quo warranto, for it concerns a very peculiar situation in which Lokin is seeking to be seated as the second nominee of CIBAC. Although an election protest may properly be available to one party-list organization seeking to unseat another party-list organization to determine which between the defeated and the winning party-list organizations actually obtained the majority of the legal votes, Lokins case is not one in which a nominee of a particular party-list organization thereby wants to unseat another nominee of the same party-list organization. Neither does an action for quo warranto lie, considering that the case does not involve the ineligibility and disloyalty of Cruz-Gonzales to the Republic of the Philippines, or some other cause of disqualification for her. Lokin has correctly brought this special civil action for certiorari against the COMELEC to seek the review of the September 14, 2007 resolution of the COMELEC in accordance with Section 7 of Article IX-A of the 1987 Constitution, notwithstanding the oath and assumption of office by Cruz-Gonzales. The constitutional mandate is now implemented by Rule 64 of the 1997 Rules of Civil Procedure, which provides for the review of the judgments, final orders or resolutions of the COMELEC and the Commission on Audit. As Rule 64 states, the mode of review is by a petition for certiorari in accordance with Rule 65 to be filed in the Supreme Court within a limited period of 30 days. Undoubtedly, the Court has original and exclusive jurisdiction over Lokins petitions for certiorari and for mandamus against the COMELEC. B Petitioner is not guilty of forum shopping Forum shopping consists of the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the

purpose of obtaining a favorable judgment. Thus, forum shopping may arise: (a) whenever as a result of an adverse decision in one forum, a party seeks a favorable decision (other than by appeal or certiorari) in another; or (b) if, after having filed a petition in the Supreme Court, a party files another petition in the Court of Appeals, because he thereby deliberately splits appeals "in the hope that even as one case in which a particular remedy is sought is dismissed, another case (offering a similar remedy) would still be open"; or (c) where a party attempts to obtain a writ of preliminary injunction from a court after failing to obtain the writ from another court.19 What is truly important to consider in determining whether forum shopping exists or not is the vexation caused to the courts and the litigants by a party who accesses different courts and administrative agencies to rule on the same or related causes or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue.20 The filing of identical petitions in different courts is prohibited, because such act constitutes forum shopping, a malpractice that is proscribed and condemned as trifling with the courts and as abusing their processes. Forum shopping is an improper conduct that degrades the administration of justice.21 Nonetheless, the mere filing of several cases based on the same incident does not necessarily constitute forum shopping. The test is whether the several actions filed involve the same transactions and the same essential facts and circumstances.22 The actions must also raise identical causes of action, subject matter, and issues.23Elsewise stated, forum shopping exists where the elements of litis pendentia are present, or where a final judgment in one case will amount to res judicata in the other.24 Lokin has filed the petition for mandamus to compel the COMELEC to proclaim him as the second nominee of CIBAC upon the issuance of NBC Resolution No. 07-72 (announcing CIBACs entitlement to an additional seat in the House of Representatives), and to strike down the provision in NBC Resolution No. 07-60 and NBC Resolution No. 07-72 holding in abeyance "all proclamation of the nominees of concerned parties, organizations and coalitions with pending disputes shall likewise be held in abeyance until final resolution of their respective cases." He has insisted that the COMELEC had the ministerial duty to proclaim him due to his being CIBACs second nominee; and that the COMELEC had no authority to exercise discretion and to suspend or defer the proclamation of winning party-list organizations with pending disputes.

On the other hand, Lokin has resorted to the petition for certiorari to assail the September 14, 2007 resolution of the COMELEC (approving the withdrawal of the nomination of Lokin, Tugna and Galang and the substitution by CruzGonzales as the second nominee and Borje as the third nominee); and to challenge the validity of Section 13 of Resolution No. 7804, the COMELECs basis for allowing CIBACs withdrawal of Lokins nomination. Applying the test for forum shopping, the consecutive filing of the action for certiorari and the action for mandamus did not violate the rule against forum shopping even if the actions involved the same parties, because they were based on different causes of action and the reliefs they sought were different. C Invalidity of Section 13 of Resolution No. 7804 The legislative power of the Government is vested exclusively in the Legislature in accordance with the doctrine of separation of powers. As a general rule, the Legislature cannot surrender or abdicate its legislative power, for doing so will be unconstitutional. Although the power to make laws cannot be delegated by the Legislature to any other authority, a power that is not legislative in character may be delegated.25 Under certain circumstances, the Legislature can delegate to executive officers and administrative boards the authority to adopt and promulgate IRRs. To render such delegation lawful, the Legislature must declare the policy of the law and fix the legal principles that are to control in given cases. The Legislature should set a definite or primary standard to guide those empowered to execute the law. For as long as the policy is laid down and a proper standard is established by statute, there can be no unconstitutional delegation of legislative power when the Legislature leaves to selected instrumentalities the duty of making subordinate rules within the prescribed limits, although there is conferred upon the executive officer or administrative board a large measure of discretion. There is a distinction between the delegation of power to make a law and the conferment of an authority or a discretion to be exercised under and in pursuance of the law, for the power to make laws necessarily involves a discretion as to what it shall be.26 The authority to make IRRs in order to carry out an express legislative purpose, or to effect the operation and enforcement of a law is not a power exclusively legislative in character, but is rather administrative in nature. The rules and regulations adopted and promulgated must not, however, subvert or be contrary to existing statutes. The function of promulgating IRRs may be legitimately exercised only for the purpose of carrying out the provisions of a law. The power of administrative agencies is confined to implementing the law or putting it into

effect. Corollary to this is that administrative regulation cannot extend the law and amend a legislative enactment. It is axiomatic that the clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation. Indeed, administrative or executive acts shall be valid only when they are not contrary to the laws or the Constitution.27 To be valid, therefore, the administrative IRRs must comply with the following requisites to be valid:28 1. Its promulgation must be authorized by the Legislature; 2. It must be within the scope of the authority given by the Legislature; 3. It must be promulgated in accordance with the prescribed procedure; and 4. It must be reasonable. The COMELEC is constitutionally mandated to enforce and administer all laws and regulations relative to the conduct of an election, a plebiscite, an initiative, a referendum, and a recall.29 In addition to the powers and functions conferred upon it by the Constitution, the COMELEC is also charged to promulgate IRRs implementing the provisions of the Omnibus Election Code or other laws that the COMELEC enforces and administers.30 The COMELEC issued Resolution No. 7804 pursuant to its powers under the Constitution, Batas Pambansa Blg. 881, and the Party-List System Act.31 Hence, the COMELEC met the first requisite. The COMELEC also met the third requisite. There is no question that Resolution No. 7804 underwent the procedural necessities of publication and dissemination in accordance with the procedure prescribed in the resolution itself. Whether Section 13 of Resolution No. 7804 was valid or not is thus to be tested on the basis of whether the second and fourth requisites were met. It is in this respect that the challenge of Lokin against Section 13 succeeds. As earlier said, the delegated authority must be properly exercised. This simply means that the resulting IRRs must not be ultra vires as to be issued beyond the limits of the authority conferred. It is basic that an administrative agency cannot amend an act of Congress,32 for administrative IRRs are solely intended to carry out, not to supplant or to modify, the law. The administrative agency issuing the IRRs may not enlarge, alter, or restrict the provisions of the law it administers

and enforces, and cannot engraft additional non-contradictory requirements not contemplated by the Legislature.33 Section 8 of R.A. No. 7941 reads: Section 8. Nomination of Party-List Representatives.-Each registered party, organization or coalition shall submit to the COMELEC not later that forty-five (45) days before the election a list of names, not less than five (5), from which party-list representatives shall be chosen in case it obtains the required number of votes. A person may be nominated in one (1) list only. Only persons who have given their consent in writing may be named in the list. The list shall not include any candidate of any elective office or a person who has lost his bid for an elective office in the immediately preceding election. No change of names or alteration of the order of nominees shall be allowed after the same shall have been submitted to the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination, becomes incapacitated in which case the name of the substitute nominee shall be placed last in the list. Incumbent sectoral representatives in the House of Representatives who are nominated in the partylist system shall not be considered resigned. The provision is daylight clear. The Legislature thereby deprived the party-list organization of the right to change its nominees or to alter the order of nominees once the list is submitted to the COMELEC, except when: (a) the nominee dies; (b) the nominee withdraws in writing his nomination; or (c) the nominee becomes incapacitated. The provision must be read literally because its language is plain and free from ambiguity, and expresses a single, definite, and sensible meaning. Such meaning is conclusively presumed to be the meaning that the Legislature has intended to convey. Even where the courts should be convinced that the Legislature really intended some other meaning, and even where the literal interpretation should defeat the very purposes of the enactment, the explicit declaration of the Legislature is still the law, from which the courts must not depart.34 When the law speaks in clear and categorical language, there is no reason for interpretation or construction, but only for application.35Accordingly, an administrative agency tasked to implement a statute may not construe it by expanding its meaning where its provisions are clear and unambiguous.36 The legislative intent to deprive the party-list organization of the right to change the nominees or to alter the order of the nominees was also expressed during the deliberations of the Congress, viz:

MR. LAGMAN: And again on Section 5, on the nomination of party list representatives, I do not see any provision here which prohibits or for that matter allows the nominating party to change the nominees or to alter the order of prioritization of names of nominees. Is the implication correct that at any time after submission the names could still be changed or the listing altered? MR. ABUEG: Mr. Speaker, that is a good issue brought out by the distinguished Gentleman from Albay and perhaps a perfecting amendment may be introduced therein. The sponsoring committee will gladly consider the same. MR. LAGMAN: In other words, what I would like to see is that after the list is submitted to the COMELEC officially, no more changes should be made in the names or in the order of listing. MR. ABUEG: Mr. Speaker, there may be a situation wherein the name of a particular nominee has been submitted to the Commission on Elections but before election day the nominee changed his political party affiliation. The nominee is therefore no longer qualified to be included in the party list and the political party has a perfect right to change the name of that nominee who changed his political party affiliation. MR. LAGMAN: Yes of course. In that particular case, the change can be effected but will be the exception rather than the rule. Another exception most probably is the nominee dies, then there has to be a change but any change for that matter should always be at the last part of the list so that the prioritization made by the party will not be adversely affected.37 The usage of "No" in Section 8 "No change of names or alteration of the order of nominees shall be allowed after the same shall have been submitted to the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination, or becomes incapacitated, in which case the name of the substitute nominee shall be placed last in the list" renders Section 8 a negative law, and is indicative of the legislative intent to make the statute mandatory. Prohibitive or negative words can rarely, if ever, be directory, for there is but one way to obey the command "thou shall not," and that is to completely refrain from doing the forbidden act,38 subject to certain exceptions stated in the law itself, like in this case. Section 8 does not unduly deprive the party-list organization of its right to choose its nominees, but merely divests it of the right to change its nominees or to alter the order in the list of its nominees names after submission of the list to the COMELEC.

