Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 179848

November 27, 2008

NESTOR A. JACOT, petitioner,

vs.
ROGEN T. DAL and COMMISSION ON ELECTIONS, respondents.
DECISION
CHICO-NAZARIO, J.:
Petitioner Nestor A. Jacot assails the Resolution1 dated 28 September 2007
of the Commission on Elections (COMELEC) En Banc in SPA No. 07-361,
affirming the Resolution dated 12 June 2007 of the COMELEC Second
Division2 disqualifying him from running for the position of Vice-Mayor of
Catarman, Camiguin, in the 14 May 2007 National and Local Elections, on the
ground that he failed to make a personal renouncement of his United States
(US) citizenship.
Petitioner was a natural born citizen of the Philippines, who became a
naturalized citizen of the US on 13 December 1989. 3
Petitioner sought to reacquire his Philippine citizenship under Republic Act
No. 9225, otherwise known as the Citizenship Retention and Re-Acquisition
Act. He filed a request for the administration of his Oath of Allegiance to the
Republic of the Philippines with the Philippine Consulate General (PCG) of
Los Angeles, California. The Los Angeles PCG issued on 19 June 2006 an
Order of Approval4 of petitioners request, and on the same day, petitioner
took his Oath of Allegiance to the Republic of the Philippines before Vice
Consul Edward C. Yulo. 5 On 27 September 2006, the Bureau of Immigration
issued Identification Certificate No. 06-12019 recognizing petitioner as a
citizen of the Philippines.6
Six months after, on 26 March 2007, petitioner filed his Certificate of
Candidacy for the Position of Vice-Mayor of the Municipality of Catarman,
Camiguin. 7

On 2 May 2007, respondent Rogen T. Dal filed a Petition for

Disqualification8 before the COMELEC Provincial Office in Camiguin against
petitioner, arguing that the latter failed to renounce his US citizenship, as
required under Section 5(2) of Republic Act No. 9225, which reads as follows:
Section 5. Civil and Political Rights and Liabilities.Those who retain or
reacquire Philippine citizenship under this Act shall enjoy full civil and
political rights and be subject to all attendant liabilities and
responsibilities under existing laws of the Philippines and the following
conditions:
xxxx
(2) Those seeking elective public office in the Philippines shall meet the
qualifications for holding such public office as required by the
Constitution and existing laws and, at the time of the filing of the
certificate of candidacy, make a personal and sworn renunciation of any
and all foreign citizenship before any public officer authorized to
administer an oath.
In his Answer9 dated 6 May 2007 and Position Paper10 dated 8 May 2007,
petitioner countered that his Oath of Allegiance to the Republic of the
Philippines made before the Los Angeles PCG and the oath contained in his
Certificate of Candidacy operated as an effective renunciation of his foreign
citizenship.
In the meantime, the 14 May 2007 National and Local Elections were held.
Petitioner garnered the highest number of votes for the position of Vice Mayor.
On 12 June 2007, the COMELEC Second Division finally issued its
Resolution11 disqualifying the petitioner from running for the position of ViceMayor of Catarman, Camiguin, for failure to make the requisite renunciation of
his US citizenship. The COMELEC Second Division explained that the
reacquisition of Philippine citizenship under Republic Act No. 9225 does not
automatically bestow upon any person the privilege to run for any elective
public office. It additionally ruled that the filing of a Certificate of Candidacy
cannot be considered as a renunciation of foreign citizenship. The COMELEC
Second Division did not consider Valles v. COMELEC12 and Mercado v.
Manzano13applicable to the instant case, since Valles and Mercado were dual
citizens since birth, unlike the petitioner who lost his Filipino citizenship by
means of naturalization. The COMELEC, thus, decreed in the aforementioned
Resolution that:

ACCORDINGLY, NESTOR ARES JACOT is DISQUALIFIED to run for

the position of Vice-Mayor of Catarman, Camiguin for the May 14, 2007
National and Local Elections. If proclaimed, respondent cannot thus
assume the Office of Vice-Mayor of said municipality by virtue of such
disqualification.14
Petitioner filed a Motion for Reconsideration on 29 June 2007 reiterating his
position that his Oath of Allegiance to the Republic of the Philippines before
the Los Angeles PCG and his oath in his Certificate of Candidacy sufficed as
an effective renunciation of his US citizenship. Attached to the said Motion
was an "Oath of Renunciation of Allegiance to the United States and
Renunciation of Any and All Foreign Citizenship" dated 27 June 2007, wherein
petitioner explicitly renounced his US citizenship.15 The COMELEC en
banc dismissed petitioners Motion in a Resolution16 dated 28 September
2007 for lack of merit.
Petitioner sought remedy from this Court via the present Special Civil Action
for Certiorari under Rule 65 of the Revised Rules of Court, where he
presented for the first time an "Affidavit of Renunciation of Allegiance to the
United States and Any and All Foreign Citizenship"17 dated 7 February 2007.
He avers that he executed an act of renunciation of his US citizenship,
separate from the Oath of Allegiance to the Republic of the Philippines he
took before the Los Angeles PCG and his filing of his Certificate of Candidacy,
thereby changing his theory of the case during the appeal. He attributes the
delay in the presentation of the affidavit to his former counsel, Atty. Marciano
Aparte, who allegedly advised him that said piece of evidence was
unnecessary but who, nevertheless, made him execute an identical document
entitled "Oath of Renunciation of Allegiance to the United States and
Renunciation of Any and All Foreign Citizenship" on 27 June 2007 after he
had already filed his Certificate of Candidacy.18
Petitioner raises the following issues for resolution of this Court:
I
WHETHER OR NOT PUBLIC RESPONDENT EXERCISED GRAVE
ABUSE OF DISCRETION WHEN IT HELD THAT PETITIONER FAILED
TO COMPLY WITH THE PROVISIONS OF R.A. 9225, OTHERWISE
KNOWN AS THE "CITIZENSHIP RETENTION AND RE-ACQUISITION
ACT OF 2003," SPECIFICALLY SECTION 5(2) AS TO THE
REQUIREMENTS FOR THOSE SEEKING ELECTIVE PUBLIC
OFFICE;

II
WHETHER OR NOT PUBLIC RESPONDENT EXERCISED GRAVE
ABUSE OF DISCRETION WHEN IT HELD THAT PETITIONER FAILED
TO COMPLY WITH THE PROVISIONS OF THE COMELEC RULES OF
PROCEDURE AS REGARDS THE PAYMENT OF THE NECESSARY
MOTION FEES; AND
III
WHETHER OR NOT UPHOLDING THE DECISION OF PUBLIC
RESPONDENT WOULD RESULT IN THE FRUSTRATION OF THE
WILL OF THE PEOPLE OF CATARMAN, CAMIGUIN.19
The Court determines that the only fundamental issue in this case is whether
petitioner is disqualified from running as a candidate in the 14 May 2007 local
elections for his failure to make a personal and sworn renunciation of his US
citizenship.
This Court finds that petitioner should indeed be disqualified.
Contrary to the assertions made by petitioner, his oath of allegiance to the
Republic of the Philippines made before the Los Angeles PCG and his
Certificate of Candidacy do not substantially comply with the requirement of a
personal and sworn renunciation of foreign citizenship because these are
distinct requirements to be complied with for different purposes.
Section 3 of Republic Act No. 9225 requires that natural-born citizens of
the Philippines, who are already naturalized citizens of a foreign country, must
take the following oath of allegiance to the Republic of the Philippines to
reacquire or retain their Philippine citizenship:
SEC. 3. Retention of Philippine Citizenship.Any provision of law to the
contrary notwithstanding, natural-born citizens of the Philippines who
have lost their Philippine citizenship by reason of their naturalization as
citizens of a foreign country are hereby deemed to have reacquired
Philippine citizenship upon taking the following oath of allegiance to the
Republic:
"I __________ solemnly swear (or affirm) that I will support and defend
the Constitution of the Republic of the Philippines and obey the laws
and legal orders promulgated by the duly constituted authorities of the

Philippines; and I hereby declare that I recognize and accept the

supreme authority of the Philippines and will maintain true faith and
allegiance thereto; and that I impose this obligation upon myself
voluntarily, without mental reservation or purpose of evasion."
Natural-born citizens of the Philippines who, after the effectivity of this
Act, become citizens of a foreign country shall retain their Philippine
citizenship upon taking the aforesaid oath.
By the oath dictated in the afore-quoted provision, the Filipino swears
allegiance to the Philippines, but there is nothing therein on his renunciation of
foreign citizenship. Precisely, a situation might arise under Republic Act No.
9225 wherein said Filipino has dual citizenship by also reacquiring or retaining
his Philippine citizenship, despite his foreign citizenship.
The afore-quoted oath of allegiance is substantially similar to the one
contained in the Certificate of Candidacy which must be executed by any
person who wishes to run for public office in Philippine elections. Such an
oath reads:
I am eligible for the office I seek to be elected. I will support and defend
the Constitution of the Philippines and will maintain true faith and
allegiance thereto; that I will obey the laws, legal orders and decrees
promulgated by the duly constituted authorities of the Republic of the
Philippines; and that I impose this obligation upon myself voluntarily,
without mental reservation or purpose of evasion. I hereby certify that
the facts stated herein are true and correct of my own personal
knowledge.
Now, Section 5(2) of Republic Act No. 9225 specifically provides that:
Section 5. Civil and Political Rights and Liabilities.Those who retain or
reacquire Philippine citizenship under this Act shall enjoy full civil and
political rights and be subject to all attendant liabilities and
responsibilities under existing laws of the Philippines and the following
conditions:
xxxx
(2) Those seeking elective public office in the Philippines shall meet the
qualifications for holding such public office as required by the
Constitution and existing laws and, at the time of the filing of the

certificate of candidacy, make a personal and sworn renunciation of any

and all foreign citizenship before any public officer authorized to
administer an oath.
The law categorically requires persons seeking elective public office, who
either retained their Philippine citizenship or those who reacquired it, to make
a personal and sworn renunciation of any and all foreign citizenship before a
public officer authorized to administer an oath simultaneous with or before the
filing of the certificate of candidacy.20
Hence, Section 5(2) of Republic Act No. 9225 compels natural-born
Filipinos, who have been naturalized as citizens of a foreign country, but
who reacquired or retained their Philippine citizenship (1) to take the
oath of allegiance under Section 3 of Republic Act No. 9225, and (2) for
those seeking elective public offices in the Philippines, to additionally
execute apersonal and sworn renunciation of any and all foreign citizenship
before an authorized public officer prior or simultaneous to the filing of their
certificates of candidacy, to qualify as candidates in Philippine elections.
Clearly Section 5(2) of Republic Act No. 9225 (on the making of a personal
and sworn renunciation of any and all foreign citizenship) requires of the
Filipinos availing themselves of the benefits under the said Act to accomplish
an undertaking other than that which they have presumably complied with
under Section 3 thereof (oath of allegiance to the Republic of the Philippines).
This is made clear in the discussion of the Bicameral Conference Committee
on Disagreeing Provisions of House Bill No. 4720 and Senate Bill No. 2130
held on 18 August 2003 (precursors of Republic Act No. 9225), where the
Hon. Chairman Franklin Drilon and Hon. Representative Arthur Defensor
explained to Hon. Representative Exequiel Javier that the oath of allegiance is
different from the renunciation of foreign citizenship:
CHAIRMAN DRILON. Okay. So, No. 2. "Those seeking elective public
office in the Philippines shall meet the qualifications for holding such
public office as required by the Constitution and existing laws and, at
the time of the filing of the certificate of candidacy, make a personal and
sworn renunciation of any and all foreign citizenship before any public
officer authorized to administer an oath." I think its very good, ha? No
problem?
REP. JAVIER. I think its already covered by the oath.
CHAIRMAN DRILON. Renouncing foreign citizenship.

REP. JAVIER. Ah but he has taken his oath already.