The prohibition is not arbitrary or capricious; neither is it without reason on the part of lawmakers. The COMELEC can rightly presume from the submission of the list that the list reflects the true will of the party-list organization. The COMELEC will not concern itself with whether or not the list contains the real intended nominees of the party-list organization, but will only determine whether the nominees pass all the requirements prescribed by the law and whether or not the nominees possess all the qualifications and none of the disqualifications. Thereafter, the names of the nominees will be published in newspapers of general circulation. Although the people vote for the party-list organization itself in a party-list system of election, not for the individual nominees, they still have the right to know who the nominees of any particular party-list organization are. The publication of the list of the party-list nominees in newspapers of general circulation serves that right of the people, enabling the voters to make intelligent and informed choices. In contrast, allowing the party-list organization to change its nominees through withdrawal of their nominations, or to alter the order of the nominations after the submission of the list of nominees circumvents the voters demand for transparency. The lawmakers exclusion of such arbitrary withdrawal has eliminated the possibility of such circumvention. D Exceptions in Section 8 of R.A. 7941 are exclusive Section 8 of R.A. No. 7941 enumerates only three instances in which the partylist organization can substitute another person in place of the nominee whose name has been submitted to the COMELEC, namely: (a) when the nominee dies; (b) when the nominee withdraws in writing his nomination; and (c) when the nominee becomes incapacitated. The enumeration is exclusive, for, necessarily, the general rule applies to all cases not falling under any of the three exceptions. When the statute itself enumerates the exceptions to the application of the general rule, the exceptions are strictly but reasonably construed. The exceptions extend only as far as their language fairly warrants, and all doubts should be resolved in favor of the general provision rather than the exceptions. Where the general rule is established by a statute with exceptions, none but the enacting authority can curtail the former. Not even the courts may add to the latter by implication, and it is a rule that an express exception excludes all others, although it is always proper in determining the applicability of the rule to inquire whether, in a particular case, it accords with reason and justice.39
1av vphi1

The appropriate and natural office of the exception is to exempt something from the scope of the general words of a statute, which is otherwise within the scope

and meaning of such general words. Consequently, the existence of an exception in a statute clarifies the intent that the statute shall apply to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any doubt will be resolved in favor of the general provision and against the exception. Indeed, the liberal construction of a statute will seem to require in many circumstances that the exception, by which the operation of the statute is limited or abridged, should receive a restricted construction. E Section 13 of Resolution No. 7804 expanded the exceptions under Section 8 of R.A. No. 7941 Section 13 of Resolution No. 7804 states: Section 13. Substitution of nominees. A party-list nominee may be substituted only when he dies, or his nomination is withdrawn by the party, or he becomes incapacitated to continue as such, or he withdraws his acceptance to a nomination. In any of these cases, the name of the substitute nominee shall be placed last in the list of nominees. No substitution shall be allowed by reason of withdrawal after the polls. Unlike Section 8 of R.A. No. 7941, the foregoing regulation provides four instances, the fourth being when the "nomination is withdrawn by the party." Lokin insists that the COMELEC gravely abused its discretion in expanding to four the three statutory grounds for substituting a nominee. We agree with Lokin. The COMELEC, despite its role as the implementing arm of the Government in the enforcement and administration of all laws and regulations relative to the conduct of an election,40 has neither the authority nor the license to expand, extend, or add anything to the law it seeks to implement thereby. The IRRs the COMELEC issues for that purpose should always accord with the law to be implemented, and should not override, supplant, or modify the law. It is basic that the IRRs should remain consistent with the law they intend to carry out. 41 Indeed, administrative IRRs adopted by a particular department of the Government under legislative authority must be in harmony with the provisions of the law, and should be for the sole purpose of carrying the laws general provisions into effect. The law itself cannot be expanded by such IRRs, because an administrative agency cannot amend an act of Congress.42

The COMELEC explains that Section 13 of Resolution No. 7804 has added nothing to Section 8 of R.A. No. 7941,43 because it has merely reworded and rephrased the statutory provisions phraseology. The explanation does not persuade. To reword means to alter the wording of or to restate in other words; to rephrase is to phrase anew or in a new form.44 Both terms signify that the meaning of the original word or phrase is not altered. However, the COMELEC did not merely reword or rephrase the text of Section 8 of R.A. No. 7941, because it established an entirely new ground not found in the text of the provision. The new ground granted to the party-list organization the unilateral right to withdraw its nomination already submitted to the COMELEC, which Section 8 of R.A. No. 7941 did not allow to be done. Neither was the grant of the unilateral right contemplated by the drafters of the law, who precisely denied the right to withdraw the nomination (as the quoted record of the deliberations of the House of Representatives has indicated). The grant thus conflicted with the statutory intent to save the nominee from falling under the whim of the party-list organization once his name has been submitted to the COMELEC, and to spare the electorate from the capriciousness of the party-list organizations. We further note that the new ground would not secure the object of R.A. No. 7941 of developing and guaranteeing a full, free and open party-list electoral system. The success of the system could only be ensured by avoiding any arbitrariness on the part of the party-list organizations, by seeing to the transparency of the system, and by guaranteeing that the electorate would be afforded the chance of making intelligent and informed choices of their party-list representatives. The insertion of the new ground was invalid. An axiom in administrative law postulates that administrative authorities should not act arbitrarily and capriciously in the issuance of their IRRs, but must ensure that their IRRs are reasonable and fairly adapted to secure the end in view. If the IRRs are shown to bear no reasonable relation to the purposes for which they were authorized to be issued, they must be held to be invalid and should be struck down.45 F Effect of partial nullity of Section 13 of Resolution No. 7804 An IRR adopted pursuant to the law is itself law.46 In case of conflict between the law and the IRR, the law prevails. There can be no question that an IRR or any of

its parts not adopted pursuant to the law is no law at all and has neither the force nor the effect of law.47 The invalid rule, regulation, or part thereof cannot be a valid source of any right, obligation, or power. Considering that Section 13 of Resolution No. 7804 to the extent that it allows the party-list organization to withdraw its nomination already submitted to the COMELEC was invalid, CIBACs withdrawal of its nomination of Lokin and the others and its substitution of them with new nominees were also invalid and ineffectual. It is clear enough that any substitution of Lokin and the others could only be for any of the grounds expressly stated in Section 8 of R.A. No. 7941. Resultantly, the COMELECs approval of CIBACs petition of withdrawal of the nominations and its recognition of CIBACs substitution, both through its assailed September 14, 2007 resolution, should be struck down for lack of legal basis. Thereby, the COMELEC acted without jurisdiction, having relied on the invalidly issued Section 13 of Resolution No. 7804 to support its action. WHEREFORE, we grant the petitions for certiorari and mandamus. We declare Section 13 of Resolution No. 7804 invalid and of no effect to the extent that it authorizes a party-list organization to withdraw its nomination of a nominee once it has submitted the nomination to the Commission on Elections. Accordingly, we annul and set aside: (a) The resolution dated September 14, 2007 issued in E. M. No. 07-054 approving Citizens Battle Against Corruptions withdrawal of the nominations of Luis K. Lokin, Jr., Sherwin N. Tugna, and Emil Galang as its second, third, and fourth nominees, respectively, and ordering their substitution by Cinchona C. Cruz-Gonzales as second nominee and Armi Jane R. Borje as third nominee; and (b) The proclamation by the Commission on Elections of Cinchona C. Cruz-Gonzales as a Party-List Representative representing Citizens Battle Against Corruption in the House of Representatives. We order the Commission on Elections to forthwith proclaim petitioner Luis K. Lokin, Jr. as a Party-List Representative representing Citizens Battle Against Corruption in the House of Representatives. We make no pronouncements on costs of suit. SO ORDERED.

LUCAS P. BERSAMIN Associate Justice WE CONCUR: RENATO C. CORONA Chief Justice ANTONIO T. CARPIO Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice TERESITA J. LEONARDO DE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice ROBERTO A. ABAD Associate Justice JOSE PORTUGAL PEREZ Associate Justice CONCHITA CARPIO MORALES Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice ARTURO D. BRION Associate Justice MARIANO C. DEL CASTILLO Associate Justice MARTIN S. VILLARAMA, JR. Associate Justice (On Leave) JOSE CATRAL MENDOZA Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. RENATO C. CORONA Chief Justice Republic of the Philippines SUPREME COURT Manila

EN BANC G.R. No. 180055 July 31, 2009

FRANKLIN M. DRILON as President and in representation of the LIBERAL PARTY OF THE PHILIPPINES (LP), AND HON. JOSEPH EMILIO A. ABAYA, HON. WAHAB M. AKBAR, HON. MARIA EVITA R. ARAGO, HON. PROCESSO J. ALCALA, HON. ROZZANO RUFINO BIAZON, HON. MARY MITZI CAJAYON, HON. FREDENIL H. CASTRO, HON. GLENN ANG CHONG, HON. SOLOMON R. CHUNGALAO, HON. PAUL RUIZ DAZA, HON. ANTONIO A. DEL ROSARIO, HON. CECILIA S. LUNA, HON. MANUEL M. MAMBA, HON. HERMILANDO I. MANDANAS, HON. ALVIN SANDOVAL, HON. LORENZO R. TAADA III, HON. REYNALDO S. UY, HON. ALFONSO V. UMALI JR., HON. LIWAYWAY VINZONS-CHATO, Petitioners, vs. HON. JOSE DE VENECIA JR. in his official capacity as Speaker of the House of Representatives; HON. ARTHUR D. DEFENSOR, SR., in his official capacity as Majority Floor Leader of the House of Representatives, HON. MANUEL B. VILLAR, in his official capacity as ex-officio Chairman of the Commission on Appointments, ATTY. MA. GEMMA D. ASPIRAS, in her official capacity as Secretary of the Commission on Appointments, HON. PROSPERO C. NOGRALES, HON. EDGARDO C. ZIALCITA, HON. ABDULLAH D. DIMAPORO, HON. JOSE CARLOS V. LACSON, HON. EILEEN R. ERMITA-BUHAIN, HON. JOSE V. YAP, HON. RODOLFO T. ALBANO III, HON. EDUARDO R. GULLAS, HON. CONRADO M. ESTRELLA III, HON. RODOLFO "OMPONG" PLAZA, HON. EMMYLOU J. TALIO-MENDOZA and HON. EMMANUEL JOEL J. VILLANUEVA, in their individual official capacities as "elected" members of the Commission on Appointments, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 183055 July 31, 2009

SENATOR MA. ANA CONSUELO A.S. MADRIGAL, Petitioner, vs. SENATOR MANUEL VILLAR in his capacity as Senate President and ExOfficio Chairman of the Commission on Appointments, REPRESENTATIVE PROSPERO NOGRALES in his capacity as the Speaker of the House of Representatives, and THE COMMISSION ON APPOINTMENTS, Respondents. DECISION

CARPIO MORALES, J.: In August 2007, the Senate and the House of Representatives elected their respective contingents to the Commission on Appointments (CA). The contingent in the Senate to the CA was composed of the following senators with their respective political parties: Sen. Maria Ana Consuelo A.S. Madrigal PDP-Laban Sen. Joker Arroyo KAMPI Sen. Alan Peter Cayetano Lakas-CMD Sen. Panfilo Lacson UNO Sen. Jinggoy Ejercito Estrada PMP Sen. Juan Ponce Enrile PMP Sen. Loren Legarda NPC Sen. Richard Gordon Lakas-CMD Sen. Mar Roxas LP Sen. Lito Lapid Lakas-CMD Sen. Miriam Defensor-Santiago PRP The members of the contingent of the House of Representatives in the CA and their respective political parties were as follows: Rep. Prospero C. Nograles Lakas-CMD Rep. Eduardo C. Zialcita Lakas-CMD Rep. Abdullah D. Dimaporo Lakas-CMD Rep. Jose Carlos V. Lacson Lakas-CMD Rep. Eileen R. Ermita-Buhain Lakas-CMD Rep. Jose V. Yap Lakas-CMD