CHAIRMAN DRILON. Nono, renouncing foreign citizenship.
xxxx
CHAIRMAN DRILON. Can I go back to No. 2. Whats your problem,
Boy? Those seeking elective office in the Philippines.
REP. JAVIER. They are trying to make him renounce his citizenship
thinking that ano
CHAIRMAN DRILON. His American citizenship.
REP. JAVIER. To discourage him from running?
CHAIRMAN DRILON. No.
REP. A.D. DEFENSOR. No. When he runs he will only have one
citizenship. When he runs for office, he will have only
one. (Emphasis ours.)
There is little doubt, therefore, that the intent of the legislators was not only for
Filipinos reacquiring or retaining their Philippine citizenship under Republic
Act No. 9225 to take their oath of allegiance to the Republic of the Philippines,
but also to explicitly renounce their foreign citizenship if they wish to run for
elective posts in the Philippines. To qualify as a candidate in Philippine
elections, Filipinos must only have one citizenship, namely, Philippine
citizenship.
By the same token, the oath of allegiance contained in the Certificate of
Candidacy, which is substantially similar to the one contained in Section 3 of
Republic Act No. 9225, does not constitute the personal and sworn
renunciation sought under Section 5(2) of Republic Act No. 9225. It bears to
emphasize that the said oath of allegiance is a general requirement for all
those who wish to run as candidates in Philippine elections; while the
renunciation of foreign citizenship is an additional requisite only for those who
have retained or reacquired Philippine citizenship under Republic Act No.
9225 and who seek elective public posts, considering their special
circumstance of having more than one citizenship.

Petitioner erroneously invokes the doctrine in Valles21 and Mercado,22 wherein

the filing by a person with dual citizenship of a certificate of candidacy,
containing an oath of allegiance, was already considered a renunciation of
foreign citizenship. The ruling of this Court in Valles andMercado is not
applicable to the present case, which is now specially governed by Republic
Act No. 9225, promulgated on 29 August 2003.
In Mercado, which was cited in Valles, the disqualification of therein private
respondent Manzano was sought under another law, Section 40(d) of the
Local Government Code, which reads:
SECTION 40. Disqualifications. The following persons are disqualified
from running for any elective local position:
xxxx
(d) Those with dual citizenship.
The Court in the aforesaid cases sought to define the term "dual
citizenship" vis--vis the concept of "dual allegiance." At the time this Court
decided the cases of Valles and Mercado on 26 May 1999 and 9 August
2000, respectively, the more explicitly worded requirements of Section 5(2) of
Republic Act No. 9225 were not yet enacted by our legislature.23
Lopez v. Commission on Elections24 is the more fitting precedent for this case
since they both share the same factual milieu. In Lopez, therein petitioner
Lopez was a natural-born Filipino who lost his Philippine citizenship after he
became a naturalized US citizen. He later reacquired his Philippine citizenship
by virtue of Republic Act No. 9225. Thereafter, Lopez filed his candidacy for a
local elective position, but failed to make a personal and sworn renunciation of
his foreign citizenship. This Court unequivocally declared that despite having
garnered the highest number of votes in the election, Lopez is nonetheless
disqualified as a candidate for a local elective position due to his failure to
comply with the requirements of Section 5(2) of Republic Act No. 9225.
Petitioner presents before this Court for the first time, in the instant Petition
for Certiorari, an "Affidavit of Renunciation of Allegiance to the United States
and Any and All Foreign Citizenship,"25which he supposedly executed on 7
February 2007, even before he filed his Certificate of Candidacy on 26 March
2007. With the said Affidavit, petitioner puts forward in the Petition at bar a
new theory of his casethat he complied with the requirement of making a
personal and sworn renunciation of his foreign citizenship before filing his

Certificate of Candidacy. This new theory constitutes a radical change from

the earlier position he took before the COMELECthat he complied with the
requirement of renunciation by his oaths of allegiance to the Republic of the
Philippines made before the Los Angeles PCG and in his Certificate of
Candidacy, and that there was no more need for a separate act of
renunciation.
As a rule, no question will be entertained on appeal unless it has been raised
in the proceedings below. Points of law, theories, issues and arguments not
brought to the attention of the lower court, administrative agency or quasijudicial body need not be considered by a reviewing court, as they cannot be
raised for the first time at that late stage. Basic considerations of fairness and
due process impel this rule.26 Courts have neither the time nor the resources
to accommodate parties who chose to go to trial haphazardly.27
Likewise, this Court does not countenance the late submission of
evidence.28 Petitioner should have offered the Affidavit dated 7 February 2007
during the proceedings before the COMELEC.
Section 1 of Rule 43 of the COMELEC Rules of Procedure provides that "In
the absence of any applicable provisions of these Rules, the pertinent
provisions of the Rules of Court in the Philippines shall be applicable by
analogy or in suppletory character and effect." Section 34 of Rule 132 of the
Revised Rules of Court categorically enjoins the admission of evidence not
formally presented:
SEC. 34. Offer of evidence. - The court shall consider no evidence
which has not been formally offered. The purpose for which the
evidence is offered must be specified.
Since the said Affidavit was not formally offered before the COMELEC,
respondent had no opportunity to examine and controvert it. To admit this
document would be contrary to due process.29 Additionally, the piecemeal
presentation of evidence is not in accord with orderly justice.30
The Court further notes that petitioner had already presented before the
COMELEC an identical document, "Oath of Renunciation of Allegiance to the
United States and Renunciation of Any and All Foreign Citizenship" executed
on 27 June 2007, subsequent to his filing of his Certificate of Candidacy on 26
March 2007. Petitioner attached the said Oath of 27 June 2007 to his Motion
for Reconsideration with the COMELEC en banc. The COMELEC en
banc eventually refused to reconsider said document for being belatedly

executed. What was extremely perplexing, not to mention suspect, was that
petitioner did not submit the Affidavit of 7 February 2007 or mention it at all in
the proceedings before the COMELEC, considering that it could have easily
won his case if it was actually executed on and in existence before the filing of
his Certificate of Candidacy, in compliance with law.
The justification offered by petitioner, that his counsel had advised him against
presenting this crucial piece of evidence, is lame and unconvincing. If the
Affidavit of 7 February 2007 was in existence all along, petitioners counsel,
and even petitioner himself, could have easily adduced it to be a crucial piece
of evidence to prove compliance with the requirements of Section 5(2) of
Republic Act No. 9225. There was no apparent danger for petitioner to submit
as much evidence as possible in support of his case, than the risk of
presenting too little for which he could lose.
And even if it were true, petitioners excuse for the late presentation of the
Affidavit of 7 February 2007 will not change the outcome of petitioners case.
It is a well-settled rule that a client is bound by his counsels conduct,
negligence, and mistakes in handling the case, and the client cannot be heard
to complain that the result might have been different had his lawyer
proceeded differently.31 The only exceptions to the general rule -- that a client
is bound by the mistakes of his counsel -- which this Court finds acceptable
are when the reckless or gross negligence of counsel deprives the client of
due process of law, or when the application of the rule results in the outright
deprivation of ones property through a technicality.32These exceptions are not
attendant in this case.
The Court cannot sustain petitioners averment that his counsel was grossly
negligent in deciding against the presentation of the Affidavit of 7 February
2007 during the proceedings before the COMELEC. Mistakes of attorneys as
to the competency of a witness; the sufficiency, relevancy or irrelevancy of
certain evidence; the proper defense or the burden of proof, failure to
introduce evidence, to summon witnesses and to argue the case -- unless
they prejudice the client and prevent him from properly presenting his case -do not constitute gross incompetence or negligence, such that clients may no
longer be bound by the acts of their counsel.33
Also belying petitioners claim that his former counsel was grossly negligent
was the fact that petitioner continuously used his former counsels theory of
the case. Even when the COMELEC already rendered an adverse decision,
he persistently argues even to this Court that his oaths of allegiance to the

Republic of the Philippines before the Los Angeles PCG and in his Certificate
of Candidacy amount to the renunciation of foreign citizenship which the law
requires. Having asserted the same defense in the instant Petition, petitioner
only demonstrates his continued reliance on and complete belief in the
position taken by his former counsel, despite the formers incongruous
allegations that the latter has been grossly negligent.
Petitioner himself is also guilty of negligence. If indeed he believed that his
counsel was inept, petitioner should have promptly taken action, such as
discharging his counsel earlier and/or insisting on the submission of his
Affidavit of 7 February 2007 to the COMELEC, instead of waiting until a
decision was rendered disqualifying him and a resolution issued dismissing
his motion for reconsideration; and, thereupon, he could have heaped the
blame on his former counsel. Petitioner could not be so easily allowed to
escape the consequences of his former counsels acts, because, otherwise, it
would render court proceedings indefinite, tentative, and subject to reopening
at any time by the mere subterfuge of replacing counsel. 34
Petitioner cites De Guzman v. Sandiganbayan,35 where therein petitioner De
Guzman was unable to present a piece of evidence because his lawyer
proceeded to file a demurrer to evidence, despite the Sandiganbayans denial
of his prior leave to do so. The wrongful insistence of the lawyer in filing a
demurrer to evidence had totally deprived De Guzman of any chance to
present documentary evidence in his defense. This was certainly not the case
in the Petition at bar.
Herein, petitioner was in no way deprived of due process. His counsel actively
defended his suit by attending the hearings, filing the pleadings, and
presenting evidence on petitioners behalf. Moreover, petitioners cause was
not defeated by a mere technicality, but because of a mistaken reliance on a
doctrine which is not applicable to his case. A case lost due to an untenable
legal position does not justify a deviation from the rule that clients are bound
by the acts and mistakes of their counsel.36
Petitioner also makes much of the fact that he received the highest number of
votes for the position of Vice-Mayor of Catarman during the 2007 local
elections. The fact that a candidate, who must comply with the election
requirements applicable to dual citizens and failed to do so, received the
highest number of votes for an elective position does not dispense with, or
amount to a waiver of, such requirement.37 The will of the people as
expressed through the ballot cannot cure the vice of ineligibility, especially if
they mistakenly believed that the candidate was qualified. The rules on

citizenship qualifications of a candidate must be strictly applied. If a person

seeks to serve the Republic of the Philippines, he must owe his loyalty to this
country only, abjuring and renouncing all fealty and fidelity to any other
state.38 The application of the constitutional and statutory provisions on
disqualification is not a matter of popularity.39
WHEREFORE, the instant appeal is DISMISSED. The Resolution dated 28
September 2007 of the COMELEC en banc in SPA No. 07-361, affirming the
Resolution dated 12 June 2007 of the COMELEC Second Division,
is AFFIRMED. Petitioner is DISQUALIFIED to run for the position of ViceMayor of Catarman, Camiguin in the 14 May 2007 National and Local
Elections, and if proclaimed, cannot assume the Office of Vice-Mayor of said
municipality by virtue of such disqualification. Costs against petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 198742

August 10, 2012

TEODORA SOBEJANA-CONDON, Petitioner,

vs.
COMMISSION ON ELECTIONS, LUIS M. BAUTISTA, ROBELITO V. PICAR and WILMA P.
PAGADUAN,Respondents.
DECISION
REYES, J.:
Failure to renounce foreign citizenship in accordance with the exact tenor of Section 5(2) of Republic Act
(R.A.) No. 9225 renders a dual citizen ineligible to run for and thus hold any elective public office.
The Case
At bar is a special civil action for certiorari1 under Rule 64 of the Rules of Court seeking to nullify
Resolution2 dated September 6, 2011 of the Commission on Elections (COMELEC) en banc in EAC (AE)
No. A-44-2010. The assailed resolution (a) reversed the Order 3 dated November 30, 2010 of COMELEC
Second Division dismissing petitioners appeal; and (b) affirmed the consolidated Decision 4 dated October

22, 2010 of the Regional Trial Court (RTC), Bauang, La Union, Branch 33, declaring petitioner Teodora
Sobejana-Condon (petitioner) disqualified and ineligible to her position as Vice-Mayor of Caba, La Union.
The Undisputed Facts
The petitioner is a natural-born Filipino citizen having been born of Filipino parents on August 8, 1944. On
December 13, 1984, she became a naturalized Australian citizen owing to her marriage to a certain Kevin
Thomas Condon.
On December 2, 2005, she filed an application to re-acquire Philippine citizenship before the Philippine
Embassy in Canberra, Australia pursuant to Section 3 of R.A. No. 9225 otherwise known as the
"Citizenship Retention and Re-Acquisition Act of 2003."5 The application was approved and the petitioner
took her oath of allegiance to the Republic of the Philippines on December 5, 2005.
On September 18, 2006, the petitioner filed an unsworn Declaration of Renunciation of Australian
Citizenship before the Department of Immigration and Indigenous Affairs, Canberra, Australia, which in
turn issued the Order dated September 27, 2006 certifying that she has ceased to be an Australian
citizen.6
The petitioner ran for Mayor in her hometown of Caba, La Union in the 2007 elections. She lost in her bid.
She again sought elective office during the May 10, 2010 elections this time for the position of ViceMayor. She obtained the highest numbers of votes and was proclaimed as the winning candidate. She
took her oath of office on May 13, 2010.
Soon thereafter, private respondents Robelito V. Picar, Wilma P. Pagaduan7 and Luis M.
Bautista,8 (private respondents) all registered voters of Caba, La Union, filed separate petitions for quo
warranto questioning the petitioners eligibility before the RTC. The petitions similarly sought the
petitioners disqualification from holding her elective post on the ground that she is a dual citizen and that
she failed to execute a "personal and sworn renunciation of any and all foreign citizenship before any
public officer authorized to administer an oath" as imposed by Section 5(2) of R.A. No. 9225.
The petitioner denied being a dual citizen and averred that since September 27, 2006, she ceased to be
an Australian citizen. She claimed that the Declaration of Renunciation of Australian Citizenship she
executed in Australia sufficiently complied with Section 5(2), R.A. No. 9225 and that her act of running for
public office is a clear abandonment of her Australian citizenship.
Ruling of the RTC
In its consolidated Decision dated October 22, 2010, the trial court held that the petitioners failure to
comply with Section 5(2) of R.A. No. 9225 rendered her ineligible to run and hold public office. As
admitted by the petitioner herself during trial, the personal declaration of renunciation she filed in Australia
was not under oath. The law clearly mandates that the document containing the renunciation of foreign
citizenship must be sworn before any public officer authorized to administer oath. Consequently, the
RTCs decision disposed as follows:

WHEREFORE, premises considered, the Court renders judgment in FAVOR of [private respondents]
and AGAINST (petitioner):
1) DECLARING [petitioner] TEODORA SOBEJANA-CONDON, disqualified and ineligible to hold the
office of Vice-Mayor of Caba, La Union;
2) NULLIFYING her proclamation as the winning candidate for Vice-Mayor of said municipality; and

3) DECLARING the position of Vice-Mayor in said municipality vacant.