Rep. Rodolfo T. Albano III KAMPI Rep. Eduardo R. Gullas KAMPI Rep. Rodolfo "Ompong" G. Plaza NPC Rep. Conrado M. Estrella NPC Rep. Emmylou J. Talio-Mendoza NP Rep. Emmanuel Joel J. Villanueva CIBAC Party List In the second week of August 2007, petitioners in the first petition, G.R. No. 180055, went to respondent then Speaker Jose de Venecia to ask for one seat for the Liberal Party in the CA. Speaker Jose de Venecia merely said that he would study their demand.1 During the session of the House of Representatives on September 3, 2007, petitioner in the first petition, Representative Taada, requested from the House of Representatives leadership2 one seat in the CA for the Liberal Party.3 To his request, Representative Neptali Gonzales II4 begged the indulgence of the Liberal Party "to allow the Legal Department to make a study on the matter."5 In a separate move, Representative Taada, by letter of September 10, 2007, requested the Secretary General of the House of Representatives the reconstitution of the House contingent in the CA to include one seat for the Liberal Party in compliance with the provision of Section 18, Article VI of the Constitution.6 Representative Taada also brought the matter to the attention of then Speaker De Venecia, reiterating the position that since there were at least 20 members of the Liberal Party in the 14th Congress, the party should be represented in the CA.7 As of October 15, 2007, however, no report or recommendation was proffered by the Legal Department, drawing Representative Taada to request a report or recommendation on the matter within three days.8 In reply, Atty. Grace Andres of the Legal Affairs Bureau of the House of Representatives informed Representative Taada that the department was constrained to withhold the release of its legal opinion because the handling lawyer was directed to secure documents necessary to establish some of the members party affiliations.9 Hence spawned the filing on October 31, 2007 of the first petition by petitioner former Senator Franklin M. Drilon (in representation of the Liberal Party), et al.,

for prohibition, mandamus, and quo warranto with prayer for the issuance of writ of preliminary injunction and temporary restraining order, against then Speaker De Venecia, Representative Arthur Defensor, Sr. in his capacity as Majority Floor Leader of the House of Representatives, Senator Manuel B. Villar in his capacity as ex officio chairman of the CA, Atty. Ma. Gemma D. Aspiras in her capacity as Secretary of the CA, and the individual members of the House of Representatives contingent to the CA.10 The petition in G.R. No. 180055 raises the following issues: a. WHETHER THE LIBERAL PARTY WITH AT LEAST TWENTY (20) MEMBERS WHO SIGNED HEREIN AS PETITIONERS, IS CONSTITUTIONALLY ENTITLED TO ONE (1) SEAT IN THE COMMISSION ON APPOINTMENTS. b. WHETHER THE HOUSE OF REPRESENTATIVES RESPONDENTS HAVE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN CONSTITUTING THE COMMISSION ON APPOINTMENTS IN CONTRAVENTION OF THE REQUIRED PROPORTIONAL CONSTITUTION BY DEPRIVING THE LIBERAL PARTY OF ITS CONSTITUTIONAL ENTITLEMENT TO ONE (1) SEAT THEREIN. c. WHETHER AS A RESULT OF THE GRAVE ABUSE OF DISCRETION COMMITTED BY THE HOUSE OF REPRESENTATIVES RESPONDENTS, THE WRITS PRAYED FOR IN THIS PETITION BE ISSUED NULLIFYING THE CURRENT COMPOSITION OF THE COMMISSION ON APPOINTMENTS, RESTRAINING THE CURRENT HOUSE OF REPRESENTATIVE MEMBERS FROM SITTING AND PARTICIPATING IN THE PROCEEDINGS OF THE COMMISSION ON APPOINTMENTS, OUSTING THE AFFECTED RESPONDENTS WHO USURPED, INTRUDED INTO AND UNLAWFULLY HELD POSITIONS IN THE COMMISSION ON APPOINTMENTS AND REQUIRING THE RESPONDENTS TO RECONSTITUTE AND/OR REELECT THE MEMBERS OF SAID COMMISSION.11 (Italics in the original) And it prays that this Court: a. Immediately upon the filing of the instant Petition, issue a Temporary Restraining Order and/or a Writ of Preliminary Prohibitory and Mandatory Injunction, enjoining all Respondents and all persons under their direction, authority, supervision, and control from further proceeding with their actions relating to the illegal and unconstitutional constitution of the Commission on Appointments and to the unlawful exercise of its members functions, contrary to the rule on proportional representation of political

parties with respect to the House of Representatives contingent in the said Commission; b. After careful consideration of the merits of the case, render judgment making the injunction permanent and ordering Respondents and all persons under their direction, authority, supervision, and control; xxxx c. Declare Respondents action in not allotting one (1) seat to Petitioners null and void for being a direct violation of Section 18, Article VI of the Constitution; d. Declare the proceedings of the Commission on Appointments null and void, insofar as they violate the rule on proportional representation of political parties in said Commission; e. Oust the affected respondents, whoever they are, who usurped, intruded into and have unlawfully held positions in the Commission on Appointments and f. Require Respondents to alter, reorganize, reconstitute and reconfigure the composition of the Commission on Appointments in accordance with proportional representation based on the actual numbers of members belonging to duly accredited and registered political parties who were elected into office during the last May 14, 2007 Elections by, at the very least, respecting and allowing Congressman Alfonso V. Umali, Jr. as the duly nominated Commission on Appointments member of the Liberal Party of the Philippines to sit therein as such.12 Respondents Senator Villar and CA Secretary Aspiras filed their Comment13 on December 6, 2007, moving for the dismissal of the petition on these grounds: I. THE POWER TO ELECT MEMBERS TO THE COMMISSION ON APPOINTMENTS BELONGS TO EACH HOUSE OF CONGRESS PURSUANT TO THE CONSTITUTION. AS SUCH, THE PETITION IS NOT DIRECTED AT THE HEREIN RESPONDENTS. II. THE CONSTITUTION DOES NOT REQUIRE THAT THE COMMISSION MUST HAVE COMPLETE MEMBERSHIP IN ORDER THAT IT CAN FUNCTION. WHAT THE CONSTITUTION REQUIRES IS THAT THERE MUST AT LEAST BE A MAJORITY OF ALL THE MEMBERS OF THE COMMISSION

FOR IT TO VALIDLY CONDUCT ITS PROCEEDINGS AND TRANSACT ITS BUSINESS.14 (Emphasis in the original) Then Speaker De Venecia and Representative Defensor filed their Comment and Opposition15 on February 18, 2008, moving too for the dismissal of the petition on these grounds: I. THE ACTS COMPLAINED OF DO NOT CONSTITUTE GRAVE ABUSE OF DISCRETION THAT WILL JUSTIFY THE GRANT OF THE EXTRAORDINARY WRIT OF MANDAMUS.16 II. THE LIBERAL PARTY DOES NOT POSSESS THE REQUISITE NUMBER OF MEMBERS THAT WOULD ENTITLE THE PARTY TO A SEAT IN THE COMMISSION ON APPOINTMENTS. IT IS, THEREFORE, NOT THE PROPER PARTY TO INSTITUTE THE INSTANT PETITION FOR QUO WARRANTO.17 III. THE PETITIONERS FAILED TO EXHAUST THE REMEDIES AVAILABLE TO THEM.18 IV. THE CONFLICTING CLAIMS OF THE PARTIES AS TO THE AFFILIATION OF THE MEMBERS NEED TO BE SETTLED IN A TRIAL.19 (Emphasis in the original) Meantime, Senator Ma. Ana Consuelo A.S. Madrigal of PDP-Laban, by separate letters of April 17, 2008 to Senator Villar and Speaker Prospero Nograles, claimed that the composition of the Senate contingent in the CA violated the constitutional requirement of proportional representation for the following reasons: 1. PMP has two representatives in the CA although it only has two members in the Senate and thus [is] entitled only to one (1) seat. 2. KAMPI has only one (1) member in the Senate and thus is not entitled to a CA seat and yet it is represented in the CA. 3. PRP has only one (1) member in the Senate and thus is not entitled to a CA seat and yet it is represented in the CA. 4. If Senators Richard Gordon and Pilar Juliana Cayetano are Independents, then Sen. Gordon cannot be a member of the CA as Independents cannot be represented in the CA even though there will be three Independents in the CA.

5. If Sen. Alan Peter Cayetano is now NP, he still can sit in the CA representing NP.20 She also claimed that the composition of the House of Representatives contingent in the CA violated the constitutional requirement of proportional representation for the following reasons: 1. Lakas-CMD currently has five (5) members in the Commission on Appointments although it is entitled only to four (4) representatives and thus [is] in excess of a member; 2. KAMPI currently has three (3) members in the Commission on Appointments although it is entitled only to two (2) representatives and thus is excess of a member; 3. Liberal Party is not represented in the Commission on Appointments although it is entitled to one (1) nominee; and 4. Party-List CIBAC has a representative in the Commission on Appointments although it only has two members in the House of Representatives and therefore [is] not entitled to any seat.21 Senator Madrigal thus requested the reorganization of the membership of the CA and that, in the meantime, "all actions of [the] CA be held in abeyance as the same may be construed as illegal and unconstitutional."22 By letter of May 13, 2008, Senator Madrigal again wrote Senator Villar as follows: Today, I was advised that the Committee on Budget and Management of Senator Mar Roxas has endorsed the ad interim appointment of Rolando G. Andaya as Secretary of the Department of Budget and Management for approval by the CA in the plenary. I believe it is imperative that the serious constitutional questions that I have raised be settled before the plenary acts on this endorsement by the Committee on Budget and Management. Otherwise, like Damocles sword, a specter of doubt continues to be raised on the validity of actions taken by the CA and its committees.23 Still later or on May 19, 2008, Senator Madrigal sent another letter to Senator Villar declaring that she "cannot in good conscience continue to participate in the proceedings of the CA, until such time as [she] get[s] a response to [her] letters and until the constitutional issue of the CAs composition is resolved by the leadership of the Commission,"24 and that without any such resolution, she would

be forced to invoke Section 20 of the CA rules against every official whose confirmation would be submitted to the body for deliberation.25 The CA Committee on Rules and Resolutions, by letter-comment of May 26, 2008, opined that the CA has neither the power nor the discretion to reject a member who is elected by either House, and that any complaints about the election of a member or members should be addressed to the body that elected them.26 By letter of May 28, 2008, Senator Villar advised Senator Madrigal as follows: xxxx Noting your position that you will not continue to participate in the proceedings of the CA "until the constitutional issue of the CAs composition is resolved by the leadership of the Commission" x x x, the Secretary of the Commission, upon my instructions, transmitted the same to the CA Committee on Rules and Resolutions. It was my intention to have the Committee study and deliberate on the matter and to recommend what step/s to take on your request that "all actions of the Commission be held in abeyance" x x x. In view however, of your manifestation during the May 26, 2008 meeting of the CA Committee on Rules and Resolutions, and of the written comment of Sen. Arroyo that "If there is a complaint in the election of a member or members, it shall be addressed to the body that elected them, namely the Senate and/or the House," I have given instructions to transmit the original copies of your letters to the Senate Secretary for their immediate inclusion in the Order of Business of the Session of the Senate so that your concerns may be addressed by the Senate in caucus and/or in plenary.27 (Emphasis and underscoring supplied) Undaunted, Senator Madrigal, by letter of June 2, 2008 addressed to Senator Villar, reiterated her request that all actions of the CA be held in abeyance pending the reorganization of both the Senate and House of Representatives contingents.28 Senator Madrigal thereafter filed on June 13, 2008 the second petition, G.R. No. 183055, for prohibition and mandamus with prayer for issuance of temporary restraining order/writ of preliminary injunction against Senator Villar in his capacity as Senate President and Ex-Officio Chairman of the CA, Speaker Nograles, and the CA,29alleging that respondents committed grave abuse of discretion amounting to lack or excess of jurisdiction

A. . . . IN FAILING TO COMPLY WITH THE CONSTITUTIONALLY REQUIRED PROPORTIONAL PARTY REPRESENTATION OF THE MEMBERS OF THE COMMISSION ON APPOINTMENTS; B. . . . IN CONTINUOUSLY CONDUCTING HEARINGS AND PROCEEDINGS ON THE APPOINTMENTS DESPITE THE COMMISSION ON APPOINTMENTS UNCONSTITUTIONAL COMPOSITION WHICH MUST BE PROHIBITED BY THIS HONORABLE COURT; and C. . . . IN FAILING, DESPITE REPEATED DEMANDS FROM PETITIONER, TO RE-ORGANIZE THE COMMISSION ON APPOINTMENTS IN ACCORDANCE WITH THE MANDATED PROPORTIONAL PARTY REPRESENTATION OF THE 1987 CONSTITUTION, WHICH REQUIREMENT MUST BE ENFORCED BY THIS HONORABLE COURT.30 (Emphasis in the original) She thus prayed for the 1. . . . issu[ance of] a temporary restraining order/a writ of preliminary injunction to enjoin Respondents from proceeding with their illegal and unlawful actions as officials and members of the Commission on Appointments which composition is unconstitutional, pending resolution of the instant Petition; 2. Declar[ation that] the composition of the Commission on Appointments [is] null and void insofar as it violates the proportional party representation requirement mandated by Article VI, Section 18 of the 1987 Philippine Constitution; 3. Issu[ance of] a Writ of Prohibition against respondents Senate President Manuel Villar, Speaker Prospero Nograles and Secretary Gemma Aspiras to desist from further proceeding with their illegal and unlawful actions as officers of the Commission on Appointments, the composition of which is null and void for being violative of the proportional party representation requirement under Article VI, Section 18 of the 1987 Philippine Constitution; and 4. Issu[ance of] a Writ of Mandamus commanding respondents Senate President Manuel Villar, Speaker Prospero Nograles and Secretary Gemma Aspiras to reorganize and reconstitute the Commission on Appointments in accordance with the 1987 Constitution.31 The Court consolidated G.R. No. 18005532 and G.R. No. 183055 on July 1, 2008.