SO ORDERED.9
Ruling of the COMELEC
The petitioner appealed to the COMELEC but the appeal was dismissed by the Second Division in its
Order10 dated November 30, 2010 for failure to pay the docket fees within the prescribed period. On
motion for reconsideration, the appeal was reinstated by the COMELEC en banc in its Resolution11 dated
September 6, 2011. In the same issuance, the substantive merits of the appeal were given due course.
The COMELEC en banc concurred with the findings and conclusions of the RTC; it also granted
the Motion for Execution Pending Appeal filed by the private respondents.
The decretal portion of the resolution reads:

WHEREFORE, premises considered the Commission RESOLVED as it hereby RESOLVES as

follows:
1. To DISMISS the instant appeal for lack of merit;
2. To AFFIRM the DECISION dated 22 October 2010 of the court a quo; and
3. To GRANT the Motion for Execution filed on November 12, 2010.
SO ORDERED.12 (Emphasis supplied)
Hence, the present petition ascribing grave abuse of discretion to the COMELEC en banc.
The Petitioners Arguments
The petitioner contends that since she ceased to be an Australian citizen on September 27, 2006, she no
longer held dual citizenship and was only a Filipino citizen when she filed her certificate of candidacy as
early as the 2007 elections. Hence, the "personal and sworn renunciation of foreign citizenship" imposed
by Section 5(2) of R.A. No. 9225 to dual citizens seeking elective office does not apply to her.
She further argues that a sworn renunciation is a mere formal and not a mandatory requirement. In
support thereof, she cites portions of the Journal of the House of Representatives dated June 2 to 5, 2003
containing the sponsorship speech for House Bill (H.B.) No. 4720, the precursor of R.A. No. 9225.
She claims that the private respondents are estopped from questioning her eligibility since they failed to
do so when she filed certificates of candidacy for the 2007 and 2010 elections.
Lastly, she disputes the power of the COMELEC en banc to: (a) take cognizance of the substantive
merits of her appeal instead of remanding the same to the COMELEC Second Division for the
continuation of the appeal proceedings; and (b) allow the execution pending appeal of the RTCs
judgment.
The Issues
Posed for resolution are the following issues: I) Whether the COMELEC en banc may resolve the merits
of an appeal after ruling on its reinstatement; II) Whether the COMELEC en banc may order the execution
of a judgment rendered by a trial court in an election case; III) Whether the private respondents are

barred from questioning the qualifications of the petitioner; and IV) For purposes of determining the
petitioners eligibility to run for public office, whether the "sworn renunciation of foreign citizenship" in
Section 5(2) of R.A. No. 9225 is a mere pro-forma requirement.
The Courts Ruling
I. An appeal may be simultaneously
reinstated and definitively resolved
by the COMELEC en banc in a
resolution disposing of a motion for
reconsideration.
The power to decide motions for reconsideration in election cases is arrogated unto the COMELEC en
banc by Section 3, Article IX-C of the Constitution, viz:

Sec. 3. The Commission on Elections may sit en banc or in two divisions, and shall promulgate its
rules of procedure in order to expedite disposition of election cases, including pre-proclamation
controversies. All such election cases shall be heard and decided in division, provided that motions
for reconsideration of decisions shall be decided by the Commission en banc.
A complementary provision is present in Section 5(c), Rule 3 of the COMELEC Rules of Procedure, to wit:

Any motion to reconsider a decision, resolution, order or ruling of a Division shall be resolved by the
Commission en banc except motions on interlocutory orders of the division which shall be resolved
by the division which issued the order.
Considering that the above cited provisos do not set any limits to the COMELEC en bancs prerogative in
resolving a motion for reconsideration, there is nothing to prevent the body from directly adjudicating the
substantive merits of an appeal after ruling for its reinstatement instead of remanding the same to the
division that initially dismissed it.
We thus see no impropriety much more grave abuse of discretion on the part of the COMELEC en
banc when it proceeded to decide the substantive merits of the petitioners appeal after ruling for its
reinstatement.
Further, records show that, in her motion for reconsideration before the COMELEC en banc, the petitioner
not only proffered arguments on the issue on docket fees but also on the issue of her eligibility. She even
filed a supplemental motion for reconsideration attaching therewith supporting documents 13 to her
contention that she is no longer an Australian citizen. The petitioner, after obtaining an unfavorable
decision, cannot be permitted to disavow the en bancs exercise of discretion on the substantial merits of
her appeal when she herself invoked the same in the first place.
The fact that the COMELEC en banc had remanded similar appeals to the Division that initially dismissed
them cannot serve as a precedent to the disposition of the petitioners appeal. A decision or resolution of
any adjudicating body can be disposed in several ways. To sustain petitioners argument would be
virtually putting a straightjacket on the COMELEC en bancs adjudicatory powers.
More significantly, the remand of the appeal to the COMELEC Second Division would be unnecessarily
circuitous and repugnant to the rule on preferential disposition of quo warranto cases espoused in Rule
36, Section 15 of the COMELEC Rules of Procedure.14

II. The COMELEC en banc has the

power to order discretionary
execution of judgment.
We cannot subscribe to petitioners submission that the COMELEC en banc has no power to order the
issuance of a writ of execution and that such function belongs only to the court of origin.
There is no reason to dispute the COMELECs authority to order discretionary execution of judgment in
view of the fact that the suppletory application of the Rules of Court is expressly sanctioned by Section 1,
Rule 41 of the COMELEC Rules of Procedure.15
Under Section 2, Rule 39 of the Rules of Court, execution pending appeal may be issued by an appellate
court after the trial court has lost jurisdiction. In Batul v. Bayron,16 we stressed the import of the provision
vis--vis election cases when we held that judgments in election cases which may be executed pending
appeal includes those decided by trial courts and those rendered by the COMELEC whether in the
exercise of its original or appellate jurisdiction.
III. Private respondents are not
estopped from questioning
petitioners eligibility to hold public
office.
The fact that the petitioners qualifications were not questioned when she filed certificates of candidacy for
2007 and 2010 elections cannot operate as an estoppel to the petition for quo warranto before the RTC.
Under the Batas Pambansa Bilang 881 (Omnibus Election Code), there are two instances where a
petition questioning the qualifications of a registered candidate to run for the office for which his certificate
of candidacy was filed can be raised, to wit:

(1) Before election, pursuant to Section 78 thereof which provides that:

Sec. 78. Petition to deny due course or to cancel a certificate of candidacy. A verified
petition seeking to deny due course or to cancel a certificate of candidacy may be filed by
any person exclusively on the ground that any material representation contained therein as
required under Section 74 hereof is false. The petition may be filed at any time not later than
twenty-five days from the time of the filing of the certificate of candidacy and shall be
decided, after due notice and hearing, not later than fifteen days before the election; and
(2) After election, pursuant to Section 253 thereof, viz:
Sec. 253. Petition for quo warranto. Any voter contesting the election of any Member of the
Batasang Pambansa, regional, provincial, or city officer on the ground of ineligibility or of
disloyalty to the Republic of the Philippines shall file a sworn petition for quo warranto with
the Commission within ten days after the proclamation of the results of the election.
(Emphasis ours)
Hence, if a person qualified to file a petition to disqualify a certain candidate fails to file the petition within
the twenty-five (25)-day period prescribed by Section 78 of the Omnibus Election Code for whatever
reasons, the elections laws do not leave him completely helpless as he has another chance to raise the
disqualification of the candidate by filing a petition forquo warranto within ten (10) days from the
proclamation of the results of the election, as provided under Section 253 of the Omnibus Election
Code.17

The above remedies were both available to the private respondents and their failure to utilize Section 78
of the Omnibus Election Code cannot serve to bar them should they opt to file, as they did so file, a quo
warranto petition under Section 253.
IV. Petitioner is disqualified from
running for elective office for
failure to renounce her Australian
citizenship in accordance with
Section 5(2) of R.A. No. 9225.
R.A. No. 9225 allows the retention and re-acquisition of Filipino citizenship for natural-born citizens who
have lost their Philippine citizenship18 by taking an oath of allegiance to the Republic, thus:

Section 3. Retention of Philippine Citizenship. Any provision of law to the contrary notwithstanding,
natural-born citizens of the Philippines who have lost their Philippine citizenship by reason of their
naturalization as citizens of a foreign country are hereby deemed to have re-acquired Philippine
citizenship upon taking the following oath of allegiance to the Republic:
"I, _____________________, solemnly swear (or affirm) that I will support and defend the
Constitution of the Republic of the Philippines and obey the laws and legal orders promulgated by
the duly constituted authorities of the Philippines; and I hereby declare that I recognize and accept
the supreme authority of the Philippines and will maintain true faith and allegiance thereto; and that I
imposed this obligation upon myself voluntarily without mental reservation or purpose of evasion."
Natural-born citizens of the Philippines who, after the effectivity of this Act, become citizens of a
foreign country shall retain their Philippine citizenship upon taking the aforesaid oath.
The oath is an abbreviated repatriation process that restores ones Filipino citizenship and all civil and
political rights and obligations concomitant therewith, subject to certain conditions imposed in Section 5,
viz:

Sec. 5. Civil and Political Rights and Liabilities. Those who retain or re-acquire Philippine
citizenship under this Act shall enjoy full civil and political rights and be subject to all attendant
liabilities and responsibilities under existing laws of the Philippines and the following conditions:
(1) Those intending to exercise their right of suffrage must meet the requirements under Section 1,
Article V of the Constitution, Republic Act No. 9189, otherwise known as "The Overseas Absentee
Voting Act of 2003" and other existing laws;
(2) Those seeking elective public office in the Philippines shall meet the qualification for holding such
public office as required by the Constitution and existing laws and, at the time of the filing of the
certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship
before any public officer authorized to administer an oath;
(3) Those appointed to any public office shall subscribe and swear to an oath of allegiance to the
Republic of the Philippines and its duly constituted authorities prior to their assumption of office:
Provided, That they renounce their oath of allegiance to the country where they took that oath;
(4) Those intending to practice their profession in the Philippines shall apply with the proper authority
for a license or permit to engage in such practice; and