Petitioners in the first petition, G.R. No. 180055, later filed on August 15, 2008 a Motion with Leave of Court to Withdraw the Petition,33 alleging that with the designation of Representative Alfonso V. Umali, Jr. of the Liberal Party as a member of the House of Representatives contingent in the CA in replacement of Representative Eduardo M. Gullas of KAMPI, their petition had become moot and academic. In his Comment of August 19, 2008 on the second petition, respondent Senator Villar proffered the following arguments: I. Petitioner has no standing to file [the] petition. II. Petitioner failed to observe the doctrine of primary jurisdiction or prior resort. Each House of Congress has the sole function of reconstituting or changing the composition of its own contingent to the CA. III. Petitioner is estopped. IV. Presumption of regularity in the conduct of official functions. V. The extraordinary remedies of Prohibition and Mandamus and the relief of a TRO are not available to the Petitioner.34 (Emphasis in the original; underscoring supplied) In his Comment and Opposition35 filed on September 3, 2008, Speaker Nograles proffered the following arguments: A. WITH RESPECT TO THE HOUSE OF REPRESENTATIVES, THE PETITIONS HAVE ALREADY BECOME MOOT AND ACADEMIC UPON THE ELECTION OF REPRESENTATIVE ALFONSO V. UMALI, JR., MEMBER OF THE LIBERAL PARTY, TO THE HOUSE CONTINGENT TO THE COMMISSION ON APPOINTMENTS.36

B. THE ACTS COMPLAINED OF DO NOT CONSTITUTE GRAVE ABUSE OF DISCRETION THAT WILL JUSTIFY THE ASSUMPTION OF JURISDICTION BY THE HONORABLE COURT AND THE GRANT OF THE EXTRAORDINARY WRITS OF MANDAMUS AND PROHIBITION.37 C. THE REMEDY OF THOSE WHO SEEK TO RECONSTITUTE THE HOUSE CONTINGENT TO THE COMMISSION ON APPOINTMENTS RESTS, IN THE FIRST INSTANCE, WITH THE HOUSE OF REPRESENTATIVES.38 D. CONSIDERING THE AFOREMENTIONED FACTS AND JURISPRUDENCE, IT IS SUBMITTED THAT SENATOR MADRIGAL HAS NO STANDING TO PURSUE THE INSTANT CASE. E. THE PETITION IS NOT ACCOMPANIED BY A VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING AS REQUIRED BY RULE 65 SECTIONS 2 AND 3 AND SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 28-91. (Emphasis and underscoring in the original) The first petition, G.R. No. 180055, has thus indeed been rendered moot with the designation of a Liberal Party member of the House contingent to the CA, hence, as prayed for, the petition is withdrawn. As for the second petition, G.R. No. 183055, it fails. Senator Madrigal failed to show that she sustained direct injury as a result of the act complained of.39 Her petition does not in fact allege that she or her political party PDP-Laban was deprived of a seat in the CA, or that she or PDP-Laban possesses personal and substantial interest to confer on her/it locus standi. Senator Madrigals primary recourse rests with the respective Houses of Congress and not with this Court. The doctrine of primary jurisdiction dictates that prior recourse to the House is necessary before she may bring her petition to court.40 Senator Villars invocation of said doctrine is thus well-taken, as is the following observation of Speaker Nograles, citing Sen. Pimentel, Jr. v. House of Representatives Electoral Tribunal:41 In order that the remedies of Prohibition and Mandamus may be availed of, there must be "no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law".
lavvph!1

It is worth recalling that, in the 11th Congress, Senator Aquilino Pimentel advocated the allocation of a position in the Commission on Appointments for the Party-List Representatives. Just like the Petitioner in the instant case, Senator Pimentel first wrote to the Senate President, requesting that the Commission on Appointments be restructured to conform to the constitutional provision on proportional representation. xxx Without awaiting final determination of the question xxx, Pimentel filed a Petition for Prohibition and Mandamus with the Supreme Court. In the said case, the Honorable Court ruled: "The Constitution expressly grants to the House of Representatives the prerogative, within constitutionally defined limits, to choose from among its district and party-list representatives those who may occupy the seats allotted to the House in the HRET and the CA. Section 18, Article VI of the Constitution explicitly confers on the Senate and on the House the authority to elect among their members those who would fill the 12 seats for Senators and 12 seats for House members in the Commission on Appointments. Under Section 17, Article VI of the Constitution, each chamber exercises the power to choose, within constitutionally defined limits, who among their members would occupy the allotted 6 seats of each chambers respective electoral tribunal. xxxx Thus, even assuming that party-list representatives comprise a sufficient number and have agreed to designate common nominees to the HRET and the CA, their primary recourse clearly rests with the House of Representatives and not this Court. Under Sections 17 and 18, Article VI of the Constitution, party-list representatives must first show to the House that they possess the required strength to be entitled to seats in the HRET and the CA. Only if the House fails to comply with the directive of the Constitution on proportional representation of political parties in the HRET and the CA can the party-list representatives seek recourse to this Court under its power of judicial review. Under the doctrine of primary jurisdiction, prior recourse to the House is necessary before petitioners may bring the instant case to the court. Consequently, petitioners direct recourse to this Court is premature. Following the ruling in Pimentel, it cannot be said that recourse was already had in the House of Representatives. Furnishing a copy of Petitioners letter to the Senate President and to the Speaker of the House of Representatives does not constitute the primary recourse required prior to the invocation of the jurisdiction of the Supreme Court. Further, it is the Members of the House who claim to have been deprived of a seat in the Commission on Appointments that must first show to the House that they possess the required numerical strength to be entitled to seats in the Commission on Appointments. Just like Senator Pimentel,

demanding seats in the Commission on Appointments for Congressmen, who have not even raised the issue of its present composition in the House, is not Senator Madrigals affair.42 (Italics, underscoring, and emphasis supplied by Representative Nograles) It bears noting that Senator Villar had already transmitted original copies of Senator Madrigals letters to the Senate Secretary for inclusion in the Order of Business of the Session of the Senate to address her concerns. Senator Madrigals filing of the second petition is thus premature. Senator Madrigals suggestion that Senators Pilar Juliana Cayetano and Richard Gordon be considered independent senators such that the latter should not be allowed to be a member of the CA,43 and that Senator Alan Peter Cayetano be considered a member of the NP such that he may sit in the CA as his inclusion in NP will entitle his party to one seat involves a determination of party affiliations, a question of fact which the Court does not resolve. WHEREFORE, the Motion with Leave of Court to Withdraw the Petition in G.R. No. 180055 is GRANTED. The Petition is WITHDRAWN. The Petition in G.R. No. 183055 is DISMISSED. SO ORDERED. CONCHITA CARPIO MORALES Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate Justice CONSUELO YNARESSANTIAGO Associate Justice MINITA V. CHICO-NAZARIO Associate Justice ANTONIO T. CARPIO Associate Justice RENATO C. CORONA Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice ARTURO D. BRION* Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice

LUCAS P. BERSAMIN Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice

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

(ABAKADA GURO Party List, et al. v. Hon. Cesar V. Purisima, et. al) CONCURRING OPINION TINGA, J.: I join Justice Coronas lucid opinion one of the more legally significant decisions of this Court of recent years because it concludes for the first time that legislative vetoes are impermissible in this jurisdiction. I fully concur with the majoritys reasoning for declaring legislative veto as invalid. Yet even as the ponencia aligns with most of my views, I write separately to fully explain my viewpoint. I. The controversy rests on the so-called "legislative veto", defined by Tribe as "measures allowing [Congress], or one of its Houses or committees, to review

and revoke the actions of federal agencies and executive departments."1 Our Constitution specifically neither prohibits nor allows legislative vetoes, unlike presidential vetoes, which are formally authorized under Section 27, Article VI. Until today, Court has likewise declined so far to pass judgment on the constitutionality of a legislative veto.2 The Court is unanimous that a legislative veto, such as that contained in Section 12 of Rep. Act No. 9335 is unconstitutional. Such a ruling would be of momentous consequence, not only because the issue has never been settled before, but also because many of our statutes incorporate a similarly worded provision that empowers members of Congress to approve the Implementing Rules of various particular laws. Moreover, the invalidation of legislative vetoes will send a definite signal to Congress that its current understanding of the extent of legislative powers is awry. Concededly, our ruling will greatly affect the workings of the legislative branch of government. It would thus be intellectually honest to also consider the question from the perspective of that branch which is the branch most affected by that ruling. Of course, the perspective of the executive should be reckoned with as well since it has traditionally inveighed against legislative vetoes. Still, if we are to consider the congressional perspective of the question, there will emerge important nuances to the question that should dissuade against any simplistic analysis of the issue. II. I have previously intimated that the President, in chartering the extent of his plenary powers, may be accorded a degree of flexibility for so long as he is not bound by any specific constitutional proscription. That same degree of deference should be extended to Congress as well. Thus, I wish to inquire into whether there is a constitutionally justifiable means to affirm legislative vetoes. The emergence of the legislative veto in the United States coincided with the decline of the non-delegation doctrine, which barred Congress from delegating its law-making powers elsewhere.3 Modern jurisprudence has authorized the delegation of lawmaking powers to administrative agencies, and there are resulting concerns that there is no constitutional assurance that the agencies are responsive to the peoples will.4 From that framework, the legislative veto can be seen as a means of limiting agency rule-making authority by lodging final control over the implementing rules to Congress. "But instead of controlling agency policy in advance by laying out a roadmap in the statute creating the agency, Congress now proposes to control policy as

it develops in notice-and-comment rulemaking, after the agencys expert staff and interested members of the public have had an opportunity to assist in its formation."5 It is a negative check by Congress on policies proposed by the agencies, and not a means for making policy directly.6 From the perspective of Congress, the legislative veto affords maximum consideration to the plenary power of legislation, as it bolsters assurances that the legislative policy embodied in the statute will be faithfully executed upon its implementation. The faithful execution of the laws of the land is a constitutional obligation imposed on the President7, yet as a matter of practice, there could be a difference of opinion between the executive and legislative branches as to the meaning of the law. The clash may be especially telling if the President and Congress are politically hostile with each other, and it bears notice that the legislative veto in the United States became especially popular beginning in the early 1970s, when the ties between the Democratic-controlled Congress and the Republican President Richard Nixon were especially frayed.8 More recently, the current U.S. President Bush has had a penchant of attaching "signing statements" to legislation he has approved, such statements indicating his own understanding of the bill he is signing into law. The legislative veto, as a practical matter, allows Congress to prevent a countervailing attempt by the executive branch to implement a law in a manner contrary to the legislative intent. There is nothing obnoxious about the policy considerations behind the legislative veto. Since the courts, in case of conflict, will uphold legislative intent over the executive interpretation of a law, the legislative veto could ensure the same judicially-confirmed result without need of elevating the clash before the courts. The exercise of the legislative veto could also allow both branches to operate within the grayer areas of their respective constitutional functions without having to resort to the judicial resolution of their potentially competing claims. As the future U.S. Supreme Court Justice Stephen Breyer once wrote: The [legislative] veto sometimes offers a compromise of important substantive conflicts embedded deeply in the Constitution. How are we to reconcile the Constitutions grant to Congress of the power to declare war with its grant to the President of authority over the Armed Forces as their Commander in Chief? The War Powers Act approaches the problem, in part, by declaring that the President cannot maintain an armed conflict for longer than ninety days if both Houses of Congress enact a resolution of disapproval. Similar vetoes are embedded in laws authorizing the President to exercise various economic powers during