(5) That right to vote or be elected or appointed to any public office in the Philippines cannot be
exercised by, or extended to, those who:
(a) are candidates for or are occupying any public office in the country of which they are
naturalized citizens; and/or
(b) are in active service as commissioned or non-commissioned officers in the armed forces
of the country which they are naturalized citizens. (Emphasis ours)
Under the provisions of the aforementioned law, the petitioner has validly re-acquired her Filipino
citizenship when she took an Oath of Allegiance to the Republic of the Philippines on December 5, 2005.
At that point, she held dual citizenship, i.e., Australian and Philippine.
On September 18, 2006, or a year before she initially sought elective public office, she filed a
renunciation of Australian citizenship in Canberra, Australia. Admittedly, however, the same was not
under oath contrary to the exact mandate of Section 5(2) that the renunciation of foreign citizenship must
be sworn before an officer authorized to administer oath.
To obviate the fatal consequence of her inutile renunciation, the petitioner pleads the Court to interpret
the "sworn renunciation of any and all foreign citizenship" in Section 5(2) to be a mere pro
forma requirement in conformity with the intent of the Legislature. She anchors her submission on the
statement made by Representative Javier during the floor deliberations on H.B. No. 4720, the precursor
of R.A. No. 9225.
At the outset, it bears stressing that the Courts duty to interpret the law according to its true intent is
exercised only when the law is ambiguous or of doubtful meaning. The first and fundamental duty of the
Court is to apply the law. As such, when the law is clear and free from any doubt, there is no occasion for
construction or interpretation; there is only room for application.19 Section 5(2) of R.A. No. 9225 is one
such instance.
Ambiguity is a condition of admitting two or more meanings, of being understood in more than one way,
or of referring to two or more things at the same time. For a statute to be considered ambiguous, it must
admit of two or more possible meanings.20
The language of Section 5(2) is free from any ambiguity. In Lopez v. COMELEC,21 we declared its
categorical and single meaning: a Filipino American or any dual citizen cannot run for any elective public
position in the Philippines unless he or she personally swears to a renunciation of all foreign citizenship at
the time of filing the certificate of candidacy. We also expounded on the form of the renunciation and held
that to be valid, the renunciation must be contained in an affidavit duly executed before an officer of the
law who is authorized to administer an oath stating in clear and unequivocal terms that affiant is
renouncing all foreign citizenship.
The same meaning was emphasized in Jacot v. Dal,22 when we held that Filipinos re-acquiring or
retaining their Philippine citizenship under R.A. No. 9225 must explicitly renounce their foreign citizenship
if they wish to run for elective posts in the Philippines, thus:

The law categorically requires persons seeking elective public office, who either retained their
Philippine citizenship or those who reacquired it, to make a personal and sworn renunciation of any
and all foreign citizenship before a public officer authorized to administer an oath simultaneous with
or before the filing of the certificate of candidacy.
Hence, Section 5(2) of Republic Act No. 9225 compels natural-born Filipinos, who have been
naturalized as citizens of a foreign country, but who reacquired or retained their Philippine

citizenship (1) to take the oath of allegiance under Section 3 of Republic Act No. 9225, and (2) for
those seeking elective public offices in the Philippines, to additionally execute a personal and sworn
renunciation of any and all foreign citizenship before an authorized public officer prior or
simultaneous to the filing of their certificates of candidacy, to qualify as candidates in Philippine
elections.
Clearly Section 5(2) of Republic Act No. 9225 (on the making of a personal and sworn renunciation
of any and all foreign citizenship) requires of the Filipinos availing themselves of the benefits under
the said Act to accomplish an undertaking other than that which they have presumably complied with
under Section 3 thereof (oath of allegiance to the Republic of the Philippines). This is made clear in
the discussion of the Bicameral Conference Committee on Disagreeing Provisions of House Bill No.
4720 and Senate Bill No. 2130 held on 18 August 2003 (precursors of Republic Act No. 9225),
where the Hon. Chairman Franklin Drilon and Hon. Representative Arthur Defensor explained to
Hon. Representative Exequiel Javier that the oath of allegiance is different from the renunciation of
foreign citizenship;
xxxx
The intent of the legislators was not only for Filipinos reacquiring or retaining their Philippine
citizenship under Republic Act No. 9225 to take their oath of allegiance to the Republic of the
Philippines, but also to explicitly renounce their foreign citizenship if they wish to run for elective
posts in the Philippines. To qualify as a candidate in Philippine elections, Filipinos must only have
one citizenship, namely, Philippine citizenship.23(Citation omitted and italics and underlining ours)
Hence, in De Guzman v. COMELEC,24 we declared petitioner therein to be disqualified from running for
the position of vice-mayor for his failure to make a personal and sworn renunciation of his American
citizenship.
We find no reason to depart from the mandatory nature infused by the above rulings to the phrase "sworn
renunciation". The language of the provision is plain and unambiguous. It expresses a single, definite,
and sensible meaning and must thus be read literally.25 The foreign citizenship must be formally rejected
through an affidavit duly sworn before an officer authorized to administer oath.
It is conclusively presumed to be the meaning that the Legislature has intended to convey. 26 Even a resort
to the Journal of the House of Representatives invoked by the petitioner leads to the same inference, viz:

INTERPELLATION OF REP. JAVIER

Rep. Javier initially inquired whether under the Bill, dual citizenship is only limited to natural-born
Filipinos and not to naturalized Filipinos.
Rep. Libanan replied in the affirmative.
Rep. Javier subsequently adverted to Section 5 of the Bill which provides that natural-born Filipinos
who have dual citizenship shall continue to enjoy full civil and political rights. This being the case, he
sought clarification as to whether they can indeed run for public office provided that they renounce
their foreign citizenship.
Rep. Libanan replied in the affirmative, citing that these citizens will only have to make a personal
and sworn renunciation of foreign citizenship before any authorized public officer.

Rep. Javier sought further clarification on this matter, citing that while the Bill provides them with full
civil and political rights as Filipino citizens, the measure also discriminates against them since they
are required to make a sworn renunciation of their other foreign citizenship if and when they run for
public office. He thereafter proposed to delete this particular provision.
In his rejoinder, Rep. Libanan explained that this serves to erase all doubts regarding any issues that
might be raised pertaining to the citizenship of any candidate. He subsequently cited the case of
Afroyim vs. Rusk, wherein the United States considered a naturalized American still as an American
citizen even when he cast his vote in Israel during one of its elections.
Rep. Javier however pointed out that the matter of voting is different because in voting, one is not
required to renounce his foreign citizenship. He pointed out that under the Bill, Filipinos who run for
public office must renounce their foreign citizenship. He pointed out further that this is a contradiction
in the Bill.
Thereafter, Rep. Javier inquired whether Filipino citizens who had acquired foreign citizenship and
are now entitled to reacquire their Filipino citizenship will be considered as natural-born citizens. As
such, he likewise inquired whether they will also be considered qualified to run for the highest
elective positions in the country.
Rep. Libanan replied in the affirmative, citing that the only requirement is that they make a sworn
renunciation of their foreign citizenship and that they comply with the residency and registration
requirements as provided for in the Constitution.
Whereupon, Rep. Javier noted that under the Constitution, natural-born citizens are those who are
citizens at the time of birth without having to perform an act to complete or perfect his/her
citizenship.
Rep. Libanan agreed therewith, citing that this is the reason why the Bill seeks the repeal of CA No.
63. The repeal, he said, would help
Filipino citizens who acquired foreign citizenship to retain their citizenship. With regard then to
Section 5 of the Bill, he explained that the Committee had decided to include this provision because
Section 18, Article XI of the Constitution provides for the accountability of public officers.
In his rejoinder, Rep. Javier maintained that in this case, the sworn renunciation of a foreign
citizenship will only become a pro forma requirement.
On further queries of Rep. Javier, Rep. Libanan affirmed that natural-born Filipino citizens who
became foreign citizens and who have reacquired their Filipino citizenship under the Bill will be
considered as natural-born citizens, and therefore qualified to run for the presidency, the vicepresidency or for a seat in Congress. He also agreed with the observation of Rep. Javier that a
natural-born citizen is one who is a citizen of the country at the time of birth. He also explained that
the Bill will, in effect, return to a Filipino citizen who has acquired foreign citizenship, the status of
being a natural-born citizen effective at the time he lost his Filipino citizenship.
As a rejoinder, Rep. Javier opined that doing so would be discriminating against naturalized Filipino
citizens and Filipino citizens by election who are all disqualified to run for certain public offices. He
then suggested that the Bill be amended by not considering as natural-born citizens those Filipinos
who had renounced their Filipino citizenship and acquired foreign citizenship. He said that they
should be considered as repatriated citizens.

In reply, Rep. Libanan assured Rep. Javier that the Committee will take note of the latters
comments on the matter. He however stressed that after a lengthy deliberation on the subject, the
Committees on Justice, and Foreign Affairs had decided to revert back to the status of being naturalborn citizens those natural-born Filipino citizens who had acquired foreign citizenship but now
wished to reacquire their Filipino citizenship.
Rep. Javier then explained that a Filipina who loses her Filipino citizenship by virtue of her marriage
to a foreigner can regain her repatriated Filipino citizenship, upon the death of her husband, by
simply taking her oath before the Department of Justice (DOJ).
Rep. Javier said that he does not oppose the Bill but only wants to be fair to other Filipino citizens
who are not considered natural-born. He reiterated that natural-born Filipino citizens who had
renounced their citizenship by pledging allegiance to another sovereignty should not be allowed to
revert back to their status of being natural-born citizens once they decide to regain their Filipino
citizenship. He underscored that this will in a way allow such Filipinos to enjoy dual citizenship.
On whether the Sponsors will agree to an amendment incorporating the position of Rep. Javier, Rep.
Libanan stated that this will defeat the purpose of the Bill.
Rep. Javier disagreed therewith, adding that natural-born Filipino citizens who acquired foreign
citizenships and later decided to regain their Filipino citizenship, will be considered as repatriated
citizens.
Rep. Libanan cited the case of Bengzon vs. HRET wherein the Supreme Court had ruled that only
naturalized Filipino citizens are not considered as natural-born citizens.
In reaction, Rep. Javier clarified that only citizens by election or those whose mothers are Filipino
citizens under the 1935 Constitution and who elected Filipino citizenship upon reaching the age of
maturity, are not deemed as natural-born citizens.
In response, Rep. Libanan maintained that in the Bengzon case, repatriation results in the recovery
of ones original nationality and only naturalized citizens are not considered as natural-born citizens.
On whether the Sponsors would agree to not giving back the status of being natural-born citizens to
natural-born Filipino citizens who acquired foreign citizenship, Rep. Libanan remarked that the Body
in plenary session will decide on the matter.27
The petitioner obviously espouses an isolated reading of Representative Javiers statement; she
conveniently disregards the preceding and succeeding discussions in the records.
The above-quoted excerpts of the legislative record show that Representative Javiers statement ought to
be understood within the context of the issue then being discussed, that is whether former natural-born
citizens who re-acquire their Filipino citizenship under the proposed law will revert to their original status
as natural-born citizens and thus be qualified to run for government positions reserved only to naturalborn Filipinos, i.e. President, Vice-President and Members of the Congress.
It was Representative Javiers position that they should be considered as repatriated Filipinos and not as
natural-born citizens since they will have to execute a personal and sworn renunciation of foreign
citizenship. Natural-born citizens are those who need not perform an act to perfect their citizenship.
Representative Libanan, however, maintained that they will revert to their original status as natural-born
citizens. To reconcile the renunciation imposed by Section 5(2) with the principle that natural-born citizens

are those who need not perform any act to perfect their citizenship, Representative Javier suggested that
the sworn renunciation of foreign citizenship be considered as a mere pro forma requirement.
Petitioners argument, therefore, loses its point. The "sworn renunciation of foreign citizenship" must be
deemed a formal requirement only with respect to the re-acquisition of ones status as a natural-born
Filipino so as to override the effect of the principle that natural-born citizens need not perform any act to
perfect their citizenship. Never was it mentioned or even alluded to that, as the petitioner wants this Court
to believe, those who re-acquire their Filipino citizenship and thereafter run for public office has the option
of executing an unsworn affidavit of renunciation.
It is also palpable in the above records that Section 5 was intended to complement Section 18, Article XI
of the Constitution on public officers primary accountability of allegiance and loyalty, which provides:

Sec. 18. Public officers and employees owe the State and this Constitution allegiance at all times
and any public officer or employee who seeks to change his citizenship or acquire the status of an
immigrant of another country during his tenure shall be dealt with by law.
An oath is a solemn declaration, accompanied by a swearing to God or a revered person or thing, that
ones statement is true or that one will be bound to a promise. The person making the oath implicitly
invites punishment if the statement is untrue or the promise is broken. The legal effect of an oath is to
subject the person to penalties for perjury if the testimony is false. 28
Indeed, the solemn promise, and the risk of punishment attached to an oath ensures truthfulness to the
prospective public officers abandonment of his adopted state and promise of absolute allegiance and
loyalty to the Republic of the Philippines.
To hold the oath to be a mere pro forma requirement is to say that it is only for ceremonial purposes; it
would also accommodate a mere qualified or temporary allegiance from government officers when the
Constitution and the legislature clearly demand otherwise.
Petitioner contends that the Australian Citizenship Act of 1948, under which she is already deemed to
have lost her citizenship, is entitled to judicial notice. We disagree.
Foreign laws are not a matter of judicial notice. Like any other fact, they must be alleged and proven. 29 To
prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25
of Rule 132 of the Revised Rules of Court which reads:

Sec. 24. Proof of official record. The record of public documents referred to in paragraph (a) of
Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or
by a copy attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreign country, the certificate may be made
by a secretary of the embassy or legation, consul general, consul, vice- consul, or consular agent or
by any officer in the foreign service of the Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office. (Emphasis ours)
Sec. 25. What attestation of copy must state. Whenever a copy of a document or record is attested
for the purpose of the evidence, the attestation must state, in substance, that the copy is a correct
copy of the original, or a specific part thereof, as the case may be. The attestation must be under the
official seal of the attesting officer, if there be any, or if he be the clerk of a court having a seal, under
the seal of such court.