times of "national emergency". To take another example, how are we to reconcile article Is grant to Congress of the power to appropriate money with article IIs grant to the President of the power to supervise its expenditure? Must the President spend all that Congress appropriates? Congress has addressed this conflict, authorizing the President to defer certain expenditures subject to a legislative veto.9 There are practical demerits imputed as well to the legislative veto, such as the delay in the implementation of the law that may ensue with requiring congressional approval of the implementing rules.10 Yet the question must ultimately rest not on the convenience or wisdom of the legislative veto device, but on whether it is constitutionally permissible. In 1983, the United States Supreme Court struck a decisive blow against the legislative veto in INS v. Chadha11, a ruling which essentially held the practice as unconstitutional. It appears that the foremost consideration of the majority opinion in Chadha were the issues of bicameralism and presentment, as discussed by the Chief Justice in his Separate Opinion in Macalintal v. COMELEC12. The twin issues of presentment and bicameralism would especially come to fore with respect to the Joint Congressional Oversight Committee under Rep. Act No. 9335, composed as it is by seven Members from the Senate and seven Members from the House of Representatives.13 Chadha emphasized that the bills passed by the U.S. Congress must be presented for approval to the President of the United States in order that they may become law.14 Section 27(1), Article VI of our Constitution imposes a similar presentment requirement. Chadha also noted that a bill must be concurred in by a majority of both Houses of Congress. Under our Constitution, Congress consists of a House of Representatives and a Senate, and the underlying uncontroverted implication is that both Houses must concur to the bill before it can become law. Assuming that the approval of the Implementing Rules to Rep. Act No. 9335 by seven Members from each House of Congress is a legislative act, such act fails either the presentment or bicameralism requirement. Such approval is neither presented to the President of the Philippines for consent, nor concurred in by a majority of either House of Congress. Yet with respect to the implications of Chadha on the principle of separation of powers, there are critical informed comments against that decision. Chadha involved the statutory authority of either House of Congress to disapprove the decision of the executive branch to allow a deportable alien to remain in the United States. The majority had characterized such

disapproval as a legislative act, since it "had the purpose and effect of altering the legal rights, duties and relations of persons".15 Yet that emphasis "on the labels of legislative, executive and judicial" was criticized as "provid[ing] the rhetorical ammunition for a variety of cases seeking judicial reassessment of the constitutionality not only of the great number of statutes that have incorporated some kind of legislative veto mechanism, but of regulatory statutes in general that sought to delegate legislative, executive and judicial power, and various combinations thereof, to the unelected officials that run the various federal agencies."16 Fisher presents a veritable laundry list of criticisms of the Chadha reasoning, replete with accusations that the analysis employed on separation of powers detracted from the intent of the Framers, resulting in giving the "executive branch a one-sided advantage in an accommodation that was meant to be a careful balancing of executive and legislative interests".17 He further observed: The Courts misreading of history and congressional procedures has produced some strange results. Its theory of government is too much at odds with the practices developed over a period of decades by the political branches. Neither administrators nor congressmen want the static model proferred by the Court. The conditions that spawned the legislative veto a half century ago have not disappeared. Executive officials still want substantial latitude in administering delegated authority; legislators still insist on maintaining control without having to pass another law. The executive and legislative branches will, therefore develop substitutes to serve as the functional equivalent of the legislative veto. Forms will change but not power relationships and the need for quid pro quo.18 And Tribe himself finds flaw in the Chadha analysis of what constituted a legislative act: And why, precisely, did the veto of the suspension of Chadhas deportation have to be deemed legislative? It was "essentially legislative," according to the Court, because it "had the purpose and effect of altering the legal rights, duties and relations of persons outside the legislative branch". Without Congress exercise of the legislative veto in his case, Chadha would have remained in America; without the veto provision in the immigration statute, the change in Chadhas legal status could have been wrought only be legislation requiring his deportation. The difficulty with this analysis is that the same observations apply with equal validity to nearly all exercises of

delegated authority, whether by a House of Congress or by an executive department or an administrative agency. Both through rulemaking and through case-by-case adjudication, exercises of delegated authority change legal rights and privileges no less than do full-fledged laws. There was perhaps less need than the Court perceived to squeeze the legislative veto into one of the three pigeonholes envisioned by the Framers. Even if Congress action had been deemed "executive" in nature, it presumably would have been unconstitutional, since Congress may make, but not execute the laws. And if the legislative veto had been deemed "judicial," it would still have violated the separation of powers, as Justice Powell recognized in his concurring opinion.19 The majority in Chadha did not address the reality that the U.S. Congress had relied on the legislative veto device for over five decades20, or for that matter, the valid concerns over the executive usurpation of legislative prerogatives that led to the invention of the veto as a countervailing measure. Justice Byron White relied extensively on these concerns in his dissenting opinion in Chadha. Nonetheless, the invalidation of the legislative veto in Chadha has caused serious discussion as to alternative constitutional means through which Congress could still ensure that its legislative intentions would not be countermanded by the executive branch. On one extreme, a Republican congressman, Nick Smith of Michigan, filed a bill requiring that significant new regulations adopted by administrative agencies be approved by a joint resolution of Congress before they would become effective.21 Less constitutionally controversial perhaps were the suggestions of Justice Breyer in remarks he made afterChadha was decided. He explained that "Congress unquestionably retains a host of traditional weapons in its legislative and political arsenal that can accomplish some of the vetos objectives."22 These include the power to provide that legislation delegating authority to the executive expires every so often. To continue to exercise that authority, the executive would have to seek congressional approval, at which point past agency behavior that Congress disliked would become the subject of serious debate. Moreover, Congress might tailor its statutes more specifically, limiting executive power. Further, Congress can require the President, before taking action, to consult with congressional representatives whose views would carry significant political weight. Additionally, Congress can delay implementation of an

executive action (as it does when the Supreme Court promulgates rules of civil procedure) until Congress has had time to consider it an to enact legislation preventing the action from taking effect. Finally, each year Congress considers the agencys budget. If a significant group of legislators strongly opposes a particular agency decision, it might well succeed in including a sentence in the appropriations bill denying the agency funds to enforce that decision.23 I raise these points because even with the invalidation of the legislative veto, Congress need not simply yield to the executive branch. The invalidation of the legislative veto can be mistakenly perceived as signal by the executive branch that it can, in the guise of rule-making power, adopt measures not authorized or even forbidden in the enabling legislation. If that happens, undue weight will be shifted to the executive branch, much like what had happened when former President Marcos exercised both executive and legislative powers. One might correctly argue that the judicial branch may still exercise corrective relief against such unauthorized exercise by the executive24, yet the relief may not come for years to come, considering the inherently deliberative judicial process. I do believe that there is a constitutionally sound mechanism through which Congress may validly influence the approval of a laws Implementing Rules. Section 12 of Rep. Act No. 9335 may not be such a means, but I maintain that it would be highly useful for the Court to explain how this can be accomplished. In this light, I submit the following proposed framework for invalidating the legislative veto while recognizing the pre-eminent congressional prerogative in defining the manner how legislation is to be implemented. III. We can consider that in the enactment and implementation of a law, there is a legislative phase and an executive phase. The legislative phase encompasses the period from the initiation of a bill in Congress until it becomes effective as a law. On the other hand, the executive phase begins the moment the law is effective and falls within the capacity of the executive branch to enforce. Notably, as such, it is only upon the effectivity of the statute that legal rights and obligations become available to those entitled by the language of the statute. Now, subject to the indispensable requisite of publication under the due process clause,25 the determination as to when a law takes effect is wholly the prerogative of Congress.26 As such, it is only upon effectivity that

the law may be executed, and the executive branch acquires the duties and powers to execute that law. Before that point, the role of the executive branch, particularly the President, is limited to signing or vetoing the law. All other powers of government that attach to the proposed law are exercised exclusively by Congress and are hence, legislative in character. In fact, the United States Supreme Court, speaking through Justice Black, has gone as far as to hold that the Constitution "limits [the Presidents] functions in the lawmaking process to the recommending of laws he thinks wise and the vetoing of laws he thinks bad."27 It is viable to hold that any provision of law that empowers Congress or any of its members to play any role in the implementation or enforcement of the law after the execution phase has begun violates the principle of separation of powers and is thus unconstitutional. Under this principle, a provision that requires Congress or its members to approve the Implementing Rules after the law has already taken effect is unconstitutional, as is a provision that allows Congress or its members to overturn any directive or ruling made by those members of the executive branch charged with the implementation of the law. This time or phase demarcation not only affords a convenient yardstick by which to assess the constitutionality of a legislated role for Congress vis--vis a law, it also hews to the proper allocation of governmental powers. Again, the exercise of executive powers relative to a statute can only emanate after the effectivity of the law, since before that point, said law cannot be executed or enforced. Until a law becomes effective, there are no executive functions attached to the law. Of course, following this rationale, Section 12 of Rep. Act No. 9335 will have to be invalidated. To cite one outstanding example of what else would be invalidated as a result is the Joint Congressional Power Commission established in the EPIRA (Rep. Act No. 9136), where the Commission composed of several members of Congress exercises a continuing role in overseeing the implementation of the EPIRA.28 The functions of the Joint Congressional Power Commission are exercised in the execution phase, and thus beyond the pale of legislative power. There are many other provisions in our laws, such as those similar to Section 12 of Rep. Act No. 9335, that will similarly not pass muster after this ruling, and the Court will have to reckon with the real problem as to whether this decision effectively nullifies those provisions as well. Nonetheless, the Court need not invalidate those provisions in other laws yet and await the appropriate cases to do so, similar

to the approach previously taken on the invalidation of municipalities created by the President in Pelaez v. Auditor General.29 IV. I seriously disagree with Justice Carpios assertion that the power to formulate or adopt implementing rules inheres in the executive function. That power is a legislative function traditionally delegated by Congress to the executive branch. The ponencia satisfactorily asserts this point through its Footnote No. 63, and I need not belabor it. One option for congressional control over executive action is to be very specific and limiting in the delegation of power to agencies, so that their rulemaking power will in turn be limited.30 The power to make rules and regulation is that kind of legislative power which may be delegated.31 In practice, the United States Congress has engaged frequently in broad delegations that in effect require agencies to make specific sub-rules i.e., to exercise legislative power.32 This practice has drawn some criticism that power is now concentrated in the executive branch and that it is thus necessary to restore Congress to its original status of preeminence.33 The growth of an enormous national bureaucracy, operating for the most part within the executive branch, may have fundamentally altered the original constitutional framework and requires some sort of response if the original constitutional concerns are to be satisfied.34 Section 12 of Rep. Act No. 9335, or any other provision of law granting components of the executive branch the power to formulate implementing rules, is a delegation of legislative power belonging to Congress to the executive branch. Congress itself has the power to formulate those particular rules and incorporate them in the law itself. What I believe Congress is precluded from doing is to exercise such power after the law has taken effect, in other words, after the execution phase has begun. Unless such a limitation were laid down, there would ensue undue encroachment by Congress in the exercise of legislative power. This delegable rule-making power may be classified into two types: (1) rules intended to regulate the internal management of the agencies themselves; and (2) rules supplementing a statute and intended to affect persons and entities outside the government made subject to agency regulation.35 Either case, the power of the executive branch to promulgate such rules springs from legislative delegation. In the Philippines, the power of executive officials to enact rules to regulate the internal management of executive departments

was specifically allocated to them by a statute, the Administrative Code of 1987, promulgated by President Aquino in the exercise of her then extant legislative powers. With respect to supplementary rules to particular legislation, the power of executive officials to formulate such rules derives from the legislation itself. But in no case does such power emanate actually from inherent executive power. The rule need not be hard and fast. We may as well pay heed to Blackstones practical observation that the "manner, time and circumstances of putting laws in execution must frequently be left to the discretion of the executive magistrates".36 But by and large, any problem left by the absence of clear and explicit statutory language is avoided in turn by the statutory delegation of legislative power to executive officials to vest them sufficient discretion to fill in the details.37 We thus cannot detract from the fundamental principle that rule-making power is legislative in character and exercised by executive officials only upon a statutory delegation of legislative power. As Fisher summarizes the peculiar dynamic: Presidents are obligated under the Constitution to take care that the laws be "faithfully executed." The often conflicting and ambiguous passages within a law must be interpreted by executive officials to construct the purpose and intent of Congress. As important as intent is the extent to which a law is carried out. President Taft once remarked, "Let anyone make the laws of the country, if I can construe them." To carry out the laws, administrators issue rules and regulations of their own. The courts long ago appreciated this need. Rules and regulations "must be received as the acts of the executive, and as such, be binding upon all within the sphere of his legal and constitutional authority. Current law authorizes the head of an executive department or military department to prescribe regulations "for the government of his department, the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property. These duties, primarily of a "housekeeping" nature, relate only distantly to the citizenry. Many regulations, however, bear directly on the public. It is here that administrative legislation must be restricted in its scope and application. Regulations are not supposed to be a

substitute for the general policymaking that Congress enacts in the form of a public law. Although administrative regulations are entitled to respect, the authority to prescribe rules and regulations is not an independent source of power to make laws. Agency rulemaking must rest on authority granted directly or indirectly by Congress.38 The Courts rightful rejection of Justice Carpios premise that the power of the President of promulgate Implementing Rules and Regulations is inherently executive provides a necessary clarification that is critical to the understanding of the Courts ruling today. Had Justice Carpios position been adopted by the Court, the result would have been a presidency much stronger than the Constitution envisioned. Acceding to the President the power to craft Implementing Rules to legislation even if Congress specifically withholds such power to the Chief Executive would have upset the finely measured schematic of balanced powers, to the benefit of the President. Fortunately, with the disavowal of that theory, greater consideration is accorded to legislative prerogatives without compromising the important functions of the presidency. V. Thusly, there is nothing inherently unconstitutional in congressional participation in the formulation of implementing rules of legislation since that power is legislative in character. Yet there still are multiple roadblocks impeding a constitutionally valid exercise of that prerogative by Congress. The matters of bicameralism and presentment, as expounded in Chadha, are hurdles which I submit should bind the Philippine Congress as it exercises its legislative functions. Section 12 of Rep. Act No. 9335 can be struck down on that ground alone.39 Moreover, imposing a rule barring a legislative role in the implementation of a law after the statutes effectivity will sufficiently preserve the integrity of our system of separation of powers. At the same time, the concerns of Congress that may have animated the rise of the legislative veto should not be disrespected by simply raising formalistic barriers against them. In practice, the legislative veto is an effective check against abuses by the executive branch. The end may not justify unconstitutional means, yet we should leave ample room for Congress to be able to address such concerns within broad constitutional parameters. There are a myriad of creative ways by which Congress may influence the formulation of Implementing Rules without offending the Constitution. If there are especially problematic areas in the law itself which Congress is not

minded to leave any room for interpretative discretion by executive officials, then the provision involved can be crafted with such specificity to preclude alternative interpretations. At the same time, commonly, legislators and their staffs may lack the expertise to draft specific language.40 Speaking from my own legislative experience, it is in the drafting of the Implementing Rules, rather than in the statute itself, that the particular expertise of the agency officials and experts tasked with the implementation of the law become especially vital. Also, Congress can dictate which particular executive officials will draft the implementing rules, prescribe legal or factual standards that must be taken into account by such drafters, or otherwise impose requirements or limitations which such drafters are bound to comply with. Again, because the power to draft implementing rules is delegated legislative power, its exercise must be within the confines of the authority charted by Congress. And because executive functions cannot commence until after the effectivity of the law, Congress may very well adopt creative but constitutional measures that suspend the effectivity of the law until implementing rules to its liking are crafted. There is nothing unconstitutional with suspending the effectivity of laws pending the occurrence of a stipulated condition. "[I]t is not always essential that a legislative act should be a completed statute which must in any event take effect as a law, at the time it leaves the hands of the legislative department. A statute may be conditional, and its taking effect may be made to depend upon some subsequent event."41 The requirements of bicameralism and especially presentment may pose insurmountable hurdles to a provision that plainly suspends the effectivity of a law pending approval by Congress or some of its members of the implementing rules.42 At the same time, it should be recognized that Congress does have the prerogative to participate in the drafting of the rules, and if it finds a means to do so before the execution phase has begun, without offending bicameralism or presentment, such means may be upheld. DANTE O. TINGA Associate Justice
Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 189466

February 11, 2010

DARYL GRACE J. ABAYON, Petitioner, vs. THE HONORABLE HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL, PERFECTO C. LUCABAN, JR., RONYL S. DE LA CRUZ and AGUSTIN C. DOROGA, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 189506 CONGRESSMAN JOVITO S. PALPARAN, JR., Petitioner, vs. HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL (HRET), DR. REYNALDO LESACA, JR., CRISTINA PALABAY, RENATO M. REYES, JR., ERLINDA CADAPAN, ANTONIO FLORES and JOSELITO USTAREZ,Respondents. DECISION ABAD, J.: These two cases are about the authority of the House of Representatives Electoral Tribunal (HRET) to pass upon the eligibilities of the nominees of the party-list groups that won seats in the lower house of Congress. The Facts and the Case In G.R. 189466, petitioner Daryl Grace J. Abayon is the first nominee of the Aangat Tayo party-list organization that won a seat in the House of Representatives during the 2007 elections. Respondents Perfecto C. Lucaban, Jr., Ronyl S. Dela Cruz, and Agustin C. Doroga, all registered voters, filed a petition for quo warranto with respondent HRET against Aangat Tayo and its nominee, petitioner Abayon, in HRET Case 07-041. They claimed that Aangat Tayo was not eligible for a party-list seat in the House of Representatives, since it did not represent the marginalized and underrepresented sectors. Respondent Lucaban and the others with him further pointed out that petitioner Abayon herself was not qualified to sit in the House as a party-list nominee since she did not belong to the marginalized and underrepresented sectors, she being the wife of an incumbent congressional district representative. She moreover lost

her bid as party-list representative of the party-list organization called An Waray in the immediately preceding elections of May 10, 2004. Petitioner Abayon countered that the Commission on Elections (COMELEC) had already confirmed the status of Aangat Tayo as a national multi-sectoral party-list organization representing the workers, women, youth, urban poor, and elderly and that she belonged to the women sector. Abayon also claimed that although she was the second nominee of An Waray party-list organization during the 2004 elections, she could not be regarded as having lost a bid for an elective office. Finally, petitioner Abayon pointed out that respondent HRET had no jurisdiction over the petition for quo warranto since respondent Lucaban and the others with him collaterally attacked the registration of Aangat Tayo as a party-list organization, a matter that fell within the jurisdiction of the COMELEC. It was Aangat Tayo that was taking a seat in the House of Representatives, and not Abayon who was just its nominee. All questions involving her eligibility as first nominee, said Abayon, were internal concerns of Aangat Tayo. On July 16, 2009 respondent HRET issued an order, dismissing the petition as against Aangat Tayo but upholding its jurisdiction over the qualifications of petitioner Abayon.1 The latter moved for reconsideration but the HRET denied the same on September 17, 2009,2 prompting Abayon to file the present petition for special civil action of certiorari. In G.R. 189506, petitioner Jovito S. Palparan, Jr. is the first nominee of the Bantay party-list group that won a seat in the 2007 elections for the members of the House of Representatives. Respondents Reynaldo Lesaca, Jr., Cristina Palabay, Renato M. Reyes, Jr., Erlinda Cadapan, Antonio Flores, and Joselito Ustarez are members of some other party-list groups. Shortly after the elections, respondent Lesaca and the others with him filed with respondent HRET a petition forquo warranto against Bantay and its nominee, petitioner Palparan, in HRET Case 07-040. Lesaca and the others alleged that Palparan was ineligible to sit in the House of Representatives as party-list nominee because he did not belong to the marginalized and underrepresented sectors that Bantay represented, namely, the victims of communist rebels, Civilian Armed Forces Geographical Units (CAFGUs), former rebels, and security guards. Lesaca and the others said that Palparan committed gross human rights violations against marginalized and underrepresented sectors and organizations. Petitioner Palparan countered that the HRET had no jurisdiction over his person since it was actually the party-list Bantay, not he, that was elected to and assumed membership in the House of Representatives. Palparan claimed that he

was just Bantays nominee. Consequently, any question involving his eligibility as first nominee was an internal concern of Bantay. Such question must be brought, he said, before that party-list group, not before the HRET. On July 23, 2009 respondent HRET issued an order dismissing the petition against Bantay for the reason that the issue of the ineligibility or qualification of the party-list group fell within the jurisdiction of the COMELEC pursuant to the Party-List System Act. HRET, however, defended its jurisdiction over the question of petitioner Palparans qualifications.3 Palparan moved for reconsideration but the HRET denied it by a resolution dated September 10, 2009,4 hence, the recourse to this Court through this petition for special civil action of certiorari and prohibition. Since the two cases raise a common issue, the Court has caused their consolidation. The Issue Presented The common issue presented in these two cases is: Whether or not respondent HRET has jurisdiction over the question of qualifications of petitioners Abayon and Palparan as nominees of Aangat Tayo and Bantay party-list organizations, respectively, who took the seats at the House of Representatives that such organizations won in the 2007 elections. The Courts Ruling Petitioners Abayon and Palparan have a common theory: Republic Act (R.A.) 7941, the Party-List System Act, vests in the COMELEC the authority to determine which parties or organizations have the qualifications to seek party-list seats in the House of Representatives during the elections. Indeed, the HRET dismissed the petitions for quo warranto filed with it insofar as they sought the disqualifications of Aangat Tayo and Bantay. Since petitioners Abayon and Palparan were not elected into office but were chosen by their respective organizations under their internal rules, the HRET has no jurisdiction to inquire into and adjudicate their qualifications as nominees. If at all, says petitioner Abayon, such authority belongs to the COMELEC which already upheld her qualification as nominee of Aangat Tayo for the women sector. For Palparan, Bantays personality is so inseparable and intertwined with his own person as its nominee so that the HRET cannot dismiss the quo warranto action against Bantay without dismissing the action against him.