The Court has admitted certain exceptions to the above rules and held that the existence of a foreign law
may also be established through: (1) a testimony under oath of an expert witness such as an attorney-atlaw in the country where the foreign law operates wherein he quotes verbatim a section of the law and
states that the same was in force at the time material to the facts at hand; and (2) likewise, in several
naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity
regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be
allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is
"satisfied of the authenticity of the written proof offered." Thus, in a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese Consulate General of Manila was held to
be a competent proof of that law.30
The petitioner failed to prove the Australian Citizenship Act of 1948 through any of the above
methods. As uniformly observed by the RTC and COMELEC, the petitioner failed to show proof of the
existence of the law during trial. Also, the letter issued by the Australian government showing that
petitioner already renounced her Australian citizenship was unauthenticated hence, the courts a quo
acted judiciously in disregarding the same.
1w phi 1

We are bound to arrive at a similar conclusion even if we were to admit as competent evidence the said
letter in view of the photocopy of a Certificate of Authentication issued by Consular Section of the
Philippine Embassy in Canberra, Australia attached to the petitioners motion for reconsideration.
We have stressed in Advocates and Adherents of Social Justice for School Teachers and Allied Workers
(AASJS) Member v. Datumanong31 that the framers of R.A. No. 9225 did not intend the law to concern
itself with the actual status of the other citizenship.
This Court as the government branch tasked to apply the enactments of the legislature must do so
conformably with the wisdom of the latter sans the interference of any foreign law. If we were to read the
Australian Citizen Act of 1948 into the application and operation of R.A. No. 9225, we would be applying
not what our legislative department has deemed wise to require. To do so would be a brazen
encroachment upon the sovereign will and power of the people of this Republic. 32
The petitioners act of running for public office does not suffice to serve as an effective renunciation of her
Australian citizenship. While this Court has previously declared that the filing by a person with dual
citizenship of a certificate of candidacy is already considered a renunciation of foreign citizenship, 33 such
ruling was already adjudged superseded by the enactment of R.A. No. 9225 on August 29, 2003 which
provides for the additional condition of a personal and sworn renunciation of foreign citizenship. 34
The fact that petitioner won the elections can not cure the defect of her candidacy. Garnering the most
number of votes does not validate the election of a disqualified candidate because the application of the
constitutional and statutory provisions on disqualification is not a matter of popularity. 35
In fine, R.A. No. 9225 categorically demands natural-born Filipinos who re-acquire their citizenship and
seek elective office, to execute a personal and sworn renunciation of any and all foreign citizenships
before an authorized public officer prior to or simultaneous to the filing of their certificates of candidacy, to
qualify as candidates in Philippine elections.36 The rule applies to all those who have re-acquired their
Filipino citizenship, like petitioner, without regard as to whether they are still dual citizens or not. It is a
pre-requisite imposed for the exercise of the right to run for public office.
Stated differently, it is an additional qualification for elective office specific only to Filipino citizens who reacquire their citizenship under Section 3 of R.A. No. 9225. It is the operative act that restores their right to
run for public office. The petitioner's failure to comply therewith in accordance with the exact tenor of the
law, rendered ineffectual the Declaration of Renunciation of Australian Citizenship she executed on
September 18, 2006. As such, she is yet to regain her political right to seek elective office. Unless she

executes a sworn renunciation of her Australian citizenship, she is ineligible to run for and hold any
elective office in the Philippines.
WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED. The Resolution dated
September 6, 2011 of the Commission on Elections en bane in EAC (AE) No. A-44-2010 is AFFIRMED in
toto.
SO ORDERED.
BIENVENIDO L. REYES<br />Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Senior Associate Justice

Revival of the Grandfather Rule?

In a surprising opinion, the General Counsel of the Securities and Exchange Commission held that the grandfather
rule should be used in determining the nationality of a corporation engaged in a partly nationalized activity instead of
the traditionally used control test.

As stated in SEC-OGC Opinion No. 10-31 (December 9, 2010), Medusa Mining Ltd (MML) is an investor in a joint
venture that is the holder of a mineral production sharing agreement. It is in partnership with PHILSAGA Mining Corp.
(PHILSAGA), apparently a Filipino corporation. MML, a 100% foreign corporation, owns 40 % of the joint venture,
while PHILSAGA owns the remaining 60% equity. Answering the question of MML on whether it has violated the
Constitution and other pertinent laws regarding foreign participation in mining activities, the OGC said that:

We opine that we must look into the citizenship of the individual stockholders, i.e. natural persons,
of that investor-corporation in order to determine if the Constitutional and statutory restrictions are
complied with. If the shares of stock of the immediate investor corporation is in turn held and
controlled by another corporation, then we must look into the citizenship of the individual
stockholders of the latter corporation. In other words, if there are layers of intervening
corporations investing in a mining joint venture, we must delve into the citizenship of the
individual stockholders of each corporation. This is the strict application of the grandfather rule,
which the Commission has been consistently applying prior to the 1990s.
This opinion, as admitted by then General Counsel Vernette G. Umali-Pacio, is in contravention of the SECs
prevailing policy of applying the control test. Under this latter test, a legal fiction is created where if 60% of the
shares of an investing corporation are owned by Philippine citizens then all of the shares of the 100% of that
corporations share are considered Filipino owned for purposes of determining the extent of foreign equity in an
investee corporation engaging in an activity restricted to Philippine citizens. The opinion defended its stand in this
way:

Control test must not be applied in determining if a corporation satisfies the Constitutions citizenship
requirements in certain areas of activitiesPhilippine citizenship is being unduly attributed to foreign
individuals who own the rest of the shares in a 60% Filipino equity corporation investing in
another corporation. Thus, applying the control test effectively circumvents the Constitutional
mandate that corporations engaging in certain activities must be 60% owned by Filipino citizens. The
words of the Constitution clearly provide that we must look at the citizenship of the

individual/natural person who ultimately owns and controls the shares of stocks of the
corporation engaging in the nationalized/partly-nationalized activity. In fact, the Mining Act strictly
adheres to the text of the Constitution and does not provide for the application of the control test.

EN BANC

WILSON P. GAMBOA,

G.R. No. 176579

Petitioner,
Present:
- versus CORONA, C.J.,
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,

CARPIO,

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.,

ABAD,

VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,

VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.

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.

Promulgated:

PABLITO V. SANIDAD and

ARNO V. SANIDAD,

June 28, 2011

Petitioners-in-Intervention.

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

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 Inter-Agency 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
to P25,217,556,000; (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 20K 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 x7

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 nationaleconomy, 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 inSalvacion:

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 issue which 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 patrimony28 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 andPangilinan 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. Nazarenostressed 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) mootnessof 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, non-inclusion 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. BienvenidoF. 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 60-40 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 SIP58 preferred 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
measly P1.00 per share.59So 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 xcorporations 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 sole right 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 of P2,328.00 per share,64 while PLDT preferred shares
with a par value ofP10.00 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 Filipinos specific 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 self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, 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-self-executing. . . . 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 selfincrimination. 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,68 this 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.

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 nonvoting 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:

I join the dissent of Mr. Justice Velasco

RENATO C. CORONA
Chief Justice

SEC Memo Circular 8-2013

SEC Guidelines on Compliance with FilipinoForeign Ownership Requirements

Posted on June 3, 2013 by Imelda A. Manguiat Posted in Constitutional Law

The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 8-2013 on May 20,
2013. The Circular sets out the guidelines to determine compliance with the required percentage of Filipinoforeign ownership in corporations engaged in nationalized and partly-nationalized activities.
Nationalized activities refer to those areas of investments which are completely or partly reserved to Philippine
nationals pursuant to the 1987 Constitution, the Foreign Investments Act, as amended (FIA), and other
existing laws such as the Retail Trade Liberalization Act.
The Circular was issued pursuant to the Supreme Courts directive in the case of Gamboa v. Teves, where the
Court interpreted the term capital in Article XII, Section 11 of the 1987 Constitution to refer only to shares
of stock entitled to vote in the election of directors. Under the Circular, for purposes of determining
compliance with the nationality restrictions, the required percentage of Filipino ownership shall be applied
to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b)
the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors. On
the other hand, corporations covered by special laws providing for specific citizenship requirements shall
continue to be guided by the provisions of those special laws. The corporate secretaries of covered
corporations are directed to monitor compliance with the provisions of the Circular.
The SEC provided for a one-year grace period to enable all corporations to comply with its new Circular,
failing which, the corporation shall be subjected to administrative sanctions under the FIA, as amended.

SEC Memorandum Circular No. 8-2013 took effect immediately after its publication last May 22.

SEC Guidelines on Compliance with FilipinoForeign Ownership Requirements

Posted on June 3, 2013 by Imelda A. Manguiat Posted in Constitutional Law

The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 8-2013 on May 20,
2013. The Circular sets out the guidelines to determine compliance with the required percentage of Filipinoforeign ownership in corporations engaged in nationalized and partly-nationalized activities.
Nationalized activities refer to those areas of investments which are completely or partly reserved to Philippine
nationals pursuant to the 1987 Constitution, the Foreign Investments Act, as amended (FIA), and other
existing laws such as the Retail Trade Liberalization Act.
The Circular was issued pursuant to the Supreme Courts directive in the case of Gamboa v. Teves, where the
Court interpreted the term capital in Article XII, Section 11 of the 1987 Constitution to refer only to shares
of stock entitled to vote in the election of directors. Under the Circular, for purposes of determining
compliance with the nationality restrictions, the required percentage of Filipino ownership shall be applied
to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b)
the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors. On
the other hand, corporations covered by special laws providing for specific citizenship requirements shall
continue to be guided by the provisions of those special laws. The corporate secretaries of covered
corporations are directed to monitor compliance with the provisions of the Circular.
The SEC provided for a one-year grace period to enable all corporations to comply with its new Circular,
failing which, the corporation shall be subjected to administrative sanctions under the FIA, as amended.
SEC Memorandum Circular No. 8-2013 took effect immediately after its publication last May 22.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 115525 October 30, 1995
JUAN T. DAVID, petitioner,
vs.

TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary

of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their
AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.
G.R. No. 115543 October 30, 1995
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE
BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 October 30, 1995
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING
CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L.
DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON.
TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.
G.R. No. 115754 October 30, 1995
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 October 30, 1995
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C.
CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE
ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT
COALITION, INC., and PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO
TAADA, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF
INTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.
G.R. No. 115852 October 30, 1995
PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115873 October 30, 1995
COOPERATIVE UNION OF THE PHILIPPINES, petitioner,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON.

TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.
G.R. No. 115931 October 30, 1995
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF
PHILIPPINE BOOK SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO,
as the Commissioner of Internal Revenue; and HON. GUILLERMO PARAYNO, JR., in his
capacity as the Commissioner of Customs,respondents.
RESOLUTION

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these
cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded
Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several
petitioners in these cases, with the exception of the Philippine Educational Publishers Association,
Inc. and the Association of Philippine Booksellers, petitioners in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a consolidated comment, to which the
Philippine Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc.,
petitioner in G.R. No. 115544, and Juan T. David, petitioner in G.R. No. 115525, each filed a reply.
In turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.
On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino,
Kilosbayan, Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders
Association (CREBA)) reiterate previous claims made by them that R.A. No. 7716 did not "originate
exclusively" in the House of Representatives as required by Art. VI, 24 of the Constitution. Although
they admit that H. No. 11197 was filed in the House of Representatives where it passed three
readings and that afterward it was sent to the Senate where after first reading it was referred to the
Senate Ways and Means Committee, they complain that the Senate did not pass it on second and
third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have
done was to amend H. No. 11197 by striking out the text of the bill and substituting it with the text of
S. No. 1630. That way, it is said, "the bill remains a House bill and the Senate version just becomes
the text (only the text) of the House bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment
to a House revenue bill by enacting its own version of a revenue bill. On at least two occasions
during the Eighth Congress, the Senate passed its own version of revenue bills, which, in
consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY
EXTENDING FROM FIVE (5) YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY
EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was approved by the President
on April 10, 1992. This Act is actually a consolidation of H. No. 34254, which was approved by the
House on January 29, 1992, and S. No. 1920, which was approved by the Senate on February 3,
1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD
TO ANY FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC GAMES) which was approved by
the President on May 22, 1992. This Act is a consolidation of H. No. 22232, which was approved by
the House of Representatives on August 2, 1989, and S. No. 807, which was approved by the
Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws which were also the result of the
consolidation of House and Senate bills. These are the following, with indications of the dates on
which the laws were approved by the President and dates the separate bills of the two chambers of
Congress were respectively passed:
1. R.A. NO. 7642
AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR
THIS PURPOSE THE PERTINENT SECTIONS OF THE NATIONAL INTERNAL
REVENUE CODE (December 28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO
REQUIRE THE PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO
ALLOW LOCAL GOVERNMENT UNITS TO SHARE IN VAT REVENUE,
AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE (December 28, 1992)
House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO
PRESCRIBE THE PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY
LARGE TAXPAYERS, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED (February 24,
1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL
SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING
GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS) TO
DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF
THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF
GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES
RENDERED BY CONTRACTORS (April 6, 1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS TO DECLARE DIVIDENDS UNDER CERTAIN CONDITIONS TO
THE NATIONAL GOVERNMENT, AND FOR OTHER PURPOSES (November 9,
1993)
House Bill No. 11024, November 3, 1993
Senate Bill No. 1168, November 3, 1993
6. R.A. NO. 7660
AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION
OF THE DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE
CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, ALLOCATING FUNDS FOR SPECIFIC PROGRAMS, AND FOR
OTHER PURPOSES (December 23, 1993)
House Bill No. 7789, May 31, 1993
Senate Bill No. 1330, November 18, 1993
7. R.A. NO. 7717
AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES
OF STOCK LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE
OR THROUGH INITIAL PUBLIC OFFERING, AMENDING FOR THE PURPOSE
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY INSERTING A
NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5,
1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of
its power to propose amendments to bills required to originate in the House, passed its own version
of a House revenue measure. It is noteworthy that, in the particular case of S. No. 1630, petitioners
Tolentino and Roco, as members of the Senate, voted to approve it on second and third readings.
On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino,
concerns a mere matter of form. Petitioner has not shown what substantial difference it would make
if, as the Senate actually did in this case, a separate bill like S. No. 1630 is instead enacted as a
substitute measure, "taking into Consideration . . . H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
68. Not more than one amendment to the original amendment shall be considered.
No amendment by substitution shall be entertained unless the text thereof is
submitted in writing.
Any of said amendments may be withdrawn before a vote is taken thereon.
69. No amendment which seeks the inclusion of a legislative provision foreign to the
subject matter of a bill (rider) shall be entertained.
xxx xxx xxx
70-A. A bill or resolution shall not be amended by substituting it with another which
covers a subject distinct from that proposed in the original bill or resolution.
(emphasis added).
Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate
possesses less power than the U.S. Senate because of textual differences between constitutional
provisions giving them the power to propose or concur with amendments.
Art. I, 7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the House of Representatives; but the
Senate may propose or concur with amendments as on other Bills.
Art. VI, 24 of our Constitution reads:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.

The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the
phrase "as on other Bills" in the American version, according to petitioners, shows the intention of
the framers of our Constitution to restrict the Senate's power to propose amendments to revenue
bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate" and
"the words 'as in any other bills' (sic) were eliminated so as to show that these bills were not to be
like other bills but must be treated as a special kind."
The history of this provision does not support this contention. The supposed indicia of constitutional
intent are nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be
recalled that the 1935 Constitution originally provided for a unicameral National Assembly. When it
was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the
procedure for lawmaking by the Senate and the House of Representatives. The work of proposing
amendments to the Constitution was done by the National Assembly, acting as a constituent
assembly, some of whose members, jealous of preserving the Assembly's lawmaking powers,
sought to curtail the powers of the proposed Senate. Accordingly they proposed the following
provision:
All bills appropriating public funds, revenue or tariff bills, bills of local application, and
private bills shall originate exclusively in the Assembly, but the Senate may propose
or concur with amendments. In case of disapproval by the Senate of any such bills,
the Assembly may repass the same by a two-thirds vote of all its members, and
thereupon, the bill so repassed shall be deemed enacted and may be submitted to
the President for corresponding action. In the event that the Senate should fail to
finally act on any such bills, the Assembly may, after thirty days from the opening of
the next regular session of the same legislative term, reapprove the same with a vote
of two-thirds of all the members of the Assembly. And upon such reapproval, the bill
shall be deemed enacted and may be submitted to the President for corresponding
action.
The special committee on the revision of laws of the Second National Assembly vetoed the proposal.
It deleted everything after the first sentence. As rewritten, the proposal was approved by the National
Assembly and embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO,
KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was submitted to the
people and ratified by them in the elections held on June 18, 1940.
This is the history of Art. VI, 18 (2) of the 1935 Constitution, from which Art. VI, 24 of the present
Constitution was derived. It explains why the word "exclusively" was added to the American text from
which the framers of the Philippine Constitution borrowed and why the phrase "as on other Bills" was
not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments
must be understood to be full, plenary and complete "as on other Bills." Thus, because revenue bills
are required to originate exclusively in the House of Representatives, the Senate cannot enact
revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by
the House, however, the Senate certainly can pass its own version on the same subject matter. This
follows from the coequality of the two chambers of Congress.
That this is also the understanding of book authors of the scope of the Senate's power to concur is
clear from the following commentaries:
The power of the Senate to propose or concur with amendments is apparently
without restriction. It would seem that by virtue of this power, the Senate can
practically re-write a bill required to come from the House and leave only a trace of
the original bill. For example, a general revenue bill passed by the lower house of the

United States Congress contained provisions for the imposition of an inheritance tax .
This was changed by the Senate into a corporation tax. The amending authority of
the Senate was declared by the United States Supreme Court to be sufficiently broad
to enable it to make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107, 55
L. ed. 389].
(L. TAADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247
(1961))
The above-mentioned bills are supposed to be initiated by the House of
Representatives because it is more numerous in membership and therefore also
more representative of the people. Moreover, its members are presumed to be more
familiar with the needs of the country in regard to the enactment of the legislation
involved.
The Senate is, however, allowed much leeway in the exercise of its power to propose
or concur with amendments to the bills initiated by the House of Representatives.
Thus, in one case, a bill introduced in the U.S. House of Representatives was
changed by the Senate to make a proposed inheritance tax a corporation tax. It is
also accepted practice for the Senate to introduce what is known as an amendment
by substitution, which may entirely replace the bill initiated in the House of
Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).
In sum, while Art. VI, 24 provides that all appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and private bills must "originate exclusively in
the House of Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise of this power, the Senate may propose an entirely new bill as a
substitute measure. As petitioner Tolentino states in a high school text, a committee to which a bill is
referred may do any of the following:
(1) to endorse the bill without changes; (2) to make changes in the bill omitting or
adding sections or altering its language; (3) to make and endorse an entirely new bill
as a substitute, in which case it will be known as acommittee bill; or (4) to make no
report at all.
(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))
To except from this procedure the amendment of bills which are required to originate in the House
by prescribing that the number of the House bill and its other parts up to the enacting clause must be
preserved although the text of the Senate amendment may be incorporated in place of the original
body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing this form. S.
No. 1630, as a substitute measure, is therefore as much an amendment of H. No. 11197 as any
which the Senate could have made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that
S. No. 1630 is anindependent and distinct bill. Hence their repeated references to its certification
that it was passed by the Senate "insubstitution of S.B. No. 1129, taking into consideration P.S. Res.
No. 734 and H.B. No. 11197," implying that there is something substantially different between the
reference to S. No. 1129 and the reference to H. No. 11197. From this premise, they conclude that

R.A. No. 7716 originated both in the House and in the Senate and that it is the product of two "halfbaked bills because neither H. No. 11197 nor S. No. 1630 was passed by both houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere
amendments of the corresponding provisions of H. No. 11197. The very tabular comparison of the
provisions of H. No. 11197 and S. No. 1630 attached as Supplement A to the basic petition of
petitioner Tolentino, while showing differences between the two bills, at the same time indicates that
the provisions of the Senate bill were precisely intended to be amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was
a mere amendment of the House bill, H. No. 11197 in its original form did not have to pass the
Senate on second and three readings. It was enough that after it was passed on first reading it was
referred to the Senate Committee on Ways and Means. Neither was it required that S. No. 1630 be
passed by the House of Representatives before the two bills could be referred to the Conference
Committee.
There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When
the House bill and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank
deposits), were referred to a conference committee, the question was raised whether the two bills
could be the subject of such conference, considering that the bill from one house had not been
passed by the other and vice versa. As Congressman Duran put the question:
MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill
is passed by the House but not passed by the Senate, and a Senate bill of a similar
nature is passed in the Senate but never passed in the House, can the two bills be
the subject of a conference, and can a law be enacted from these two bills? I
understand that the Senate bill in this particular instance does not refer to
investments in government securities, whereas the bill in the House, which was
introduced by the Speaker, covers two subject matters: not only investigation of
deposits in banks but also investigation of investments in government securities.
Now, since the two bills differ in their subject matter, I believe that no law can be
enacted.
Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:
THE SPEAKER. The report of the conference committee is in order. It is precisely in
cases like this where a conference should be had. If the House bill had been
approved by the Senate, there would have been no need of a conference; but
precisely because the Senate passed another bill on the same subject matter, the
conference committee had to be created, and we are now considering the report of
that committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))
III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct
and unrelated measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that
because the President separately certified to the need for the immediate enactment of these
measures, his certification was ineffectual and void. The certification had to be made of the version
of the same revenue bill which at the moment was being considered. Otherwise, to follow petitioners'
theory, it would be necessary for the President to certify as many bills as are presented in a house of
Congress even though the bills are merely versions of the bill he has already certified. It is enough
that he certifies the bill which, at the time he makes the certification, is under consideration. Since on