But, although it is the party-list organization that is voted for in the elections, it is not the organization that sits as and becomes a member of the House of Representatives. Section 5, Article VI of the Constitution,5 identifies who the "members" of that House are: Sec. 5. (1). The House of Representatives shall be composed of not more than two hundred and fifty members, unless otherwise fixed by law, who shall be elected from legislative districts apportioned among the provinces, cities, and the Metropolitan Manila area in accordance with the number of their respective inhabitants, and on the basis of a uniform and progressive ratio, and those who, as provided by law, shall be elected through a party-list system of registered national, regional, and sectoral parties or organizations. (Underscoring supplied) Clearly, the members of the House of Representatives are of two kinds: "members x x x who shall be elected from legislative districts" and "those who x x x shall be elected through a party-list system of registered national, regional, and sectoral parties or organizations." This means that, from the Constitutions point of view, it is the party-list representatives who are "elected" into office, not their parties or organizations. These representatives are elected, however, through that peculiar party-list system that the Constitution authorized and that Congress by law established where the voters cast their votes for the organizations or parties to which such party-list representatives belong. Once elected, both the district representatives and the party-list representatives are treated in like manner. They have the same deliberative rights, salaries, and emoluments. They can participate in the making of laws that will directly benefit their legislative districts or sectors. They are also subject to the same term limitation of three years for a maximum of three consecutive terms. It may not be amiss to point out that the Party-List System Act itself recognizes party-list nominees as "members of the House of Representatives," thus: Sec. 2. Declaration of Policy. - The State shall promote proportional representation in the election of representatives to the House of Representatives through a party-list system of registered national, regional and sectoral parties or organizations or coalitions thereof, which will enable Filipino citizens belonging to the marginalized and underrepresented sectors, organizations and parties, and who lack well-defined political constituencies but who could contribute to the formulation and enactment of appropriate legislation that will benefit the nation as a whole, to become members of the House of Representatives. Towards this end, the State shall develop and guarantee a full, free and open party system in order to attain the broadest possible representation of party, sectoral or group interests in the House of Representatives by enhancing their chances to compete

for and win seats in the legislature, and shall provide the simplest scheme possible. (Underscoring supplied) As this Court also held in Bantay Republic Act or BA-RA 7941 v. Commission on Elections,6 a party-list representative is in every sense "an elected member of the House of Representatives." Although the vote cast in a party-list election is a vote for a party, such vote, in the end, would be a vote for its nominees, who, in appropriate cases, would eventually sit in the House of Representatives. Both the Constitution and the Party-List System Act set the qualifications and grounds for disqualification of party-list nominees. Section 9 of R.A. 7941, echoing the Constitution, states: Sec. 9. Qualification of Party-List Nominees. No person shall be nominated as party-list representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of the Philippines for a period of not less than one (1) year immediately preceding the day of the election, able to read and write, bona fide member of the party or organization which he seeks to represent for at least ninety (90) days preceding the day of the election, and is at least twenty-five (25) years of age on the day of the election.
1avvph i1

In case of a nominee of the youth sector, he must at least be twenty-five (25) but not more than thirty (30) years of age on the day of the election. Any youth sectoral representative who attains the age of thirty (30) during his term shall be allowed to continue until the expiration of his term. In the cases before the Court, those who challenged the qualifications of petitioners Abayon and Palparan claim that the two do not belong to the marginalized and underrepresented sectors that they ought to represent. The Party-List System Act provides that a nominee must be a "bona fide member of the party or organization which he seeks to represent."7 It is for the HRET to interpret the meaning of this particular qualification of a nomineethe need for him or her to be a bona fide member or a representative of his party-list organizationin the context of the facts that characterize petitioners Abayon and Palparans relation to Aangat Tayo and Bantay, respectively, and the marginalized and underrepresented interests that they presumably embody. Petitioners Abayon and Palparan of course point out that the authority to determine the qualifications of a party-list nominee belongs to the party or organization that nominated him. This is true, initially. The right to examine the

fitness of aspiring nominees and, eventually, to choose five from among them after all belongs to the party or organization that nominates them.8 But where an allegation is made that the party or organization had chosen and allowed a disqualified nominee to become its party-list representative in the lower House and enjoy the secured tenure that goes with the position, the resolution of the dispute is taken out of its hand. Parenthetically, although the Party-List System Act does not so state, the COMELEC seems to believe, when it resolved the challenge to petitioner Abayon, that it has the power to do so as an incident of its authority to approve the registration of party-list organizations. But the Court need not resolve this question since it is not raised here and has not been argued by the parties. What is inevitable is that Section 17, Article VI of the Constitution9 provides that the HRET shall be the sole judge of all contests relating to, among other things, the qualifications of the members of the House of Representatives. Since, as pointed out above, party-list nominees are "elected members" of the House of Representatives no less than the district representatives are, the HRET has jurisdiction to hear and pass upon their qualifications. By analogy with the cases of district representatives, once the party or organization of the party-list nominee has been proclaimed and the nominee has taken his oath and assumed office as member of the House of Representatives, the COMELECs jurisdiction over election contests relating to his qualifications ends and the HRETs own jurisdiction begins.10 The Court holds that respondent HRET did not gravely abuse its discretion when it dismissed the petitions for quo warranto against Aangat Tayo party-list and Bantay party-list but upheld its jurisdiction over the question of the qualifications of petitioners Abayon and Palparan. WHEREFORE, the Court DISMISSES the consolidated petitions and AFFIRMS the Order dated July 16, 2009 and Resolution 09-183 dated September 17, 2009 in HRET Case 07-041 of the House of Representatives Electoral Tribunal as well as its Order dated July 23, 2009 and Resolution 09-178 dated September 10, 2009 in HRET Case 07-040. SO ORDERED. ROBERTO A. ABAD Associate Justice WE CONCUR:

REYNATO S. PUNO Chief Justice ANTONIO T. CARPIO Associate Justice CONCHITA CARPIO MORALES Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice ARTURO D. BRION Associate Justice LUCAS P. BERSAMIN Associate Justice MARTIN S. VILLARAMA, JR. Associate Justice RENATO C. CORONA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice MARIANO C. DEL CASTILLO Associate Justice JOSE P. PEREZ Associate Justice

JOSE C. MENDOZA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 167916 August 26, 2008

SARAH P. AMPONG, petitioner, vs. CIVIL SERVICE COMMISSION, CSC-Regional Office No. 11, respondents. DECISION REYES R.T., J.: CAN the Civil Service Commission (CSC) properly assume jurisdiction over administrative proceedings against a judicial employee involving acts of dishonesty as a teacher, committed prior to her appointment to the judiciary? Before Us is a petition for review on certiorari assailing the Decision1 of the Court of Appeals (CA) affirming the CSCs exercise of administrative jurisdiction over petitioner. The Facts The following facts are uncontroverted: On November 10, 1991, a Professional Board Examination for Teachers (PBET)2 was held in Davao City. A certain Evelyn Junio-Decir3 applied for and took the examination at Room 16, Kapitan Tomas Monteverde Elementary School. She passed with a rating of 74.27%.4 At the time of the PBET examinations, petitioner Sarah P. Ampong (nee Navarra) and Decir were public school teachers under the supervision of the Department of Education, Culture and Sports (DECS).5Later, on August 3, 1993, Ampong transferred to the Regional Trial Court (RTC) in Alabel, Sarangani Province, where she was appointed as Court Interpreter III. On July 5, 1994, a woman representing herself as Evelyn Decir went to the Civil Service Regional Office (CSRO) No. XI, Davao City, to claim a copy of her PBET Certificate of Eligibility. During the course of the transaction, the CSRO personnel noticed that the woman did not resemble the picture of the examinee in the Picture Seat Plan (PSP). Upon further probing, it was confirmed that the person claiming the eligibility was different from the one who took the examinations. It was petitioner Ampong who took and passed the examinations under the name Evelyn Decir. The CSRO conducted a preliminary investigation and determined the existence of a prima facie case against Decir and Ampong for Dishonesty,

Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service. On August 23, 1994, they were formally charged and required to file answers under oath. The formal charge reads: That sometime before the conduct of the November 10, 1991 Professional Board Examination for Teachers (PBET), a certain Ms. Evelyn B. Junio (now Decir) took the said examination at Rm. 16 Kapitan Tomas Monteverde Elementary School, Davao City, with a passing rate of 74.27%; That on July 5, 1994 she appeared before the CSC Region XI Office to get her Guro Certificate; That upon verification, it was found out that the picture attached in the Picture Seat Plan, marked as Annex "A" and "A-1," respectively, were not the same compared to the picture attached in the CSC Form 212 of Evelyn JunioDecir marked herein as annex "B," "B-1," respectively. There was also a marked difference in the signatures affixed in the said annexes; That further investigations revealed that it was the pictures of Ms. Sarah Navarra, wife of her husbands first cousin, who took the said examination in behalf of Ms. Evelyn Junio-Decir, a provisional teacher; That the said act of Mesdames Decir and Navarra are acts of dishonesty and conduct prejudicial to the best interest of the service; that in (sic) taking the CS examination for and in behalf of another undermines the sanctity of the CS examinations; All these contrary to existing civil service laws and regulations. (Emphasis supplied) In her sworn statement dated November 3, 1994, Decir denied the charges against her. She reasoned out that it must have been the examination proctor who pasted the wrong picture on the PSP and that her signatures were different because she was still signing her maiden name at the time of the examination. In her Answer, Decir contended that: 2. The same accusation is denied, the truth being: a. When I took the Professional Board Examination for Teachers (PBET) in the year 1991, I handed my 1x1 I.D. picture to the proctor assigned in the examination room who might have inadvertently pasted in the Seat Plan [the] wrong picture instead [of] my own picture; b. With respect to the marked difference in my signature both appearing in the aforesaid Seat Plan and also with the Form 212, the disparity lies in that in the year 1991, when I took the afroresaid examination, I was still sporting my maiden name

Evelyn B. Junio in order to coincide with all my pertinent supporting papers, like the special order (s.o.), appointment and among others, purposely to take said communications. However, immediately after taking the PBET Examination in 1991, I started using the full name of Evelyn Junio-Decir.6 Even before filing an Answer, petitioner Ampong voluntarily appeared at the CSRO on February 2, 1995 and admitted to the wrongdoing. When reminded that she may avail herself of the services of counsel, petitioner voluntarily waived said right. On March 13, 1995, petitioner gave another admission in the following tenor: Q: Now, what is then your intention in coming to this Region inasmuch as you are still intending to file an answer to the formal charge? A: I came here because I want to admit personally. So that I will not be coming here anymore. I will submit my case for Resolution. Q: So, you intend to waive your right for the formal hearing and you also admit orally on the guilt of the charge on the Formal Charge dated August 24, 1994? A: Q: Yes, Maam. What else do you want to tell the Commission?