March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be certified.
For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate
enactment because it was the one which at that time was being considered by the House. This bill
was later substituted, together with other bills, by H. No. 11197.
As to what Presidential certification can accomplish, we have already explained in the main decision
that the phrase "except when the President certifies to the necessity of its immediate enactment,
etc." in Art. VI, 26 (2) qualifies not only the requirement that "printed copies [of a bill] in its final form
[must be] distributed to the members three days before its passage" but also the requirement that
before a bill can become a law it must have passed "three readings on separate days." There is not
only textual support for such construction but historical basis as well.
Art. VI, 21 (2) of the 1935 Constitution originally provided:
(2) No bill shall be passed by either House unless it shall have been printed and
copies thereof in its final form furnished its Members at least three calendar days
prior to its passage, except when the President shall have certified to the necessity of
its immediate enactment. Upon the last reading of a bill, no amendment thereof shall
be allowed and the question upon its passage shall be taken immediately thereafter,
and theyeas and nays entered on the Journal.
When the 1973 Constitution was adopted, it was provided in Art. VIII, 19 (2):
(2) No bill shall become a law unless it has passed three readings on separate days,
and printed copies thereof in its final form have been distributed to the Members
three days before its passage, except when the Prime Minister certifies to the
necessity of its immediate enactment to meet a public calamity or emergency. Upon
the last reading of a bill, no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and the yeas and nays entered in the
Journal.
This provision of the 1973 document, with slight modification, was adopted in Art. VI, 26 (2) of the
present Constitution, thus:
(2) No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
The exception is based on the prudential consideration that if in all cases three readings on separate
days are required and a bill has to be printed in final form before it can be passed, the need for a law
may be rendered academic by the occurrence of the very emergency or public calamity which it is
meant to address.
Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a
country like the Philippines where budget deficit is a chronic condition. Even if this were the case, an
enormous budget deficit does not make the need for R.A. No. 7716 any less urgent or the situation
calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed
that there was an urgent need for consideration of S. No. 1630, because they responded to the call
of the President by voting on the bill on second and third readings on the same day. While the
judicial department is not bound by the Senate's acceptance of the President's certification, the
respect due coequal departments of the government in matters committed to them by the
Constitution and the absence of a clear showing of grave abuse of discretion caution a stay of the
judicial hand.
At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it
was discussed for six days. Only its distribution in advance in its final printed form was actually
dispensed with by holding the voting on second and third readings on the same day (March 24,
1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on second
reading and its approval on March 24, 1994 elapsed before it was finally voted on by the Senate on
third reading.
The purpose for which three readings on separate days is required is said to be two-fold: (1) to
inform the members of Congress of what they must vote on and (2) to give them notice that a
measure is progressing through the enacting process, thus enabling them and others interested in
the measure to prepare their positions with reference to it. (1 J. G. SUTHERLAND, STATUTES AND
STATUTORY CONSTRUCTION 10.04, p. 282 (1972)). These purposes were substantially
achieved in the case of R.A. No. 7716.
IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the
Movement of Attorneys for Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of
the constitutional policy of full public disclosure and the people's right to know (Art. II, 28 and Art.
III, 7) the Conference Committee met for two days in executive session with only the conferees
present.
As pointed out in our main decision, even in the United States it was customary to hold such
sessions with only the conferees and their staffs in attendance and it was only in 1975 when a new
rule was adopted requiring open sessions. Unlike its American counterpart, the Philippine Congress
has not adopted a rule prescribing open hearings for conference committees.
It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least
staff members were present. These were staff members of the Senators and Congressmen,
however, who may be presumed to be their confidential men, not stenographers as in this case who
on the last two days of the conference were excluded. There is no showing that the conferees
themselves did not take notes of their proceedings so as to give petitioner Kilosbayan basis for
claiming that even in secret diplomatic negotiations involving state interests, conferees keep notes of
their meetings. Above all, the public's right to know was fully served because the Conference
Committee in this case submitted a report showing the changes made on the differing versions of
the House and the Senate.
Petitioners cite the rules of both houses which provide that conference committee reports must
contain "a detailed, sufficiently explicit statement of the changes in or other amendments." These
changes are shown in the bill attached to the Conference Committee Report. The members of both
houses could thus ascertain what changes had been made in the original bills without the need of a
statement detailing the changes.
The same question now presented was raised when the bill which became R.A. No. 1400 (Land
Reform Act of 1955) was reported by the Conference Committee. Congressman Bengzon raised a
point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of
the conference committee regarding House Bill No. 2557 by reason of the provision
of Section 11, Article XII, of the Rules of this House which provides specifically that
the conference report must be accompanied by a detailed statement of the effects of
the amendment on the bill of the House. This conference committee report is not
accompanied by that detailed statement, Mr. Speaker. Therefore it is out of order to
consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection
with the point of order raised by the gentleman from Pangasinan.
There is no question about the provision of the Rule cited by the gentleman from
Pangasinan, but this provision applies to those cases where only portions of the bill
have been amended. In this case before us an entire bill is presented; therefore, it
can be easily seen from the reading of the bill what the provisions are. Besides, this
procedure has been an established practice.
After some interruption, he continued:
MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for
the provisions of the Rules, and the reason for the requirement in the provision cited
by the gentleman from Pangasinan is when there are only certain words or phrases
inserted in or deleted from the provisions of the bill included in the conference report,
and we cannot understand what those words and phrases mean and their relation to
the bill. In that case, it is necessary to make a detailed statement on how those
words and phrases will affect the bill as a whole; but when the entire bill itself is
copied verbatim in the conference report, that is not necessary. So when the reason
for the Rule does not exist, the Rule does not exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))
Congressman Tolentino was sustained by the chair. The record shows that when the ruling was
appealed, it was upheld by viva voce and when a division of the House was called, it was sustained
by a vote of 48 to 5. (Id.,
p. 4058)
Nor is there any doubt about the power of a conference committee to insert new provisions as long
as these are germane to the subject of the conference. As this Court held in Philippine Judges
Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then Justice Cruz, the
jurisdiction of the conference committee is not limited to resolving differences between the Senate
and the House. It may propose an entirely new provision. What is important is that its report is
subsequently approved by the respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been added by the conference committee,
there was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no
amendment thereto shall be allowed."
Applying these principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually became R.A.
No. 7354 and that copies thereof in its final formwere not distributed among the
members of each House. Both the enrolled bill and the legislative journals certify that

the measure was duly enacted i.e., in accordance with Article VI, Sec. 26 (2) of the
Constitution. We are bound by such official assurances from a coordinate
department of the government, to which we owe, at the very least, a becoming
courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference committees in the Philippines in a
1979 study:
Conference committees may be of two types: free or instructed. These committees
may be given instructions by their parent bodies or they may be left without
instructions. Normally the conference committees are without instructions, and this is
why they are often critically referred to as "the little legislatures." Once bills have
been sent to them, the conferees have almost unlimited authority to change the
clauses of the bills and in fact sometimes introduce new measures that were not in
the original legislation. No minutes are kept, and members' activities on conference
committees are difficult to determine. One congressman known for his idealism put it
this way: "I killed a bill on export incentives for my interest group [copra] in the
conference committee but I could not have done so anywhere else." The conference
committee submits a report to both houses, and usually it is accepted. If the report is
not accepted, then the committee is discharged and new members are appointed.
(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND
LEGISLATURES: A COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW,
eds.)).
In citing this study, we pass no judgment on the methods of conference committees. We cite it only
to say that conference committees here are no different from their counterparts in the United States
whose vast powers we noted in Philippine Judges Association v. Prado, supra. At all events, under
Art. VI, 16(3) each house has the power "to determine the rules of its proceedings," including those
of its committees. Any meaningful change in the method and procedures of Congress or its
committees must therefore be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, 26
(1) of the Constitution which provides that "Every bill passed by Congress shall embrace only one
subject which shall be expressed in the title thereof." PAL contends that the amendment of its
franchise by the withdrawal of its exemption from the VAT is not expressed in the title of the law.
Pursuant to 13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all
other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature, or
description, imposed, levied, established, assessed or collected by any municipal, city, provincial or
national authority or government agency, now or in the future."
PAL was exempted from the payment of the VAT along with other entities by 103 of the National
Internal Revenue Code, which provides as follows:
103. Exempt transactions. The following shall be exempt from the value-added
tax:
xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to
which the Philippines is a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending
103, as follows:
103. Exempt transactions. The following shall be exempt from the value-added
tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .
The amendment of 103 is expressed in the title of R.A. No. 7716 which reads:
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING
ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE
PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT)
SYSTEM [BY] WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR
THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER PURPOSES,"
Congress thereby clearly expresses its intention to amend any provision of the NIRC which stands in
the way of accomplishing the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific
reference to P.D. No. 1590. It is unnecessary to do this in order to comply with the constitutional
requirement, since it is already stated in the title that the law seeks to amend the pertinent provisions
of the NIRC, among which is 103(q), in order to widen the base of the VAT. Actually, it is the bill
which becomes a law that is required to express in its title the subject of legislation. The titles of H.
No. 11197 and S. No. 1630 in fact specifically referred to 103 of the NIRC as among the provisions
sought to be amended. We are satisfied that sufficient notice had been given of the pendency of
these bills in Congress before they were enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was
rejected. R.A. No. 7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION,
DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR
REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED THEREWITH. It
contained a provision repealing all franking privileges. It was contended that the withdrawal of
franking privileges was not expressed in the title of the law. In holding that there was sufficient
description of the subject of the law in its title, including the repeal of franking privileges, this Court
held:
To require every end and means necessary for the accomplishment of the general
objectives of the statute to be expressed in its title would not only be unreasonable
but would actually render legislation impossible. [Cooley, Constitutional Limitations,
8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its

title, but matter germane to the subject as expressed in the title, and
adopted to the accomplishment of the object in view, may properly be
included in the act. Thus, it is proper to create in the same act the
machinery by which the act is to be enforced, to prescribe the
penalties for its infraction, and to remove obstacles in the way of its
execution. If such matters are properly connected with the subject as
expressed in the title, it is unnecessary that they should also have
special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed.
725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the
press is not exempt from the taxing power of the State and that what the constitutional guarantee of
free press prohibits are laws which single out the press or target a group belonging to the press for
special treatment or which in any way discriminate against the press on the basis of the content of
the publication, and R.A. No. 7716 is none of these.
Now it is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate, it is
averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional."
With respect to the first contention, it would suffice to say that since the law granted the press a
privilege, the law could take back the privilege anytime without offense to the Constitution. The
reason is simple: by granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to
which other businesses have long ago been subject. It is thus different from the tax involved in the
cases invoked by the PPI. The license tax inGrosjean v. American Press Co., 297 U.S. 233, 80 L.
Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts
only of newspapers whose weekly circulation was over 20,000, with the result that the tax applied
only to 13 out of 124 publishers in Louisiana. These large papers were critical of Senator Huey Long
who controlled the state legislature which enacted the license tax. The censorial motivation for the
law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S.
575, 75 L. Ed. 2d 295 (1983), the tax was found to be discriminatory because although it could have
been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using, storing
or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes.
It was, however, later made to pay a special use tax on the cost of paper and ink which made these
items "the only items subject to the use tax that were component of goods to be sold at retail." The
U.S. Supreme Court held that the differential treatment of the press "suggests that the goal of
regulation is not related to suppression of expression, and such goal is presumptively
unconstitutional." It would therefore appear that even a law that favors the press is constitutionally
suspect. (See the dissent of Rehnquist, J. in that case)
Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely
and unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously
granted to PAL, petroleum concessionaires, enterprises registered with the Export Processing Zone

Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially
withdrawn, in an effort to broaden the base of the tax.
The PPI says that the discriminatory treatment of the press is highlighted by the fact that
transactions, which are profit oriented, continue to enjoy exemption under R.A. No. 7716. An
enumeration of some of these transactions will suffice to show that by and large this is not so and
that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are
granted, in some cases, to encourage agricultural production and, in other cases, for the personal
benefit of the end-user rather than for profit. The exempt transactions are:
(a) Goods for consumption or use which are in their original state (agricultural,
marine and forest products, cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services
to enhance agriculture (milling of palay, corn, sugar cane and raw sugar, livestock,
poultry feeds, fertilizer, ingredients used for the manufacture of feeds).
(b) Goods used for personal consumption or use (household and personal effects of
citizens returning to the Philippines) or for professional use, like professional
instruments and implements, by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for
manufacture of petroleum products subject to excise tax and services subject to
percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and
services rendered under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 5860)
The PPI asserts that it does not really matter that the law does not discriminate against the press
because "even nondiscriminatory taxation on constitutionally guaranteed freedom is
unconstitutional." PPI cites in support of this assertion the following statement in Murdock
v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):
The fact that the ordinance is "nondiscriminatory" is immaterial. The protection
afforded by the First Amendment is not so restricted. A license tax certainly does not
acquire constitutional validity because it classifies the privileges protected by the
First Amendment along with the wares and merchandise of hucksters and peddlers
and treats them all alike. Such equality in treatment does not save the ordinance.
Freedom of press, freedom of speech, freedom of religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for
regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the
exercise of its right. Hence, although its application to others, such those selling goods, is valid, its
application to the press or to religious groups, such as the Jehovah's Witnesses, in connection with
the latter's sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put
it, "it is one thing to impose a tax on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386
(1957) which invalidated a city ordinance requiring a business license fee on those engaged in the
sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by
the American Bible Society without restraining the free exercise of its right to propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege,
much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to burden the exercise of its right any more than
to make the press pay income tax or subject it to general regulation is not to violate its freedom
under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds
derived from the sales are used to subsidize the cost of printing copies which are given free to those
who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the
volume of sale. Granting that to be the case, the resulting burden on the exercise of religious
freedom is so incidental as to make it difficult to differentiate it from any other economic imposition
that might make the right to disseminate religious doctrines costly. Otherwise, to follow the
petitioner's argument, to increase the tax on the sale of vestments would be to lay an impermissible
burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by 107 of the NIRC, as amended by
7 of R.A. No. 7716, although fixed in amount, is really just to pay for the expenses of registration
and enforcement of provisions such as those relating to accounting in 108 of the NIRC. That the
PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the
payment of this fee because it also sells some copies. At any rate whether the PBS is liable for the
VAT must be decided in concrete cases, in the event it is assessed this tax by the Commissioner of
Internal Revenue.
VII. Alleged violations of the due process, equal protection and contract clauses and the rule on
taxation. CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies
transactions as covered or exempt without reasonable basis and (3) violates the rule that taxes
should be uniform and equitable and that Congress shall "evolve a progressive system of taxation."
With respect to the first contention, it is claimed that the application of the tax to existing contracts of
the sale of real property by installment or on deferred payment basis would result in substantial
increases in the monthly amortizations to be paid because of the 10% VAT. The additional amount, it
is pointed out, is something that the buyer did not anticipate at the time he entered into the contract.
The short answer to this is the one given by this Court in an early case: "Authorities from numerous
sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an
increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of
the Constitution. Even though such taxation may affect particular contracts, as it may increase the
debt of one person and lessen the security of another, or may impose additional burdens upon one

class and release the burdens of another, still the tax must be paid unless prohibited by the
Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal
sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not
only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22
SCRA 135, 147 (1968)) Contracts must be understood as having been made in reference to the
possible exercise of the rightful authority of the government and no obligation of contract can extend
to the defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).
It is next pointed out that while 4 of R.A. No. 7716 exempts such transactions as the sale of
agricultural products, food items, petroleum, and medical and veterinary services, it grants no
exemption on the sale of real property which is equally essential. The sale of real property for
socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate
transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise be
exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods
and services was already exempt under 103, pars. (b) (d) (1) of the NIRC before the enactment of
R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted exemption to these
transactions, while subjecting those of petitioner to the payment of the VAT. Moreover, there is a
difference between the "homeless poor" and the "homeless less poor" in the example given by
petitioner, because the second group or middle class can afford to rent houses in the meantime that
they cannot yet buy their own homes. The two social classes are thus differently situated in life. "It is
inherent in the power to tax that the State be free to select the subjects of taxation, and it has been
repeatedly held that 'inequalities which result from a singling out of one particular class for taxation,
or exemption infringe no constitutional limitation.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord,
City of Baguio v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984);
Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, 28(1)
which provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same
class be taxed at the same rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or
ordinance applies equally to all persons, forms and corporations placed in similar situation. (City of
Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A.
No. 7716 merely expands the base of the tax. The validity of the original VAT Law was questioned
in Kapatiran ng Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on
grounds similar to those made in these cases, namely, that the law was "oppressive, discriminatory,
unjust and regressive in violation of Art. VI, 28(1) of the Constitution." (At 382) Rejecting the
challenge to the law, this Court held:
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform.
...
The sales tax adopted in EO 273 is applied similarly on all goods and services sold
to the public, which are not exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or
services by persons engaged in business with an aggregate gross annual sales
exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from
its application. Likewise exempt from the tax are sales of farm and marine products,
so that the costs of basic food and other necessities, spared as they are from the
incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of
the Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the
mandate of Congress to provide for a progressive system of taxation because the law imposes a flat
rate of 10% and thus places the tax burden on all taxpayers without regard to their ability to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation."
The constitutional provision has been interpreted to mean simply that "direct taxes are . . . to be
preferred [and] as much as possible, indirect taxes should be minimized." (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress
is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps
are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII,
17(1) of the 1973 Constitution from which the present Art. VI, 28(1) was taken. Sales taxes are
also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the
case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero
rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the NIRC), while
granting exemptions to other transactions. (R.A. No. 7716, 4, amending 103 of the NIRC).
Thus, the following transactions involving basic and essential goods and services are exempted from
the VAT:
(a) Goods for consumption or use which are in their original state (agricultural,
marine and forest products, cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services
to enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock,
poultry feeds, fertilizer, ingredients used for the manufacture of feeds).
(b) Goods used for personal consumption or use (household and personal effects of
citizens returning to the Philippines) and or professional use, like professional
instruments and implements, by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for
manufacture of petroleum products subject to excise tax and services subject to
percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and
services rendered under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 5860)
On the other hand, the transactions which are subject to the VAT are those which involve goods and
services which are used or availed of mainly by higher income groups. These include real properties
held primarily for sale to customers or for lease in the ordinary course of trade or business, the right
or privilege to use patent, copyright, and other similar property or right, the right or privilege to use
industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio, television,
satellite transmission and cable television time, hotels, restaurants and similar places, securities,
lending investments, taxicabs, utility cars for rent, tourist buses, and other common carriers, services
of franchise grantees of telephone and telegraph.
The problem with CREBA's petition is that it presents broad claims of constitutional violations by
tendering issues not at retail but at wholesale and in the abstract. There is no fully developed record
which can impart to adjudication the impact of actuality. There is no factual foundation to show in
the concrete the application of the law to actual contracts and exemplify its effect on property rights.
For the fact is that petitioner's members have not even been assessed the VAT. Petitioner's case is
not made concrete by a series of hypothetical questions asked which are no different from those
dealt with in advisory opinions.
The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere
allegation, as here, does not suffice. There must be a factual foundation of such
unconstitutional taint. Considering that petitioner here would condemn such a
provision as void on its face, he has not made out a case. This is merely to adhere to
the authoritative doctrine that where the due process and equal protection clauses
are invoked, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.
(Sison, Jr. v. Ancheta, 130 SCRA at 661)
Adjudication of these broad claims must await the development of a concrete case. It may be that
postponement of adjudication would result in a multiplicity of suits. This need not be the case,
however. Enforcement of the law may give rise to such a case. A test case, provided it is an actual
case and not an abstract or hypothetical one, may thus be presented.
Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues.
Otherwise, adjudication would be no different from the giving of advisory opinion that does not really
settle legal issues.
We are told that it is our duty under Art. VIII, 1, 2 to decide whenever a claim is made that "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." This duty can only arise if an actual case or
controversy is before us. Under Art . VIII, 5 our jurisdiction is defined in terms of "cases" and all that
Art. VIII, 1, 2 can plausibly mean is that in the exercise of that jurisdiction we have the judicial

power to determine questions of grave abuse of discretion by any branch or instrumentality of the
government.
Put in another way, what is granted in Art. VIII, 1, 2 is "judicial power," which is "the power of a
court to hear and decide cases pending between parties who have the right to sue and be sued in
the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from
legislative and executive power. This power cannot be directly appropriated until it is apportioned
among several courts either by the Constitution, as in the case of Art. VIII, 5, or by statute, as in the
case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980 (B.P.
Blg. 129). The power thus apportioned constitutes the court's "jurisdiction," defined as "the power
conferred by law upon a court or judge to take cognizance of a case, to the exclusion of all others."
(United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this
Court cannot inquire into any allegation of grave abuse of discretion by the other departments of the
government.
VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of
the Philippines (CUP), after briefly surveying the course of legislation, argues that it was to adopt a
definite policy of granting tax exemption to cooperatives that the present Constitution embodies
provisions on cooperatives. To subject cooperatives to the VAT would therefore be to infringe a
constitutional policy. Petitioner claims that in 1973, P.D. No. 175 was promulgated exempting
cooperatives from the payment of income taxes and sales taxes but in 1984, because of the crisis
which menaced the national economy, this exemption was withdrawn by P.D. No. 1955; that in 1986,
P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December
31, 1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the
framers of the Constitution "repudiated the previous actions of the government adverse to the
interests of the cooperatives, that is, the repeated revocation of the tax exemption to
cooperatives and instead upheld the policy of strengthening the cooperatives by way of the grant of
tax exemptions," by providing the following in Art. XII:
1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country
shall be given optimum opportunity to develop. Private enterprises, including
corporations, cooperatives, and similar collective organizations, shall be encouraged
to broaden the base of their ownership.
15. The Congress shall create an agency to promote the viability and growth of
cooperatives as instruments for social justice and economic development.
Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out
cooperatives by withdrawing their exemption from income and sales taxes under P.D. No. 175, 5.
What P.D. No. 1955, 1 did was to withdraw the exemptions and preferential treatments theretofore

granted to private business enterprises in general, in view of the economic crisis which then beset
the nation. It is true that after P.D. No. 2008, 2 had restored the tax exemptions of cooperatives in
1986, the exemption was again repealed by E.O. No. 93, 1, but then again cooperatives were not
the only ones whose exemptions were withdrawn. The withdrawal of tax incentives applied to all,
including government and private entities. In the second place, the Constitution does not really
require that cooperatives be granted tax exemptions in order to promote their growth and viability.
Hence, there is no basis for petitioner's assertion that the government's policy toward cooperatives
had been one of vacillation, as far as the grant of tax privileges was concerned, and that it was to put
an end to this indecision that the constitutional provisions cited were adopted. Perhaps as a matter
of policy cooperatives should be granted tax exemptions, but that is left to the discretion of
Congress. If Congress does not grant exemption and there is no discrimination to cooperatives, no
violation of any constitutional policy can be charged.
Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt
from taxation. Such theory is contrary to the Constitution under which only the following are exempt
from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, 28 (3), and
non-stock, non-profit educational institutions by reason of Art. XIV, 4 (3).
CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the
equal protection of the law because electric cooperatives are exempted from the VAT. The
classification between electric and other cooperatives (farmers cooperatives, producers
cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that
there is greater need to provide cheaper electric power to as many people as possible, especially
those living in the rural areas, than there is to provide them with other necessities in life. We cannot
say that such classification is unreasonable.
We have carefully read the various arguments raised against the constitutional validity of R.A. No.
7716. We have in fact taken the extraordinary step of enjoining its enforcement pending resolution of
these cases. We have now come to the conclusion that the law suffers from none of the infirmities
attributed to it by petitioners and that its enactment by the other branches of the government does
not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency
must be addressed to Congress as the body which is electorally responsible, remembering that, as
Justice Holmes has said, "legislators are the ultimate guardians of the liberties and welfare of the
people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194
U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in
arguing that we should enforce the public accountability of legislators, that those who took part in
passing the law in question by voting for it in Congress should later thrust to the courts the burden of
reviewing measures in the flush of enactment. This Court does not sit as a third branch of the
legislature, much less exercise a veto power over legislation.
WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining
order previously issued is hereby lifted.
SO ORDERED.
Narvasa, C.J., Feliciano, Melo, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.
Padilla and Vitug, JJ., maintained their separate opinion.
Regalado, Davide, Jr., Romero, Bellosillo and Puno, JJ, maintained their dissenting opinion.
Panganiban, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-66006 February 28, 1985

BAGONG FILIPINAS OVERSEAS CORPORATION and GOLDEN STAR SHIPPING,
LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION, DIRECTOR PATRICIA SANTO TOMAS and PROSERFINA
PANCHO respondents.
Elizer A. Odulios for petitioners.
Pedro L. Linsangan for respondent P. Pancho.

AQUINO, J.:
The issue in this case is whether the shipboard employment contract or Hongkong law should
govern the amount of death compensation due to the wife of Guillermo Pancho who was employed
by Golden Star Shipping, Ltd., a Hongkong based firm.
The shipboard employment contract dated June 1, 1978 was executed in this country between
Pancho and Bagong Filipinas Overseas Corporation, the local agent of Golden Star Shipping. It was
approved by the defunct National Seamen Board. Pancho was hired as an oiler in the M/V
Olivine for 12 months with a gross monthly wage of US $195.
In October, 1978, he had a cerebral stroke. He was rushed to the hospital while the vessel was
docked at Gothenberg, Sweden. He was repatriated to the Philippines and confined at the San Juan
de Dios Hospital. He died on December 13, 1979.
The National Seamen Board awarded his widow, Proserfina, P20,000 as disability compensation
benefits pursuant to the above-mentioned employment contract plus P2,000 as attorney's fees.
Proserfina appealed to the National Labor Relations Commission which awarded her $621 times 36
months or its equivalent in Philippine currency plus 10% of the benefits as attorney's fees. Golden
Star Shipping assailed that decision by certiorari.
We hold that the shipboard employment contract is controlling in this case. The contract provides
that the beneficiaries of the seaman are entitled to P20,000 "over and above the benefits" for which
the Philippine Government is liable under Philippine law.
Hongkong law on workmen's compensation is not the applicable law. The case of Norse
Management Co. vs. National Seamen Board, G. R. No. 54204, September 30, 1982, 117 SCRA
486 cannot be a precedent because it was expressly stipulated in the employment contract in that
case that the workmen's compensation payable to the employee should be in accordance with

Philippine Law or the Workmen's Insurance Law of the country where the vessel is registered
"whichever is greater".
The Solicitor General opines that the employment contract should be applied. For that reason, he
refused to uphold the decision of the NLRC.
WHEREFORE, the judgment of the National Labor Relations Commission is reversed and set aside.
The decision of the National Seamen Board dated February 26, 1981 is affirmed. No costs.
SO ORDERED.
Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.
Makasiar, J., I reserve my vote.

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