A: x x x Inasmuch as I am already remorseful, I am repenting of the wrong that I have done. I am hoping that the Commission can help x x x so that I will be given or granted another chance to serve the government. xxxx Q: Now inasmuch as you have declared that you have admitted the guilt that you took the examination for and in behalf of Evelyn Junio Decir, are you telling this to the Commission without the assistance of the counsel or waiver of your right to be assisted by counsel. A: Yes, Maam. I am waiving my right.7 (Emphasis supplied)

Petitioner reiterated her admission in her sworn Answer dated March 16, 1995: 3. That, during the commission of the act, I was still under the Department of Education, Culture and Sports, as Teacher in-charge of San Miguel Primary School, Malungon North District, way back in 1991, when the husband of Evelyn Junio-Decir, my husbands cousin came to me and persuaded me to take the examination in behalf of his wife to which I disagreed but he earnestly begged so that I was convinced to agree because I pity his wife considering that she is an immediate relative, and there was no monetary consideration involved in this neither a compensatory reward for me, as I was overcome by their persuasion; 4. That, despite the fact that I was a teacher, I was not aware that the acts I was charged, is a ground for disciplinary action and punishable by dismissal; 5. That I should not have conformed to this anomalous transaction considering that I was born in a Christian family, and was brought up in the fear of Lord, and had been a consistent officer of the Church Board, had been a religious leader for so many years, and had been the organizer of the Music Festival of the Association of Evangelical Churches of Malungon, Sarangani Province, thus I was devoted to church work and was known to be of good conduct; and that my friends and acquaintances can vouch to that, but I was just forced by circumstances to agree to the spouses Godfre and Evelyn Decir.8 (Emphasis added) CSC Finding and Penalty On March 21, 1996, the CSC found petitioner Ampong and Decir guilty of dishonesty, dismissing them from the service. The dispositive part of the CSC resolution states: WHEREFORE, the Commission hereby finds Evelyn J. Decir and Sarah P. Navarra guilty of Dishonesty. Accordingly, they are meted the penalty of dismissal with all its accessory penalties. The PBET rating of Decir is revoked.9 Petitioner moved for reconsideration, raising for the first time the issue of jurisdiction.10 She argued that the exclusive authority to discipline employees

of the judiciary lies with the Supreme Court; that the CSC acted with abuse of discretion when it continued to exercise jurisdiction despite her assumption of duty as a judicial employee. She contended that at the time the case was instituted on August 23, 1994, the CSC already lost jurisdiction over her. She was appointed as Interpreter III of the RTC, Branch 38, Alabel, Sarangani Province on August 3, 1993. The CSC denied the motion for reconsideration.11 According to the Commission, to allow petitioner to evade administrative liability would be a mockery of the countrys administrative disciplinary system. It will open the floodgates for others to escape prosecution by the mere expedient of joining another branch of government. In upholding its jurisdiction over petitioner, the CSC differentiated between administrative supervision exercised by the Supreme Court and administrative jurisdiction granted to the Commission over all civil service employees: Moreover, it must be pointed out that administrative supervision is distinct from administrative jurisdiction. While it is true that this Commission does not have administrative supervision over employees in the judiciary, it definitely has concurrent jurisdiction over them. Such jurisdiction was conferred upon the Civil Service Commission pursuant to existing law specifically Section 12(11), Chapter 3, Book V of the Administrative Code of 1987 (Executive Order No. 292) which provides as follows: "(11) Hear and decide administrative cases instituted by or through it directly or on appeal, including contested appointment, and review decisions and actions of its offices and of the agencies attached to it x x x." The fact that court personnel are under the administrative supervision of the Supreme Court does not totally isolate them from the operations of the Civil Service Law. Appointments of all officials and employees in the judiciary is governed by the Civil Service Law (Section 5(6), Article VIII, 1987 Constitution). (Emphasis supplied) CA Disposition Via petition for review under Rule 43, petitioner elevated the matter to the CA.12 She insisted that as a judicial employee, it is the Supreme Court and not the CSC that has disciplinary jurisdiction over her.

In a Decision dated November 30, 2004,13 the CA denied the petition for lack of merit. The CA noted that petitioner never raised the issue of jurisdiction until after the CSC ruled against her. Rather, she willingly appeared before the commission, freely admitted her wrongdoing, and even requested for clemency. Thus, she was estopped from questioning the Commissions jurisdiction. The appellate court opined that while lack of jurisdiction may be assailed at any stage, a partys active participation in the proceedings before a court, tribunal or body will estop such party from assailing its jurisdiction. The CA further ruled that a member of the judiciary may be under the jurisdiction of two different bodies. As a public school teacher or a court interpreter, petitioner was part of the civil service, subject to its rules and regulations. When she committed acts in violation of the Civil Service Law, the CSC was clothed with administrative jurisdiction over her. Issue Petitioner, through this petition, assigns the lone error that: The Honorable Court of Appeals-First Division decided a question of substance in a way not in accord with law and jurisprudence, gravely erred in facts and in law, and has sanctioned such departure and grave error because it ignored or was not aware of Garcia v. De la Pea, 229 SCRA 766 (1994) and Adm. Matter No. OCA I.P.I. 97-329-P (CSC v. Ampong) dated January 31, 2001, which reiterate the rule that exclusive authority to discipline employees of the judiciary lies with the Supreme Court, in issuing the questioned decision and resolution; which grave error warrant reversal of the questioned decision and resolution.14 Put simply, the issue boils down to whether the CSC has administrative jurisdiction over an employee of the Judiciary for acts committed while said employee was still with the Executive or Education Department. Our Ruling The answer to the question at the outset is in the negative but We rule against the petition on the ground of estoppel.

It is true that the CSC has administrative jurisdiction over the civil service. As defined under the Constitution and the Administrative Code, the civil service embraces every branch, agency, subdivision, and instrumentality of the government, and government-owned or controlled corporations.15 Pursuant to its administrative authority, the CSC is granted the power to "control, supervise, and coordinate the Civil Service examinations."16 This authority grants to the CSC the right to take cognizance of any irregularity or anomaly connected with the examinations.17 However, the Constitution provides that the Supreme Court is given exclusive administrative supervision over all courts and judicial personnel.18 By virtue of this power, it is only the Supreme Court that can oversee the judges and court personnels compliance with all laws, rules and regulations. It may take the proper administrative action against them if they commit any violation. No other branch of government may intrude into this power, without running afoul of the doctrine of separation of powers.19Thus, this Court ruled that the Ombudsman cannot justify its investigation of a judge on the powers granted to it by the Constitution. It violates the specific mandate of the Constitution granting to the Supreme Court supervisory powers over all courts and their personnel; it undermines the independence of the judiciary.20 In Civil Service Commission v. Sta. Ana,21 this Court held that impersonating an examinee of a civil service examination is an act of dishonesty. But because the offender involved a judicial employee under the administrative supervision of the Supreme Court, the CSC filed the necessary charges before the Office of the Court Administrator (OCA), a procedure which this Court validated. A similar fate befell judicial personnel in Bartolata v. Julaton,22 involving judicial employees who also impersonated civil service examinees. As in Sta. Ana, the CSC likewise filed the necessary charges before the OCA because respondents were judicial employees. Finding respondents guilty of dishonesty and meting the penalty of dismissal, this Court held that "respondents machinations reflect their dishonesty and lack of integrity, rendering them unfit to maintain their positions as public servants and employees of the judiciary."23 Compared to Sta. Ana and Bartolata, the present case involves a similar violation of the Civil Service Law by a judicial employee. But this case is slightly different in that petitioner committed the offensebefore her appointment to the judicial branch. At the time of commission, petitioner was a public school teacher under the administrative supervision of the DECS and,

in taking the civil service examinations, under the CSC. Petitioner surreptitiously took the CSC-supervised PBET exam in place of another person. When she did that, she became a party to cheating or dishonesty in a civil service-supervised examination. That she committed the dishonest act before she joined the RTC does not take her case out of the administrative reach of the Supreme Court. The bottom line is administrative jurisdiction over a court employee belongs to the Supreme Court, regardless of whether the offense was committed before or after employment in the judiciary. Indeed, the standard procedure is for the CSC to bring its complaint against a judicial employee before the OCA. Records show that the CSC did not adhere to this procedure in the present case. However, We are constrained to uphold the ruling of the CSC based on the principle of estoppel. The previous actions of petitioner have estopped her from attacking the jurisdiction of the CSC. A party who has affirmed and invoked the jurisdiction of a court or tribunal exercising quasi-judicial functions to secure an affirmative relief may not afterwards deny that same jurisdiction to escape a penalty.24 As this Court declared in Aquino v. Court of Appeals:25 In the interest of sound administration of justice, such practice cannot be tolerated. If we are to sanction this argument, then all the proceedings had before the lower court and the Court of Appeals while valid in all other respects would simply become useless.26 Under the principle of estoppel, a party may not be permitted to adopt a different theory on appeal to impugn the courts jurisdiction.27 In Emin v. De Leon,28 this Court sustained the exercise of jurisdiction by the CSC, while recognizing at the same time that original disciplinary jurisdiction over public school teachers belongs to the appropriate committee created for the purpose as provided for under the Magna Carta for Public School Teachers.29 It was there held that a party who fully participated in the proceedings before the CSC and was accorded due process is estopped from subsequently attacking its jurisdiction. Petitioner was given ample opportunity to present her side and adduce evidence in her defense before the CSC. She filed with it her answer to the charges leveled against her. When the CSC found her guilty, she moved for a

reconsideration of the ruling. These circumstances all too clearly show that due process was accorded to petitioner. Petitioners admission of guilt stands. Apart from her full participation in the proceedings before the CSC, petitioner admitted to the offense charged that she impersonated Decir and took the PBET exam in the latters place. We note that even before petitioner filed a written answer, she voluntarily went to the CSC Regional Office and admitted to the charges against her. In the same breath, she waived her right to the assistance of counsel. Her admission, among others, led the CSC to find her guilty of dishonesty, meting out to her the penalty of dismissal. Now, she assails said confession, arguing that it was given without aid of counsel. In police custodial investigations, the assistance of counsel is necessary in order for an extra-judicial confession to be made admissible in evidence against the accused in a criminal complaint. If assistance was waived, the waiver should have been made with the assistance of counsel.30 But while a partys right to the assistance of counsel is sacred in proceedings criminal in nature, there is no such requirement in administrative proceedings. In Lumiqued v. Exevea,31 this Court ruled that a party in an administrative inquiry may or may not be assisted by counsel. Moreover, the administrative body is under no duty to provide the person with counsel because assistance of counsel is not an absolute requirement.32 Petitioners admission was given freely. There was no compulsion, threat or intimidation. As found by the CSC, petitioners admission was substantial enough to support a finding of guilt. The CSC found petitioner guilty of dishonesty. It is categorized as "an act which includes the procurement and/or use of fake/spurious civil service eligibility, the giving of assistance to ensure the commission or procurement of the same, cheating, collusion, impersonation, or any other anomalous act which amounts to any violation of the Civil Service examination."33 Petitioner impersonated Decir in the PBET exam, to ensure that the latter would obtain a passing mark. By intentionally practicing a deception to secure a passing mark, their acts undeniably involve dishonesty.34 This Court has defined dishonesty as the "(d)isposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity; lack of honesty, probity or integrity in principle; lack of fairness and straightforwardness; disposition to defraud, deceive or betray."35 Petitioners dishonest act as a civil servant

renders her unfit to be a judicial employee. Indeed, We take note that petitioner should not have been appointed as a judicial employee had this Court been made aware of the cheating that she committed in the civil service examinations. Be that as it may, petitioners present status as a judicial employee is not a hindrance to her getting the penalty she deserves. The conduct and behavior of everyone connected with an office charged with the dispensation of justice is circumscribed with a heavy burden or responsibility. The image of a court, as a true temple of justice, is mirrored in the conduct, official or otherwise, of the men and women who work thereat, from the judge to the least and lowest of its personnel.36 As the Court held in another administrative case for dishonesty: x x x Any act which diminishes or tends to diminish the faith of the people in the judiciary shall not be countenanced. We have not hesitated to impose the utmost penalty of dismissal for even the slightest breach of duty by, and the slightest irregularity in the conduct of, said officers and employees, if so warranted. Such breach and irregularity detract from the dignity of the highest court of the land and erode the faith of the people in the judiciary. xxxx As a final point, we take this opportunity to emphasize that no quibbling, much less hesitation or circumvention, on the part of any employee to follow and conform to the rules and regulations enunciated by this Court and the Commission on Civil Service, should be tolerated. The Court, therefore, will not hesitate to rid its ranks of undesirables who undermine its efforts toward an effective and efficient system of justice.37 (Emphasis added) We will not tolerate dishonesty for the Judiciary expects the best from all its employees.38 Hindi namin papayagan ang pandaraya sapagkat inaasahan ng Hudikatura ang pinakamabuti sa lahat nitong kawani. WHEREFORE, the petition is DENIED for lack of merit. SO ORDERED. RUBEN T. REYES Associate Justice

WE CONCUR:
REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate Justice ANTONIO T. CARPIO Associate Justice RENATO C. CORONA Associate Justice ADOLFO S. AZCUNA Associate Justice MINITA V. CHICO-NAZARIO Associate Justice
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CONSUELO YNARES-SANTIAGO Associate Justice MA. ALICIA AUSTRIA-MARTINEZ Associate Justice CONCHITA CARPIO MORALES Associate Justice DANTE O. TINGA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

ARTURO D. BRION Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice