G.R. No.

101083 July 30, 1993

and granting the plaintiffs ". . . such other reliefs just and equitable under the
premises." 5

OPOSA vs. FACTORAN

DAVIDE, JR., J.:
In a broader sense, this petition bears upon the right of Filipinos to a balanced
and healthful ecology which the petitioners dramatically associate with the
twin concepts of "inter-generational responsibility" and "inter-generational
justice." Specifically, it touches on the issue of whether the said petitioners
have a cause of action to "prevent the misappropriation or impairment" of
Philippine rainforests and "arrest the unabated hemorrhage of the country's
vital life support systems and continued rape of Mother Earth."
The controversy has its genesis in Civil Case No. 90-77 which was filed before
Branch 66 (Makati, Metro Manila) of the Regional Trial Court (RTC), National
Capital Judicial Region. The principal plaintiffs therein, now the principal
petitioners, are all minors duly represented and joined by their respective
parents. Impleaded as an additional plaintiff is the Philippine Ecological
Network, Inc. (PENI), a domestic, non-stock and non-profit corporation
organized for the purpose of, inter alia, engaging in concerted action geared
for the protection of our environment and natural resources. The original
defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary of the
Department of Environment and Natural Resources (DENR). His substitution in
this petition by the new Secretary, the Honorable Angel C. Alcala, was
subsequently ordered upon proper motion by the petitioners. 1 The complaint 2
was instituted as a taxpayers' class suit 3 and alleges that the plaintiffs "are all
citizens of the Republic of the Philippines, taxpayers, and entitled to the full
benefit, use and enjoyment of the natural resource treasure that is the
country's virgin tropical forests." The same was filed for themselves and others
who are equally concerned about the preservation of said resource but are "so
numerous that it is impracticable to bring them all before the Court." The
minors further asseverate that they "represent their generation as well as
generations yet unborn." 4 Consequently, it is prayed for that judgment be
rendered:
. . . ordering defendant, his agents, representatives and other
persons acting in his behalf to
(1) Cancel all existing timber license agreements in the
country;
(2) Cease and desist from receiving, accepting, processing,
renewing or approving new timber license agreements.

The complaint starts off with the general averments that the Philippine
archipelago of 7,100 islands has a land area of thirty million (30,000,000)
hectares and is endowed with rich, lush and verdant rainforests in which
varied, rare and unique species of flora and fauna may be found; these
rainforests contain a genetic, biological and chemical pool which is
irreplaceable; they are also the habitat of indigenous Philippine cultures which
have existed, endured and flourished since time immemorial; scientific
evidence reveals that in order to maintain a balanced and healthful ecology,
the country's land area should be utilized on the basis of a ratio of fifty-four
per cent (54%) for forest cover and forty-six per cent (46%) for agricultural,
residential, industrial, commercial and other uses; the distortion and
disturbance of this balance as a consequence of deforestation have resulted in
a host of environmental tragedies, such as (a) water shortages resulting from
drying up of the water table, otherwise known as the "aquifer," as well as of
rivers, brooks and streams, (b) salinization of the water table as a result of the
intrusion therein of salt water, incontrovertible examples of which may be
found in the island of Cebu and the Municipality of Bacoor, Cavite, (c) massive
erosion and the consequential loss of soil fertility and agricultural productivity,
with the volume of soil eroded estimated at one billion (1,000,000,000) cubic
meters per annum approximately the size of the entire island of
Catanduanes, (d) the endangering and extinction of the country's unique, rare
and varied flora and fauna, (e) the disturbance and dislocation of cultural
communities, including the disappearance of the Filipino's indigenous cultures,
(f) the siltation of rivers and seabeds and consequential destruction of corals
and other aquatic life leading to a critical reduction in marine resource
productivity, (g) recurrent spells of drought as is presently experienced by the
entire country, (h) increasing velocity of typhoon winds which result from the
absence of windbreakers, (i) the floodings of lowlands and agricultural plains
arising from the absence of the absorbent mechanism of forests, (j) the
siltation and shortening of the lifespan of multi-billion peso dams constructed
and operated for the purpose of supplying water for domestic uses, irrigation
and the generation of electric power, and (k) the reduction of the earth's
capacity to process carbon dioxide gases which has led to perplexing and
catastrophic climatic changes such as the phenomenon of global warming,
otherwise known as the "greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of
continued and deforestation are so capable of unquestionable demonstration
that the same may be submitted as a matter of judicial notice. This
notwithstanding, they expressed their intention to present expert witnesses as
well as documentary, photographic and film evidence in the course of the trial.
As their cause of action, they specifically allege that:

CAUSE OF ACTION
7. Plaintiffs replead by reference the foregoing allegations.

This act of defendant constitutes a misappropriation and/or

impairment of the natural resource property he holds in trust
for the benefit of plaintiff minors and succeeding generations.

8. Twenty-five (25) years ago, the Philippines had some

sixteen (16) million hectares of rainforests constituting roughly
53% of the country's land mass.

15. Plaintiffs have a clear and constitutional right to a

balanced and healthful ecology and are entitled to protection
by the State in its capacity as the parens patriae.

9. Satellite images taken in 1987 reveal that there remained

no more than 1.2 million hectares of said rainforests or four
per cent (4.0%) of the country's land area.

16. Plaintiff have exhausted all administrative remedies with

the defendant's office. On March 2, 1990, plaintiffs served
upon defendant a final demand to cancel all logging permits in
the country.

10. More recent surveys reveal that a mere 850,000 hectares

of virgin old-growth rainforests are left, barely 2.8% of the
entire land mass of the Philippine archipelago and about 3.0
million hectares of immature and uneconomical secondary
growth forests.
11. Public records reveal that the defendant's, predecessors
have granted timber license agreements ('TLA's') to various
corporations to cut the aggregate area of 3.89 million hectares
for commercial logging purposes.
A copy of the TLA holders and the corresponding areas covered
is hereto attached as Annex "A".
12. At the present rate of deforestation, i.e. about 200,000
hectares per annum or 25 hectares per hour nighttime,
Saturdays, Sundays and holidays included the Philippines
will be bereft of forest resources after the end of this ensuing
decade, if not earlier.
13. The adverse effects, disastrous consequences, serious
injury and irreparable damage of this continued trend of
deforestation to the plaintiff minor's generation and to
generations yet unborn are evident and incontrovertible. As a
matter of fact, the environmental damages enumerated in
paragraph 6 hereof are already being felt, experienced and
suffered by the generation of plaintiff adults.
14. The continued allowance by defendant of TLA holders to
cut and deforest the remaining forest stands will work great
damage and irreparable injury to plaintiffs especially
plaintiff minors and their successors who may never see,
use, benefit from and enjoy this rare and unique natural
resource treasure.

A copy of the plaintiffs' letter dated March 1, 1990 is hereto

attached as Annex "B".
17. Defendant, however, fails and refuses to cancel the
existing TLA's to the continuing serious damage and extreme
prejudice of plaintiffs.
18. The continued failure and refusal by defendant to cancel
the TLA's is an act violative of the rights of plaintiffs,
especially plaintiff minors who may be left with a country that
is desertified (sic), bare, barren and devoid of the wonderful
flora, fauna and indigenous cultures which the Philippines had
been abundantly blessed with.
19. Defendant's refusal to cancel the aforementioned TLA's is
manifestly contrary to the public policy enunciated in the
Philippine Environmental Policy which, in pertinent part,
states that it is the policy of the State
(a) to create, develop, maintain and improve conditions under
which man and nature can thrive in productive and enjoyable
harmony with each other;
(b) to fulfill the social, economic and other requirements of
present and future generations of Filipinos and;
(c) to ensure the attainment of an environmental quality that
is conductive to a life of dignity and well-being. (P.D. 1151, 6
June 1977)
20. Furthermore, defendant's continued refusal to cancel the
aforementioned TLA's is contradictory to the Constitutional
policy of the State to

a. effect "a more equitable distribution of opportunities,

income and wealth" and "make full and efficient use of natural
resources (sic)." (Section 1, Article XII of the Constitution);

On 14 May 1992, We resolved to give due course to the petition and required
the parties to submit their respective Memoranda after the Office of the
Solicitor General (OSG) filed a Comment in behalf of the respondents and the
petitioners filed a reply thereto.

b. "protect the nation's marine wealth." (Section 2, ibid);

c. "conserve and promote the nation's cultural heritage and
resources (sic)" (Section 14, Article XIV, id.);
d. "protect and advance the right of the people to a balanced
and healthful ecology in accord with the rhythm and harmony
of nature." (Section 16, Article II, id.)
21. Finally, defendant's act is contrary to the highest law of
humankind the natural law and violative of plaintiffs' right
to self-preservation and perpetuation.
22. There is no other plain, speedy and adequate remedy in
law other than the instant action to arrest the unabated
hemorrhage of the country's vital life support systems and
continued rape of Mother Earth. 6
On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a
Motion to Dismiss the complaint based on two (2) grounds, namely: (1) the
plaintiffs have no cause of action against him and (2) the issue raised by the
plaintiffs is a political question which properly pertains to the legislative or
executive branches of Government. In their 12 July 1990 Opposition to the
Motion, the petitioners maintain that (1) the complaint shows a clear and
unmistakable cause of action, (2) the motion is dilatory and (3) the action
presents a justiciable question as it involves the defendant's abuse of
discretion.
On 18 July 1991, respondent Judge issued an order granting the
aforementioned motion to dismiss. 7 In the said order, not only was the
defendant's claim that the complaint states no cause of action against him
and that it raises a political question sustained, the respondent Judge further
ruled that the granting of the relief prayed for would result in the impairment
of contracts which is prohibited by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule 65
of the Revised Rules of Court and ask this Court to rescind and set aside the
dismissal order on the ground that the respondent Judge gravely abused his
discretion in dismissing the action. Again, the parents of the plaintiffs-minors
not only represent their children, but have also joined the latter in this case. 8

Petitioners contend that the complaint clearly and unmistakably states a cause
of action as it contains sufficient allegations concerning their right to a sound
environment based on Articles 19, 20 and 21 of the Civil Code (Human
Relations), Section 4 of Executive Order (E.O.) No. 192 creating the DENR,
Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental
Policy), Section 16, Article II of the 1987 Constitution recognizing the right of
the people to a balanced and healthful ecology, the concept of generational
genocide in Criminal Law and the concept of man's inalienable right to selfpreservation and self-perpetuation embodied in natural law. Petitioners
likewise rely on the respondent's correlative obligation per Section 4 of E.O.
No. 192, to safeguard the people's right to a healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave
abuse of discretion in granting Timber License Agreements (TLAs) to cover
more areas for logging than what is available involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's nonimpairment clause, petitioners maintain that the same does not apply in this
case because TLAs are not contracts. They likewise submit that even if TLAs
may be considered protected by the said clause, it is well settled that they
may still be revoked by the State when the public interest so requires.
On the other hand, the respondents aver that the petitioners failed to allege in
their complaint a specific legal right violated by the respondent Secretary for
which any relief is provided by law. They see nothing in the complaint but
vague and nebulous allegations concerning an "environmental right" which
supposedly entitles the petitioners to the "protection by the state in its
capacity as parens patriae." Such allegations, according to them, do not reveal
a valid cause of action. They then reiterate the theory that the question of
whether logging should be permitted in the country is a political question
which should be properly addressed to the executive or legislative branches of
Government. They therefore assert that the petitioners' resources is not to file
an action to court, but to lobby before Congress for the passage of a bill that
would ban logging totally.
As to the matter of the cancellation of the TLAs, respondents submit that the
same cannot be done by the State without due process of law. Once issued, a
TLA remains effective for a certain period of time usually for twenty-five
(25) years. During its effectivity, the same can neither be revised nor cancelled
unless the holder has been found, after due notice and hearing, to have
violated the terms of the agreement or other forestry laws and regulations.

Petitioners' proposition to have all the TLAs indiscriminately cancelled without

the requisite hearing would be violative of the requirements of due process.
Before going any further, We must first focus on some procedural matters.
Petitioners instituted Civil Case No. 90-777 as a class suit. The original
defendant and the present respondents did not take issue with this matter.
Nevertheless, We hereby rule that the said civil case is indeed a class suit. The
subject matter of the complaint is of common and general interest not just to
several, but to all citizens of the Philippines. Consequently, since the parties
are so numerous, it, becomes impracticable, if not totally impossible, to bring
all of them before the court. We likewise declare that the plaintiffs therein are
numerous and representative enough to ensure the full protection of all
concerned interests. Hence, all the requisites for the filing of a valid class suit
under Section 12, Rule 3 of the Revised Rules of Court are present both in the
said civil case and in the instant petition, the latter being but an incident to
the former.
This case, however, has a special and novel element. Petitioners minors assert
that they represent their generation as well as generations yet unborn. We find
no difficulty in ruling that they can, for themselves, for others of their
generation and for the succeeding generations, file a class suit. Their
personality to sue in behalf of the succeeding generations can only be based on
the concept of intergenerational responsibility insofar as the right to a
balanced and healthful ecology is concerned. Such a right, as hereinafter
expounded, considers
the "rhythm and harmony of nature." Nature means the created world in its
entirety. 9 Such rhythm and harmony indispensably include, inter alia, the
judicious disposition, utilization, management, renewal and conservation of
the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas
and other natural resources to the end that their exploration, development and
utilization be equitably accessible to the present as well as future generations.
10
Needless to say, every generation has a responsibility to the next to preserve
that rhythm and harmony for the full enjoyment of a balanced and healthful
ecology. Put a little differently, the minors' assertion of their right to a sound
environment constitutes, at the same time, the performance of their obligation
to ensure the protection of that right for the generations to come.
The locus standi of the petitioners having thus been addressed, We shall now
proceed to the merits of the petition.
After a careful perusal of the complaint in question and a meticulous
consideration and evaluation of the issues raised and arguments adduced by
the parties, We do not hesitate to find for the petitioners and rule against the
respondent Judge's challenged order for having been issued with grave abuse of
discretion amounting to lack of jurisdiction. The pertinent portions of the said
order reads as follows:

xxx xxx xxx

After a careful and circumspect evaluation of the Complaint,
the Court cannot help but agree with the defendant. For
although we believe that plaintiffs have but the noblest of all
intentions, it (sic) fell short of alleging, with sufficient
definiteness, a specific legal right they are seeking to enforce
and protect, or a specific legal wrong they are seeking to
prevent and redress (Sec. 1, Rule 2, RRC). Furthermore, the
Court notes that the Complaint is replete with vague
assumptions and vague conclusions based on unverified data.
In fine, plaintiffs fail to state a cause of action in its
Complaint against the herein defendant.
Furthermore, the Court firmly believes that the matter before
it, being impressed with political color and involving a matter
of public policy, may not be taken cognizance of by this Court
without doing violence to the sacred principle of "Separation
of Powers" of the three (3) co-equal branches of the
Government.
The Court is likewise of the impression that it cannot, no
matter how we stretch our jurisdiction, grant the reliefs
prayed for by the plaintiffs, i.e., to cancel all existing timber
license agreements in the country and to cease and desist
from receiving, accepting, processing, renewing or approving
new timber license agreements. For to do otherwise would
amount to "impairment of contracts" abhored (sic) by the
fundamental law. 11
We do not agree with the trial court's conclusions that the plaintiffs failed to
allege with sufficient definiteness a specific legal right involved or a specific
legal wrong committed, and that the complaint is replete with vague
assumptions and conclusions based on unverified data. A reading of the
complaint itself belies these conclusions.
The complaint focuses on one specific fundamental legal right the right to a
balanced and healthful ecology which, for the first time in our nation's
constitutional history, is solemnly incorporated in the fundamental law. Section
16, Article II of the 1987 Constitution explicitly provides:
Sec. 16. The State shall protect and advance the right of the
people to a balanced and healthful ecology in accord with the
rhythm and harmony of nature.
This right unites with the right to health which is provided for
in the preceding section of the same article:

Sec. 15. The State shall protect and promote the right to
health of the people and instill health consciousness among
them.
While the right to a balanced and healthful ecology is to be found under the
Declaration of Principles and State Policies and not under the Bill of Rights, it
does not follow that it is less important than any of the civil and political rights
enumerated in the latter. Such a right belongs to a different category of rights
altogether for it concerns nothing less than self-preservation and selfperpetuation aptly and fittingly stressed by the petitioners the
advancement of which may even be said to predate all governments and
constitutions. As a matter of fact, these basic rights need not even be written
in the Constitution for they are assumed to exist from the inception of
humankind. If they are now explicitly mentioned in the fundamental charter, it
is because of the well-founded fear of its framers that unless the rights to a
balanced and healthful ecology and to health are mandated as state policies by
the Constitution itself, thereby highlighting their continuing importance and
imposing upon the state a solemn obligation to preserve the first and protect
and advance the second, the day would not be too far when all else would be
lost not only for the present generation, but also for those to come
generations which stand to inherit nothing but parched earth incapable of
sustaining life.
The right to a balanced and healthful ecology carries with it the correlative
duty to refrain from impairing the environment. During the debates on this
right in one of the plenary sessions of the 1986 Constitutional Commission, the
following exchange transpired between Commissioner Wilfrido Villacorta and
Commissioner Adolfo Azcuna who sponsored the section in question:
MR. VILLACORTA:
Does this section mandate the State to
provide sanctions against all forms of
pollution air, water and noise pollution?
MR. AZCUNA:
Yes, Madam President. The right to healthful
(sic) environment necessarily carries with it
the correlative duty of not impairing the
same and, therefore, sanctions may be
provided for impairment of environmental
balance. 12
The said right implies, among many other things, the judicious management
and conservation of the country's forests.

Without such forests, the ecological or environmental balance would

be irreversiby disrupted.
Conformably with the enunciated right to a balanced and healthful ecology and
the right to health, as well as the other related provisions of the Constitution
concerning the conservation, development and utilization of the country's
natural resources, 13 then President Corazon C. Aquino promulgated on 10 June
1987 E.O. No. 192, 14 Section 4 of which expressly mandates that the
Department of Environment and Natural Resources "shall be the primary
government agency responsible for the conservation, management,
development and proper use of the country's environment and natural
resources, specifically forest and grazing lands, mineral, resources, including
those in reservation and watershed areas, and lands of the public domain, as
well as the licensing and regulation of all natural resources as may be provided
for by law in order to ensure equitable sharing of the benefits derived
therefrom for the welfare of the present and future generations of Filipinos."
Section 3 thereof makes the following statement of policy:
Sec. 3. Declaration of Policy. It is hereby declared the
policy of the State to ensure the sustainable use,
development, management, renewal, and conservation of the
country's forest, mineral, land, off-shore areas and other
natural resources, including the protection and enhancement
of the quality of the environment, and equitable access of the
different segments of the population to the development and
the use of the country's natural resources, not only for the
present generation but for future generations as well. It is also
the policy of the state to recognize and apply a true value
system including social and environmental cost implications
relative to their utilization, development and conservation of
our natural resources.
This policy declaration is substantially re-stated it Title XIV, Book IV of the
Administrative Code of 1987, 15 specifically in Section 1 thereof which reads:
Sec. 1. Declaration of Policy. (1) The State shall ensure, for
the benefit of the Filipino people, the full exploration and
development as well as the judicious disposition, utilization,
management, renewal and conservation of the country's
forest, mineral, land, waters, fisheries, wildlife, off-shore
areas and other natural resources, consistent with the
necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment and
the objective of making the exploration, development and
utilization of such natural resources equitably accessible to
the different segments of the present as well as future
generations.

(2) The State shall likewise recognize and apply a true value
system that takes into account social and environmental cost
implications relative to the utilization, development and
conservation of our natural resources.
The above provision stresses "the necessity of maintaining a sound ecological
balance and protecting and enhancing the quality of the environment." Section
2 of the same Title, on the other hand, specifically speaks of the mandate of
the DENR; however, it makes particular reference to the fact of the agency's
being subject to law and higher authority. Said section provides:
Sec. 2. Mandate. (1) The Department of Environment and
Natural Resources shall be primarily responsible for the
implementation of the foregoing policy.
(2) It shall, subject to law and higher authority, be in charge
of carrying out the State's constitutional mandate to control
and supervise the exploration, development, utilization, and
conservation of the country's natural resources.
Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives
which will serve as the bases for policy formulation, and have defined the
powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987
Constitution, specific statutes already paid special attention to the
"environmental right" of the present and future generations. On 6 June 1977,
P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine
Environment Code) were issued. The former "declared a continuing policy of
the State (a) to create, develop, maintain and improve conditions under which
man and nature can thrive in productive and enjoyable harmony with each
other, (b) to fulfill the social, economic and other requirements of present and
future generations of Filipinos, and (c) to insure the attainment of an
environmental quality that is conducive to a life of dignity and well-being." 16
As its goal, it speaks of the "responsibilities of each generation as trustee and
guardian of the environment for succeeding generations." 17 The latter statute,
on the other hand, gave flesh to the said policy.
Thus, the right of the petitioners (and all those they represent) to a balanced
and healthful ecology is as clear as the DENR's duty under its mandate and by
virtue of its powers and functions under E.O. No. 192 and the Administrative
Code of 1987 to protect and advance the said right.
A denial or violation of that right by the other who has the corelative duty or
obligation to respect or protect the same gives rise to a cause of action.
Petitioners maintain that the granting of the TLAs, which they claim was done
with grave abuse of discretion, violated their right to a balanced and healthful

ecology; hence, the full protection thereof requires that no further TLAs should
be renewed or granted.
A cause of action is defined as:
. . . an act or omission of one party in violation of the legal
right or rights of the other; and its essential elements are
legal right of the plaintiff, correlative obligation of the
defendant, and act or omission of the defendant in violation of
said legal right. 18
It is settled in this jurisdiction that in a motion to dismiss based on the ground
that the complaint fails to state a cause of action, 19 the question submitted to
the court for resolution involves the sufficiency of the facts alleged in the
complaint itself. No other matter should be considered; furthermore, the truth
of falsity of the said allegations is beside the point for the truth thereof is
deemed hypothetically admitted. The only issue to be resolved in such a case
is: admitting such alleged facts to be true, may the court render a valid
judgment in accordance with the prayer in the complaint? 20 In Militante vs.
Edrosolano, 21 this Court laid down the rule that the judiciary should "exercise
the utmost care and circumspection in passing upon a motion to dismiss on the
ground of the absence thereof [cause of action] lest, by its failure to manifest
a correct appreciation of the facts alleged and deemed hypothetically
admitted, what the law grants or recognizes is effectively nullified. If that
happens, there is a blot on the legal order. The law itself stands in disrepute."
After careful examination of the petitioners' complaint, We find the statements
under the introductory affirmative allegations, as well as the specific
averments under the sub-heading CAUSE OF ACTION, to be adequate enough to
show, prima facie, the claimed violation of their rights. On the basis thereof,
they may thus be granted, wholly or partly, the reliefs prayed for. It bears
stressing, however, that insofar as the cancellation of the TLAs is concerned,
there is the need to implead, as party defendants, the grantees thereof for
they are indispensable parties.
The foregoing considered, Civil Case No. 90-777 be said to raise a political
question. Policy formulation or determination by the executive or legislative
branches of Government is not squarely put in issue. What is principally
involved is the enforcement of a right vis-a-vis policies already formulated and
expressed in legislation. It must, nonetheless, be emphasized that the political
question doctrine is no longer, the insurmountable obstacle to the exercise of
judicial power or the impenetrable shield that protects executive and
legislative actions from judicial inquiry or review. The second paragraph of
section 1, Article VIII of the Constitution states that:
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally

demandable and enforceable, and to determine whether or

not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Commenting on this provision in his book, Philippine Political Law, 22 Mr.
Justice Isagani A. Cruz, a distinguished member of this Court, says:
The first part of the authority represents the traditional
concept of judicial power, involving the settlement of
conflicting rights as conferred as law. The second part of the
authority represents a broadening of judicial power to enable
the courts of justice to review what was before forbidden
territory, to wit, the discretion of the political departments of
the government.
As worded, the new provision vests in the judiciary, and
particularly the Supreme Court, the power to rule upon even
the wisdom of the decisions of the executive and the
legislature and to declare their acts invalid for lack or excess
of jurisdiction because tainted with grave abuse of discretion.
The catch, of course, is the meaning of "grave abuse of
discretion," which is a very elastic phrase that can expand or
contract according to the disposition of the judiciary.
In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
In the case now before us, the jurisdictional objection
becomes even less tenable and decisive. The reason is that,
even if we were to assume that the issue presented before us
was political in nature, we would still not be precluded from
revolving it under the expanded jurisdiction conferred upon us
that now covers, in proper cases, even the political question.
Article VII, Section 1, of the Constitution clearly provides: . . .
The last ground invoked by the trial court in dismissing the complaint is the
non-impairment of contracts clause found in the Constitution. The court a quo
declared that:
The Court is likewise of the impression that it cannot, no
matter how we stretch our jurisdiction, grant the reliefs
prayed for by the plaintiffs, i.e., to cancel all existing timber
license agreements in the country and to cease and desist
from receiving, accepting, processing, renewing or approving
new timber license agreements. For to do otherwise would
amount to "impairment of contracts" abhored (sic) by the
fundamental law. 24

We are not persuaded at all; on the contrary, We are amazed, if not shocked,
by such a sweeping pronouncement. In the first place, the respondent
Secretary did not, for obvious reasons, even invoke in his motion to dismiss the
non-impairment clause. If he had done so, he would have acted with utmost
infidelity to the Government by providing undue and unwarranted benefits and
advantages to the timber license holders because he would have forever bound
the Government to strictly respect the said licenses according to their terms
and conditions regardless of changes in policy and the demands of public
interest and welfare. He was aware that as correctly pointed out by the
petitioners, into every timber license must be read Section 20 of the Forestry
Reform Code (P.D. No. 705) which provides:
. . . Provided, That when the national interest so requires, the
President may amend, modify, replace or rescind any
contract, concession, permit, licenses or any other form of
privilege granted herein . . .
Needless to say, all licenses may thus be revoked or rescinded by
executive action. It is not a contract, property or a property right
protested by the due process clause of the Constitution. In Tan vs.
Director of Forestry, 25 this Court held:
. . . A timber license is an instrument by which the State
regulates the utilization and disposition of forest resources to
the end that public welfare is promoted. A timber license is
not a contract within the purview of the due process clause; it
is only a license or privilege, which can be validly withdrawn
whenever dictated by public interest or public welfare as in
this case.
A license is merely a permit or privilege to do what otherwise
would be unlawful, and is not a contract between the
authority, federal, state, or municipal, granting it and the
person to whom it is granted; neither is it property or a
property right, nor does it create a vested right; nor is it
taxation (37 C.J. 168). Thus, this Court held that the granting
of license does not create irrevocable rights, neither is it
property or property rights (People vs. Ong Tin, 54 O.G. 7576).
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy
Executive Secretary: 26
. . . Timber licenses, permits and license agreements are the
principal instruments by which the State regulates the
utilization and disposition of forest resources to the end that
public welfare is promoted. And it can hardly be gainsaid that
they merely evidence a privilege granted by the State to

qualified entities, and do not vest in the latter a permanent or

irrevocable right to the particular concession area and the
forest products therein. They may be validly amended,
modified, replaced or rescinded by the Chief Executive when
national interests so require. Thus, they are not deemed
contracts within the purview of the due process of law clause
[See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. Director of Forestry, G.R. No. L-24548,
October 27, 1983, 125 SCRA 302].
Since timber licenses are not contracts, the non-impairment clause, which
reads:
Sec. 10. No law impairing, the obligation of contracts shall be
passed. 27
cannot be invoked.
In the second place, even if it is to be assumed that the same are contracts,
the instant case does not involve a law or even an executive issuance declaring
the cancellation or modification of existing timber licenses. Hence, the nonimpairment clause cannot as yet be invoked. Nevertheless, granting further
that a law has actually been passed mandating cancellations or modifications,
the same cannot still be stigmatized as a violation of the non-impairment
clause. This is because by its very nature and purpose, such as law could have
only been passed in the exercise of the police power of the state for the
purpose of advancing the right of the people to a balanced and healthful
ecology, promoting their health and enhancing the general welfare. In Abe vs.
Foster Wheeler
Corp. 28 this Court stated:
The freedom of contract, under our system of government, is
not meant to be absolute. The same is understood to be
subject to reasonable legislative regulation aimed at the
promotion of public health, moral, safety and welfare. In
other words, the constitutional guaranty of non-impairment of
obligations of contract is limited by the exercise of the police
power of the State, in the interest of public health, safety,
moral and general welfare.

contract rights are absolute; for government cannot exist if

the citizen may at will use his property to the detriment of his
fellows, or exercise his freedom of contract to work them
harm. Equally fundamental with the private right is that of the
public to regulate it in the common interest.
In short, the non-impairment clause must yield to the police power of the
state. 31
Finally, it is difficult to imagine, as the trial court did, how the non-impairment
clause could apply with respect to the prayer to enjoin the respondent
Secretary from receiving, accepting, processing, renewing or approving new
timber licenses for, save in cases of renewal, no contract would have as of yet
existed in the other instances. Moreover, with respect to renewal, the holder is
not entitled to it as a matter of right.
WHEREFORE, being impressed with merit, the instant Petition is hereby
GRANTED, and the challenged Order of respondent Judge of 18 July 1991
dismissing Civil Case No. 90-777 is hereby set aside. The petitioners may
therefore amend their complaint to implead as defendants the holders or
grantees of the questioned timber license agreements.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 110120 March 16, 1994
LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC,
Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of
Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN, respondents.
Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner.
The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio,
Jr. and the City Government of Caloocan.

The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in
Philippine American Life Insurance Co. vs. Auditor General, 30 to wit:
Under our form of government the use of property and the
making of contracts are normally matters of private and not of
public concern. The general rule is that both shall be free of
governmental interference. But neither property rights nor

ROMERO, J.:
The clash between the responsibility of the City Government of Caloocan to
dispose off the 350 tons of garbage it collects daily and the growing concern

and sensitivity to a pollution-free environment of the residents of Barangay

Camarin, Tala Estate, Caloocan City where these tons of garbage are dumped
everyday is the hub of this controversy elevated by the protagonists to the
Laguna Lake Development Authority (LLDA) for adjudication.
The instant case stemmed from an earlier petition filed with this Court by
Laguna Lake Development Authority (LLDA for short) docketed as G.R.
No. 107542 against the City Government of Caloocan, et al. In the Resolution of
November 10, 1992, this Court referred G.R. No. 107542 to the Court of
Appeals for appropriate disposition. Docketed therein as CA-G.R. SP
No. 29449, the Court of Appeals, in a decision 1 promulgated on January 29,
1993 ruled that the LLDA has no power and authority to issue a cease and desist
order enjoining the dumping of garbage in Barangay Camarin, Tala Estate,
Caloocan City. The LLDA now seeks, in this petition, a review of the decision of
the Court of Appeals.

The dumping operation was forthwith stopped by the City Government of

Caloocan. However, sometime in August 1992 the dumping operation was
resumed after a meeting held in July 1992 among the City Government of
Caloocan, the representatives of Task Force Camarin Dumpsite and LLDA at the
Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed
to settle the problem.
After an investigation by its team of legal and technical personnel on August
14, 1992, the LLDA issued another order reiterating the December 5, 1991,
order and issued an Alias Cease and Desist Order enjoining the City Government
of Caloocan from continuing its dumping operations at the Camarin area.
On September 25, 1992, the LLDA, with the assistance of the Philippine
National Police, enforced its Alias Cease and Desist Order by prohibiting the
entry of all garbage dump trucks into the Tala Estate, Camarin area being
utilized as a dumpsite.

The facts, as disclosed in the records, are undisputed.

On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes
Parish, Barangay Camarin, Caloocan City, filed a letter-complaint 2 with the
Laguna Lake Development Authority seeking to stop the operation of the 8.6hectare open garbage dumpsite in Tala Estate, Barangay Camarin, Caloocan
City due to its harmful effects on the health of the residents and the possibility
of pollution of the water content of the surrounding area.
On November 15, 1991, the LLDA conducted an on-site investigation,
monitoring and test sampling of the leachate 3 that seeps from said dumpsite to
the nearby creek which is a tributary of the Marilao River. The LLDA Legal and
Technical personnel found that the City Government of Caloocan was
maintaining an open dumpsite at the Camarin area without first securing an
Environmental Compliance Certificate (ECC) from the Environmental
Management Bureau (EMB) of the Department of Environment and Natural
Resources, as required under Presidential Decree No. 1586, 4 and clearance
from LLDA as required under Republic Act No. 4850, 5 as amended by
Presidential Decree No. 813 and Executive Order No. 927, series of 1983. 6
After a public hearing conducted on December 4, 1991, the LLDA, acting on the
complaint of Task Force Camarin Dumpsite, found that the water collected
from the leachate and the receiving streams could considerably affect the
quality, in turn, of the receiving waters since it indicates the presence of
bacteria, other than coliform, which may have contaminated the sample during
collection or handling. 7 On December 5, 1991, the LLDA issued a Cease and
Desist Order 8 ordering the City Government of Caloocan, Metropolitan Manila
Authority, their contractors, and other entities, to completely halt, stop and
desist from dumping any form or kind of garbage and other waste matter at the
Camarin dumpsite.

Pending resolution of its motion for reconsideration earlier filed on September

17, 1992 with the LLDA, the City Government of Caloocan filed with the
Regional Trial Court of Caloocan City an action for the declaration of nullity of
the cease and desist order with prayer for the issuance of writ of injunction,
docketed as Civil Case No. C-15598. In its complaint, the City Government of
Caloocan sought to be declared as the sole authority empowered to promote
the health and safety and enhance the right of the people in Caloocan City to a
balanced ecology within its territorial jurisdiction. 9
On September 25, 1992, the Executive Judge of the Regional Trial Court of
Caloocan City issued a temporary restraining order enjoining the LLDA from
enforcing its cease and desist order. Subsequently, the case was raffled to the
Regional Trial Court, Branch 126 of Caloocan which, at the time, was presided
over by Judge Manuel Jn. Serapio of the Regional Trial Court, Branch 127, the
pairing judge of the recently-retired presiding judge.
The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the
ground, among others, that under Republic Act No. 3931, as amended by
Presidential Decree No. 984, otherwise known as the Pollution Control Law, the
cease and desist order issued by it which is the subject matter of the complaint
is reviewable both upon the law and the facts of the case by the Court of
Appeals and not by the Regional Trial Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating
Civil Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the
Task Force Camarin Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario
Asistio." The LLDA, however, maintained during the trial that the foregoing
cases, being independent of each other, should have been treated separately.

On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to
dismiss, issued in the consolidated cases an order 11 denying LLDA's motion to
dismiss and granting the issuance of a writ of preliminary injunction enjoining
the LLDA, its agent and all persons acting for and on its behalf, from enforcing
or implementing its cease and desist order which prevents plaintiff City of
Caloocan from dumping garbage at the Camarin dumpsite during the pendency
of this case and/or until further orders of the court.
On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and
injunction with prayer for restraining order with the Supreme Court, docketed
as G.R. No. 107542, seeking to nullify the aforesaid order dated October 16,
1992 issued by the Regional Trial Court, Branch 127 of Caloocan City denying its
motion to dismiss.
The Court, acting on the petition, issued a Resolution 12 on November 10, 1992
referring the case to the Court of Appeals for proper disposition and at the
same time, without giving due course to the petition, required the respondents
to comment on the petition and file the same with the Court of Appeals within
ten (10) days from notice. In the meantime, the Court issued a temporary
restraining order, effective immediately and continuing until further orders
from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding
Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from
exercising jurisdiction over the case for declaration of nullity of the cease and
desist order issued by the Laguna Lake Development Authority (LLDA); and (2)
City Mayor of Caloocan and/or the City Government of Caloocan to cease and
desist from dumping its garbage at the Tala Estate, Barangay Camarin,
Caloocan City.
Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr.
filed on November 12, 1992 a motion for reconsideration and/or to
quash/recall the temporary restraining order and an urgent motion for
reconsideration alleging that ". . . in view of the calamitous situation that
would arise if the respondent city government fails to collect 350 tons of
garbage daily for lack of dumpsite (i)t is therefore, imperative that the issue be
resolved with dispatch or with sufficient leeway to allow the respondents to
find alternative solutions to this garbage problem."
On November 17, 1992, the Court issued a Resolution 13 directing the Court of
Appeals to immediately set the case for hearing for the purpose of determining
whether or not the temporary restraining order issued by the Court should be
lifted and what conditions, if any, may be required if it is to be so lifted or
whether the restraining order should be maintained or converted into a
preliminary injunction.
The Court of Appeals set the case for hearing on November 27, 1992, at 10:00
in the morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals.
14
After the oral argument, a conference was set on December 8, 1992 at 10:00

o'clock in the morning where the Mayor of Caloocan City, the General Manager
of LLDA, the Secretary of DENR or his duly authorized representative and the
Secretary of DILG or his duly authorized representative were required to
appear.
It was agreed at the conference that the LLDA had until December 15, 1992 to
finish its study and review of respondent's technical plan with respect to the
dumping of its garbage and in the event of a rejection of respondent's technical
plan or a failure of settlement, the parties will submit within 10 days from
notice their respective memoranda on the merits of the case, after which the
petition shall be deemed submitted for resolution. 15 Notwithstanding such
efforts, the parties failed to settle the dispute.
On April 30, 1993, the Court of Appeals promulgated its decision holding that:
(1) the Regional Trial Court has no jurisdiction on appeal to try, hear and
decide the action for annulment of LLDA's cease and desist order, including the
issuance of a temporary restraining order and preliminary injunction in relation
thereto, since appeal therefrom is within the exclusive and appellate
jurisdiction of the Court of Appeals under Section 9, par. (3), of Batas
Pambansa Blg. 129; and (2) the Laguna Lake Development Authority has no
power and authority to issue a cease and desist order under its enabling law,
Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary
injunction issued in the said case was set aside; the cease and desist order of
LLDA was likewise set aside and the temporary restraining order enjoining the
City Mayor of Caloocan and/or the City Government of Caloocan to cease and
desist from dumping its garbage at the Tala Estate, Barangay Camarin,
Caloocan City was lifted, subject, however, to the condition that any future
dumping of garbage in said area, shall be in conformity with the procedure and
protective works contained in the proposal attached to the records of this case
and found on pages 152-160 of the Rollo, which was thereby adopted by
reference and made an integral part of the decision, until the corresponding
restraining and/or injunctive relief is granted by the proper Court upon LLDA's
institution of the necessary legal proceedings.
Hence, the Laguna Lake Development Authority filed the instant petition for
review on certiorari, now docketed as G.R. No. 110120, with prayer that the
temporary restraining order lifted by the Court of Appeals be re-issued until
after final determination by this Court of the issue on the proper interpretation
of the powers and authority of the LLDA under its enabling law.
On July, 19, 1993, the Court issued a temporary restraining order 16 enjoining
the City Mayor of Caloocan and/or the City Government of Caloocan to cease
and desist from dumping its garbage at the Tala Estate, Barangay Camarin,

Caloocan City, effective as of this date and containing until otherwise ordered
by the Court.
It is significant to note that while both parties in this case agree on the need to
protect the environment and to maintain the ecological balance of the
surrounding areas of the Camarin open dumpsite, the question as to which
agency can lawfully exercise jurisdiction over the matter remains highly open
to question.
The City Government of Caloocan claims that it is within its power, as a local
government unit, pursuant to the general welfare provision of the Local
Government Code, 17 to determine the effects of the operation of the dumpsite
on the ecological balance and to see that such balance is maintained. On the
basis of said contention, it questioned, from the inception of the dispute
before the Regional Trial Court of Caloocan City, the power and authority of
the LLDA to issue a cease and desist order enjoining the dumping of garbage in
the Barangay Camarin over which the City Government of Caloocan has
territorial jurisdiction.
The Court of Appeals sustained the position of the City of Caloocan on the
theory that Section 7 of Presidential Decree No. 984, otherwise known as the
Pollution Control law, authorizing the defunct National Pollution Control
Commission to issue an ex-parte cease and desist order was not incorporated in
Presidential Decree No. 813 nor in Executive Order No. 927, series of
1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act
No. 4850, as amended, the LLDA is instead required "to institute the necessary
legal proceeding against any person who shall commence to implement or
continue implementation of any project, plan or program within the Laguna de
Bay region without previous clearance from the Authority."
The LLDA now assails, in this partition for review, the abovementioned ruling of
the Court of Appeals, contending that, as an administrative agency which was
granted regulatory and adjudicatory powers and functions by Republic Act No.
4850 and its amendatory laws, Presidential Decree No. 813 and Executive Order
No. 927, series of 1983, it is invested with the power and authority to issue a
cease and desist order pursuant to Section 4 par. (c), (d), (e), (f) and (g) of
Executive Order No. 927 series of 1983 which provides, thus:
Sec. 4. Additional Powers and Functions. The authority shall
have the following powers and functions:
xxx xxx xxx
(c) Issue orders or decisions to compel compliance with the
provisions of this Executive Order and its implementing rules
and regulations only after proper notice and hearing.

(d) Make, alter or modify orders requiring the discontinuance

of pollution specifying the conditions and the time within
which such discontinuance must be accomplished.
(e) Issue, renew, or deny permits, under such conditions as it
may determine to be reasonable, for the prevention and
abatement of pollution, for the discharge of sewage, industrial
waste, or for the installation or operation of sewage works and
industrial disposal system or parts thereof.
(f) After due notice and hearing, the Authority may also
revoke, suspend or modify any permit issued under this Order
whenever the same is necessary to prevent or abate pollution.
(g) Deputize in writing or request assistance of appropriate
government agencies or instrumentalities for the purpose of
enforcing this Executive Order and its implementing rules and
regulations and the orders and decisions of the Authority.
The LLDA claims that the appellate court deliberately suppressed and totally
disregarded the above provisions of Executive Order No. 927, series of 1983,
which granted administrative quasi-judicial functions to LLDA on pollution
abatement cases.
In light of the relevant environmental protection laws cited which are
applicable in this case, and the corresponding overlapping jurisdiction of
government agencies implementing these laws, the resolution of the issue of
whether or not the LLDA has the authority and power to issue an order which,
in its nature and effect was injunctive, necessarily requires a determination of
the threshold question: Does the Laguna Lake Development Authority, under its
Charter and its amendatory laws, have the authority to entertain the complaint
against the dumping of garbage in the open dumpsite in Barangay Camarin
authorized by the City Government of Caloocan which is allegedly endangering
the health, safety, and welfare of the residents therein and the sanitation and
quality of the water in the area brought about by exposure to pollution caused
by such open garbage dumpsite?
The matter of determining whether there is such pollution of the environment
that requires control, if not prohibition, of the operation of a business
establishment is essentially addressed to the Environmental Management
Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive Order No.
192, series of 1987, 18 has assumed the powers and functions of the defunct
National Pollution Control Commission created under Republic Act No. 3931.
Under said Executive Order, a Pollution Adjudication Board (PAB) under the
Office of the DENR Secretary now assumes the powers and functions of the
National Pollution Control Commission with respect to adjudication of pollution
cases. 19

As a general rule, the adjudication of pollution cases generally pertains to the

Pollution Adjudication Board (PAB), except in cases where the special law
provides for another forum. It must be recognized in this regard that the LLDA,
as a specialized administrative agency, is specifically mandated under Republic
Act No. 4850 and its amendatory laws to carry out and make effective the
declared national policy 20 of promoting and accelerating the development and
balanced growth of the Laguna Lake area and the surrounding provinces of
Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and
Caloocan 21 with due regard and adequate provisions for environmental
management and control, preservation of the quality of human life and
ecological systems, and the prevention of undue ecological disturbances,
deterioration and pollution. Under such a broad grant and power and
authority, the LLDA, by virtue of its special charter, obviously has the
responsibility to protect the inhabitants of the Laguna Lake region from the
deleterious effects of pollutants emanating from the discharge of wastes from
the surrounding areas. In carrying out the aforementioned declared policy, the
LLDA is mandated, among others, to pass upon and approve or disapprove all
plans, programs, and projects proposed by local government offices/agencies
within the region, public corporations, and private persons or enterprises
where such plans, programs and/or projects are related to those of the LLDA
for the development of the region. 22

The cease and desist order issued by the LLDA requiring the City Government of
Caloocan to stop dumping its garbage in the Camarin open dumpsite found by
the LLDA to have been done in violation of Republic Act No. 4850, as amended,
and other relevant environment laws, 23 cannot be stamped as an unauthorized
exercise by the LLDA of injunctive powers. By its express terms, Republic Act
No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of
1983, authorizes the LLDA to "make, alter or modify order requiring the
discontinuance or pollution." 24 (Emphasis supplied) Section 4, par. (d) explicitly
authorizes the LLDA to make whatever order may be necessary in the exercise
of its jurisdiction.

In the instant case, when the complainant Task Force Camarin Dumpsite of Our
Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed its lettercomplaint before the LLDA, the latter's jurisdiction under its charter was
validly invoked by complainant on the basis of its allegation that the open
dumpsite project of the City Government of Caloocan in Barangay Camarin was
undertaken without a clearance from the LLDA, as required under Section 4,
par. (d), of Republic Act. No. 4850, as amended by P.D. No. 813 and Executive
Order No. 927. While there is also an allegation that the said project was
without an Environmental Compliance Certificate from the Environmental
Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA
over this case was recognized by the Environmental Management Bureau of the
DENR when the latter acted as intermediary at the meeting among the
representatives of the City Government of Caloocan, Task Force Camarin
Dumpsite and LLDA sometime in July 1992 to discuss the possibility of
re-opening the open dumpsite.

Assuming arguendo that the authority to issue a "cease and desist order" were
not expressly conferred by law, there is jurisprudence enough to the effect
that the rule granting such authority need not necessarily be express. 25 While
it is a fundamental rule that an administrative agency has only such powers as
are expressly granted to it by law, it is likewise a settled rule that an
administrative agency has also such powers as are necessarily implied in the
exercise of its express powers. 26 In the exercise, therefore, of its express
powers under its charter as a regulatory and quasi-judicial body with respect to
pollution cases in the Laguna Lake region, the authority of the LLDA to issue a
"cease and desist order" is, perforce, implied. Otherwise, it may well be
reduced to a "toothless" paper agency.

Having thus resolved the threshold question, the inquiry then narrows down to
the following issue: Does the LLDA have the power and authority to issue a
"cease and desist" order under Republic Act No. 4850 and its amendatory laws,
on the basis of the facts presented in this case, enjoining the dumping of
garbage in Tala Estate, Barangay Camarin, Caloocan City.
The irresistible answer is in the affirmative.

To be sure, the LLDA was not expressly conferred the power "to issue and exparte cease and desist order" in a language, as suggested by the City
Government of Caloocan, similar to the express grant to the defunct National
Pollution Control Commission under Section 7 of P.D. No. 984 which,
admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of
1983. However, it would be a mistake to draw therefrom the conclusion that
there is a denial of the power to issue the order in question when the power "to
make, alter or modify orders requiring the discontinuance of pollution" is
expressly and clearly bestowed upon the LLDA by Executive Order No. 927,
series of 1983.

In this connection, it must be noted that in Pollution Adjudication Board v.

Court of Appeals, et al., 27 the Court ruled that the Pollution Adjudication
Board (PAB) has the power to issue an ex-parte cease and desist order when
there is prima facie evidence of an establishment exceeding the allowable
standards set by the anti-pollution laws of the country. The ponente, Associate
Justice Florentino P. Feliciano, declared:
Ex parte cease and desist orders are permitted by law and
regulations in situations like that here presented precisely
because stopping the continuous discharge of pollutive and
untreated effluents into the rivers and other inland waters of
the Philippines cannot be made to wait until protracted
litigation over the ultimate correctness or propriety of such

orders has run its full course, including multiple and

sequential appeals such as those which Solar has taken, which
of course may take several years. The relevant pollution
control statute and implementing regulations were enacted
and promulgated in the exercise of that pervasive, sovereign
power to protect the safety, health, and general welfare and
comfort of the public, as well as the protection of plant and
animal life, commonly designated as the police power. It is a
constitutional commonplace that the ordinary requirements of
procedural due process yield to the necessities of protecting
vital public interests like those here involved, through the
exercise of police power. . . .
The immediate response to the demands of "the necessities of protecting vital
public interests" gives vitality to the statement on ecology embodied in the
Declaration of Principles and State Policies or the 1987 Constitution. Article II,
Section 16 which provides:
The State shall protect and advance the right of the people to
a balanced and healthful ecology in accord with the rhythm
and harmony of nature.
As a constitutionally guaranteed right of every person, it carries the correlative
duty of non-impairment. This is but in consonance with the declared policy of
the state "to protect and promote the right to health of the people and instill
health consciousness among them." 28 It is to be borne in mind that the
Philippines is party to the Universal Declaration of Human Rights and the Alma
Conference Declaration of 1978 which recognize health as a fundamental
human right. 29
The issuance, therefore, of the cease and desist order by the LLDA, as a
practical matter of procedure under the circumstances of the case, is a proper
exercise of its power and authority under its charter and its amendatory laws.
Had the cease and desist order issued by the LLDA been complied with by the
City Government of Caloocan as it did in the first instance, no further legal
steps would have been necessary.
The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring
upon the LLDA the means of directly enforcing such orders, has provided under
its Section 4 (d) the power to institute "necessary legal proceeding against any
person who shall commence to implement or continue implementation of any
project, plan or program within the Laguna de Bay region without previous
clearance from the LLDA."
Clearly, said provision was designed to invest the LLDA with sufficiently broad
powers in the regulation of all projects initiated in the Laguna Lake region,
whether by the government or the private sector, insofar as the

implementation of these projects is concerned. It was meant to deal with cases

which might possibly arise where decisions or orders issued pursuant to the
exercise of such broad powers may not be obeyed, resulting in the thwarting of
its laudabe objective. To meet such contingencies, then the writs of mandamus
and injunction which are beyond the power of the LLDA to issue, may be sought
from the proper courts.
Insofar as the implementation of relevant anti-pollution laws in the Laguna
Lake region and its surrounding provinces, cities and towns are concerned, the
Court will not dwell further on the related issues raised which are more
appropriately addressed to an administrative agency with the special
knowledge and expertise of the LLDA.
WHEREFORE, the petition is GRANTED. The temporary restraining order issued
by the Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the
City Government of Caloocan from dumping their garbage at the Tala Estate,
Barangay Camarin, Caloocan City is hereby made permanent.
SO ORDERED.
G.R. No. 118295 May 2, 1997
TANADA vs. ANGARA
PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted
by the membership thereto of the vast majority of countries has revolutionized
international business and economic relations amongst states. It has
irreversibly propelled the world towards trade liberalization and economic
globalization. Liberalization, globalization, deregulation and privatization, the
third-millennium buzz words, are ushering in a new borderless world of
business by sweeping away as mere historical relics the heretofore traditional
modes of promoting and protecting national economies like tariffs, export
subsidies, import quotas, quantitative restrictions, tax exemptions and
currency controls. Finding market niches and becoming the best in specific
industries in a market-driven and export-oriented global scenario are replacing
age-old "beggar-thy-neighbor" policies that unilaterally protect weak and
inefficient domestic producers of goods and services. In the words of Peter
Drucker, the well-known management guru, "Increased participation in the
world economy has become the key to domestic economic growth and
prosperity."
Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second

World War, plans for the establishment of three multilateral institutions
inspired by that grand political body, the United Nations were discussed at
Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which
was to address the rehabilitation and reconstruction of war-ravaged and later
developing countries; the second, the International Monetary Fund (IMF) which
was to deal with currency problems; and the third, the International Trade
Organization (ITO), which was to foster order and predictability in world trade
and to minimize unilateral protectionist policies that invite challenge, even
retaliation, from other states. However, for a variety of reasons, including its
non-ratification by the United States, the ITO, unlike the IMF and WB, never
took off. What remained was only GATT the General Agreement on Tariffs
and Trade. GATT was a collection of treaties governing access to the
economies of treaty adherents with no institutionalized body administering the
agreements or dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the
Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally
gave birth to that administering body the World Trade Organization with
the signing of the "Final Act" in Marrakesh, Morocco and the ratification of the
WTO Agreement by its members. 1
Like many other developing countries, the Philippines joined WTO as a founding
member with the goal, as articulated by President Fidel V. Ramos in two letters
to the Senate (infra), of improving "Philippine access to foreign markets,
especially its major trading partners, through the reduction of tariffs on its
exports, particularly agricultural and industrial products." The President also
saw in the WTO the opening of "new opportunities for the services sector . . . ,
(the reduction of) costs and uncertainty associated with exporting . . . , and
(the attraction of) more investments into the country." Although the Chief
Executive did not expressly mention it in his letter, the Philippines and this is
of special interest to the legal profession will benefit from the WTO system
of dispute settlement by judicial adjudication through the independent WTO
settlement bodies called (1) Dispute Settlement Panels and (2) Appellate
Tribunal. Heretofore, trade disputes were settled mainly through negotiations
where solutions were arrived at frequently on the basis of relative bargaining
strengths, and where naturally, weak and underdeveloped countries were at a
disadvantage.
The Petition in Brief
Arguing mainly (1) that the WTO requires the Philippines "to place nationals
and products of member-countries on the same footing as Filipinos and local
products" and (2) that the WTO "intrudes, limits and/or impairs" the
constitutional powers of both Congress and the Supreme Court, the instant
petition before this Court assails the WTO Agreement for violating the mandate
of the 1987 Constitution to "develop a self-reliant and independent national

economy effectively controlled by Filipinos . . . (to) give preference to

qualified Filipinos (and to) promote the preferential use of Filipino labor,
domestic materials and locally produced goods."
Simply stated, does the Philippine Constitution prohibit Philippine participation
in worldwide trade liberalization and economic globalization? Does it proscribe
Philippine integration into a global economy that is liberalized, deregulated
and privatized? These are the main questions raised in this petition for
certiorari, prohibition and mandamus under Rule 65 of the Rules of Court
praying (1) for the nullification, on constitutional grounds, of the concurrence
of the Philippine Senate in the ratification by the President of the Philippines
of the Agreement Establishing the World Trade Organization (WTO Agreement,
for brevity) and (2) for the prohibition of its implementation and enforcement
through the release and utilization of public funds, the assignment of public
officials and employees, as well as the use of government properties and
resources by respondent-heads of various executive offices concerned
therewith. This concurrence is embodied in Senate Resolution No. 97, dated
December 14, 1994.
The Facts
On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The
Department of Trade and Industry (Secretary Navarro, for brevity),
representing the Government of the Republic of the Philippines, signed in
Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round
of Multilateral Negotiations (Final Act, for brevity).
By signing the Final Act, 2 Secretary Navarro on behalf of the Republic of the
Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the
consideration of their respective competent authorities, with
a view to seeking approval of the Agreement in accordance
with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter
dated August 11, 1994 from the President of the Philippines, 3 stating among
others that "the Uruguay Round Final Act is hereby submitted to the Senate for
its concurrence pursuant to Section 21, Article VII of the Constitution."
On August 13, 1994, the members of the Philippine Senate received another
letter from the President of the Philippines 4 likewise dated August 11, 1994,
which stated among others that "the Uruguay Round Final Act, the Agreement
Establishing the World Trade Organization, the Ministerial Declarations and

Decisions, and the Understanding on Commitments in Financial Services are

hereby submitted to the Senate for its concurrence pursuant to Section 21,
Article VII of the Constitution."
On December 9, 1994, the President of the Philippines certified the necessity
of the immediate adoption of P.S. 1083, a resolution entitled "Concurring in the
Ratification of the Agreement Establishing the World Trade Organization." 5
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which
"Resolved, as it is hereby resolved, that the Senate concur, as it hereby
concurs, in the ratification by the President of the Philippines of the
Agreement Establishing the World Trade Organization." 6 The text of the WTO
Agreement is written on pages 137 et seq. of Volume I of the 36-volume
Uruguay Round of Multilateral Trade Negotiations and includes various
agreements and associated legal instruments (identified in the said Agreement
as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade
Agreements, for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and
Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual
Property Rights
ANNEX 2

Understanding on Rules and Procedures

Governing
the Settlement of Disputes
ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed 7 the Instrument
of Ratification, declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS,
President of the Republic of the Philippines, after having seen
and considered the aforementioned Agreement Establishing
the World Trade Organization and the agreements and
associated legal instruments included in Annexes one (1), two
(2) and three (3) of that Agreement which are integral parts
thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and
Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines
is composed of the Agreement Proper and "the associated legal instruments
included in Annexes one (1), two (2) and three (3) of that Agreement which are
integral parts thereof."
On the other hand, the Final Act signed by Secretary Navarro embodies not only
the WTO Agreement (and its integral annexes aforementioned) but also (1) the
Ministerial Declarations and Decisions and (2) the Understanding on
Commitments in Financial Services. In his Memorandum dated May 13, 1996, 8
the Solicitor General describes these two latter documents as follows:
The Ministerial Decisions and Declarations are twenty-five
declarations and decisions on a wide range of matters, such as
measures in favor of least developed countries, notification
procedures, relationship of WTO with the International
Monetary Fund (IMF), and agreements on technical barriers to
trade and on dispute settlement.
The Understanding on Commitments in Financial Services
dwell on, among other things, standstill or limitations and
qualifications of commitments to existing non-conforming
measures, market access, national treatment, and definitions
of non-resident supplier of financial services, commercial
presence and new financial service.

On December 29, 1994, the present petition was filed. After careful
deliberation on respondents' comment and petitioners' reply thereto, the Court
resolved on December 12, 1995, to give due course to the petition, and the
parties thereafter filed their respective memoranda. The court also requested
the Honorable Lilia R. Bautista, the Philippine Ambassador to the United
Nations stationed in Geneva, Switzerland, to submit a paper, hereafter
referred to as "Bautista Paper," 9 for brevity, (1) providing a historical
background of and (2) summarizing the said agreements.
During the Oral Argument held on August 27, 1996, the Court directed:

C. Whether the provisions of the Agreement Establishing the

World Trade Organization contravene the provisions of Sec.
19, Article II, and Secs. 10 and 12, Article XII, all of the 1987
Philippine Constitution.
D. Whether provisions of the Agreement Establishing the World
Trade Organization unduly limit, restrict and impair Philippine
sovereignty specifically the legislative power which, under
Sec. 2, Article VI, 1987 Philippine Constitution is "vested in the
Congress of the Philippines";

(a) the petitioners to submit the (1) Senate Committee Report

on the matter in controversy and (2) the transcript of
proceedings/hearings in the Senate; and

E. Whether provisions of the Agreement Establishing the World

Trade Organization interfere with the exercise of judicial
power.

(b) the Solicitor General, as counsel for respondents, to file

(1) a list of Philippine treaties signed prior to the Philippine
adherence to the WTO Agreement, which derogate from
Philippine sovereignty and (2) copies of the multi-volume WTO
Agreement and other documents mentioned in the Final Act,
as soon as possible.

F. Whether the respondent members of the Senate acted in

grave abuse of discretion amounting to lack or excess of
jurisdiction when they voted for concurrence in the
ratification of the constitutionally-infirm Agreement
Establishing the World Trade Organization.

After receipt of the foregoing documents, the Court said it would consider the
case submitted for resolution. In a Compliance dated September 16, 1996, the
Solicitor General submitted a printed copy of the 36-volume Uruguay Round of
Multilateral Trade Negotiations, and in another Compliance dated October 24,
1996, he listed the various "bilateral or multilateral treaties or international
instruments involving derogation of Philippine sovereignty." Petitioners, on the
other hand, submitted their Compliance dated January 28, 1997, on January
30, 1997.

G. Whether the respondent members of the Senate acted in

grave abuse of discretion amounting to lack or excess of
jurisdiction when they concurred only in the ratification of the
Agreement Establishing the World Trade Organization, and not
with the Presidential submission which included the Final Act,
Ministerial Declaration and Decisions, and the Understanding
on Commitments in Financial Services.
On the other hand, the Solicitor General as counsel for respondents
"synthesized the several issues raised by petitioners into the following":

10

The Issues
In their Memorandum dated March 11, 1996, petitioners summarized the issues
as follows:
A. Whether the petition presents a political question or is
otherwise not justiciable.
B. Whether the petitioner members of the Senate who
participated in the deliberations and voting leading to the
concurrence are estopped from impugning the validity of the
Agreement Establishing the World Trade Organization or of the
validity of the concurrence.

1. Whether or not the provisions of the "Agreement

Establishing the World Trade Organization and the Agreements
and Associated Legal Instruments included in Annexes one (1),
two (2) and three (3) of that agreement" cited by petitioners
directly contravene or undermine the letter, spirit and intent
of Section 19, Article II and Sections 10 and 12, Article XII of
the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly
limit, restrict or impair the exercise of legislative power by
Congress.

3. Whether or not certain provisions of the Agreement impair

the exercise of judicial power by this Honorable Court in
promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate "in the
ratification by the President of the Philippines of the
Agreement establishing the World Trade Organization" implied
rejection of the treaty embodied in the Final Act.
By raising and arguing only four issues against the seven presented by
petitioners, the Solicitor General has effectively ignored three, namely: (1)
whether the petition presents a political question or is otherwise not
justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Taada
and Anna Dominique Coseteng) are estopped from joining this suit; and (3)
whether the respondent-members of the Senate acted in grave abuse of
discretion when they voted for concurrence in the ratification of the WTO
Agreement. The foregoing notwithstanding, this Court resolved to deal with
these three issues thus:
(1) The "political question" issue being very fundamental and vital, and being
a matter that probes into the very jurisdiction of this Court to hear and decide
this case was deliberated upon by the Court and will thus be ruled upon as
the first issue;
(2) The matter of estoppel will not be taken up because this defense is
waivable and the respondents have effectively waived it by not pursuing it in
any of their pleadings; in any event, this issue, even if ruled in respondents'
favor, will not cause the petition's dismissal as there are petitioners other than
the two senators, who are not vulnerable to the defense of estoppel; and
(3) The issue of alleged grave abuse of discretion on the part of the respondent
senators will be taken up as an integral part of the disposition of the four issues
raised by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did
not question the locus standi of petitioners. Hence, they are also deemed to
have waived the benefit of such issue. They probably realized that grave
constitutional issues, expenditures of public funds and serious international
commitments of the nation are involved here, and that transcendental public
interest requires that the substantive issues be met head on and decided on
the merits, rather than skirted or deflected by procedural matters. 11
To recapitulate, the issues that will be ruled upon shortly are:
(1) DOES THE PETITION PRESENT A JUSTICIABLE
CONTROVERSY? OTHERWISE STATED, DOES THE PETITION

INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS

NO JURISDICTION?
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS
THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS.
10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES
LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE
POWER BY CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH
THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN
PROMULGATING RULES ON EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO
AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID,
CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT,
MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?
The First Issue: Does the Court
Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to
have infringed the Constitution, it becomes not only the right but in fact the
duty of the judiciary to settle the dispute. "The question thus posed is judicial
rather than political. The duty (to adjudicate) remains to assure that the
supremacy of the Constitution is upheld." 12 Once a "controversy as to the
application or interpretation of a constitutional provision is raised before this
Court (as in the instant case), it becomes a legal issue which the Court is bound
by constitutional mandate to decide." 13
The jurisdiction of this Court to adjudicate the matters 14 raised in the petition
is clearly set out in the 1987 Constitution, 15 as follows:
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or
instrumentality of the government.

The foregoing text emphasizes the judicial department's duty and power to
strike down grave abuse of discretion on the part of any branch or
instrumentality of government including Congress. It is an innovation in our
political law. 16 As explained by former Chief Justice Roberto Concepcion, 17
"the judiciary is the final arbiter on the question of whether or not a branch of
government or any of its officials has acted without jurisdiction or in excess of
jurisdiction or so capriciously as to constitute an abuse of discretion amounting
to excess of jurisdiction. This is not only a judicial power but a duty to pass
judgment on matters of this nature."
As this Court has repeatedly and firmly emphasized in many cases, 18 it will not
shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it
in appropriate cases, committed by any officer, agency, instrumentality or
department of the government.

Specifically, the "flagship" constitutional provisions referred to are Sec 19,

Article II, and Secs. 10 and 12, Article XII, of the Constitution, which are
worded as follows:
Article II
DECLARATION OF PRINCIPLES
AND STATE POLICIES
xxx xxx xxx
Sec. 19. The State shall develop a self-reliant and independent
national economy effectively controlled by Filipinos.
xxx xxx xxx

As the petition alleges grave abuse of discretion and as there is no other plain,
speedy or adequate remedy in the ordinary course of law, we have no
hesitation at all in holding that this petition should be given due course and the
vital questions raised therein ruled upon under Rule 65 of the Rules of Court.
Indeed, certiorari, prohibition and mandamus are appropriate remedies to
raise constitutional issues and to review and/or prohibit/nullify, when proper,
acts of legislative and executive officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this
Court will not review the wisdom of the decision of the President and the
Senate in enlisting the country into the WTO, or pass upon the merits of trade
liberalization as a policy espoused by said international body. Neither will it
rule on the propriety of the government's economic policy of
reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other
import/trade barriers. Rather, it will only exercise its constitutional duty "to
determine whether or not there had been a grave abuse of discretion
amounting to lack or excess of jurisdiction" on the part of the Senate in
ratifying the WTO Agreement and its three annexes.
Second Issue: The WTO Agreement
and Economic Nationalism
This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the "letter, spirit and intent" of the
Constitution mandating "economic nationalism" are violated by the so-called
"parity provisions" and "national treatment" clauses scattered in various parts
not only of the WTO Agreement and its annexes but also in the Ministerial
Decisions and Declarations and in the Understanding on Commitments in
Financial Services.

Article XII
NATIONAL ECONOMY AND PATRIMONY
xxx xxx xxx
Sec. 10. . . . The Congress shall enact measures that will
encourage the formation and operation of enterprises whose
capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the
national economy and patrimony, the State shall give
preference to qualified Filipinos.
xxx xxx xxx
Sec. 12. The State shall promote the preferential use of
Filipino labor, domestic materials and locally produced goods,
and adopt measures that help make them competitive.
Petitioners aver that these sacred constitutional principles are desecrated by
the following WTO provisions quoted in their memorandum: 19
a) In the area of investment measures related to trade in
goods (TRIMS, for brevity):
Article 2

National Treatment and Quantitative Restrictions.

1. Without prejudice to other rights and
obligations under GATT 1994, no Member
shall apply any TRIM that is inconsistent with
the provisions of Article II or Article XI of
GATT 1994.
2. An illustrative list of TRIMS that are
inconsistent with the obligations of general
elimination of quantitative restrictions
provided for in paragraph I of Article XI of
GATT 1994 is contained in the Annex to this
Agreement." (Agreement on Trade-Related
Investment Measures, Vol. 27, Uruguay
Round, Legal Instruments, p. 22121, emphasis
supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national
treatment provided for in paragraph 4 of Article III of GATT
1994 include those which are mandatory or enforceable under
domestic law or under administrative rulings, or compliance
with which is necessary to obtain an advantage, and which
require:
(a) the purchase or use by an enterprise of
products of domestic origin or from any
domestic source, whether specified in terms
of particular products, in terms of volume or
value of products, or in terms of proportion of
volume or value of its local production; or
(b) that an enterprise's purchases or use of
imported products be limited to an amount
related to the volume or value of local
products that it exports.
2. TRIMS that are inconsistent with the obligations of general
elimination of quantitative restrictions provided for in
paragraph 1 of Article XI of GATT 1994 include those which are

mandatory or enforceable under domestic laws or under

administrative rulings, or compliance with which is necessary
to obtain an advantage, and which restrict:
(a) the importation by an enterprise of
products used in or related to the local
production that it exports;
(b) the importation by an enterprise of
products used in or related to its local
production by restricting its access to foreign
exchange inflows attributable to the
enterprise; or
(c) the exportation or sale for export
specified in terms of particular products, in
terms of volume or value of products, or in
terms of a preparation of volume or value of
its local production. (Annex to the Agreement
on Trade-Related Investment Measures, Vol.
27, Uruguay Round Legal Documents, p.
22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is
quoted as follows:
The products of the territory of any
contracting party imported into the territory
of any other contracting party shall be
accorded treatment no less favorable than
that accorded to like products of national
origin in respect of laws, regulations and
requirements affecting their internal sale,
offering for sale, purchase, transportation,
distribution or use, the provisions of this
paragraph shall not prevent the application of
differential internal transportation charges
which are based exclusively on the economic
operation of the means of transport and not
on the nationality of the product." (Article III,
GATT 1947, as amended by the Protocol
Modifying Part II, and Article XXVI of GATT, 14
September 1948, 62 UMTS 82-84 in relation to
paragraph 1(a) of the General Agreement on
Tariffs and Trade 1994, Vol. 1, Uruguay
Round, Legal Instruments p. 177, emphasis
supplied).

(b) In the area of trade related aspects of intellectual

property rights (TRIPS, for brevity):
Each Member shall accord to the nationals of
other Members treatment no less favourable
than that it accords to its own nationals with
regard to the protection of intellectual
property. . . (par. 1 Article 3, Agreement on
Trade-Related Aspect of Intellectual Property
rights, Vol. 31, Uruguay Round, Legal
Instruments, p. 25432 (emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and
subject to any conditions and qualifications
set out therein, each Member shall accord to
services and service suppliers of any other
Member, in respect of all measures affecting
the supply of services, treatment no less
favourable than it accords to its own like
services and service suppliers.
2. A Member may meet the requirement of
paragraph I by according to services and
service suppliers of any other Member, either
formally suppliers of any other Member,
either formally identical treatment or
formally different treatment to that it
accords to its own like services and service
suppliers.
3. Formally identical or formally different
treatment shall be considered to be less
favourable if it modifies the conditions of
completion in favour of services or service
suppliers of the Member compared to like
services or service suppliers of any other
Member. (Article XVII, General Agreement on
Trade in Services, Vol. 28, Uruguay Round
Legal Instruments, p. 22610 emphasis
supplied).
It is petitioners' position that the foregoing "national treatment" and "parity
provisions" of the WTO Agreement "place nationals and products of member

countries on the same footing as Filipinos and local products," in contravention

of the "Filipino First" policy of the Constitution. They allegedly render
meaningless the phrase "effectively controlled by Filipinos." The constitutional
conflict becomes more manifest when viewed in the context of the clear duty
imposed on the Philippines as a WTO member to ensure the conformity of its
laws, regulations and administrative procedures with its obligations as provided
in the annexed agreements. 20 Petitioners further argue that these provisions
contravene constitutional limitations on the role exports play in national
development and negate the preferential treatment accorded to Filipino labor,
domestic materials and locally produced goods.
On the other hand, respondents through the Solicitor General counter (1) that
such Charter provisions are not self-executing and merely set out general
policies; (2) that these nationalistic portions of the Constitution invoked by
petitioners should not be read in isolation but should be related to other
relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read
properly, the cited WTO clauses do not conflict with Constitution; and (4) that
the WTO Agreement contains sufficient provisions to protect developing
countries like the Philippines from the harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.
Declaration of Principles
Not Self-Executing
By its very title, Article II of the Constitution is a "declaration of principles and
state policies." The counterpart of this article in the 1935 Constitution 21 is
called the "basic political creed of the nation" by Dean Vicente Sinco. 22 These
principles in Article II are not intended to be self-executing principles ready for
enforcement through the courts. 23 They are used by the judiciary as aids or as
guides in the exercise of its power of judicial review, and by the legislature in
its enactment of laws. As held in the leading case of Kilosbayan, Incorporated
vs. Morato, 24 the principles and state policies enumerated in Article II and
some sections of Article XII are not "self-executing provisions, the disregard of
which can give rise to a cause of action in the courts. They do not embody
judicially enforceable constitutional rights but guidelines for legislation."
In the same light, we held in Basco vs. Pagcor 25 that broad constitutional
principles need legislative enactments to implement the, thus:
On petitioners' allegation that P.D. 1869 violates Sections 11
(Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article
II; Section 13 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution,
suffice it to state also that these are merely statements of
principles and policies. As such, they are basically not self-

executing, meaning a law should be passed by Congress to

clearly define and effectuate such principles.
In general, therefore, the 1935 provisions
were not intended to be self-executing
principles ready for enforcement through the
courts. They were rather directives addressed
to the executive and to the legislature. If the
executive and the legislature failed to heed
the directives of the article, the available
remedy was not judicial but political. The
electorate could express their displeasure
with the failure of the executive and the
legislature through the language of the
ballot. (Bernas, Vol. II, p. 2).
The reasons for denying a cause of action to an alleged infringement of board
constitutional principles are sourced from basic considerations of due process
and the lack of judicial authority to wade "into the uncharted ocean of social
and economic policy making." Mr. Justice Florentino P. Feliciano in his
concurring opinion in Oposa vs. Factoran, Jr., 26 explained these reasons as
follows:
My suggestion is simply that petitioners must, before the trial
court, show a more specific legal right a right cast in
language of a significantly lower order of generality than
Article II (15) of the Constitution that is or may be violated
by the actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can validly
render judgment grating all or part of the relief prayed for. To
my mind, the court should be understood as simply saying that
such a more specific legal right or rights may well exist in our
corpus of law, considering the general policy principles found
in the Constitution and the existence of the Philippine
Environment Code, and that the trial court should have given
petitioners an effective opportunity so to demonstrate,
instead of aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an
essential component of a cause of action be a specific,
operable legal right, rather than a constitutional or statutory
policy, for at least two (2) reasons. One is that unless the legal
right claimed to have been violated or disregarded is given
specification in operational terms, defendants may well be
unable to defend themselves intelligently and effectively; in
other words, there are due process dimensions to this matter.

The second is a broader-gauge consideration where a

specific violation of law or applicable regulation is not alleged
or proved, petitioners can be expected to fall back on the
expanded conception of judicial power in the second
paragraph of Section 1 of Article VIII of the Constitution which
reads:
Sec. 1. . . .
Judicial power includes the duty of the courts
of justice to settle actual controversies
involving rights which are legally demandable
and enforceable, and to determine whether
or not there has been a grave abuse of
discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis
supplied)
When substantive standards as general as "the right to a
balanced and healthy ecology" and "the right to health" are
combined with remedial standards as broad ranging as "a grave
abuse of discretion amounting to lack or excess of
jurisdiction," the result will be, it is respectfully submitted, to
propel courts into the uncharted ocean of social and economic
policy making. At least in respect of the vast area of
environmental protection and management, our courts have
no claim to special technical competence and experience and
professional qualification. Where no specific, operable norms
and standards are shown to exist, then the policy making
departments the legislative and executive departments
must be given a real and effective opportunity to fashion and
promulgate those norms and standards, and to implement
them before the courts should intervene.
Economic Nationalism Should Be Read with
Other Constitutional Mandates to Attain
Balanced Development of Economy
On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying
down general principles relating to the national economy and patrimony,
should be read and understood in relation to the other sections in said article,
especially Secs. 1 and 13 thereof which read:
Sec. 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. . . .
xxx xxx xxx
Sec. 13. The State shall pursue a trade policy that serves the
general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of
national economic development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the
nation for the benefit of the people; and
3. An expanding productivity as the key to raising the quality of life for all
especially the underprivileged.
With these goals in context, the Constitution then ordains the ideals of
economic nationalism (1) by expressing preference in favor of qualified
Filipinos "in the grant of rights, privileges and concessions covering the national
economy and patrimony" 27 and in the use of "Filipino labor, domestic materials
and locally-produced goods"; (2) by mandating the State to "adopt measures
that help make them competitive; 28 and (3) by requiring the State to "develop
a self-reliant and independent national economy effectively controlled by
Filipinos." 29 In similar language, the Constitution takes into account the
realities of the outside world as it requires the pursuit of "a trade policy that
serves the general welfare and utilizes all forms and arrangements of exchange
on the basis of equality ad reciprocity"; 30 and speaks of industries "which are
competitive in both domestic and foreign markets" as well as of the protection
of "Filipino enterprises against unfair foreign competition and trade practices."

It is true that in the recent case of Manila Prince Hotel vs. Government Service
Insurance System, et al., 31 this Court held that "Sec. 10, second par., Art. XII
of the 1987 Constitution is a mandatory, positive command which is complete
in itself and which needs no further guidelines or implementing laws or rule for
its enforcement. From its very words the provision does not require any
legislation to put it in operation. It is per se judicially enforceable." However,
as the constitutional provision itself states, it is enforceable only in regard to
"the grants of rights, privileges and concessions covering national economy and
patrimony" and not to every aspect of trade and commerce. It refers to
exceptions rather than the rule. The issue here is not whether this paragraph of
Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a
rule, there are enough balancing provisions in the Constitution to allow the
Senate to ratify the Philippine concurrence in the WTO Agreement. And we
hold that there are.
All told, while the Constitution indeed mandates a bias in favor of Filipino
goods, services, labor and enterprises, at the same time, it recognizes the need
for business exchange with the rest of the world on the bases of equality and
reciprocity and limits protection of Filipino enterprises only against foreign
competition and trade practices that are unfair. 32 In other words, the
Constitution did not intend to pursue an isolationist policy. It did not shut out
foreign investments, goods and services in the development of the Philippine
economy. While the Constitution does not encourage the unlimited entry of
foreign goods, services and investments into the country, it does not prohibit
them either. In fact, it allows an exchange on the basis of equality and
reciprocity, frowning only on foreign competition that is unfair.
WTO Recognizes Need to
Protect Weak Economies
Upon the other hand, respondents maintain that the WTO itself has some builtin advantages to protect weak and developing economies, which comprise the
vast majority of its members. Unlike in the UN where major states have
permanent seats and veto powers in the Security Council, in the WTO,
decisions are made on the basis of sovereign equality, with each member's vote
equal in weight to that of any other. There is no WTO equivalent of the UN
Security Council.
WTO decides by consensus whenever possible, otherwise,
decisions of the Ministerial Conference and the General
Council shall be taken by the majority of the votes cast,
except in cases of interpretation of the Agreement or waiver
of the obligation of a member which would require three
fourths vote. Amendments would require two thirds vote in
general. Amendments to MFN provisions and the Amendments
provision will require assent of all members. Any member may

withdraw from the Agreement upon the expiration of six

months from the date of notice of withdrawals. 33
Hence, poor countries can protect their common interests more effectively
through the WTO than through one-on-one negotiations with developed
countries. Within the WTO, developing countries can form powerful blocs to
push their economic agenda more decisively than outside the Organization.
This is not merely a matter of practical alliances but a negotiating strategy
rooted in law. Thus, the basic principles underlying the WTO Agreement
recognize the need of developing countries like the Philippines to "share in the
growth in international trade commensurate with the needs of their economic
development." These basic principles are found in the preamble 34 of the WTO
Agreement as follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and
economic endeavour should be conducted with a view to
raising standards of living, ensuring full employment and a
large and steadily growing volume of real income and effective
demand, and expanding the production of and trade in goods
and services, while allowing for the optimal use of the world's
resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the
environment and to enhance the means for doing so in a
manner consistent with their respective needs and concerns at
different levels of economic development,
Recognizing further that there is need for positive efforts
designed to ensure that developing countries, and especially
the least developed among them, secure a share in the growth
in international trade commensurate with the needs of their
economic development,
Being desirous of contributing to these objectives by entering
into reciprocal and mutually advantageous arrangements
directed to the substantial reduction of tariffs and other
barriers to trade and to the elimination of discriminatory
treatment in international trade relations,
Resolved, therefore, to develop an integrated, more viable
and durable multilateral trading system encompassing the
General Agreement on Tariffs and Trade, the results of past
trade liberalization efforts, and all of the results of the
Uruguay Round of Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the

objectives underlying this multilateral trading system, . . .
(emphasis supplied.)
Specific WTO Provisos
Protect Developing Countries
So too, the Solicitor General points out that pursuant to and consistent with
the foregoing basic principles, the WTO Agreement grants developing countries
a more lenient treatment, giving their domestic industries some protection
from the rush of foreign competition. Thus, with respect to tariffs in general,
preferential treatment is given to developing countries in terms of the amount
of tariff reduction and the period within which the reduction is to be spread
out. Specifically, GATT requires an average tariff reduction rate of 36% for
developed countries to be effected within a period of six (6) years while
developing countries including the Philippines are required to effect an
average tariff reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT requires developed countries to reduce
domestic support to agricultural products by 20% over six (6) years, as
compared to only 13% for developing countries to be effected within ten (10)
years.
In regard to export subsidy for agricultural products, GATT requires developed
countries to reduce their budgetary outlays for export subsidy by 36% and
export volumes receiving export subsidy by 21% within a period of six (6) years.
For developing countries, however, the reduction rate is only two-thirds of
that prescribed for developed countries and a longer period of ten (10) years
within which to effect such reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign
competition and trade practices including anti-dumping measures,
countervailing measures and safeguards against import surges. Where local
businesses are jeopardized by unfair foreign competition, the Philippines can
avail of these measures. There is hardly therefore any basis for the statement
that under the WTO, local industries and enterprises will all be wiped out and
that Filipinos will be deprived of control of the economy. Quite the contrary,
the weaker situations of developing nations like the Philippines have been
taken into account; thus, there would be no basis to say that in joining the
WTO, the respondents have gravely abused their discretion. True, they have
made a bold decision to steer the ship of state into the yet uncharted sea of
economic liberalization. But such decision cannot be set aside on the ground of
grave abuse of discretion, simply because we disagree with it or simply because
we believe only in other economic policies. As earlier stated, the Court in
taking jurisdiction of this case will not pass upon the advantages and
disadvantages of trade liberalization as an economic policy. It will only perform

its constitutional duty of determining whether the Senate committed grave

abuse of discretion.
Constitution Does Not
Rule Out Foreign Competition
Furthermore, the constitutional policy of a "self-reliant and independent
national economy" 35 does not necessarily rule out the entry of foreign
investments, goods and services. It contemplates neither "economic seclusion"
nor "mendicancy in the international community." As explained by
Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional
policy:
Economic self-reliance is a primary objective of a developing
country that is keenly aware of overdependence on external
assistance for even its most basic needs. It does not mean
autarky or economic seclusion; rather, it means avoiding
mendicancy in the international community. Independence
refers to the freedom from undue foreign control of the
national economy, especially in such strategic industries as in
the development of natural resources and public utilities. 36
The WTO reliance on "most favored nation," "national treatment," and "trade
without discrimination" cannot be struck down as unconstitutional as in fact
they are rules of equality and reciprocity that apply to all WTO members. Aside
from envisioning a trade policy based on "equality and reciprocity," 37 the
fundamental law encourages industries that are "competitive in both domestic
and foreign markets," thereby demonstrating a clear policy against a sheltered
domestic trade environment, but one in favor of the gradual development of
robust industries that can compete with the best in the foreign markets.
Indeed, Filipino managers and Filipino enterprises have shown capability and
tenacity to compete internationally. And given a free trade environment,
Filipino entrepreneurs and managers in Hongkong have demonstrated the
Filipino capacity to grow and to prosper against the best offered under a policy
of laissez faire.
Constitution Favors Consumers,
Not Industries or Enterprises
The Constitution has not really shown any unbalanced bias in favor of any
business or enterprise, nor does it contain any specific pronouncement that
Filipino companies should be pampered with a total proscription of foreign
competition. On the other hand, respondents claim that WTO/GATT aims to
make available to the Filipino consumer the best goods and services obtainable
anywhere in the world at the most reasonable prices. Consequently, the
question boils down to whether WTO/GATT will favor the general welfare of
the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the general
welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos' general welfare because it
will as promised by its promoters expand the country's exports and
generate more employment?
Will it bring more prosperity, employment, purchasing power and quality
products at the most reasonable rates to the Filipino public?
The responses to these questions involve "judgment calls" by our policy makers,
for which they are answerable to our people during appropriate electoral
exercises. Such questions and the answers thereto are not subject to judicial
pronouncements based on grave abuse of discretion.
Constitution Designed to Meet
Future Events and Contingencies
No doubt, the WTO Agreement was not yet in existence when the Constitution
was drafted and ratified in 1987. That does not mean however that the Charter
is necessarily flawed in the sense that its framers might not have anticipated
the advent of a borderless world of business. By the same token, the United
Nations was not yet in existence when the 1935 Constitution became effective.
Did that necessarily mean that the then Constitution might not have
contemplated a diminution of the absoluteness of sovereignty when the
Philippines signed the UN Charter, thereby effectively surrendering part of its
control over its foreign relations to the decisions of various UN organs like the
Security Council?
It is not difficult to answer this question. Constitutions are designed to meet
not only the vagaries of contemporary events. They should be interpreted to
cover even future and unknown circumstances. It is to the credit of its drafters
that a Constitution can withstand the assaults of bigots and infidels but at the
same time bend with the refreshing winds of change necessitated by unfolding
events. As one eminent political law writer and respected jurist 38 explains:
The Constitution must be quintessential rather than
superficial, the root and not the blossom, the base and framework only of the edifice that is yet to rise. It is but the core of
the dream that must take shape, not in a twinkling by
mandate of our delegates, but slowly "in the crucible of
Filipino minds and hearts," where it will in time develop its
sinews and gradually gather its strength and finally achieve its
substance. In fine, the Constitution cannot, like the goddess
Athena, rise full-grown from the brow of the Constitutional
Convention, nor can it conjure by mere fiat an instant Utopia.
It must grow with the society it seeks to re-structure and

march apace with the progress of the race, drawing from the
vicissitudes of history the dynamism and vitality that will
keep it, far from becoming a petrified rule, a pulsing, living
law attuned to the heartbeat of the nation.
Third Issue: The WTO Agreement and Legislative Power
The WTO Agreement provides that "(e)ach Member shall ensure the conformity
of its laws, regulations and administrative procedures with its obligations as
provided in the annexed Agreements." 39 Petitioners maintain that this
undertaking "unduly limits, restricts and impairs Philippine sovereignty,
specifically the legislative power which under Sec. 2, Article VI of the 1987
Philippine Constitution is vested in the Congress of the Philippines. It is an
assault on the sovereign powers of the Philippines because this means that
Congress could not pass legislation that will be good for our national interest
and general welfare if such legislation will not conform with the WTO
Agreement, which not only relates to the trade in goods . . . but also to the
flow of investments and money . . . as well as to a whole slew of agreements
on socio-cultural matters . . . 40
More specifically, petitioners claim that said WTO proviso derogates from the
power to tax, which is lodged in the Congress. 41 And while the Constitution
allows Congress to authorize the President to fix tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts, such
authority is subject to "specified limits and . . . such limitations and
restrictions" as Congress may provide, 42 as in fact it did under Sec. 401 of the
Tariff and Customs Code.
Sovereignty Limited by
International Law and Treaties
This Court notes and appreciates the ferocity and passion by which petitioners
stressed their arguments on this issue. However, while sovereignty has
traditionally been deemed absolute and all-encompassing on the domestic
level, it is however subject to restrictions and limitations voluntarily agreed to
by the Philippines, expressly or impliedly, as a member of the family of
nations. Unquestionably, the Constitution did not envision a hermit-type
isolation of the country from the rest of the world. In its Declaration of
Principles and State Policies, the Constitution "adopts the generally accepted
principles of international law as part of the law of the land, and adheres to
the policy of peace, equality, justice, freedom, cooperation and amity, with all
nations." 43 By the doctrine of incorporation, the country is bound by generally
accepted principles of international law, which are considered to be
automatically part of our own laws. 44 One of the oldest and most fundamental
rules in international law is pacta sunt servanda international agreements
must be performed in good faith. "A treaty engagement is not a mere moral
obligation but creates a legally binding obligation on the parties . . . A state

which has contracted valid international obligations is bound to make in its

legislations such modifications as may be necessary to ensure the fulfillment of
the obligations undertaken." 45
By their inherent nature, treaties really limit or restrict the absoluteness of
sovereignty. By their voluntary act, nations may surrender some aspects of
their state power in exchange for greater benefits granted by or derived from a
convention or pact. After all, states, like individuals, live with coequals, and in
pursuit of mutually covenanted objectives and benefits, they also commonly
agree to limit the exercise of their otherwise absolute rights. Thus, treaties
have been used to record agreements between States concerning such widely
diverse matters as, for example, the lease of naval bases, the sale or cession of
territory, the termination of war, the regulation of conduct of hostilities, the
formation of alliances, the regulation of commercial relations, the settling of
claims, the laying down of rules governing conduct in peace and the
establishment of international organizations. 46 The sovereignty of a state
therefore cannot in fact and in reality be considered absolute. Certain
restrictions enter into the picture: (1) limitations imposed by the very nature
of membership in the family of nations and (2) limitations imposed by treaty
stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its
destiny alone. The age of self-sufficient nationalism is over. The age of
interdependence is here." 47
UN Charter and Other Treaties
Limit Sovereignty
Thus, when the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the "concept of
sovereignty as auto-limitation." 47-A Under Article 2 of the UN Charter, "(a)ll
members shall give the United Nations every assistance in any action it takes in
accordance with the present Charter, and shall refrain from giving assistance to
any state against which the United Nations is taking preventive or enforcement
action." Such assistance includes payment of its corresponding share not merely
in administrative expenses but also in expenditures for the peace-keeping
operations of the organization. In its advisory opinion of July 20, 1961, the
International Court of Justice held that money used by the United Nations
Emergency Force in the Middle East and in the Congo were "expenses of the
United Nations" under Article 17, paragraph 2, of the UN Charter. Hence, all its
members must bear their corresponding share in such expenses. In this sense,
the Philippine Congress is restricted in its power to appropriate. It is compelled
to appropriate funds whether it agrees with such peace-keeping expenses or
not. So too, under Article 105 of the said Charter, the UN and its
representatives enjoy diplomatic privileges and immunities, thereby limiting
again the exercise of sovereignty of members within their own territory.
Another example: although "sovereign equality" and "domestic jurisdiction" of
all members are set forth as underlying principles in the UN Charter, such
provisos are however subject to enforcement measures decided by the Security
Council for the maintenance of international peace and security under Chapter

VII of the Charter. A final example: under Article 103, "(i)n the event of a
conflict between the obligations of the Members of the United Nations under
the present Charter and their obligations under any other international
agreement, their obligation under the present charter shall prevail," thus
unquestionably denying the Philippines as a member the sovereign power
to make a choice as to which of conflicting obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered into many other
international pacts both bilateral and multilateral that involve limitations
on Philippine sovereignty. These are enumerated by the Solicitor General in his
Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes
on income, where the Philippines agreed, among others, to
exempt from tax, income received in the Philippines by,
among others, the Federal Reserve Bank of the United States,
the Export/Import Bank of the United States, the Overseas
Private Investment Corporation of the United States. Likewise,
in said convention, wages, salaries and similar remunerations
paid by the United States to its citizens for labor and personal
services performed by them as employees or officials of the
United States are exempt from income tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among
others, for the avoidance of double taxation with respect to
taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the
avoidance of double taxation.
(d) Bilateral convention with the French Republic for the
avoidance of double taxation.
(e) Bilateral air transport agreement with Korea where the
Philippines agreed to exempt from all customs duties,
inspection fees and other duties or taxes aircrafts of South
Korea and the regular equipment, spare parts and supplies
arriving with said aircrafts.
(f) Bilateral air service agreement with Japan, where the
Philippines agreed to exempt from customs duties, excise
taxes, inspection fees and other similar duties, taxes or
charges fuel, lubricating oils, spare parts, regular equipment,
stores on board Japanese aircrafts while on Philippine soil.

(g) Bilateral air service agreement with Belgium where the

Philippines granted Belgian air carriers the same privileges as
those granted to Japanese and Korean air carriers under
separate air service agreements.
(h) Bilateral notes with Israel for the abolition of transit and
visitor visas where the Philippines exempted Israeli nationals
from the requirement of obtaining transit or visitor visas for a
sojourn in the Philippines not exceeding 59 days.
(i) Bilateral agreement with France exempting French
nationals from the requirement of obtaining transit and visitor
visa for a sojourn not exceeding 59 days.
(j) Multilateral Convention on Special Missions, where the
Philippines agreed that premises of Special Missions in the
Philippines are inviolable and its agents can not enter said
premises without consent of the Head of Mission concerned.
Special Missions are also exempted from customs duties, taxes
and related charges.
(k) Multilateral convention on the Law of Treaties. In this
convention, the Philippines agreed to be governed by the
Vienna Convention on the Law of Treaties.
(l) Declaration of the President of the Philippines accepting
compulsory jurisdiction of the International Court of Justice.
The International Court of Justice has jurisdiction in all legal
disputes concerning the interpretation of a treaty, any
question of international law, the existence of any fact which,
if established, would constitute a breach "of international
obligation."
In the foregoing treaties, the Philippines has effectively agreed to limit the
exercise of its sovereign powers of taxation, eminent domain and police power.
The underlying consideration in this partial surrender of sovereignty is the
reciprocal commitment of the other contracting states in granting the same
privilege and immunities to the Philippines, its officials and its citizens. The
same reciprocity characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear
disarmament, human rights, the environment, the law of the
sea, or trade, constrain domestic political sovereignty through
the assumption of external obligations. But unless anarchy in
international relations is preferred as an alternative, in most
cases we accept that the benefits of the reciprocal obligations
involved outweigh the costs associated with any loss of

political sovereignty. (T)rade treaties that structure relations

by reference to durable, well-defined substantive norms and
objective dispute resolution procedures reduce the risks of
larger countries exploiting raw economic power to bully
smaller countries, by subjecting power relations to some form
of legal ordering. In addition, smaller countries typically stand
to gain disproportionately from trade liberalization. This is
due to the simple fact that liberalization will provide access to
a larger set of potential new trading relationship than in case
of the larger country gaining enhanced success to the smaller
country's market. 48
The point is that, as shown by the foregoing treaties, a portion of sovereignty
may be waived without violating the Constitution, based on the rationale that
the Philippines "adopts the generally accepted principles of international law as
part of the law of the land and adheres to the policy of . . . cooperation and
amity with all nations."
Fourth Issue: The WTO Agreement and Judicial Power
Petitioners aver that paragraph 1, Article 34 of the General Provisions and
Basic Principles of the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) 49 intrudes on the power of the Supreme Court to
promulgate rules concerning pleading, practice and procedures. 50
To understand the scope and meaning of Article 34, TRIPS,
to restate its full text as follows:

51

it will be fruitful

Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the
infringement of the rights of the owner referred to in
paragraph 1 (b) of Article 28, if the subject matter of a patent
is a process for obtaining a product, the judicial authorities
shall have the authority to order the defendant to prove that
the process to obtain an identical product is different from the
patented process. Therefore, Members shall provide, in at
least one of the following circumstances, that any identical
product when produced without the consent of the patent
owner shall, in the absence of proof to the contrary, be
deemed to have been obtained by the patented process:
(a) if the product obtained by the patented
process is new;

(b) if there is a substantial likelihood that the

identical product was made by the process
and the owner of the patent has been unable
through reasonable efforts to determine the
process actually used.
2. Any Member shall be free to provide that the burden of
proof indicated in paragraph 1 shall be on the alleged infringer
only if the condition referred to in subparagraph (a) is fulfilled
or only if the condition referred to in subparagraph (b) is
fulfilled.
3. In the adduction of proof to the contrary, the legitimate
interests of defendants in protecting their manufacturing and
business secrets shall be taken into account.
From the above, a WTO Member is required to provide a rule of disputable (not
the words "in the absence of proof to the contrary") presumption that a product
shown to be identical to one produced with the use of a patented process shall
be deemed to have been obtained by the (illegal) use of the said patented
process, (1) where such product obtained by the patented product is new, or
(2) where there is "substantial likelihood" that the identical product was made
with the use of the said patented process but the owner of the patent could
not determine the exact process used in obtaining such identical product.
Hence, the "burden of proof" contemplated by Article 34 should actually be
understood as the duty of the alleged patent infringer to overthrow such
presumption. Such burden, properly understood, actually refers to the "burden
of evidence" (burden of going forward) placed on the producer of the identical
(or fake) product to show that his product was produced without the use of the
patented process.
The foregoing notwithstanding, the patent owner still has the "burden of proof"
since, regardless of the presumption provided under paragraph 1 of Article 34,
such owner still has to introduce evidence of the existence of the alleged
identical product, the fact that it is "identical" to the genuine one produced by
the patented process and the fact of "newness" of the genuine product or the
fact of "substantial likelihood" that the identical product was made by the
patented process.
The foregoing should really present no problem in changing the rules of
evidence as the present law on the subject, Republic Act No. 165, as amended,
otherwise known as the Patent Law, provides a similar presumption in cases of
infringement of patented design or utility model, thus:
Sec. 60. Infringement. Infringement of a design patent or of
a patent for utility model shall consist in unauthorized copying
of the patented design or utility model for the purpose of

trade or industry in the article or product and in the making,

using or selling of the article or product copying the patented
design or utility model. Identity or substantial identity with
the patented design or utility model shall constitute evidence
of copying. (emphasis supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a
disputable presumption applies only if (1) the product obtained by the
patented process in NEW or (2) there is a substantial likelihood that the
identical product was made by the process and the process owner has not been
able through reasonable effort to determine the process used. Where either of
these two provisos does not obtain, members shall be free to determine the
appropriate method of implementing the provisions of TRIPS within their own
internal systems and processes.
By and large, the arguments adduced in connection with our disposition of the
third issue derogation of legislative power will apply to this fourth issue
also. Suffice it to say that the reciprocity clause more than justifies such
intrusion, if any actually exists. Besides, Article 34 does not contain an
unreasonable burden, consistent as it is with due process and the concept of
adversarial dispute settlement inherent in our judicial system.
So too, since the Philippine is a signatory to most international conventions on
patents, trademarks and copyrights, the adjustment in legislation and rules of
procedure will not be substantial. 52
Fifth Issue: Concurrence Only in the WTO Agreement and
Not in Other Documents Contained in the Final Act
Petitioners allege that the Senate concurrence in the WTO Agreement and its
annexes but not in the other documents referred to in the Final Act, namely
the Ministerial Declaration and Decisions and the Understanding on
Commitments in Financial Services is defective and insufficient and thus
constitutes abuse of discretion. They submit that such concurrence in the WTO
Agreement alone is flawed because it is in effect a rejection of the Final Act,
which in turn was the document signed by Secretary Navarro, in representation
of the Republic upon authority of the President. They contend that the second
letter of the President to the Senate 53 which enumerated what constitutes the
Final Act should have been the subject of concurrence of the Senate.
"A final act, sometimes called protocol de cloture, is an instrument which
records the winding up of the proceedings of a diplomatic conference and
usually includes a reproduction of the texts of treaties, conventions,
recommendations and other acts agreed upon and signed by the
plenipotentiaries attending the conference." 54 It is not the treaty itself. It is
rather a summary of the proceedings of a protracted conference which may
have taken place over several years. The text of the "Final Act Embodying the

Results of the Uruguay Round of Multilateral Trade Negotiations" is contained in

just one page 55 in Vol. I of the 36-volume Uruguay Round of Multilateral Trade
Negotiations. By signing said Final Act, Secretary Navarro as representative of
the Republic of the Philippines undertook:
(a) to submit, as appropriate, the WTO Agreement for the
consideration of their respective competent authorities with a
view to seeking approval of the Agreement in accordance with
their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
The assailed Senate Resolution No. 97 expressed concurrence in exactly what
the Final Act required from its signatories, namely, concurrence of the Senate
in the WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need
for ratification. They were approved by the ministers by virtue of Article XXV: 1
of GATT which provides that representatives of the members can meet "to give
effect to those provisions of this Agreement which invoke joint action, and
generally with a view to facilitating the operation and furthering the objectives
of this Agreement." 56
The Understanding on Commitments in Financial Services also approved in
Marrakesh does not apply to the Philippines. It applies only to those 27
Members which "have indicated in their respective schedules of commitments
on standstill, elimination of monopoly, expansion of operation of existing
financial service suppliers, temporary entry of personnel, free transfer and
processing of information, and national treatment with respect to access to
payment, clearing systems and refinancing available in the normal course of
business." 57
On the other hand, the WTO Agreement itself expresses what multilateral
agreements are deemed included as its integral parts, 58 as follows:
Article II
Scope of the WTO
1. The WTO shall provide the common institutional frame-work
for the conduct of trade relations among its Members in
matters to the agreements and associated legal instruments
included in the Annexes to this Agreement.
2. The Agreements and associated legal instruments included
in Annexes 1, 2, and 3, (hereinafter referred to as "Multilateral

Agreements") are integral parts of this Agreement, binding on

all Members.
3. The Agreements and associated legal instruments included
in Annex 4 (hereinafter referred to as "Plurilateral Trade
Agreements") are also part of this Agreement for those
Members that have accepted them, and are binding on those
Members. The Plurilateral Trade Agreements do not create
either obligation or rights for Members that have not accepted
them.
4. The General Agreement on Tariffs and Trade 1994 as
specified in annex 1A (hereinafter referred to as "GATT 1994")
is legally distinct from the General Agreement on Tariffs and
Trade, dated 30 October 1947, annexed to the Final Act
adopted at the conclusion of the Second Session of the
Preparatory Committee of the United Nations Conference on
Trade and Employment, as subsequently rectified, amended or
modified (hereinafter referred to as "GATT 1947").
It should be added that the Senate was well-aware of what it was concurring in
as shown by the members' deliberation on August 25, 1994. After reading the
letter of President Ramos dated August 11, 1994, 59 the senators
of the Republic minutely dissected what the Senate was concurring in, as
follows: 60
THE CHAIRMAN: Yes. Now, the question of the validity of the
submission came up in the first day hearing of this Committee
yesterday. Was the observation made by Senator Taada that
what was submitted to the Senate was not the agreement on
establishing the World Trade Organization by the final act of
the Uruguay Round which is not the same as the agreement
establishing the World Trade Organization? And on that basis,
Senator Tolentino raised a point of order which, however, he
agreed to withdraw upon understanding that his suggestion for
an alternative solution at that time was acceptable. That
suggestion was to treat the proceedings of the Committee as
being in the nature of briefings for Senators until the question
of the submission could be clarified.
And so, Secretary Romulo, in effect, is the President
submitting a new . . . is he making a new submission which
improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut
and there should be no misunderstanding, it was his intention
to clarify all matters by giving this letter.

THE CHAIRMAN: Thank you.

Can this Committee hear from Senator Taada and later on
Senator Tolentino since they were the ones that raised this
question yesterday?
Senator Taada, please.
SEN. TAADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now
clearly appear that what is being submitted to the Senate for
ratification is not the Final Act of the Uruguay Round, but
rather the Agreement on the World Trade Organization as
well as the Ministerial Declarations and Decisions, and the
Understanding and Commitments in Financial Services.
I am now satisfied with the wording of the new submission of
President Ramos.
SEN. TAADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from
Senator Tolentino? And after him Senator Neptali Gonzales and
Senator Lina.
SEN. TOLENTINO, Mr. Chairman, I have not seen the new
submission actually transmitted to us but I saw the draft of
his earlier, and I think it now complies with the provisions of
the Constitution, and with the Final Act itself . The
Constitution does not require us to ratify the Final Act. It
requires us to ratify the Agreement which is now being
submitted. The Final Act itself specifies what is going to be
submitted to with the governments of the participants.
In paragraph 2 of the Final Act, we read and I quote:
By signing the present Final Act, the representatives agree:
(a) to submit as appropriate the WTO Agreement for the
consideration of the respective competent authorities with a
view to seeking approval of the Agreement in accordance with
their procedures.
In other words, it is not the Final Act that was agreed to be
submitted to the governments for ratification or acceptance

as whatever their constitutional procedures may provide but

it is the World Trade Organization Agreement. And if that is
the one that is being submitted now, I think it satisfies both
the Constitution and the Final Act itself .
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on
Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are
already a matter of record. And they had been adequately
reflected in the journal of yesterday's session and I don't see
any need for repeating the same.
Now, I would consider the new submission as an act ex
abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do
you want to make any comment on this?
SEN. LINA. Mr. President, I agree with the observation just
made by Senator Gonzales out of the abundance of question.
Then the new submission is, I believe, stating the obvious and
therefore I have no further comment to make.
Epilogue
In praying for the nullification of the Philippine ratification of the WTO
Agreement, petitioners are invoking this Court's constitutionally imposed duty
"to determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction" on the part of the Senate in giving
its concurrence therein via Senate Resolution No. 97. Procedurally, a writ of
certiorari grounded on grave abuse of discretion may be issued by the Court
under Rule 65 of the Rules of Court when it is amply shown that petitioners
have no other plain, speedy and adequate remedy in the ordinary course of
law.
By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. 61 Mere abuse of discretion is
not enough. It must be grave abuse of discretion as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and must be so patent and so gross as to amount to an evasion of a
positive duty or to a virtual refusal to perform the duty enjoined or to act at all
in contemplation of law. 62 Failure on the part of the petitioner to show grave
abuse of discretion will result in the dismissal of the petition. 63

In rendering this Decision, this Court never forgets that the Senate, whose act
is under review, is one of two sovereign houses of Congress and is thus entitled
to great respect in its actions. It is itself a constitutional body independent and
coordinate, and thus its actions are presumed regular and done in good faith.
Unless convincing proof and persuasive arguments are presented to overthrow
such presumptions, this Court will resolve every doubt in its favor. Using the
foregoing well-accepted definition of grave abuse of discretion and the
presumption of regularity in the Senate's processes, this Court cannot find any
cogent reason to impute grave abuse of discretion to the Senate's exercise of
its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article
VII of the Constitution. 64
It is true, as alleged by petitioners, that broad constitutional principles require
the State to develop an independent national economy effectively controlled
by Filipinos; and to protect and/or prefer Filipino labor, products, domestic
materials and locally produced goods. But it is equally true that such principles
while serving as judicial and legislative guides are not in themselves
sources of causes of action. Moreover, there are other equally fundamental
constitutional principles relied upon by the Senate which mandate the pursuit
of a "trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity" and the
promotion of industries "which are competitive in both domestic and foreign
markets," thereby justifying its acceptance of said treaty. So too, the alleged
impairment of sovereignty in the exercise of legislative and judicial powers is
balanced by the adoption of the generally accepted principles of international
law as part of the law of the land and the adherence of the Constitution to the
policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly
gave its consent to the WTO Agreement thereby making it "a part of the law of
the land" is a legitimate exercise of its sovereign duty and power. We find no
"patent and gross" arbitrariness or despotism "by reason of passion or personal
hostility" in such exercise. It is not impossible to surmise that this Court, or at
least some of its members, may even agree with petitioners that it is more
advantageous to the national interest to strike down Senate Resolution No. 97.
But that is not a legal reason to attribute grave abuse of discretion to the
Senate and to nullify its decision. To do so would constitute grave abuse in the
exercise of our own judicial power and duty. Ineludably, what the Senate did
was a valid exercise of its authority. As to whether such exercise was wise,
beneficial or viable is outside the realm of judicial inquiry and review. That is a
matter between the elected policy makers and the people. As to whether the
nation should join the worldwide march toward trade liberalization and
economic globalization is a matter that our people should determine in electing
their policy makers. After all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends,
predicts an Asian Renaissance 65 where "the East will become the dominant

region of the world economically, politically and culturally in the next

century." He refers to the "free market" espoused by WTO as the "catalyst" in
this coming Asian ascendancy. There are at present about 31 countries
including China, Russia and Saudi Arabia negotiating for membership in the
WTO. Notwithstanding objections against possible limitations on national
sovereignty, the WTO remains as the only viable structure for multilateral
trading and the veritable forum for the development of international trade
law. The alternative to WTO is isolation, stagnation, if not economic selfdestruction. Duly enriched with original membership, keenly aware of the
advantages and disadvantages of globalization with its on-line experience, and
endowed with a vision of the future, the Philippines now straddles the
crossroads of an international strategy for economic prosperity and stability in
the new millennium. Let the people, through their duly authorized elected
officers, make their free choice.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 92024 November 9, 1990
CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,
vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY,
LUZON PETROCHEMICAL CORPORATION, and PILIPINAS SHELL CORPORATION,
respondents.
Abraham C. La Vina for petitioner.
Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell
Petroleum Corporation.

GUTIERREZ, JR., J.:

This is a petition to annul and set aside the decision of the Board of
Investments (BOI)/Department of Trade and Industry (DTI) approving the
transfer of the site of the proposed petrochemical plant from Bataan to
Batangas and the shift of feedstock for that plant from naphtha only to naphtha
and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled

"Congressman Enrique T. Garcia v. the Board of Investments", September 7,
1989, where this Court issued a decision, ordering the BOI as follows:
WHEREFORE, the petition for certiorari is granted. The Board
of Investments is ordered: (1) to publish the amended
application for registration of the Bataan Petrochemical
Corporation, (2) to allow the petitioner to have access to its
records on the original and amended applications for
registration, as a petrochemical manufacturer, of the
respondent Bataan Petrochemical Corporation, excluding,
however, privileged papers containing its trade secrets and
other business and financial information, and (3) to set for
hearing the petitioner's opposition to the amended application
in order that he may present at such hearing all the evidence
in his possession in support of his opposition to the transfer of
the site of the BPC petrochemical plant to Batangas province.
The hearing shall not exceed a period of ten (10) days from
the date fixed by the BOI, notice of which should be served by
personal service to the petitioner through counsel, at least
three (3) days in advance. The hearings may be held from day
to day for a period of ten (10) days without postponements.
The petition for a writ of prohibition or preliminary injunction
is denied. No costs. (Rollo, pages 450-451)
However, acting on the petitioner's motion for partial reconsideration asking
that we rule on the import of P.D. Nos. 949 and 1803 and on the foreign
investor's claim of right of final choice of plant site, in the light of the
provisions of the Constitution and the Omnibus Investments Code of 1987, this
Court on October 24, 1989, made the observation that P.D. Nos. 949 and 1803
"do not provide that the Limay site should be the only petrochemical zone in
the country, nor prohibit the establishment of a petrochemical plant elsewhere
in the country, that the establishment of a petrochemical plant in Batangas
does not violate P.D. No. 949 and P.D. No. 1803.
Our resolution skirted the issue of whether the investor given the initial
inducements and other circumstances surrounding its first choice of plant site
may change it simply because it has the final choice on the matter. The Court
merely ruled that the petitioner appears to have lost interest in the case by his
failure to appear at the hearing that was set by the BOI after receipt of the
decision, so he may be deemed to have waived the fruit of the judgment. On
this ground, the motion for partial reconsideration was denied.
A motion for reconsideration of said resolution was filed by the petitioner
asking that we resolve the basic issue of whether or not the foreign investor
has the right of final choice of plant site; that the non-attendance of the
petitioner at the hearing was because the decision was not yet final and

executory; and that the petitioner had not therefor waived the right to a
hearing before the BOI.
In the Court's resolution dated January 17, 1990, we stated:
Does the investor have a "right of final choice" of plant site?
Neither under the 1987 Constitution nor in the Omnibus
Investments Code is there such a 'right of final choice.' In the
first place, the investor's choice is subject to processing and
approval or disapproval by the BOI (Art. 7, Chapter II, Omnibus
Investments Code). By submitting its application and amended
application to the BOI for approval, the investor recognizes
the sovereign prerogative of our Government, through the BOI,
to approve or disapprove the same after determining whether
its proposed project will be feasible, desirable and beneficial
to our country. By asking that his opposition to the LPC's
amended application be heard by the BOI, the petitioner
likewise acknowledges that the BOI, not the investor, has the
last word or the "final choice" on the matter.
Secondly, as this case has shown, even a choice that had been
approved by the BOI may not be 'final', for supervening
circumstances and changes in the conditions of a place may
dictate a corresponding change in the choice of plant site in
order that the project will not fail. After all, our country will
benefit only when a project succeeds, not when it fails.
(Rollo, pp. 538-539)
Nevertheless, the motion for reconsideration of the petitioner was denied.
A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and
this ponente voted to grant the motion for reconsideration stating that the
hearing set by the BOI was premature as the decision of the Court was not yet
final and executory; that as contended by the petitioner the Court must first
rule on whether or not the investor has the right of final choice of plant site for
if the ruling is in the affirmative, the hearing would be a useless exercise; that
in the October 19, 1989 resolution, the Court while upholding validity of the
transfer of the plant site did not rule on the issue of who has the final choice;
that they agree with the observation of the majority that "the investor has no
final choice either under the 1987 Constitution or in the Omnibus Investments
Code and that it is the BOI who decides for the government" and that the plea
of the petitioner should be granted to give him the chance to show the justness
of his claim and to enable the BOI to give a second hard look at the matter.
Thus, the herein petition which relies on the ruling of the Court in the
resolution of January 17, 1990 in G.R. No. 88637 that the investor has no right
of final choice under the 1987 Constitution and the Omnibus Investments Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain
located in Lamao, Limay, Bataan were reserved for the Petrochemical
Industrial Zone under the administration, management, and ownership of the
Philippine National Oil Company (PNOC).
The Bataan Refining Corporation (BRC) is a wholly government owned
corporation, located at Bataan. It produces 60% of the national output of
naphtha.
Taiwanese investors in a petrochemical project formed the Bataan
Petrochemical Corporation (BPC) and applied with BOI for registration as a new
domestic producer of petrochemicals. Its application specified Bataan as the
plant site. One of the terms and conditions for registration of the project was
the use of "naphtha cracker" and "naphtha" as feedstock or fuel for its
petrochemical plant. The petrochemical plant was to be a joint venture with
PNOC. BPC was issued a certificate of registration on February 24, 1988 by BOI.
BPC was given pioneer status and accorded fiscal and other incentives by BOI,
like: (1) exemption from taxes on raw materials, (2) repatriation of the entire
proceeds of liquidation investments in currency originally made and at the
exchange rate obtaining at the time of repatriation; and (3) remittance of
earnings on investments. As additional incentive, the House of Representatives
approved a bill introduced by the petitioner eliminating the 48% ad valorem tax
on naphtha if and when it is used as raw materials in the petrochemical plant.
(G.R. No. 88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-442)
However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation,
the major investor in BPC, personally delivered to Trade Secretary Jose
Concepcion a letter dated January 25, 1989 advising him of BPC's desire to
amend the original registration certification of its project by changing the job
site from Limay, Bataan, to Batangas. The reason adduced for the transfer was
the insurgency and unstable labor situation, and the presence in Batangas of a
huge liquefied petroleum gas (LPG) depot owned by the Philippine Shell
Corporation.
The petitioner vigorously opposed the proposal and no less than President
Aquino expressed her preference that the plant be established in Bataan in a
conference with the Taiwanese investors, the Secretary of National Defense
and The Chief of Staff of the Armed Forces.
Despite speeches in the Senate and House opposing the Transfer of the project
to Batangas, BPC filed on April 11, 1989 its request for approval of the
amendments. Its application is as follows: "(l) increasing the investment
amount from US $220 million to US $320 million; (2) increasing the production
capacity of its naphtha cracker, polythylene plant and polypropylene plant; (3)
changing the feedstock from naphtha only to "naphtha and/or liquefied

petroleum gas;" and (4) transferring the job site from Limay, Bataan, to
Batangas. (Annex B to Petition; Rollo, p. 25)
Notwithstanding opposition from any quarters and the request of the petitioner
addressed to Secretary Concepcion to be furnished a copy of the proposed
amendment with its attachments which was denied by the BOI on May 25, 1989,
BOI approved the revision of the registration of BPC's petrochemical project.
(Petition, Annex F; Rollo, p. 32; See pp. 4 to 6, Decision in G.R. No. 88637;
supra.)
BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways
and Means of the Senate asserted that:
The BOI has taken a public position preferring Bataan over
Batangas as the site of the petrochemical complex, as this
would provide a better distribution of industries around the
Metro Manila area. ... In advocating the choice of Bataan as
the project site for the petrochemical complex, the BOI,
however, made it clear, and I would like to repeat this that
the BOI made it clear in its view that the BOI or the
government for that matter could only recomend as to where
the project should be located. The BOI recognizes and respect
the principle that the final chouce is still with the proponent
who would in the final analysis provide the funding or risk
capital for the project. (Petition, P. 13; Annex D to the
petition)
This position has not been denied by BOI in its pleadings in G.R. No. 88637 and
in the present petition.
Section 1, Article VIII of the 1987 Constitution provides:
SECTION 1. The judicial power shall be vested in one Supreme
Court and in such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
There is before us an actual controversy whether the petrochemical plant
should remain in Bataan or should be transferred to Batangas, and whether its
feedstock originally of naphtha only should be changed to naphtha and/or
liquefied petroleum gas as the approved amended application of the BPC, now

Luzon Petrochemical Corporation (LPC), shows. And in the light of the

categorical admission of the BOI that it is the investor who has the final choice
of the site and the decision on the feedstock, whether or not it constitutes a
grave abuse of discretion for the BOI to yield to the wishes of the investor,
national interest notwithstanding.
We rule that the Court has a constitutional duty to step into this controversy
and determine the paramount issue. We grant the petition.
First, Bataan was the original choice as the plant site of the BOI to which the
BPC agreed. That is why it organized itself into a corporation bearing the name
Bataan. There is available 576 hectares of public land precisely reserved as the
petrochemical zone in Limay, Bataan under P.D. No. 1803. There is no need to
buy expensive real estate for the site unlike in the proposed transfer to
Batangas. The site is the result of careful study long before any covetous
interests intruded into the choice. The site is ideal. It is not unduly constricted
and allows for expansion. The respondents have not shown nor reiterated that
the alleged peace and order situation in Bataan or unstable labor situation
warrant a transfer of the plant site to Batangas. Certainly, these were taken
into account when the firm named itself Bataan Petrochemical Corporation.
Moreover, the evidence proves the contrary.
Second, the BRC, a government owned Filipino corporation, located in Bataan
produces 60% of the national output of naphtha which can be used as feedstock
for the plant in Bataan. It can provide the feedstock requirement of the plant.
On the other hand, the country is short of LPG and there is need to import the
same for use of the plant in Batangas. The local production thereof by Shell can
hardly supply the needs of the consumers for cooking purposes. Scarce dollars
will be diverted, unnecessarily, from vitally essential projects in order to feed
the furnaces of the transferred petrochemical plant.
Third, naphtha as feedstock has been exempted by law from the ad valorem
tax by the approval of Republic Act No. 6767 by President Aquino but excluding
LPG from exemption from ad valorem tax. The law was enacted specifically for
the petrochemical industry. The policy determination by both Congress and the
President is clear. Neither BOI nor a foreign investor should disregard or
contravene expressed policy by shifting the feedstock from naphtha to LPG.
Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of
the State to "regulate and exercise authority over foreign investments within
its national jurisdiction and in accordance with its national goals and
priorities." The development of a self-reliant and independent national
economy effectively controlled by Filipinos is mandated in Section 19, Article II
of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development

of the national economy in consonance with the principles and objectives of
economic nationalism" is the set goal of government.
Fifth, with the admitted fact that the investor is raising the greater portion of
the capital for the project from local sources by way of loan which led to the
so-called "petroscam scandal", the capital requirements would be greatly
minimized if LPC does not have to buy the land for the project and its
feedstock shall be limited to naphtha which is certainly more economical, more
readily available than LPG, and does not have to be imported.
Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in
the venture to the great benefit and advantage of the government which shall
have a participation in the management of the project instead of a firm which
is a huge multinational corporation.
In the light of all the clear advantages manifest in the plant's remaining in
Bataan, practically nothing is shown to justify the transfer to Batangas except a
near-absolute discretion given by BOI to investors not only to freely choose the
site but to transfer it from their own first choice for reasons which remain
murky to say the least.
And this brings us to a prime consideration which the Court cannot rightly
ignore.

A petrochemical industry is not an ordinary investment opportunity. It should

not be treated like a garment or embroidery firm, a shoe-making venture, or
even an assembler of cars or manufacturer of computer chips, where the BOI
reasoning may be accorded fuller faith and credit. The petrochemical industry
is essential to the national interest. In other ASEAN countries like Indonesia and
Malaysia, the government superintends the industry by controlling the
upstream or cracker facility.
In this particular BPC venture, not only has the Government given
unprecedented favors, among them:
(1) For an initial authorized capital of only P20 million, the
Central Bank gave an eligible relending credit or relending
facility worth US $50 million and a debt to swap arrangement
for US $30 million or a total accommodation of US $80 million
which at current exchange rates is around P2080 million.
(2) A major part of the company's capitalization shall not come
from foreign sources but from loans, initially a Pl Billion
syndicated loan, to be given by both government banks and a
consortium of Philippine private banks or in common parlance,
a case of 'guiniguisa sa sariling manteca.'
(3) Tax exemptions and privileges were given as part of its
'preferred pioneer status.'

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx
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.
xxx xxx xxx
Every provision of the Constitution on the national economy and patrimony is
infused with the spirit of national interest. The non-alienation of natural
resources, the State's full control over the development and utilization of our
scarce resources, agreements with foreigners being based on real contributions
to the economic growth and general welfare of the country and the regulation
of foreign investments in accordance with national goals and priorities are too
explicit not to be noticed and understood.

(4) Loan applications of other Philippine firms will be crowded

out of the Asian Development Bank portfolio because of the
petrochemical firm's massive loan request. (Taken from the
proceedings before the Senate Blue Ribbon Committee).
but through its regulatory agency, the BOI, it surrenders even the power to
make a company abide by its initial choice, a choice free from any suspicion of
unscrupulous machinations and a choice which is undoubtedly in the best
interests of the Filipino people.
The Court, therefore, holds and finds that the BOI committed a grave abuse of
discretion in approving the transfer of the petrochemical plant from Bataan to
Batangas and authorizing the change of feedstock from naphtha only to
naphtha and/or LPG for the main reason that the final say is in the investor all
other circumstances to the contrary notwithstanding. No cogent advantage to
the government has been shown by this transfer. This is a repudiation of the
independent policy of the government expressed in numerous laws and the
Constitution to run its own affairs the way it deems best for the national
interest.

One can but remember the words of a great Filipino leader who in part said he
would not mind having a government run like hell by Filipinos than one
subservient to foreign dictation. In this case, it is not even a foreign
government but an ordinary investor whom the BOI allows to dictate what we
shall do with our heritage.

adding specifically that "the State shall regulate the acquisition, ownership,
use, enjoyment and disposition of private property and equitably diffuse
property ownership and profits." 2 Significantly, there was also the specific
injunction to "formulate and implement an agrarian reform program aimed at
emancipating the tenant from the bondage of the soil." 3

WHEREFORE, the petition is hereby granted. The decision of the respondent

Board of Investments approving the amendment of the certificate of
registration of the Luzon Petrochemical Corporation on May 23, 1989 under its
Resolution No. 193, Series of 1989, (Annex F to the Petition) is SET ASIDE as
NULL and VOID. The original certificate of registration of BPC' (now LPC) of
February 24, 1988 with Bataan as the plant site and naphtha as the feedstock
is, therefore, ordered maintained.

The Constitution of 1987 was not to be outdone. Besides echoing these

sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere
provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:

SO ORDERED.
Association of Small Landowners in the Phils. vs. Sec. of DAR
CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged
Hercules for his life on his way to Mycenae after performing his eleventh labor.
The two wrestled mightily and Hercules flung his adversary to the ground
thinking him dead, but Antaeus rose even stronger to resume their struggle.
This happened several times to Hercules' increasing amazement. Finally, as
they continued grappling, it dawned on Hercules that Antaeus was the son of
Gaea and could never die as long as any part of his body was touching his
Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air,
beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating
touch even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell
of the elemental forces of life and death, of men and women who, like Antaeus
need the sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the
distribution of this precious resource among our people. But it is more than a
slogan. Through the brooding centuries, it has become a battle-cry dramatizing
the increasingly urgent demand of the dispossessed among us for a plot of
earth as their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social
justice to "insure the well-being and economic security of all the people," 1
especially the less privileged. In 1973, the new Constitution affirmed this goal

SEC. 4. The State shall, by law, undertake an agrarian reform

program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively
the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the
State shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations
and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right
of small landowners. The State shall further provide incentives
for voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land
Reform Code, had already been enacted by the Congress of the Philippines on
August 8, 1963, in line with the above-stated principles. This was substantially
superseded almost a decade later by P.D. No. 27, which was promulgated on
October 21, 1972, along with martial law, to provide for the compulsory
acquisition of private lands for distribution among tenant-farmers and to
specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even energized
the thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C.
Aquino issued E.O. No. 228, declaring full land ownership in favor of the
beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued
lands covered by the decree as well as the manner of their payment. This was
followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a
comprehensive agrarian reform program (CARP), and E.O. No. 229, providing
the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started its own
deliberations, including extensive public hearings, on the improvement of the
interests of farmers. The result, after almost a year of spirited debate, was the

enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian

Reform Law of 1988, which President Aquino signed on June 10, 1988. This law,
while considerably changing the earlier mentioned enactments, nevertheless
gives them suppletory effect insofar as they are not inconsistent with its
provisions. 4

The petitioners also maintain that in declaring the beneficiaries under P.D. No.
27 to be the owners of the lands occupied by them, E.O. No. 228 ignored
judicial prerogatives and so violated due process. Worse, the measure would
not solve the agrarian problem because even the small farmers are deprived of
their lands and the retention rights guaranteed by the Constitution.

The above-captioned cases have been consolidated because they involve

common legal questions, including serious challenges to the constitutionality of
the several measures mentioned above. They will be the subject of one
common discussion and resolution, The different antecedents of each case will
require separate treatment, however, and will first be explained hereunder.

In his Comment, the Solicitor General stresses that P.D. No. 27 has already
been upheld in the earlier cases of Chavez v. Zobel, 7 Gonzales v. Estrella, 8
and Association of Rice and Corn Producers of the Philippines, Inc. v. The
National Land Reform Council. 9 The determination of just compensation by
the executive authorities conformably to the formula prescribed under the
questioned order is at best initial or preliminary only. It does not foreclose
judicial intervention whenever sought or warranted. At any rate, the challenge
to the order is premature because no valuation of their property has as yet
been made by the Department of Agrarian Reform. The petitioners are also not
proper parties because the lands owned by them do not exceed the maximum
retention limit of 7 hectares.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos.
228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants
and owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland
worked by four tenants and owned by petitioner Augustin Hermano, Jr. The
tenants were declared full owners of these lands by E.O. No. 228 as qualified
farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on
grounds inter alia of separation of powers, due process, equal protection and
the constitutional limitation that no private property shall be taken for public
use without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of
Article XIII, Section 4, of the Constitution, for failure to provide for retention
limits for small landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners
argue that the same may be made only by a court of justice and not by the
President of the Philippines. They invoke the recent cases of EPZA v. Dulay 5
and Manotok v. National Food Authority. 6 Moreover, the just compensation
contemplated by the Bill of Rights is payable in money or in cash and not in the
form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order
also deprives the petitioners of their property rights as protected by due
process. The equal protection clause is also violated because the order places
the burden of solving the agrarian problems on the owners only of agricultural
lands. No similar obligation is imposed on the owners of other properties.

Replying, the petitioners insist they are proper parties because P.D. No. 27
does not provide for retention limits on tenanted lands and that in any event
their petition is a class suit brought in behalf of landowners with landholdings
below 24 hectares. They maintain that the determination of just compensation
by the administrative authorities is a final ascertainment. As for the cases
invoked by the public respondent, the constitutionality of P.D. No. 27 was
merely assumed in Chavez, while what was decided in Gonzales was the
validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D.
No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly
repealed by R.A. No. 6657. Nevertheless, this statute should itself also be
declared unconstitutional because it suffers from substantially the same
infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by
Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR
was insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite a
compromise agreement he had reached with his tenant on the payment of
rentals. In a subsequent motion dated April 10, 1989, he adopted the
allegations in the basic amended petition that the above- mentioned
enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc.
is an organization composed of 1,400 planter-members. This petition seeks to
prohibit the implementation of Proc. No. 131 and E.O. No. 229.

The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not
the President. Although they agree that the President could exercise legislative
power until the Congress was convened, she could do so only to enact
emergency measures during the transition period. At that, even assuming that
the interim legislative power of the President was properly exercised, Proc.
No. 131 and E.O. No. 229 would still have to be annulled for violating the
constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as
the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive
Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts
of sale of ill-gotten wealth received through the Presidential Commission on
Good Government and such other sources as government may deem
appropriate. The amounts collected and accruing to this special fund shall be
considered automatically appropriated for the purpose authorized in this
Proclamation the amount appropriated is in futuro, not in esse. The money
needed to cover the cost of the contemplated expropriation has yet to be
raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of
just compensation as it is traditionally understood, i.e., with money and in full,
but no such payment is contemplated in Section 5 of the E.O. No. 229. On the
contrary, Section 6, thereof provides that the Land Bank of the Philippines
"shall compensate the landowner in an amount to be established by the
government, which shall be based on the owner's declaration of current fair
market value as provided in Section 4 hereof, but subject to certain controls to
be defined and promulgated by the Presidential Agrarian Reform Council." This
compensation may not be paid fully in money but in any of several modes that
may consist of part cash and part bond, with interest, maturing periodically, or
direct payment in cash or bond as may be mutually agreed upon by the
beneficiary and the landowner or as may be prescribed or approved by the
PARC.
The petitioners also argue that in the issuance of the two measures, no effort
was made to make a careful study of the sugar planters' situation. There is no
tenancy problem in the sugar areas that can justify the application of the CARP
to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with
problems exclusively their own, their right to equal protection has been
violated.

A motion for intervention was filed on August 27,1987 by the National

Federation of Sugarcane Planters (NASP) which claims a membership of at least
20,000 individual sugar planters all over the country. On September 10, 1987,
another motion for intervention was filed, this time by Manuel Barcelona, et
al., representing coconut and riceland owners. Both motions were granted by
the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian
Reform Program and that, in any event, the appropriation is invalid because of
uncertainty in the amount appropriated. Section 2 of Proc. No. 131 and
Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty
billion pesos and thus specifies the minimum rather than the maximum
authorized amount. This is not allowed. Furthermore, the stated initial amount
has not been certified to by the National Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to
establish by clear and convincing evidence the necessity for the exercise of the
powers of eminent domain, and the violation of the fundamental right to own
property.
The petitioners also decry the penalty for non-registration of the lands, which
is the expropriation of the said land for an amount equal to the government
assessor's valuation of the land for tax purposes. On the other hand, if the
landowner declares his own valuation he is unjustly required to immediately
pay the corresponding taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the
presumption of constitutionality in favor of Proc. No. 131 and E.O. No. 229. He
also justifies the necessity for the expropriation as explained in the "whereas"
clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general
survey on the people's opinion thereon are not indispensable prerequisites to
its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have
failed to show that they belong to a different class and should be differently
treated. The Comment also suggests the possibility of Congress first distributing
public agricultural lands and scheduling the expropriation of private
agricultural lands later. From this viewpoint, the petition for prohibition would
be premature.
The public respondent also points out that the constitutional prohibition is
against the payment of public money without the corresponding appropriation.
There is no rule that only money already in existence can be the subject of an
appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian
Reform Fund, although denominated as an initial amount, is actually the

maximum sum appropriated. The word "initial" simply means that additional
amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his
own behalf, assailing the constitutionality of E.O. No. 229. In addition to the
arguments already raised, Serrano contends that the measure is
unconstitutional because:

(3) The petitioner is denied the right of maximum retention

provided for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly
before Congress convened is anomalous and arbitrary, besides violating the
doctrine of separation of powers. The legislative power granted to the
President under the Transitory Provisions refers only to emergency measures
that may be promulgated in the proper exercise of the police power.

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not
expressed in the title;
(3) The power of the President to legislate was terminated on
July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the
National Treasury did not originate from the House of
Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian
Reform, in violation of due process and the requirement for just compensation,
placed his landholding under the coverage of Operation Land Transfer.
Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his
small landholding under Operation Land transfer and asked for the recall and
cancellation of the Certificates of Land Transfer in the name of the private
respondents. He claims that on December 24, 1986, his petition was denied
without hearing. On February 17, 1987, he filed a motion for reconsideration,
which had not been acted upon when E.O. Nos. 228 and 229 were issued. These
orders rendered his motion moot and academic because they directly effected
the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the
President of the Philippines.
(2) The said executive orders are violative of the
constitutional provision that no private property shall be taken
without due process or just compensation.

The petitioner also invokes his rights not to be deprived of his property without
due process of law and to the retention of his small parcels of riceholding as
guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues
that, besides denying him just compensation for his land, the provisions of E.O.
No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary
after October 21, 1972 shall be considered as advance
payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention
that the inclusion of even small landowners in the program along with other
landowners with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian
Reform is still unresolved. As for the validity of the issuance of E.O. Nos. 228
and 229, he argues that they were enacted pursuant to Section 6, Article XVIII
of the Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the
first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was
deemed the owner of the land he was tilling. The leasehold rentals paid after
that date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion
he filed was resolved on December 14, 1987. An appeal to the Office of the
President would be useless with the promulgation of E.O. Nos. 228 and 229,
which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27
to owners of rice and corn lands not exceeding seven hectares as long as they

are cultivating or intend to cultivate the same. Their respective lands do not
exceed the statutory limit but are occupied by tenants who are actually
cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D.
No. 27:
No tenant-farmer in agricultural lands primarily devoted to
rice and corn shall be ejected or removed from his
farmholding until such time as the respective rights of the
tenant- farmers and the landowner shall have been
determined in accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to
enjoy their right of retention because the Department of Agrarian Reform has
so far not issued the implementing rules required under the above-quoted
decree. They therefore ask the Court for a writ of mandamus to compel the
respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who own
other agricultural lands of more than 7 hectares in aggregate area or lands used
for residential, commercial, industrial or other purposes from which they
derive adequate income for their family. And even assuming that the
petitioners do not fall under its terms, the regulations implementing P.D. No.
27 have already been issued, to wit, the Memorandum dated July 10, 1975
(Interim Guidelines on Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81
dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27
and Retention by Small Landowners), and DAR Administrative Order No. 1,
series of 1985 (Providing for a Cut-off Date for Landowners to Apply for
Retention and/or to Protest the Coverage of their Landholdings under
Operation Land Transfer pursuant to P.D. No. 27). For failure to file the
corresponding applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the
President of the Philippines. Moreover, the issuance of the implementing rules,
assuming this has not yet been done, involves the exercise of discretion which
cannot be controlled through the writ of mandamus. This is especially true if
this function is entrusted, as in this case, to a separate department of the
government.

In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended to
cover them also, the said measures are nevertheless not in force because they
have not been published as required by law and the ruling of this Court in
Tanada v. Tuvera. 10 As for LOI 474, the same is ineffective for the additional
reason that a mere letter of instruction could not have repealed the
presidential decree.
I
Although holding neither purse nor sword and so regarded as the weakest of
the three departments of the government, the judiciary is nonetheless vested
with the power to annul the acts of either the legislative or the executive or of
both when not conformable to the fundamental law. This is the reason for what
some quarters call the doctrine of judicial supremacy. Even so, this power is
not lightly assumed or readily exercised. The doctrine of separation of powers
imposes upon the courts a proper restraint, born of the nature of their
functions and of their respect for the other departments, in striking down the
acts of the legislative and the executive as unconstitutional. The policy,
indeed, is a blend of courtesy and caution. To doubt is to sustain. The theory is
that before the act was done or the law was enacted, earnest studies were
made by Congress or the President, or both, to insure that the Constitution
would not be breached.
In addition, the Constitution itself lays down stringent conditions for a
declaration of unconstitutionality, requiring therefor the concurrence of a
majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc. 11 And as
established by judge made doctrine, the Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a
judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been opportunely
raised by the proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures complained of. 13 And
even if, strictly speaking, they are not covered by the definition, it is still
within the wide discretion of the Court to waive the requirement and so
remove the impediment to its addressing and resolving the serious
constitutional questions raised.

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental
importance to the public of these cases demands that they be settled promptly
and definitely, brushing aside, if we must, technicalities of procedure." We
have since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present
petitions.
In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not
hesitate to declare a law or act invalid when it is convinced that this must be
done. In arriving at this conclusion, its only criterion will be the Constitution as
God and its conscience give it the light to probe its meaning and discover its
purpose. Personal motives and political considerations are irrelevancies that
cannot influence its decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will
not hesitate to "make the hammer fall, and heavily," to use Justice Laurel's
pithy language, where the acts of these departments, or of any public official,
betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act
of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is
in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review
under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court
must categorically resolve. And so we shall.
II

We proceed first to the examination of the preliminary issues before resolving

the more serious challenges to the constitutionality of the several measures
involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his
powers under martial law has already been sustained in Gonzales v. Estrella
and we find no reason to modify or reverse it on that issue. As for the power of
President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the
same was authorized under Section 6 of the Transitory Provisions of the 1987
Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when
the Congress of the Philippines was formally convened and took over legislative
power from her. They are not "midnight" enactments intended to pre-empt the
legislature because E.O. No. 228 was issued on July 17, 1987, and the other
measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22,
1987. Neither is it correct to say that these measures ceased to be valid when
she lost her legislative power for, like any statute, they continue to be in force
unless modified or repealed by subsequent law or declared invalid by the
courts. A statute does not ipso facto become inoperative simply because of the
dissolution of the legislature that enacted it. By the same token, President
Aquino's loss of legislative power did not have the effect of invalidating all the
measures enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but
in fact substantially affirmed the challenged measures and has specifically
provided that they shall be suppletory to R.A. No. 6657 whenever not
inconsistent with its provisions. 17 Indeed, some portions of the said measures,
like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and
Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in the
CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it
does not conform to the requirements of a valid appropriation as specified in
the Constitution. Clearly, however, Proc. No. 131 is not an appropriation
measure even if it does provide for the creation of said fund, for that is not its
principal purpose. An appropriation law is one the primary and specific purpose
of which is to authorize the release of public funds from the treasury. 19 The
creation of the fund is only incidental to the main objective of the
proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit,
Section 24 and Section 25(4) of Article VI, are not applicable. With particular
reference to Section 24, this obviously could not have been complied with for
the simple reason that the House of Representatives, which now has the
exclusive power to initiate appropriation measures, had not yet been convened
when the proclamation was issued. The legislative power was then solely

vested in the President of the Philippines, who embodied, as it were, both

houses of Congress.

case. LOI 474 was published, though, in the Official Gazette dated November
29,1976.)

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for retention limits as
required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A.
No. 6657 does provide for such limits now in Section 6 of the law, which in fact
is one of its most controversial provisions. This section declares:

Finally, there is the contention of the public respondent in G.R. No. 78742 that
the writ of mandamus cannot issue to compel the performance of a
discretionary act, especially by a specific department of the government. That
is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel
the discharge of the discretionary duty itself but not to control the discretion
to be exercised. In other words, mandamus can issue to require action only but
not specific action.

Retention Limits. Except as otherwise provided in this Act,

no person may own or retain, directly or indirectly, any public
or private agricultural land, the size of which shall vary
according to factors governing a viable family-sized farm, such
as commodity produced, terrain, infrastructure, and soil
fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3)
hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least
fifteen (15) years of age; and (2) that he is actually tilling the
land or directly managing the farm; Provided, That landowners
whose lands have been covered by Presidential Decree No. 27
shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or
direct compulsory heirs who still own the original homestead
at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a
bill shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue
of its contents and will suffice if the matters embodied in the text are relevant
to each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law
because it came from President Marcos. Such are the ways of despots. Hence,
it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could
not have repealed P.D. No. 27 because the former was only a letter of
instruction. The important thing is that it was issued by President Marcos,
whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still
had to comply with the requirement for publication as this Court held in
Tanada v. Tuvera. 21 Hence, unless published in the Official Gazette in
accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that

Whenever a duty is imposed upon a public official and an

unnecessary and unreasonable delay in the exercise of such
duty occurs, if it is a clear duty imposed by law, the courts
will intervene by the extraordinary legal remedy of mandamus
to compel action. If the duty is purely ministerial, the courts
will require specific action. If the duty is purely discretionary,
the courts by mandamus will require action only. For example,
if an inferior court, public official, or board should, for an
unreasonable length of time, fail to decide a particular
question to the great detriment of all parties concerned, or a
court should refuse to take jurisdiction of a cause when the
law clearly gave it jurisdiction mandamus will issue, in the
first case to require a decision, and in the second to require
that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is
still a plain, speedy and adequate remedy available from the administrative
authorities, resort to the courts may still be permitted if the issue raised is a
question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the
same time on the same subject. In the case of City of Baguio v. NAWASA, 24 for
example, where a law required the transfer of all municipal waterworks
systems to the NAWASA in exchange for its assets of equivalent value, the
Court held that the power being exercised was eminent domain because the
property involved was wholesome and intended for a public use. Property
condemned under the police power is noxious or intended for a noxious
purpose, such as a building on the verge of collapse, which should be
demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is
not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.

In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the
limits of the police power in a famous aphorism: "The general rule at least is
that while property may be regulated to a certain extent, if regulation goes too
far it will be recognized as a taking." The regulation that went "too far" was a
law prohibiting mining which might cause the subsidence of structures for
human habitation constructed on the land surface. This was resisted by a coal
company which had earlier granted a deed to the land over its mine but
reserved all mining rights thereunder, with the grantee assuming all risks and
waiving any damage claim. The Court held the law could not be sustained
without compensating the grantor. Justice Brandeis filed a lone dissent in
which he argued that there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some right
theretofore enjoyed, and is, in that sense, an abridgment by
the State of rights in property without making compensation.
But restriction imposed to protect the public health, safety or
morals from dangers threatened is not a taking. The
restriction here in question is merely the prohibition of a
noxious use. The property so restricted remains in the
possession of its owner. The state does not appropriate it or
make any use of it. The state merely prevents the owner from
making a use which interferes with paramount rights of the
public. Whenever the use prohibited ceases to be noxious as
it may because of further changes in local or social conditions
the restriction will have to be removed and the owner will
again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as
an implement of the former like the power of taxation. The employment of the
taxing power to achieve a police purpose has long been accepted. 26 As for the
power of expropriation, Prof. John J. Costonis of the University of Illinois
College of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272
US 365, which sustained a zoning law under the police power) makes the
following significant remarks:
Euclid, moreover, was decided in an era when judges located
the Police and eminent domain powers on different planets.
Generally speaking, they viewed eminent domain as
encompassing public acquisition of private property for
improvements that would be available for public use," literally
construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's reliance
on an analogy to nuisance law to bolster its support of zoning.
So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the

pertinent measure need have afforded no compensation

whatever. With the progressive growth of government's
involvement in land use, the distance between the two powers
has contracted considerably. Today government often employs
eminent domain interchangeably with or as a useful
complement to the police power-- a trend expressly approved
in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use"
test to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police
power. On the role of eminent domain in the attainment of this purpose,
Justice Douglas declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary, there
is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right
to realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the
end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote
in 1978, the U.S Supreme Court sustained the respondent's Landmarks
Preservation Law under which the owners of the Grand Central Terminal had
not been allowed to construct a multi-story office building over the Terminal,
which had been designated a historic landmark. Preservation of the landmark
was held to be a valid objective of the police power. The problem, however,
was that the owners of the Terminal would be deprived of the right to use the
airspace above it although other landowners in the area could do so over their
respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central
Terminal which it said would "undoubtedly mitigate" the loss caused by the
regulation. This "fair compensation," as he called it, was explained by Prof.
Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn
Central was authorized to transfer to neighboring properties the authorized but
unused rights accruing to the site prior to the Terminal's designation as a
landmark the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing
bulk restrictions on neighboring sites were proportionately relaxed,
theoretically enabling Penn Central to recoup its losses at the Terminal site by

constructing or selling to others the right to construct larger, hence more

profitable buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under
challenge merely prescribe retention limits for landowners, there is an exercise
of the police power for the regulation of private property in accordance with
the Constitution. But where, to carry out such regulation, it becomes necessary
to deprive such owners of whatever lands they may own in excess of the
maximum area allowed, there is definitely a taking under the power of eminent
domain for which payment of just compensation is imperative. The taking
contemplated is not a mere limitation of the use of the land. What is required
is the surrender of the title to and the physical possession of the said excess
and all beneficial rights accruing to the owner in favor of the farmerbeneficiary. This is definitely an exercise not of the police power but of the
power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain,
the several measures before us are challenged as violative of the due process
and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that
no retention limits are prescribed has already been discussed and dismissed. It
is noted that although they excited many bitter exchanges during the
deliberation of the CARP Law in Congress, the retention limits finally agreed
upon are, curiously enough, not being questioned in these petitions. We
therefore do not discuss them here. The Court will come to the other claimed
violations of due process in connection with our examination of the adequacy
of just compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal
protection because of the absence of retention limits has also become
academic under Section 6 of R.A. No. 6657. Significantly, they too have not
questioned the area of such limits. There is also the complaint that they should
not be made to share the burden of agrarian reform, an objection also made by
the sugar planters on the ground that they belong to a particular class with
particular interests of their own. However, no evidence has been submitted to
the Court that the requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to
each other in certain particulars and different from each other in these same
particulars. 31 To be valid, it must conform to the following requirements: (1) it
must be based on substantial distinctions; (2) it must be germane to the
purposes of the law; (3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class. 32 The Court finds
that all these requisites have been met by the measures here challenged as
arbitrary and discriminatory.

Equal protection simply means that all persons or things similarly situated must
be treated alike both as to the rights conferred and the liabilities imposed. 33
The petitioners have not shown that they belong to a different class and
entitled to a different treatment. The argument that not only landowners but
also owners of other properties must be made to share the burden of
implementing land reform must be rejected. There is a substantial distinction
between these two classes of owners that is clearly visible except to those who
will not see. There is no need to elaborate on this matter. In any event, the
Congress is allowed a wide leeway in providing for a valid classification. Its
decision is accorded recognition and respect by the courts of justice except
only where its discretion is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished
from those of a particular class require the interference of the State and, no
less important, the means employed are reasonably necessary for the
attainment of the purpose sought to be achieved and not unduly oppressive
upon individuals. 34 As the subject and purpose of agrarian reform have been
laid down by the Constitution itself, we may say that the first requirement has
been satisfied. What remains to be examined is the validity of the method
employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of
the individual are concerned, the end does not justify the means. It is not
enough that there be a valid objective; it is also necessary that the means
employed to pursue it be in keeping with the Constitution. Mere expediency
will not excuse constitutional shortcuts. There is no question that not even the
strongest moral conviction or the most urgent public need, subject only to a
few notable exceptions, will excuse the bypassing of an individual's rights. It is
no exaggeration to say that a, person invoking a right guaranteed under Article
III of the Constitution is a majority of one even as against the rest of the nation
who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1
of Article III of the Constitution. With regard to his property, the owner enjoys
the added protection of Section 9, which reaffirms the familiar rule that
private property shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables
it to forcibly acquire private lands intended for public use
upon payment of just compensation to the owner. Obviously,
there is no need to expropriate where the owner is willing to

sell under terms also acceptable to the purchaser, in which

case an ordinary deed of sale may be agreed upon by the
parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the
vendee, that the power of eminent domain will come into play
to assert the paramount authority of the State over the
interests of the property owner. Private rights must then yield
to the irresistible demands of the public interest on the timehonored justification, as in the case of the police power, that
the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that "private property shall not be taken for public use
without just compensation" and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a
proper exercise of the power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310
that the State should first distribute public agricultural lands in the pursuit of
agrarian reform instead of immediately disturbing property rights by forcibly
acquiring private agricultural lands. Parenthetically, it is not correct to say
that only public agricultural lands may be covered by the CARP as the
Constitution calls for "the just distribution of all agricultural lands." In any
event, the decision to redistribute private agricultural lands in the manner
prescribed by the CARP was made by the legislative and executive departments
in the exercise of their discretion. We are not justified in reviewing that
discretion in the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As
explained by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
"those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in regard
to which full discretionary authority has been delegated to the
legislative or executive branch of the government." It is
concerned with issues dependent upon the wisdom, not
legality, of a particular measure.
It is true that the concept of the political question has been constricted with
the enlargement of judicial power, which now includes the authority of the
courts "to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." 37 Even so, this should not be construed as

a license for us to reverse the other departments simply because their views
may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to
include in the CARP the redistribution of private landholdings (even as the
distribution of public agricultural lands is first provided for, while also
continuing apace under the Public Land Act and other cognate laws). The Court
sees no justification to interpose its authority, which we may assert only if we
believe that the political decision is not unwise, but illegal. We do not find it
to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March
3,1909 that the entire St. Mary's river between the American
bank and the international line, as well as all of the upland
north of the present ship canal, throughout its entire length,
was "necessary for the purpose of navigation of said waters,
and the waters connected therewith," that determination is
conclusive in condemnation proceedings instituted by the
United States under that Act, and there is no room for judicial
review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled
for us by the Constitution itself No less than the 1987 Charter calls for agrarian
reform, which is the reason why private agricultural lands are to be taken from
their owners, subject to the prescribed maximum retention limits. The
purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary
measures "to encourage and undertake the just distribution of all agricultural
lands to enable farmers who are landless to own directly or collectively the
lands they till." That public use, as pronounced by the fundamental law itself,
must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a
longer and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. 39 It has been repeatedly stressed by
this Court that the measure is not the taker's gain but the owner's loss. 40 The
word "just" is used to intensify the meaning of the word "compensation" to
convey the idea that the equivalent to be rendered for the property to be
taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate
more than a mere regulation of the use of private lands under the police
power. We deal here with an actual taking of private agricultural lands that has

dispossessed the owners of their property and deprived them of all its
beneficial use and enjoyment, to entitle them to the just compensation
mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable
taking when the following conditions concur: (1) the expropriator must enter a
private property; (2) the entry must be for more than a momentary period; (3)
the entry must be under warrant or color of legal authority; (4) the property
must be devoted to public use or otherwise informally appropriated or
injuriously affected; and (5) the utilization of the property for public use must
be in such a way as to oust the owner and deprive him of beneficial enjoyment
of the property. All these requisites are envisioned in the measures before us.

the government. EPZA v. Dulay 44 resolved a challenge to several decrees

promulgated by President Marcos providing that the just compensation for
property under expropriation should be either the assessment of the property
by the government or the sworn valuation thereof by the owner, whichever was
lower. In declaring these decrees unconstitutional, the Court held through Mr.
Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible encroachment on
judicial prerogatives. It tends to render this Court inutile in a
matter which under this Constitution is reserved to it for final
determination.

Where the State itself is the expropriator, it is not necessary for it to make a
deposit upon its taking possession of the condemned property, as "the
compensation is a public charge, the good faith of the public is pledged for its
payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:

Thus, although in an expropriation proceeding the court

technically would still have the power to determine the just
compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner or
the assessor. As a necessary consequence, it would be useless
for the court to appoint commissioners under Rule 67 of the
Rules of Court. Moreover, the need to satisfy the due process
clause in the taking of private property is seemingly fulfilled
since it cannot be said that a judicial proceeding was not had
before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of
a mere formality or charade as the court has only to choose
between the valuation of the owner and that of the assessor,
and its choice is always limited to the lower of the two. The
court cannot exercise its discretion or independence in
determining what is just or fair. Even a grade school pupil
could substitute for the judge insofar as the determination of
constitutional just compensation is concerned.

Upon receipt by the landowner of the corresponding payment

or, in case of rejection or no response from the landowner,
upon the deposit with an accessible bank designated by the
DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall take immediate
possession of the land and shall request the proper Register of
Deeds to issue a Transfer Certificate of Title (TCT) in the
name of the Republic of the Philippines. The DAR shall
thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation,
which it is claimed is entrusted to the administrative authorities in violation of
judicial prerogatives. Specific reference is made to Section 16(d), which
provides that in case of the rejection or disregard by the owner of the offer of
the government to buy his land-

xxx
In the present petition, we are once again confronted with the
same question of whether the courts under P.D. No. 1533,
which contains the same provision on just compensation as its
predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated
by the decree and to this effect, to appoint commissioners for
such purpose.

... the DAR shall conduct summary administrative proceedings

to determine the compensation for the land by requiring the
landowner, the LBP and other interested parties to submit
evidence as to the just compensation for the land, within
fifteen (15) days from the receipt of the notice. After the
expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case within
thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to
the courts of justice and may not be usurped by any other branch or official of

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the

opportunity to prove that the valuation in the tax documents
is unfair or wrong. And it is repulsive to the basic concepts of
justice and fairness to allow the haphazard work of a minor
bureaucrat or clerk to absolutely prevail over the judgment of
a court promulgated only after expert commissioners have
actually viewed the property, after evidence and arguments
pro and con have been presented, and after all factors and
considerations essential to a fair and just determination have
been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not
suffer from the arbitrariness that rendered the challenged decrees
constitutionally objectionable. Although the proceedings are described as
summary, the landowner and other interested parties are nevertheless allowed
an opportunity to submit evidence on the real value of the property. But more
importantly, the determination of the just compensation by the DAR is not by
any means final and conclusive upon the landowner or any other interested
party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the
matter to the court of proper jurisdiction for final
determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all
parties concerned. Otherwise, the courts of justice will still have the right to
review with finality the said determination in the exercise of what is
admittedly a judicial function.

(a) For lands above fifty (50)

hectares, insofar as the
excess hectarage is
concerned Twenty-five
percent (25%) cash, the
balance to be paid in
government financial
instruments negotiable at
any time.
(b) For lands above twentyfour (24) hectares and up to
fifty (50) hectares Thirty
percent (30%) cash, the
balance to be paid in
government financial
instruments negotiable at
any time.
(c) For lands twenty-four
(24) hectares and below
Thirty-five percent (35%)
cash, the balance to be paid
in government financial
instruments negotiable at
any time.

The second and more serious objection to the provisions on just compensation
is not as easily resolved.

(2) Shares of stock in government-owned or controlled

corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by the
PARC;

This refers to Section 18 of the CARP Law providing in full as follows:

(3) Tax credits which can be used against any tax liability;

SEC. 18. Valuation and Mode of Compensation. The LBP shall

compensate the landowner in such amount as may be agreed
upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16 and
17, and other pertinent provisions hereof, or as may be finally
determined by the court, as the just compensation for the
land.
The compensation shall be paid in one of the following modes,
at the option of the landowner:
(1) Cash payment, under the following terms and conditions:

(4) LBP bonds, which shall have the following features:

(a) Market interest rates
aligned with 91-day treasury
bill rates. Ten percent (10%)
of the face value of the
bonds shall mature every
year from the date of
issuance until the tenth
(10th) year: Provided, That
should the landowner choose
to forego the cash portion,
whether in full or in part, he

shall be paid correspondingly

in LBP bonds;

(v) Payment for various taxes

and fees to government:
Provided, That the use of
these bonds for these
purposes will be limited to a
certain percentage of the
outstanding balance of the
financial instruments;
Provided, further, That the
PARC shall determine the
percentages mentioned
above;

(b) Transferability and

negotiability. Such LBP bonds
may be used by the
landowner, his successors-ininterest or his assigns, up to
the amount of their face
value, for any of the
following:
(i) Acquisition of land or
other real properties of the
government, including assets
under the Asset Privatization
Program and other assets
foreclosed by government
financial institutions in the
same province or region
where the lands for which
the bonds were paid are
situated;
(ii) Acquisition of shares of
stock of government-owned
or controlled corporations or
shares of stock owned by the
government in private
corporations;
(iii) Substitution for surety or
bail bonds for the provisional
release of accused persons,
or for performance bonds;
(iv) Security for loans with
any government financial
institution, provided the
proceeds of the loans shall
be invested in an economic
enterprise, preferably in a
small and medium- scale
industry, in the same
province or region as the
land for which the bonds are
paid;

(vi) Payment for tuition fees

of the immediate family of
the original bondholder in
government universities,
colleges, trade schools, and
other institutions;
(vii) Payment for fees of the
immediate family of the
original bondholder in
government hospitals; and
(viii) Such other uses as the
PARC may from time to time
allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision
is unconstitutional insofar as it requires the owners of the expropriated
properties to accept just compensation therefor in less than money, which is
the only medium of payment allowed. In support of this contention, they cite
jurisprudence holding that:
The fundamental rule in expropriation matters is that the
owner of the property expropriated is entitled to a just
compensation, which should be neither more nor less,
whenever it is possible to make the assessment, than the
money equivalent of said property. Just compensation has
always been understood to be the just and complete
equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation .
(Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration,

46

this Court held:

45

It is well-settled that just compensation means the equivalent

for the value of the property at the time of its taking.
Anything beyond that is more, and anything short of that is
less, than just compensation. It means a fair and full
equivalent for the loss sustained, which is the measure of the
indemnity, not whatever gain would accrue to the
expropriating entity. The market value of the land taken is the
just compensation to which the owner of condemned property
is entitled, the market value being that sum of money which a
person desirous, but not compelled to buy, and an owner,
willing, but not compelled to sell, would agree on as a price to
be given and received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been
derived, the weight of authority is also to the effect that just compensation for
property expropriated is payable only in money and not otherwise. Thus
The medium of payment of compensation is ready money or
cash. The condemnor cannot compel the owner to accept
anything but money, nor can the owner compel or require the
condemnor to pay him on any other basis than the value of the
property in money at the time and in the manner prescribed
by the Constitution and the statutes. When the power of
eminent domain is resorted to, there must be a standard
medium of payment, binding upon both parties, and the law
has fixed that standard as money in cash. 47 (Emphasis
supplied.)
Part cash and deferred payments are not and cannot, in the
nature of things, be regarded as a reliable and constant
standard of compensation. 48
"Just compensation" for property taken by condemnation
means a fair equivalent in money, which must be paid at least
within a reasonable time after the taking, and it is not within
the power of the Legislature to substitute for such payment
future obligations, bonds, or other valuable advantage. 49
(Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the
payment of just compensation is money and no other. And so, conformably, has
just compensation been paid in the past solely in that medium. However, we
do not deal here with the traditional excercise of the power of eminent
domain. This is not an ordinary expropriation where only a specific property of
relatively limited area is sought to be taken by the State from its owner for a
specific and perhaps local purpose.

What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever
found and of whatever kind as long as they are in excess of the maximum
retention limits allowed their owners. This kind of expropriation is intended for
the benefit not only of a particular community or of a small segment of the
population but of the entire Filipino nation, from all levels of our society, from
the impoverished farmer to the land-glutted owner. Its purpose does not cover
only the whole territory of this country but goes beyond in time to the
foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as
involved in this program as we are today, although hopefully only as
beneficiaries of a richer and more fulfilling life we will guarantee to them
tomorrow through our thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself that has ordained this
revolution in the farms, calling for "a just distribution" among the farmers of
lands that have heretofore been the prison of their dreams but can now
become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation under
the laws before us, we estimate that hundreds of billions of pesos will be
needed, far more indeed than the amount of P50 billion initially appropriated,
which is already staggering as it is by our present standards. Such amount is in
fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty
when they called for agrarian reform as a top priority project of the
government. It is a part of this assumption that when they envisioned the
expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less
conventional if more practical method. There can be no doubt that they were
aware of the financial limitations of the government and had no illusions that
there would be enough money to pay in cash and in full for the lands they
wanted to be distributed among the farmers. We may therefore assume that
their intention was to allow such manner of payment as is now provided for by
the CARP Law, particularly the payment of the balance (if the owner cannot be
paid fully with money), or indeed of the entire amount of the just
compensation, with other things of value. We may also suppose that what they
had in mind was a similar scheme of payment as that prescribed in P.D. No. 27,
which was the law in force at the time they deliberated on the new Charter
and with which they presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be given
the concept of just compensation as applied to the comprehensive agrarian
reform program being contemplated. There was the suggestion to "fine tune"

the requirement to suit the demands of the project even as it was also felt that
they should "leave it to Congress" to determine how payment should be made
to the landowner and reimbursement required from the farmer-beneficiaries.
Such innovations as "progressive compensation" and "State-subsidized
compensation" were also proposed. In the end, however, no special definition
of the just compensation for the lands to be expropriated was reached by the
Commission. 50
On the other hand, there is nothing in the records either that militates against
the assumptions we are making of the general sentiments and intention of the
members on the content and manner of the payment to be made to the
landowner in the light of the magnitude of the expenditure and the limitations
of the expropriator.
With these assumptions, the Court hereby declares that the content and
manner of the just compensation provided for in the afore- quoted Section 18
of the CARP Law is not violative of the Constitution. We do not mind admitting
that a certain degree of pragmatism has influenced our decision on this issue,
but after all this Court is not a cloistered institution removed from the realities
and demands of society or oblivious to the need for its enhancement. The
Court is as acutely anxious as the rest of our people to see the goal of agrarian
reform achieved at last after the frustrations and deprivations of our peasant
masses during all these disappointing decades. We are aware that invalidation
of the said section will result in the nullification of the entire program, killing
the farmer's hopes even as they approach realization and resurrecting the
spectre of discontent and dissent in the restless countryside. That is not in our
view the intention of the Constitution, and that is not what we shall decree
today.
Accepting the theory that payment of the just compensation is not always
required to be made fully in money, we find further that the proportion of cash
payment to the other things of value constituting the total payment, as
determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger
the payment in money, primarily because the small landowner will be needing
it more than the big landowners, who can afford a bigger balance in bonds and
other things of value. No less importantly, the government financial
instruments making up the balance of the payment are "negotiable at any
time." The other modes, which are likewise available to the landowner at his
option, are also not unreasonable because payment is made in shares of stock,
LBP bonds, other properties or assets, tax credits, and other things of value
equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the
landowners, big and small, not a little inconvenience. As already remarked,
this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their

forebearance and even sacrifice, will not begrudge us their indispensable share
in the attainment of the ideal of agrarian reform. Otherwise, our pursuit of this
elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O.
No. 229 does not seem to be viable any more as it appears that Section 4 of the
said Order has been superseded by Section 14 of the CARP Law. This repeats
the requisites of registration as embodied in the earlier measure but does not
provide, as the latter did, that in case of failure or refusal to register the land,
the valuation thereof shall be that given by the provincial or city assessor for
tax purposes. On the contrary, the CARP Law says that the just compensation
shall be ascertained on the basis of the factors mentioned in its Section 17 and
in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his
property even before actual payment to him in full of just compensation, in
contravention of a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall
pass from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both here
and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not
vest the condemnor until the judgment fixing just compensation is entered and
paid, but the condemnor's title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioner's report under the Local
Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a canal is complete
at the time of entry, title to the property taken remains in the owner until
payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation
had actually been made. In fact, the decisions appear to be uniformly to this
effect. As early as 1838, in Rubottom v. McLure, 54 it was held that "actual
payment to the owner of the condemned property was a condition precedent
to the investment of the title to the property in the State" albeit "not to the
appropriation of it to public use." In Rexford v. Knight, 55 the Court of Appeals
of New York said that the construction upon the statutes was that the fee did
not vest in the State until the payment of the compensation although the
authority to enter upon and appropriate the land was complete prior to the
payment. Kennedy further said that "both on principle and authority the rule is
... that the right to enter on and use the property is complete, as soon as the
property is actually appropriated under the authority of law for a public use,

but that the title does not pass from the owner without his consent, until just
compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,
56
that:
If the laws which we have exhibited or cited in the preceding
discussion are attentively examined it will be apparent that
the method of expropriation adopted in this jurisdiction is
such as to afford absolute reassurance that no piece of land
can be finally and irrevocably taken from an unwilling owner
until compensation is paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer
as October 21, 1972 and declared that he shall "be deemed the owner" of a
portion of land consisting of a family-sized farm except that "no title to the
land owned by him was to be actually issued to him unless and until he had
become a full-fledged member of a duly recognized farmers' cooperative." It
was understood, however, that full payment of the just compensation also had
to be made first, conformably to the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners
as of October 21, 1972 of the land they acquired by virtue of
Presidential Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the said
decree, after proof of full-fledged membership in the farmers' cooperatives and
full payment of just compensation. Hence, it was also perfectly proper for the
Order to also provide in its Section 2 that the "lease rentals paid to the
landowner by the farmer- beneficiary after October 21, 1972 (pending transfer
of ownership after full payment of just compensation), shall be considered as
advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership
of the land to the government on receipt by the landowner of the
corresponding payment or the deposit by the DAR of the compensation in cash
or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by
arbitrarily transferring title before the land is fully paid for must also be
rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer
under P.D. No. 27, as recognized under E.O. No. 228, are retained by him even
now under R.A. No. 6657. This should counter-balance the express provision in
Section 6 of the said law that "the landowners whose lands have been covered
by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or
direct compulsory heirs who still own the original homestead at the time of the
approval of this Act shall retain the same areas as long as they continue to
cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742
that the appeal filed by the petitioners with the Office of the President has
already been resolved. Although we have said that the doctrine of exhaustion
of administrative remedies need not preclude immediate resort to judicial
action, there are factual issues that have yet to be examined on the
administrative level, especially the claim that the petitioners are not covered
by LOI 474 because they do not own other agricultural lands than the subjects
of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that
the petitioners have not yet exercised their retention rights, if any, under P.D.
No. 27, the Court holds that they are entitled to the new retention rights
provided for by R.A. No. 6657, which in fact are on the whole more liberal than
those granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have been
the subject of bitter attack from those who point to the shortcomings of these
measures and ask that they be scrapped entirely. To be sure, these enactments
are less than perfect; indeed, they should be continuously re-examined and
rehoned, that they may be sharper instruments for the better protection of the
farmer's rights. But we have to start somewhere. In the pursuit of agrarian
reform, we do not tread on familiar ground but grope on terrain fraught with
pitfalls and expected difficulties. This is inevitable. The CARP Law is not a
tried and tested project. On the contrary, to use Justice Holmes's words, "it is
an experiment, as all life is an experiment," and so we learn as we venture
forward, and, if necessary, by our own mistakes. We cannot expect perfection
although we should strive for it by all means. Meantime, we struggle as best we
can in freeing the farmer from the iron shackles that have unconscionably, and
for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive
agrarian reform program are removed, to clear the way for the true freedom of
the farmer. We may now glimpse the day he will be released not only from
want but also from the exploitation and disdain of the past and from his own
feelings of inadequacy and helplessness. At last his servitude will be ended

forever. At last the farm on which he toils will be his farm. It will be his portion
of the Mother Earth that will give him not only the staff of life but also the joy
of living. And where once it bred for him only deep despair, now can he see in
it the fruition of his hopes for a more fulfilling future. Now at last can he
banish from his small plot of earth his insecurities and dark resentments and
"rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos.
228 and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to
the State only upon full payment of compensation to their
respective owners.
3. All rights previously acquired by the tenant- farmers under
P.D. No. 27 are retained and recognized.
4. Landowners who were unable to exercise their rights of
retention under P.D. No. 27 shall enjoy the retention rights
granted by R.A. No. 6657 under the conditions therein
prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.
SO ORDERED.
G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION, Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL
MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:

"Land for the landless," a shibboleth the landed gentry doubtless has received
with much misgiving, if not resistance, even if only the number of agrarian
suits filed serves to be the norm. Through the years, this battle cry and root of
discord continues to reflect the seemingly ceaseless discourse on, and great
disparity in, the distribution of land among the people, "dramatizing the
increasingly urgent demand of the dispossessed x x x for a plot of earth as their
place in the sun."2 As administrations and political alignments change, policies
advanced, and agrarian reform laws enacted, the latest being what is
considered a comprehensive piece, the face of land reform varies and is
masked in myriads of ways. The stated goal, however, remains the same: clear
the way for the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a government
policy even before the Commonwealth era. In fact, at the onset of the
American regime, initial steps toward land reform were already taken to
address social unrest.4 Then, under the 1935 Constitution, specific provisions
on social justice and expropriation of landed estates for distribution to tenants
as a solution to land ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting
in motion the expropriation of all tenanted estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted,6
abolishing share tenancy and converting all instances of share tenancy into
leasehold tenancy.7 RA 3844 created the Land Bank of the Philippines (LBP) to
provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship
in rice and corn, supposedly to be accomplished by expropriating lands in
excess of 75 hectares for their eventual resale to tenants. The law, however,
had this restricting feature: its operations were confined mainly to areas in
Central Luzon, and its implementation at any level of intensity limited to the
pilot project in Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring
the entire country a land reform area, and providing for the automatic
conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the
retention limit was cut down to seven hectares.9
Barely a month after declaring martial law in September 1972, then President
Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the
"emancipation of the tiller from the bondage of the soil."10 Based on this
issuance, tenant-farmers, depending on the size of the landholding worked on,
can either purchase the land they tilled or shift from share to fixed-rent
leasehold tenancy.11 While touted as "revolutionary," the scope of the agrarian
reform program PD 27 enunciated covered only tenanted, privately-owned rice
and corn lands.12

Then came the revolutionary government of then President Corazon C. Aquino

and the drafting and eventual ratification of the 1987 Constitution. Its
provisions foreshadowed the establishment of a legal framework for the
formulation of an expansive approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in
the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its
title14 indicates, the mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the highest policy-making body
that formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of
1988, also known as CARL or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and distribution. As to be expected,
RA 6657 met stiff opposition, its validity or some of its provisions challenged at
every possible turn. Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform 15 stated the observation that the assault was
inevitable, the CARP being an untried and untested project, "an experiment
[even], as all life is an experiment," the Court said, borrowing from Justice
Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and
seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 200634-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as
the implementing Notice of Coverage dated January 2, 2006 (Notice of
Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a
6,443-hectare mixed agricultural-industrial-residential expanse straddling
several municipalities of Tarlac and owned by Compaia General de Tabacos de
Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to
sell Hacienda Luisita as well as their controlling interest in the sugar mill within
the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible
transaction. The Tarlac Development Corporation (Tadeco), then owned and/or
controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed

upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in
pesos, while that for the controlling interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine
government, through the then Central Bank of the Philippines, assisted the
buyer to obtain a dollar loan from a US bank.20 Also, the Government Service
Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a
PhP 5.911 million loan in favor of Tadeco to pay the peso price component of
the sale. One of the conditions contained in the approving GSIS Resolution No.
3203, as later amended by Resolution No. 356, Series of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and
whenever conditions should exist warranting such action under the provisions
of the Land Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacaleras interest in CAT.22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state that on May 7, 1980, the
martial law administration filed a suit before the Manila Regional Trial Court
(RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the
then Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform
[DAR]) so that the land can be distributed to farmers at cost. Responding,
Tadeco or its owners alleged that Hacienda Luisita does not have tenants,
besides which sugar landsof which the hacienda consistedare not covered by
existing agrarian reform legislations. As perceived then, the government
commenced the case against Tadeco as a political message to the family of the
late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the governments case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially instituted
and won against Tadeco, et al. The dismissal action was, however, made
subject to the obtention by Tadeco of the PARCs approval of a stock
distribution plan (SDP) that must initially be implemented after such approval
shall have been secured.24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x
x governmental agencies concerned in moving for the dismissal of the case

subject, however, to the following conditions embodied in the letter dated

April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan
for failure to comply with all the requirements for corporate
landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails
to initially implement it.

corporation or association shall be subject to periodic audit by

certified public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and

xxxx
WHEREFORE, the present case on appeal is hereby dismissed without prejudice,
and should be revived if any of the conditions as above set forth is not duly
complied with by the TADECO.25

(d) Any transfer of shares of stocks by the original beneficiaries shall

be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.

Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative

to the actual land transfer scheme of CARP, to give qualified beneficiaries the
right to purchase shares of stocks of the corporation under a stock ownership
arrangement and/or land-to-share ratio.

If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Emphasis added.)

Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of which
the corporate landowner can comply with CARP, but subject to well-defined
conditions and timeline requirements. Sec. 31 of RA 6657 provides:

Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued
Administrative Order No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and
Procedures for Corporate Landowners Desiring to Avail Themselves of the
Stock Distribution Plan under Section 31 of RA 6657.

SEC. 31. Corporate Landowners.Corporate landowners may voluntarily

transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.

From the start, the stock distribution scheme appeared to be Tadecos

preferred option, for, on August 23, 1988,28 it organized a spin-off corporation,
HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this
purpose, Tadeco assigned and conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.29

Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted
to agricultural activities, bears in relation to the companys total assets,
under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the

Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr.,

and Paz C. Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the
Securities and Exchange Commissions (SECs) approval, increased its capital
stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a
par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares
also with par value of PhP 1/share, 150,000,000 of which were to be issued
only to qualified and registered beneficiaries of the CARP, and the remaining
250,000,000 to any stockholder of the corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco
contributed to the capital stock of HLI, as appraised and approved by the SEC,

have an aggregate value of PhP 590,554,220, or after deducting the total

liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP
1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of
the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement
(MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs34 and
attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis
and mechanics of the SDP, which would eventually be submitted to the PARC
for approval. In the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda
Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY
[HLI] is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per
share, that has to be distributed to the THIRD PARTY [FWBs] under the
stock distribution plan, the said 33.296% thereof being
P118,391,976.85 or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the
permanent and seasonal employees, who are regularly or periodically
employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND
PARTY shall arrange with the FIRST PARTY [Tadeco] the acquisition
and distribution to the THIRD PARTY on the basis of number of days
worked and at no cost to them of one-thirtieth (1/30) of
118,391,976.85 shares of the capital stock of the SECOND PARTY that
are presently owned and held by the FIRST PARTY, until such time as
the entire block of 118,391,976.85 shares shall have been completely
acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of
the [SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three
(3%) of the total gross sales from the production of the agricultural
land, whether it be in the form of cash dividends or incentive bonuses
or both.
5. Even if only a part or fraction of the shares earmarked for
distribution will have been acquired from the FIRST PARTY and

distributed to the THIRD PARTY, FIRST PARTY shall execute at the

beginning of each fiscal year an irrevocable proxy, valid and effective
for one (1) year, in favor of the farmworkers appearing as shareholders
of the SECOND PARTY at the start of said year which will empower the
THIRD PARTY or their representative to vote in stockholders and board
of directors meetings of the SECOND PARTY convened during the year
the entire 33.296% of the outstanding capital stock of the SECOND
PARTY earmarked for distribution and thus be able to gain such
number of seats in the board of directors of the SECOND PARTY that
the whole 33.296% of the shares subject to distribution will be entitled
to.
6. In addition, the SECOND PARTY shall within a reasonable time
subdivide and allocate for free and without charge among the qualified
family-beneficiaries residing in the place where the agricultural land is
situated, residential or homelots of not more than 240 sq.m. each,
with each family-beneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on the date of the
execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the
(C.A.R.P.) of the government and with the supervision of the [DAR],
with the end in view of improving the lot of the qualified beneficiaries
of the [SDP] and obtaining for them greater benefits. (Emphasis
added.)
As may be gleaned from the SDOA, included as part of the distribution plan are:
(a) production-sharing equivalent to three percent (3%) of gross sales from the
production of the agricultural land payable to the FWBs in cash dividends or
incentive bonus; and (b) distribution of free homelots of not more than 240
square meters each to family-beneficiaries. The production-sharing, as the SDP
indicated, is payable "irrespective of whether [HLI] makes money or not,"
implying that the benefits do not partake the nature of dividends, as the term
is ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period material, the
assigned value of the agricultural land in the hacienda was PhP 196.63 million,
while the total assets of HLI was PhP 590.55 million with net assets of PhP
355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of
stock corresponds to 33.3% of the outstanding capital stock of the HLI
equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock
Distribution under C.A.R.P.,"35 which was substantially based on the SDOA.

Notably, in a follow-up referendum the DAR conducted on October 14, 1989,

5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI.36
One hundred thirty-two (132) chose actual land distribution.37

(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe

benefits
(b) 59 million shares of stock distributed for free to the FWBs;

After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec.
Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S.
Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be
revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI
shall ensure that there will be no dilution in the shares of stocks of
individual [FWBs];

(c) 150 million pesos (P150,000,000) representing 3% of the gross

produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of
500 hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;

2. That a safeguard shall be provided by [Tadeco]/HLI against the

dilution of the percentage shareholdings of the [FWBs], i.e., that the
33% shareholdings of the [FWBs] will be maintained at any given time;

(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80

hectares at 80 million pesos (P80,000,000) for the SCTEX;

3. That the mechanics for distributing the stocks be explicitly stated in

the [MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;

(g) Social service benefits, such as but not limited to free

hospitalization/medical/maternity services, old age/death benefits
and no interest bearing salary/educational loans and rice sugar
accounts. 42

4. That the stock distribution plan provide for clear and definite terms
for determining the actual number of seats to be allocated for the
[FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of
homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly
provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both
the SDP and MOA.39 Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989,
approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master
list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:

Two separate groups subsequently contested this claim of HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of
the hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA
6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award,
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR,
upon application of the beneficiary or the landowner, with due notice to the
affected parties, and subject to existing laws, may authorize the
reclassification, or conversion of the land and its disposition: Provided, That
the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs,
including respondent Rene Galang, and Jose Julio Suniga, as evidenced by the
Manifesto of Support they signed and which was submitted to the DAR.44 After
the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the
application on August 14, 1996, per DAR Conversion Order No. 030601074-764(95), Series of 1996,45 subject to payment of three percent (3%) of the gross
selling price to the FWBs and to HLIs continued compliance with its
undertakings under the SDP, among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares

of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the
converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title
(TCT) No. 28791047 was canceled and TCT No. 29209148 was issued in the name
of Centennary. HLI transferred the remaining 200 hectares covered by TCT No.
287909 to Luisita Realty Corporation (LRC)49 in two separate transactions in
1997 and 1998, both uniformly involving 100 hectares for PhP 250 million
each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000
divided into 12,100,000 shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto
G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial
Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the
purpose of developing an industrial complex.52 As a result, Centennarys TCT
No. 292091 was canceled to be replaced by TCT No. 31098653 in the name of
LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for
which two (2) separate titles were issued in the name of LIPCO, specifically: (a)
TCT No. 36580054 and (b) TCT No. 365801,55 covering 180 and four hectares,
respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal
Commercial Banking Corporation (RCBC) by way of dacion en pago in payment
of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled
and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired
by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX)
complex. In absolute terms, 4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both
undated, reached the DAR in the latter part of 2003. In the first, denominated
as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory
Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI
had failed to give them their dividends and the one percent (1%) share in gross
sales, as well as the thirty-three percent (33%) share in the proceeds of the
sale of the converted 500 hectares of land. They further claimed that their
lives have not improved contrary to the promise and rationale for the adoption

of the SDOA. They also cited violations by HLI of the SDOAs terms.58 They
prayed for a renegotiation of the SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the
hacienda were the call in the second petition, styled as Petisyon (Petition).59
The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten
name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as
"Sec-Gen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of
AMBALAs members purportedly composing about 80% of the 5,339 FWBs of
Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group.
On the other hand, HLIs answer62 to the AMBALA petition was contained in its
letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues
relating to the SDP of HLI. Among other duties, the Special Task Force was
mandated to review the terms and conditions of the SDOA and PARC Resolution
No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance reports; evaluate
the merits of the petitions for the revocation of the SDP; conduct ocular
inspections or field investigations; and recommend appropriate remedial
measures for approval of the Secretary.63
After investigation and evaluation, the Special Task Force submitted its
"Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI
has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task Forces
recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec.
Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive
Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of
Hacienda Luisita through the compulsory acquisition scheme. Following review,
the PARC Validation Committee favorably endorsed the DAR Secretarys
recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-3201, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY
RESOLVED, to approve and confirm the recommendation of the PARC Executive
Committee adopting in toto the report of the PARC ExCom Validation
Committee affirming the recommendation of the DAR to recall/revoke the SDO
plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI

SDO plan be forthwith placed under the compulsory coverage or mandated land
acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 200569 for certified copies of
said documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same
day, the DAR Tarlac provincial office issued the Notice of Coverage71 which HLI
received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration.72 As HLI
later rued, it "can not know from the above-quoted resolution the facts and the
law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a
temporary restraining order,75 enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion).77 In it,
Mallari stated that he has broken away from AMBALA with other AMBALA exmembers and formed Farmworkers Agrarian Reform Movement, Inc. (FARM).78
Should this shift in alliance deny him standing, Mallari also prayed that FARM
be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other FARM
members, particularly would-be intervenors Renato Lalic, et al. As things
stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari
faction and leaving Renato Lalic, et al. as the remaining members of FARM who
sought to intervene.

On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang
faction submitted their Comment/Opposition dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File
and Admit Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO
later followed with a similar motion.82 In both motions, RCBC and LIPCO
contended that the assailed resolution effectively nullified the TCTs under
their respective names as the properties covered in the TCTs were veritably
included in the January 2, 2006 notice of coverage. In the main, they claimed
that the revocation of the SDP cannot legally affect their rights as innocent
purchasers for value. Both motions for leave to intervene were granted and the
corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on
oral arguments. On the other hand, the Court, on August 24, 2010, heard public
respondents as well as the respective counsels of the AMBALA-MallariSupervisory Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
Supervisory Group, represented by Suniga and Andaya; and the United Luisita
Workers Union, represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise Agreement (English and
Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an
amicable settlement, issued a Resolution84 creating a Mediation Panel
composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson,
and former CA Justices Hector Hofilea and Teresita Dy-Liacco Flores, as
members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20,
and 27, 2010, were conducted. Despite persevering and painstaking efforts on
the part of the panel, mediation had to be discontinued when no acceptable
agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY
PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO
NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER

AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS
FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION
WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF
RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY
WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF
CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE
LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x,
ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE
1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR
RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND
THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE
PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID
PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE
PARTIES TO THE SDOA ARE NOW GOVERNED BY THE CORPORATION
CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x
x.

II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT
AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS
AS AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over
certain portions of the converted property, and, hence, would ascribe on PARC
the commission of grave abuse of discretion when it included those portions in
the notice of coverage. And apart from raising issues identical with those of
HLI, such as but not limited to the absence of valid grounds to warrant the
rescission and/or revocation of the SDP, LIPCO would allege that the assailed
resolution and the notice of coverage were issued without affording it the right
to due process as an innocent purchaser for value. The government, LIPCO also
argues, is estopped from recovering properties which have since passed to
innocent parties.
Simply formulated, the principal determinative issues tendered in the main
petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA
6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity
or propriety of such recall or revocatory action; and (5) corollary to (4), the
validity of the terms and conditions of the SDP, as embodied in the SDOA.
Our Ruling

On the other hand, RCBC submits the following issues:

I.
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT
EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP
DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED
VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY
AS AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE
OF COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF
NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF
PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONERINTERVENOR RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT
REVOCATION OR RESCISSION OF THE SDOA.

We first proceed to the examination of the preliminary issues before delving on

the more serious challenges bearing on the validity of PARCs assailed issuance
and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene
Galang, who filed the revocatory petitions before the DAR. As HLI would have
it, Galang, the self-styled head of AMBALA, gained HLI employment in June
1990 and, thus, could not have been a party to the SDOA executed a year
earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are not
regular farmworkers, but the company nonetheless considered them FWBs
under the SDOA as a mere concession to enable them to enjoy the same
benefits given qualified regular farmworkers. However, if the SDOA would be
canceled and land distribution effected, so HLI claims, citing Fortich v.

Corona,86 the supervisors would be excluded from receiving lands as

farmworkers other than the regular farmworkers who are merely entitled to
the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the
farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by [HLI]."88
Galang, per HLIs own admission, is employed by HLI, and is, thus, a qualified
beneficiary of the SDP; he comes within the definition of a real party-ininterest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to
be benefited or injured by the judgment in the suit or is the party entitled to
the avails of the suit.
The same holds true with respect to the Supervisory Group whose members
were admittedly employed by HLI and whose names and signatures even
appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP,
Suniga and the other 61 supervisors are certainly parties who would benefit or
be prejudiced by the judgment recalling the SDP or replacing it with some
other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular
farmworkers, but are in the category of "other farmworkers" mentioned in Sec.
4, Article XIII of the Constitution,89 thus only entitled to a share of the fruits of
the land, as indeed Fortich teaches, this does not detract from the fact that
they are still identified as being among the "SDP qualified beneficiaries." As
such, they are, thus, entitled to bring an action upon the SDP.90 At any rate,
the following admission made by Atty. Gener Asuncion, counsel of HLI, during
the oral arguments should put to rest any lingering doubt as to the status of
protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the
qualified farmer beneficiaries of Hacienda Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that
question refers to the complaints of protest initiated before the DAR and the
real party in interest there be considered as possessed by the farmer
beneficiaries who initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly
allowed to represent themselves, their fellow farmers or their organizations in
any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
xxxx

Responsible farmer leaders shall be allowed to represent themselves, their

fellow farmers or their organizations in any proceedings before the DAR:
Provided, however, that when there are two or more representatives for any
individual or group, the representatives should choose only one among
themselves to represent such party or group before any DAR proceedings.
(Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are
contextually real parties-in-interest allowed by law to file a petition before the
DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for as
records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not
carry the usual authorization of the individuals in whose behalf it was supposed
to have been instituted. To date, such authorization document, which would
logically include a list of the names of the authorizing FWBs, has yet to be
submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI
maintains that PARC is without authority to revoke an SDP, for neither RA 6657
nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO
229 empowers PARC to approve the plan for stock distribution in appropriate
cases, the empowerment only includes the power to disapprove, but not to
recall its previous approval of the SDP after it has been implemented by the
parties.93 To HLI, it is the court which has jurisdiction and authority to order
the revocation or rescission of the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve
the plan for stock distribution of the corporate landowner belongs to PARC.
However, contrary to petitioner HLIs posture, PARC also has the power to
revoke the SDP which it previously approved. It may be, as urged, that RA 6657
or other executive issuances on agrarian reform do not explicitly vest the PARC
with the power to revoke/recall an approved SDP. Such power or authority,
however, is deemed possessed by PARC under the principle of necessary
implication, a basic postulate that what is implied in a statute is as much a
part of it as that which is expressed.94
We have explained that "every statute is understood, by implication, to contain
all such provisions as may be necessary to effectuate its object and purpose, or
to make effective rights, powers, privileges or jurisdiction which it grants,
including all such collateral and subsidiary consequences as may be fairly and
logically inferred from its terms."95 Further, "every statutory grant of power,
right or privilege is deemed to include all incidental power, right or privilege.96

Gordon v. Veridiano II is instructive:

The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited
by the authority to grant the license, from which it is derived in the first place.
Thus, if the FDA grants a license upon its finding that the applicant drug store
has complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA
may revoke the said license. By the same token, having granted the permit
upon his ascertainment that the conditions thereof as applied x x x have been
complied with, it is only for the violation of such conditions that the mayor
may revoke the said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke
or recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power
would reduce it into a toothless agency of CARP, because the very same agency
tasked to ensure compliance by the corporate landowner with the approved
SDP would be without authority to impose sanctions for non-compliance with
it.98 With the view We take of the case, only PARC can effect such revocation.
The DAR Secretary, by his own authority as such, cannot plausibly do so, as the
acceptance and/or approval of the SDP sought to be taken back or undone is
the act of PARC whose official composition includes, no less, the President as
chair, the DAR Secretary as vice-chair, and at least eleven (11) other
department heads.99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP
has been implemented would impair the contractual obligations created under
the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts
and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the non-impairment
guarantee. There is, in that instance, no impingement of the impairment
clause, the non-impairment protection being applicable only to laws that
derogate prior acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties. Impairment, in fine, obtains if a
subsequent law changes the terms of a contract between the parties, imposes
new conditions, dispenses with those agreed upon or withdraws existing
remedies for the enforcement of the rights of the parties.100 Necessarily, the

constitutional proscription would not apply to laws already in effect at the

time of contract execution, as in the case of RA 6657, in relation to DAO 10,
vis--vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned
with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as
to laws already in existence, their provisions are read into contracts and
deemed a part thereof. Thus, the non-impairment clause under Section 10,
Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing that
"[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as
such, a breach of its terms and conditions is not a PARC administrative matter,
but one that gives rise to a cause of action cognizable by regular courts.102 This
contention has little to commend itself. The SDOA is a special contract imbued
with public interest, entered into and crafted pursuant to the provisions of RA
6657. It embodies the SDP, which requires for its validity, or at least its
enforceability, PARCs approval. And the fact that the certificate of
compliance103to be issued by agrarian authorities upon completion of the
distribution of stocksis revocable by the same issuing authority supports the
idea that everything about the implementation of the SDP is, at the first
instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should be the applicable law on
the disposition of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply
with RA 6657, which the OSG aptly described as the "mother law" of the SDOA
and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage
of CARP by invoking exclusive applicability of the Corporation Code under the
guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the
parties arising from the SDP should not be made to supplant or circumvent the
agrarian reform program.

Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other
hand, RA 6657 is the special law on agrarian reform. As between a general and
special law, the latter shall prevailgeneralia specialibus non derogant.105
Besides, the present impasse between HLI and the private respondents is not
an intra-corporate dispute which necessitates the application of the
Corporation Code. What private respondents questioned before the DAR is the
proper implementation of the SDP and HLIs compliance with RA 6657.
Evidently, RA 6657 should be the applicable law to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the eventual distribution of the land to
the FWBs would amount to a disposition of all or practically all of the corporate
assets of HLI. HLI would add that this contingency, if ever it comes to pass,
requires the applicability of the Corporation Code provisions on corporate
dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would
apply insofar as the winding up of HLIs affairs or liquidation of the assets is
concerned. However, the mere inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the lands eventual distribution to the
FWBs will not, without more, automatically trigger the dissolution of HLI. As
stated in the SDOA itself, the percentage of the value of the agricultural land
of Hacienda Luisita in relation to the total assets transferred and conveyed by
Tadeco to HLI comprises only 33.296%, following this equation: value of the
agricultural lands divided by total corporate assets. By no stretch of
imagination would said percentage amount to a disposition of all or practically
all of HLIs corporate assets should compulsory land acquisition and distribution
ensue.
This brings us to the validity of the revocation of the approval of the SDP
sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special Task Force, as endorsed
by PARC Excom. But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the
corporation, as a mode of CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the fundamental right of farmers and
farmworkers under Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine,
there is stock certificate ownership of the farmers or farmworkers instead of

them owning the land, as envisaged in the Constitution. For FARM, this
modality of distribution is an anomaly to be annulled for being inconsistent
with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the
Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in
this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term
"agrarian reform." The constitutionality of a law, HLI added, cannot, as here,
be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and
necessarily its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and
pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are
first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the
case.108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM,
composed of a small minority of 27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 3l of RA 6657, since as early as
November 21, l989 when PARC approved the SDP of Hacienda Luisita or at least
within a reasonable time thereafter and why its members received benefits
from the SDP without so much of a protest. It was only on December 4, 2003 or
14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated
November 21, 1989 that said plan and approving resolution were sought to be
revoked, but not, to stress, by FARM or any of its members, but by petitioner
AMBALA. Furthermore, the AMBALA petition did NOT question the
constitutionality of Sec. 31 of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on
May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it
took FARM some eighteen (18) years from November 21, 1989 before it

challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in

the day. The FARM members slept on their rights and even accepted benefits
from the SDP with nary a complaint on the alleged unconstitutionality of Sec.
31 upon which the benefits were derived. The Court cannot now be goaded into
resolving a constitutional issue that FARM failed to assail after the lapse of a
long period of time and the occurrence of numerous events and activities which
resulted from the application of an alleged unconstitutional legal provision.
It has been emphasized in a number of cases that the question of
constitutionality will not be passed upon by the Court unless it is properly
raised and presented in an appropriate case at the first opportunity.109 FARM is,
therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be raised
at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be
the very lis mota of the case does not likewise obtain. The lis mota aspect is
not present, the constitutional issue tendered not being critical to the
resolution of the case. The unyielding rule has been to avoid, whenever
plausible, an issue assailing the constitutionality of a statute or governmental
act.110 If some other grounds exist by which judgment can be made without
touching the constitutionality of a law, such recourse is favored.111 Garcia v.
Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake
judicial review means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed of
on some other ground, such as the application of the statute or the general
law. The petitioner must be able to show that the case cannot be legally
resolved unless the constitutional question raised is determined. This
requirement is based on the rule that every law has in its favor the
presumption of constitutionality; to justify its nullification, there must be a
clear and unequivocal breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken
by AMBALA (to which the FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by HLI with the conditions of
the SDP to support a plea for its revocation. And before the Court, the lis mota
is whether or not PARC acted in grave abuse of discretion when it ordered the
recall of the SDP for such non-compliance and the fact that the SDP, as
couched and implemented, offends certain constitutional and statutory
provisions. To be sure, any of these key issues may be resolved without
plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking
deeply into the underlying petitions of AMBALA, et al., it is not the said section
per se that is invalid, but rather it is the alleged application of the said
provision in the SDP that is flawed.

It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec.
7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock
distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700
provides: "[T]hat after June 30, 2009, the modes of acquisition shall be
limited to voluntary offer to sell and compulsory acquisition." Thus, for all
intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is
no longer an available option under existing law. The question of whether or
not it is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic114 provided the following
requisites are present:
x x x first, there is a grave violation of the Constitution; second, the
exceptional character of the situation and the paramount public interest is
involved; third, when the constitutional issue raised requires formulation of
controlling principles to guide the bench, the bar, and the public; fourth, the
case is capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article
XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the
right of the farmers and regular farmworkers, who are landless, to OWN
directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the
State shall encourage and undertake the just distribution of all agricultural
lands, subject to such priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary landsharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular
farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS
THEY TILL. The basic law allows two (2) modes of land distributiondirect and
indirect ownership. Direct transfer to individual farmers is the most commonly
used method by DAR and widely accepted. Indirect transfer through collective
ownership of the agricultural land is the alternative to direct ownership of
agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY
authorizes collective ownership by farmers. No language can be found in the
1987 Constitution that disqualifies or prohibits corporations or cooperatives of
farmers from being the legal entity through which collective ownership can be
exercised. The word "collective" is defined as "indicating a number of persons

or things considered as constituting one group or aggregate,"115 while

"collectively" is defined as "in a collective sense or manner; in a mass or
body."116 By using the word "collectively," the Constitution allows for indirect
ownership of land and not just outright agricultural land transfer. This is in
recognition of the fact that land reform may become successful even if it is
done through the medium of juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29
allows workers cooperatives or associations to collectively own the land, while
the second paragraph of Sec. 31 allows corporations or associations to own
agricultural land with the farmers becoming stockholders or members. Said
provisions read:
SEC. 29. Farms owned or operated by corporations or other business
associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual workerbeneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker beneficiaries who shall form a
workers cooperative or association which will deal with the corporation or
business association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the companys total assets, under
such terms and conditions as may be agreed upon by them. In no case shall the
compensation received by the workers at the time the shares of stocks are
distributed be reduced. The same principle shall be applied to associations,
with respect to their equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated
from individual farmers, are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution
that land can be owned COLLECTIVELY by farmers. Even the framers of the l987

Constitution are in unison with respect to the two (2) modes of ownership of
agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the
principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal
ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers
cooperatives, do the farmers own specific areas of land where they only unite
in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved:
the "moshave" type of agriculture and the "kibbutz." So are both contemplated
in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng mga
magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila
itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively the
lands they till," is this land for the tillers rather than land for the landless?
Before, we used to hear "land for the landless," but now the slogan is "land for
the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig
sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung
saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin
naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid,
katulad ng sitwasyon sa Negros.117 (Emphasis supplied.)

As Commissioner Tadeo explained, the farmers will work on the agricultural

land "sama-sama" or collectively. Thus, the main requisite for collective
ownership of land is collective or group work by farmers of the agricultural
land. Irrespective of whether the landowner is a cooperative, association or
corporation composed of farmers, as long as concerted group work by the
farmers on the land is present, then it falls within the ambit of collective
ownership scheme.

FARM contends that the farmers in the stock distribution scheme under Sec. 31
do not own the agricultural land but are merely given stock certificates. Thus,
the farmers lose control over the land to the board of directors and executive
officials of the corporation who actually manage the land. They conclude that
such arrangement runs counter to the mandate of the Constitution that any
agrarian reform must preserve the control over the land in the hands of the
tiller.

Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment

on the part of the State to pursue, by law, an agrarian reform program founded
on the policy of land for the landless, but subject to such priorities as Congress
may prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress necessarily
implies that the above constitutional provision is not self-executory and that
legislation is needed to implement the urgently needed program of agrarian
reform. And RA 6657 has been enacted precisely pursuant to and as a
mechanism to carry out the constitutional directives. This piece of legislation,
in fact, restates118 the agrarian reform policy established in the
aforementioned provision of the Constitution of promoting the welfare of
landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as
"the redistribution of lands to farmers and regular farmworkers who are
landless to lift the economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution of lands, such as
production or profit sharing, labor administration and the distribution of
shares of stock which will allow beneficiaries to receive a just share of the
fruits of the lands they work."

This contention has no merit.

With the view We take of this case, the stock distribution option devised under
Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument of
social justice under Sec. 4 of Article XIII of the Constitution. Albeit land
ownership for the landless appears to be the dominant theme of that policy,
We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not
constrict Congress to passing an agrarian reform law planted on direct land
transfer to and ownership by farmers and no other, or else the enactment
suffers from the vice of unconstitutionality. If the intention were otherwise,
the framers of the Constitution would have worded said section in a manner
mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer
features, is not inconsistent with the States commitment to farmers and
farmworkers to advance their interests under the policy of social justice. The
legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective
ownership by which the imperatives of social justice may, in its estimation, be
approximated, if not achieved. The Court should be bound by such policy
choice.

While it is true that the farmer is issued stock certificates and does not directly
own the land, still, the Corporation Code is clear that the FWB becomes a
stockholder who acquires an equitable interest in the assets of the corporation,
which include the agricultural lands. It was explained that the "equitable
interest of the shareholder in the property of the corporation is represented by
the term stock, and the extent of his interest is described by the term shares.
The expression shares of stock when qualified by words indicating number and
ownership expresses the extent of the owners interest in the corporate
property."119 A share of stock typifies an aliquot part of the corporations
property, or the right to share in its proceeds to that extent when distributed
according to law and equity and that its holder is not the owner of any part of
the capital of the corporation.120 However, the FWBs will ultimately own the
agricultural lands owned by the corporation when the corporation is eventually
dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land
operated and managed by the corporation, a reading of the second paragraph
of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries
have "the right to purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets." The wording of the
formula in the computation of the number of shares that can be bought by the
farmers does not mean loss of control on the part of the farmers. It must be
remembered that the determination of the percentage of the capital stock that
can be bought by the farmers depends on the value of the agricultural land and
the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657.
The policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR and
PARC to see to it the farmers should always own majority of the common
shares entitled to elect the members of the board of directors to ensure that
the farmers will have a clear majority in the board. Before the SDP is
approved, strict scrutiny of the proposed SDP must always be undertaken by
the DAR and PARC, such that the value of the agricultural land contributed to
the corporation must always be more than 50% of the total assets of the
corporation to ensure that the majority of the members of the board of

directors are composed of the farmers. The PARC composed of the President of
the Philippines and cabinet secretaries must see to it that control over the
board of directors rests with the farmers by rejecting the inclusion of nonagricultural assets which will yield the majority in the board of directors to
non-farmers. Any deviation, however, by PARC or DAR from the correct
application of the formula prescribed by the second paragraph of Sec. 31 of RA
6675 does not make said provision constitutionally infirm. Rather, it is the
application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657
does not trench on the constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is
land distribution and that actual land distribution is the essential characteristic
of a constitutional agrarian reform program. On the contrary, there have been
so many instances where, despite actual land distribution, the implementation
of agrarian reform was still unsuccessful. As a matter of fact, this Court may
take judicial notice of cases where FWBs sold the awarded land even to nonqualified persons and in violation of the prohibition period provided under the
law. This only proves to show that the mere fact that there is land distribution
does not guarantee a successful implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of
land ownership where non-human juridical persons, such as corporations, were
prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a
collective manner through a cooperative or corporation. The former is too
often left to his own devices when faced with failing crops and bad weather, or
compelled to obtain usurious loans in order to purchase costly fertilizers or
farming equipment. The experiences learned from failed land reform activities
in various parts of the country are lack of financing, lack of farm equipment,
lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-tomarket roads, among others. Thus, at the end of the day, there is still no
successful implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a
better position to secure funding and competently maintain the agri-business
than the individual farmer. While direct singular ownership over farmland does
offer advantages, such as the ability to make quick decisions unhampered by
interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement.
Thus, government must be flexible and creative in its mode of implementation
to better its chances of success. One such option is collective ownership
through juridical persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution,
the requirement that the instant case be capable of repetition yet evading

review is also wanting. It would be speculative for this Court to assume that
the legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that
a law is the product of earnest studies by Congress to ensure that no
constitutional prescription or concept is infringed.121 Corollarily, courts will not
pass upon questions of wisdom, expediency and justice of legislation or its
provisions. Towards this end, all reasonable doubts should be resolved in favor
of the constitutionality of a law and the validity of the acts and processes
taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated in such a manner as to
leave no doubt in the mind of the Court. In other words, the grounds for nullity
must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA
6657.
The wisdom of Congress in allowing an SDP through a corporation as an
alternative mode of implementing agrarian reform is not for judicial
determination. Established jurisprudence tells us that it is not within the
province of the Court to inquire into the wisdom of the law, for, indeed, We
are bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises
of the revocation or recall of HLIs SDP. Or to be more precise, the inquiry
should be: whether or not PARC gravely abused its discretion in revoking or
recalling the subject SDP and placing the hacienda under CARPs compulsory
acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec.
31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the
lives of the FWBs have hardly improved and the promised increased
income has not materialized;

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
workedor the so-called "man days"is grossly onerous to the FWBs, as
HLI, in the guise of rotation, can unilaterally deny work to anyone. In
elaboration of this ground, PARCs Resolution No. 2006-34-01, denying
HLIs motion for reconsideration of Resolution No. 2005-32-01, stated
that the man days criterion worked to dilute the entitlement of the
original share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross
sales every year as production-sharing benefit on top of the workers
salary; and
(6) Several homelot awardees have yet to receive their individual
titles.
Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests
on solid grounds set forth in the Terminal Report, a position shared by AMBALA,
which, in some pleadings, is represented by the same counsel as that appearing
for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of
the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And
training its sight on the resulting dilution of the equity of the FWBs appearing
in HLIs masterlist, FARM would state that the SDP, as couched and
implemented, spawned disparity when there should be none; parity when there
should have been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to
enhance the dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.It is the policy of the State

to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of
the landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural
development and industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due
regard to the rights of landowners to just compensation and to the ecological
needs of the nation, shall be undertaken to provide farmers and farm workers
with the opportunity to enhance their dignity and improve the quality of their
lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular
farm workers, who are landless, to own directly or collectively the lands they
till or, in the case of other farm workers, to receive a share of the fruits
thereof. To this end, the State shall encourage the just distribution of all
agricultural lands, subject to the priorities and retention limits set forth in this
Act, having taken into account ecological, developmental, and equity
considerations, and subject to the payment of just compensation. The State
shall respect the right of small landowners and shall provide incentives for
voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to
provide farmers and farm workers with the opportunity to enhance their dignity
and improve the quality of their lives through greater productivity of
agricultural lands." Of note is the term "opportunity" which is defined as a
favorable chance or opening offered by circumstances.127 Considering this, by
no stretch of imagination can said provision be construed as a guarantee in
improving the lives of the FWBs. At best, it merely provides for a possibility or
favorable chance of uplifting the economic status of the FWBs, which may or
may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA 6657
and DAO 10, a violation of which would justify discarding the stock distribution
option. Nothing in that option agreement, law or department order indicates
otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during
the regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages
and higher benefits exclusive of free hospital and medical benefits to their
immediate family. And attached as Annex "G" to HLIs Memorandum is the
certified true report of the finance manager of Jose Cojuangco & Sons
Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC.
Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock

Option was Approved by PARC/CARP," detailing what HLI gave their workers
from 1989 to 2005. The sum total, as added up by the Court, yields the
following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) =
PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP
303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the
sale of the 500-hectare converted lands. While not included in the report, HLI
manifests having given the FWBs 3% of the PhP 80 million paid for the 80
hectares of land traversed by the SCTEX.128 On top of these, it is worth
remembering that the shares of stocks were given by HLI to the FWBs for free.
Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI
has not anyway earned profits through the years, it cannot be over-emphasized
that, as a matter of common business sense, no corporation could guarantee a
profitable run all the time. As has been suggested, one of the key features of
an SDP of a corporate landowner is the likelihood of the corporate vehicle not
earning, or, worse still, losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood
that the plan "would result in increased income and greater benefits to
[qualified beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to
have not, as it cannot, actually exact assurance of success on something that is
subject to the will of man, the forces of nature or the inherent risky nature of
business.131 Just like in actual land distribution, an SDP cannot guarantee, as
indeed the SDOA does not guarantee, a comfortable life for the FWBs. The
Court can take judicial notice of the fact that there were many instances
wherein after a farmworker beneficiary has been awarded with an agricultural
land, he just subsequently sells it and is eventually left with nothing in the
end.
In all then, the onerous condition of the FWBs economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its SDP
and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe
Sec. 31 of RA 6657, albeit public respondents erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without
relevance to the issue on the propriety of the assailed order revoking HLIs
SDP, for the paragraph deals with the transfer of agricultural lands to the
government, as a mode of CARP compliance, thus:

SEC. 31. Corporate Landowners.Corporate landowners may voluntarily

transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries under
such terms and conditions, consistent with this Act, as they may agree, subject
to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide
as follows:
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted
to agricultural activities, bears in relation to the companys total assets,
under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by
certified public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall
be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of
RA 6657 refers to as that "proportion of the capital stock of the corporation
that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets" had been observed.

Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec.
31 of RA 6657. The stipulation reads:

that there has been no violation of the statutory prescription under subparagraph (a) on the auditing of HLIs accounts.

1. The percentage of the value of the agricultural land of Hacienda Luisita

(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred
and conveyed to the SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share,
that has to be distributed to the THIRD PARTY under the stock distribution
plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.

Public respondents, however, submit that the distribution of the mandatory

minimum ratio of land-to-shares of stock, referring to the 118,391,976.85
shares with par value of PhP 1 each, should have been made in full within two
(2) years from the approval of RA 6657, in line with the last paragraph of Sec.
31 of said law.133

The appraised value of the agricultural land is PhP 196,630,000 and of HLIs
other assets is PhP 393,924,220. The total value of HLIs assets is, therefore,
PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP
196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which
represents the stockholdings of the 6,296 original qualified farmworkerbeneficiaries (FWBs) in HLI. The total number of shares to be distributed to
said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting
33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI
with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI
shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These
shares under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the
6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs
shall be assured of at least one (1) representative in the board of directors or
in a management or executive committee irrespective of the value of the
equity of the FWBs in HLI, the Court finds that the SDOA contained provisions
making certain the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from the FIRST PARTY and distributed to the THIRD PARTY,
FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the farmworkers
appearing as shareholders of the SECOND PARTY at the start of said year which
will empower the THIRD PARTY or their representative to vote in stockholders
and board of directors meetings of the SECOND PARTY convened during the
year the entire 33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of seats in the
board of directors of the SECOND PARTY that the whole 33.296% of the shares
subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of its
books by accountants chosen by the FWBs; hence, the assumption may be made

Public respondents submission is palpably erroneous. We have closely

examined the last paragraph alluded to, with particular focus on the two-year
period mentioned, and nothing in it remotely supports the public respondents
posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within
which the corporate landowner, to avoid land transfer as a mode of CARP
coverage under RA 6657, is to avail of the stock distribution option or to have
the SDP approved. The HLI secured approval of its SDP in November 1989, well
within the two-year period reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of
RA 6657 as well as the statutory issues, We shall now delve into what PARC and
respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda
Luisita unfragmented is also not among the imperative impositions by the SDP,
RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in
1989 to the PARC effectively assured the intended stock beneficiaries that the
physical integrity of the farm shall remain inviolate. Accordingly, the Terminal
Report and the PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500 hectares of the
hacienda. In not too many words, the Report and the resolution view the
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the

continued operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of
the stated criteria to guide PARC in deciding on whether or not to accept an
SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the
undertaking to keep the farm intact and unfragmented ad infinitum. And there
is logic to HLIs stated observation that the key phrase in the provision of Sec.
5(a) is "viability of corporate operations": "[w]hat is thus required is not the
agricultural land remaining intact x x x but the viability of the corporate
operations with its agricultural land being intact and unfragmented. Corporate
operation may be viable even if the corporate agricultural land does not remain
intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as
not violative of any issuance, let alone undermining the viability of Hacienda
Luisitas operation, as the DAR Secretary approved the land conversion applied
for and its disposition via his Conversion Order dated August 14, 1996 pursuant
to Sec. 65 of RA 6657 which reads:

especially when they are affirmed by the CA.135 However, such rule is not
absolute. One such exception is when the findings of an administrative agency
are conclusions without citation of specific evidence on which they are
based,136 such as in this particular instance. As culled from its Terminal Report,
it would appear that the Special Task Force rejected HLIs claim of compliance
on the basis of this ratiocination:

Sec. 65. Conversion of Lands.After the lapse of five years from its award
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR
upon application of the beneficiary or landowner with due notice to the
affected parties, and subject to existing laws, may authorize the x x x
conversion of the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the
gross production sales of the hacienda and pay dividends from profit, the
entries in its financial books tend to indicate compliance by HLI of the profitsharing equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due FWBs as employees of
the company and (b) the 3% of the gross selling price of the converted land and
that portion used for the SCTEX. A plausible evidence of compliance or noncompliance, as the case may be, could be the books of account of HLI.
Evidently, the cry of some groups of not having received their share from the
gross production sales has not adequately been validated on the ground by the
Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when
supported by substantial evidence and are accorded due respect and weight,

The Task Force position: Though, allegedly, the Supervisory Group

receives the 3% gross production share and that others alleged that
they received 30 million pesos still others maintain that they have not
received anything yet. Item No. 4 of the MOA is clear and must be
followed. There is a distinction between the total gross sales from the
production of the land and the proceeds from the sale of the land. The
former refers to the fruits/yield of the agricultural land while the
latter is the land itself. The phrase "the beneficiaries are entitled
every year to an amount approximately equivalent to 3% would only be
feasible if the subject is the produce since there is at least one harvest
per year, while such is not the case in the sale of the agricultural land.
This negates then the claim of HLI that, all that the FWBs can be
entitled to, if any, is only 3% of the purchase price of the converted
land.
Besides, the Conversion Order dated 14 August 1996 provides that "the
benefits, wages and the like, presently received by the FWBs shall not
in any way be reduced or adversely affected. Three percent of the
gross selling price of the sale of the converted land shall be awarded
to the beneficiaries of the SDO." The 3% gross production share then is
different from the 3% proceeds of the sale of the converted land and,
with more reason, the 33% share being claimed by the FWBs as part
owners of the Hacienda, should have been given the FWBs, as
stockholders, and to which they could have been entitled if only the
land were acquired and redistributed to them under the CARP.
xxxx

The FWBs do not receive any other benefits under the MOA except the
aforementioned [(viz: shares of stocks (partial), 3% gross production
sale (not all) and homelots (not all)].

Judging from the above statements, the Special Task Force is at best silent on
whether HLI has failed to comply with the 3% production-sharing obligation or
the 3% of the gross selling price of the converted land and the SCTEX lot. In
fact, it admits that the FWBs, though not all, have received their share of the
gross production sales and in the sale of the lot to SCTEX. At most, then, HLI
had complied substantially with this SDP undertaking and the conversion order.
To be sure, this slight breach would not justify the setting to naught by PARC of
the approval action of the earlier PARC. Even in contract law, rescission,
predicated on violation of reciprocity, will not be permitted for a slight or

casual breach of contract; rescission may be had only for such breaches that
are substantial and fundamental as to defeat the object of the parties in
making the agreement.137
Despite the foregoing findings, the revocation of the approval of the SDP is not
without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding
section shall be provided with homelots and small farmlots for their family use,
to be taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual workerbeneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker-beneficiaries who shall form a
workers cooperative or association which will deal with the corporation or
business association. Until a new agreement is entered into by and between
the workers cooperative or association and the corporation or business
association, any agreement existing at the time this Act takes effect between
the former and the previous landowner shall be respected by both the workers
cooperative or association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations
which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it except by stipulation, as in
this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without
charge among the qualified family-beneficiaries x x x residential or homelots of
not more than 240 sq. m. each, with each family beneficiary being assured of
receiving and owning a homelot in the barrio or barangay where it actually
resides," "within a reasonable time."

More than sixteen (16) years have elapsed from the time the SDP was approved
by PARC, and yet, it is still the contention of the FWBs that not all was given
the 240-square meter homelots and, of those who were already given, some
still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said
homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries,
the qualified family beneficiaries were not given the 240 square meters each.
So, can you also [prove] that the qualified family beneficiaries were already
provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing
that all the qualified beneficiaries have received homelots was submitted by
HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied
with its undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines
of stock distribution, We find that it violates two (2) provisions of DAO 10. Par.
3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
[HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution
to the THIRD PARTY [FWBs] on the basis of number of days worked and at no
cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital
stock of the SECOND PARTY that are presently owned and held by the FIRST
PARTY, until such time as the entire block of 118,391,976.85 shares shall have
been completely acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to
the FWBs, albeit not entailing a cash out from them, is contingent on the
number of "man days," that is, the number of days that the FWBs have worked
during the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the minimum ratio of
shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in
Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all

other shares, to each of the qualified beneficiaries. This distribution plan in all
cases, shall be at least the minimum ratio for purposes of compliance with
Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter
of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of
stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This
minimum ratio contemplates of that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets."139 It is this set of
shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated
"for the distribution of an equal number of shares of stock of the same class
and value, with the same rights and features as all other shares, to each of the
qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a
gratuitous extra grant, meaning that this set or category constitutes an
augmentation share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the management, in the
exercise of its sound discretion, may deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved
HLIs SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the
30-year stock distribution program envisaged under the plan, FWBs who came
in after 1989, new FWBs in fine, may be accommodated, as they appear to
have in fact been accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs
shall depend on the number of "man days," HLI violated the afore-quoted rule
on stock distribution and effectively deprived the FWBs of equal shares of stock
in the corporation, for, in net effect, these 6,296 qualified FWBs, who
theoretically had given up their rights to the land that could have been
distributed to them, suffered a dilution of their due share entitlement. As has
been observed during the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to water down the shares of
the original 6,296 FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Thats the only point I want to know x x x. Now, but they chose
to enter SDOA instead of placing the land under CARP. And for that reason
those who would have gotten their shares of the land actually gave up their
rights to this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to
own the land because that way the government takes own [sic] the land and
distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI
to the farmers at that time that numbered x x x those who signed five thousand
four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers
came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave
additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong
to them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your
Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original (interrupted)

Justice Abad: So why is it that the rights of those who gave up their lands
would be diluted, because the company has chosen to use the shares as reward
system for new workers who come in? It is not that the new workers, in effect,
become just workers of the corporation whose stockholders were already fixed.
The TADECO who has shares there about sixty six percent (66%) and the five
thousand four hundred ninety eight (5,498) farmers at the time of the SDOA?
Explain to me. Why, why will you x x x what right or where did you get that
right to use this shares, to water down the shares of those who should have
been benefited, and to use it as a reward system decided by the company?142

It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by
PARC. While neither of the clashing parties has made a compelling case of the
thrust of this provision, the Court is of the view and so holds that the intent is
to compel the corporate landowner to complete, not merely initiate, the
transfer process of shares within that three-month timeframe. Reinforcing this
conclusion is the 60-day stock transfer recording (with the SEC) requirement
reckoned from the implementation of the SDP.

From the above discourse, it is clear as day that the original 6,296 FWBs, who
were qualified beneficiaries at the time of the approval of the SDP, suffered
from watering down of shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and
distribution of the HLI shares were based on "man days" or "number of days
worked" by the FWB in a years time. As explained by HLI, a beneficiary needs
to work for at least 37 days in a fiscal year before he or she becomes entitled
to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get
any share at year end. The number of HLI shares distributed varies depending
on the number of days the FWBs were allowed to work in one year. Worse, HLI
hired farmworkers in addition to the original 6,296 FWBs, such that, as
indicated in the Compliance dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as of said date stood at 10,502.
All these farmworkers, which include the original 6,296 FWBs, were given
shares out of the 118,931,976.85 HLI shares representing the 33.296% of the
total outstanding capital stock of HLI. Clearly, the minimum individual
allocation of each original FWB of 18,804.32 shares was diluted as a result of
the use of "man days" and the hiring of additional farmworkers.

To the Court, there is a purpose, which is at once discernible as it is practical,

for the three-month threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with agrarian reform by simply
deferring to absurd limits the implementation of the stock distribution scheme.

Going into another but related matter, par. 3 of the SDOA expressly providing
for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution plan within three (3) months
from receipt by the corporate landowner of the approval of the plan by PARC.
In fact, based on the said provision, the transfer of the shares of stock in the
names of the qualified FWBs should be recorded in the stock and transfer books
and must be submitted to the SEC within sixty (60) days from implementation.
As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock
distribution plan shall be implemented within three (3) months from receipt by
the corporate landowner-applicant of the approval thereof by the PARC, and
the transfer of the shares of stocks in the names of the qualified beneficiaries
shall be recorded in stock and transfer books and submitted to the Securities
and Exchange Commission (SEC) within sixty (60) days from the said
implementation of the stock distribution plan. (Emphasis supplied.)

The argument is urged that the thirty (30)-year distribution program is justified
by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To
HLI, said section provides a justifying dimension to its 30-year stock
distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall
be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x
x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that
what is involved is stock distribution, it is the corporate landowner who has the
obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within
which to pay the cost of the land thus awarded them to make it less
cumbersome for them to pay the government. To be sure, the reason
underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as the
shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of
RA 6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10
has the force and effect of law and must be duly complied with.143 The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No.

89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and
voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray
for the exclusion from the coverage of the assailed PARC resolution those
portions of the converted land within Hacienda Luisita which RCBC and LIPCO
acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the
converted farm land. Thus, their plea for the exclusion of that portion from
PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of
Coverage dated January 2, 2006, which called for mandatory CARP acquisition
coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding
the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the
entire three hundred (300) hectares of land from Centennary for the purpose of
developing the land into an industrial complex.144 Accordingly, the TCT in
Centennarys name was canceled and a new one issued in LIPCOs name.
Thereafter, said land was subdivided into two (2) more parcels of land. Later
on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by
virtue of which TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered
owner receiving a certificate of title in pursuance of a decree of registration
and every subsequent purchaser of registered land taking a certificate of title
for value and in good faith shall hold the same free from all encumbrances
except those noted on the certificate and enumerated therein."145
It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of such burdens and claims
as are annotated on the title. This principle admits of certain exceptions, such
as when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of sufficient facts
to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.146 A higher level of care and diligence is of course
expected from banks, their business being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:

x x x A purchaser in good faith is one who buys property of another, without

notice that some other person has a right to, or interest in, such property at
the time of such purchase, or before he has notice of the claim or interest of
some other persons in the property. Good faith, or the lack of it, is in the final
analysis a question of intention; but in ascertaining the intention by which one
is actuated on a given occasion, we are necessarily controlled by the evidence
as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined. Truly, good faith is not a visible, tangible fact that
can be seen or touched, but rather a state or condition of mind which can only
be judged by actual or fancied tokens or signs. Otherwise stated, good faith x x
x refers to the state of mind which is manifested by the acts of the individual
concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in such
property; and (2) that the purchaser pays a full and fair price for the property
at the time of such purchase or before he or she has notice of the claim of
another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted
land in questionpurchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a right to or interest in
such property. In fact, at the time LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the property from agricultural to
industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of
Hacienda Luisita, only the following general annotations appeared on the TCTs
of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial
estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and
the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300
million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the
lots that were previously covered by the SDP. Good faith "consists in the
possessors belief that the person from whom he received it was the owner of
the same and could convey his title. Good faith requires a well-founded belief
that the person from whom title was received was himself the owner of the
land, with the right to convey it. There is good faith where there is an honest

intention to abstain from taking any unconscientious advantage from

another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were
validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2
and, hence, can be legally and validly acquired by them. After all, Sec. 65 of
RA 6657 explicitly allows conversion and disposition of agricultural lands
previously covered by CARP land acquisition "after the lapse of five (5) years
from its award when the land ceases to be economically feasible and sound for
agricultural purposes or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial
purposes." Moreover, DAR notified all the affected parties, more particularly
the FWBs, and gave them the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian
reform matters and its original exclusive jurisdiction over all matters involving
the implementation of agrarian reform. The DAR conversion order became final
and executory after none of the FWBs interposed an appeal to the CA. In this
factual setting, RCBC and LIPCO purchased the lots in question on their honest
and well-founded belief that the previous registered owners could legally sell
and convey the lots though these were previously subject of CARP coverage.
Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for
value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for
the amount of PhP 750 million pursuant to a Deed of Sale dated July 30,
1998.151 On the other hand, in a Deed of Absolute Assignment dated November
25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way
of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights
which cannot just be disregarded by DAR, PARC or even by this Court. As held
in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of purchasers
in good faith, it is now of no moment that some irregularity attended the
issuance of the SPA, consistent with our pronouncement in Heirs of Spouses
Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot
be valid, is inapplicable in this case as it will directly contravene the Torrens
system of registration. Where innocent third persons, relying on the

correctness of the certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the cancellation
of the certificate. The effect of such outright cancellation will be to impair
public confidence in the certificate of title. The sanctity of the Torrens system
must be preserved; otherwise, everyone dealing with the property registered
under the system will have to inquire in every instance as to whether the title
had been regularly or irregularly issued, contrary to the evident purpose of the
law.
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the
property and he is entitled to the protection of the law.152 x x x (Emphasis
supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow from
Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered
institution removed" from the realities on the ground. To note, the approval
and issuances of both the national and local governments showing that certain
portions of Hacienda Luisita have effectively ceased, legally and physically, to
be agricultural and, therefore, no longer CARPable are a matter of fact which
cannot just be ignored by the Court and the DAR. Among the
approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang
Bayan of Tarlac favorably endorsing the 300-hectare industrial estate
project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996
issued in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June
1997, approving LIPCOs application for a mixed ecozone and
proclaiming the three hundred (300) hectares of the industrial land as
a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan
of Tarlac, approving the Final Development Permit for the Luisita
Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan
of Tarlac;155

(f) DENR Environmental Compliance Certificate dated 01 October 1997

issued for the proposed project of building an industrial complex on
three hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997
issued by the HLURB on the project of Luisita Industrial Park II with an
area of three million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the
HLURB authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring
Certain Parcels of Private Land in Barangay San Miguel, Municipality of
Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to
Republic Act No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of industrial land as a
Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued
by the PEZA, stating that pursuant to Presidential Proclamation No.
1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of Luisita Industrial Park
II located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in
an economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie
indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074764-(95) issued in 1996 by then DAR Secretary Garilao had effectively
converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion
order, both RCBC and LIPCO cannot be considered at fault for believing that
certain portions of Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely
abused its discretion when it placed LIPCOs and RCBCs property which once
formed part of Hacienda Luisita under the CARP compulsory acquisition scheme
via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as
part of the SCTEX, this should also be excluded from the compulsory agrarian
reform coverage considering that the transfer was consistent with the
governments exercise of the power of eminent domain159 and none of the
parties actually questioned the transfer.

While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC
Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to
certain "operative facts" that had occurred in the interim. Pertinently, the
"operative fact" doctrine realizes that, in declaring a law or executive action
null and void, or, by extension, no longer without force and effect, undue
harshness and resulting unfairness must be avoided. This is as it should
realistically be, since rights might have accrued in favor of natural or juridical
persons and obligations justly incurred in the meantime.160 The actual
existence of a statute or executive act is, prior to such a determination, an
operative fact and may have consequences which cannot justly be ignored; the
past cannot always be erased by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to
be given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done
while such legislative or executive act was in operation and presumed to be
valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to
reflect awareness that precisely because the judiciary is the government organ
which has the final say on whether or not a legislative or executive measure is
valid, a period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to deprive
the law of its quality of fairness and justice then, if there be no recognition of
what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence
of a statute, prior to such a determination of [unconstitutionality], is an
operative fact and may have consequences which cannot justly be ignored. The
past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
aspects,with respect to particular relations, individual and corporate, and
particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had
passed since the PARCs approval of the HLIs SDP, in conjunction with
numerous activities performed in good faith by HLI, and the reliance by the
FWBs on the legality and validity of the PARC-approved SDP, perforce, certain
rights of the parties, more particularly the FWBs, have to be respected
pursuant to the application in a general way of the operative fact doctrine.

A view, however, has been advanced that the operative fact doctrine is of
minimal or altogether without relevance to the instant case as it applies only in
considering the effects of a declaration of unconstitutionality of a statute, and
not of a declaration of nullity of a contract. This is incorrect, for this view
failed to consider is that it is NOT the SDOA dated May 11, 1989 which was
revoked in the instant case. Rather, it is PARCs approval of the HLIs Proposal
for Stock Distribution under CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco,
HLI, and the qualified FWBs executed the SDOA. This agreement provided the
basis and mechanics of the SDP that was subsequently proposed and submitted
to DAR for approval. It was only after its review that the PARC, through then
Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving
the SDP. Considerably, it is not the SDOA which gave legal force and effect to
the stock distribution scheme but instead, it is the approval of the SDP under
the PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans
recommendation to the PARC Excom, what he proposed is the recall/revocation
of PARC Resolution No. 89-12-2 approving HLIs SDP, and not the revocation of
the SDOA. Sec. Pangandamans recommendation was favorably endorsed by the
PARC Validation Committee to the PARC Excom, and these recommendations
were referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not
the SDOA which was made the basis for the implementation of the stock
distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this
case, the approval by PARC of the HLI proposal for stock distributionis wellsettled in our jurisprudence. In Chavez v. National Housing Authority,163 We
held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of
the various agreements implementing the SMDRP is an operative fact that can
no longer be disturbed or simply ignored, citing Rieta v. People of the
Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid and must be complied with,
thus:

xxx

xxx

xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of
suspension, as we have no reason to do so, much less retroactively apply such
nullification to deprive private respondent of a compelling and valid reason for
not filing the leave application. For as we have held, a void act though in law a
mere scrap of paper nonetheless confers legitimacy upon past acts or omissions
done in reliance thereof. Consequently, the existence of a statute or executive
order prior to its being adjudged void is an operative fact to which legal
consequences are attached. It would indeed be ghastly unfair to prevent
private respondent from relying upon the order of suspension in lieu of a formal
leave application. (Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated
General Order No. 60, issued by then President Ferdinand E. Marcos was
subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force
and effect. Thus, he asserts, any evidence obtained pursuant thereto is
inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing
therein how such a declaration might affect acts done on a presumption of
their validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank to
wit:
The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence affording
no basis for the challenged decree. . . . It is quite clear, however, that such
broad statements as to the effect of a determination of unconstitutionality
must be taken with qualifications. The actual existence of a statute, prior to
[the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects with respect to
particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality and

acted upon accordingly, of public policy in the light of the nature both of the
statute and of its previous application, demand examination. These questions
are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot
be justified.
xxx

xxx

xxx

"Similarly, the implementation/enforcement of presidential decrees prior to

their publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be
erased by a new judicial declaration . . . that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of
a statute, there is an imperative necessity of taking into account its actual
existence as an operative fact negating the acceptance of "a principle of
absolute retroactive invalidity." Whatever was done while the legislative or the
executive act was in operation should be duly recognized and presumed to be
valid in all respects. The ASSO that was issued in 1979 under General Order No.
60 long before our Decision in Taada and the arrest of petitioner is an
operative fact that can no longer be disturbed or simply ignored. (Citations
omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it
revokes or recalls the SDP, what it actually revoked or recalled was the PARCs
approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what
was actually declared null and void was an executive act, PARC Resolution No.
89-12-2,165 and not a contract (SDOA). It is, therefore, wrong to say that it was
the SDOA which was annulled in the instant case. Evidently, the operative fact
doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita
SDP are upheld, the revocation must, by application of the operative fact
principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn
a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or
the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs
were said to have received from HLI salaries and cash benefits, hospital and
medical benefits, 240-square meter homelots, 3% of the gross produce from
agricultural lands, and 3% of the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005.166 On August 6, 20l0, HLI

and private respondents submitted a Compromise Agreement, in which HLI

gave the FWBs the option of acquiring a piece of agricultural land or remain as
HLI stockholders, and as a matter of fact, most FWBs indicated their choice of
remaining as stockholders. These facts and circumstances tend to indicate that
some, if not all, of the FWBs may actually desire to continue as HLI
shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries
as of November 21, 1989 when the SDP was approved, they are not accorded
the right to acquire land but shall, however, continue as HLI stockholders. All
the benefits and homelots167 received by the 10,502 FWBs (6,296 original FWBs
and 4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010
shall be respected with no obligation to refund or return them since the
benefits (except the homelots) were received by the FWBs as farmhands in the
agricultural enterprise of HLI and other fringe benefits were granted to them
pursuant to the existing collective bargaining agreement with Tadeco. If the
number of HLI shares in the names of the original FWBs who opt to remain as
HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares
per FWB, the HLI shall assign additional shares to said FWBs to complete said
minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not
obliged to return the same to HLI or pay for its value since this is a benefit
granted under the SDP. The homelots do not form part of the 4,915.75 hectares
covered by the SDP but were taken from the 120.9234 hectare residential lot
owned by Tadeco. Those who did not receive the homelots as of the revocation
of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was
issued, will no longer be entitled to homelots. Thus, in the determination of
the ultimate agricultural land that will be subjected to land distribution, the
aggregate area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land
subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX
lot came after compulsory coverage has taken place, the FWBs should have
their corresponding share of the lands value. There is merit in the claim. Since
the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all
the lands subject of the SDP will automatically be subject of compulsory
coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare
lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare
SCTEX lot acquired by the government from the area covered by SDP, then HLI
and its subsidiary, Centennary, shall be liable to the FWBs for the price
received for said lots. HLI shall be liable for the value received for the sale of
the 200-hectare land to LRC in the amount of PhP 500,000,000 and the
equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the
300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000.
Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of
the 80.51-hectare SCTEX lot.

We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of
the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take
into account the payment of taxes and expenses relating to the transfer of the
land and HLIs statement that most, if not all, of the proceeds were used for
legitimate corporate purposes. In order to determine once and for all whether
or not all the proceeds were properly utilized by HLI and its subsidiary,
Centennary, DAR will engage the services of a reputable accounting firm to be
approved by the parties to audit the books of HLI to determine if the proceeds
of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were
actually used for legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order. The cost of the audit
will be shouldered by HLI. If after such audit, it is determined that there
remains a balance from the proceeds of the sale, then the balance shall be
distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of
the land from 1989. We disagree. It should not be forgotten that the FWBs are
also stockholders of HLI, and the benefits acquired by the corporation from its
possession and use of the land ultimately redounded to the FWBs benefit
based on its business operations in the form of salaries, and other fringe
benefits under the CBA. To still require HLI to pay rent to the FWBs will result
in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the
SDP although it will no longer be operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The non-agricultural assets
amounting to PhP 393,924,220 shall remain with HLI, while the agricultural
lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares
shall be turned over to DAR for distribution to the FWBs. To be deducted from
said area are the 500-hectare lot subject of the August 14, 1996 Conversion
Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square
meters of individual lots that should have been distributed to FWBs by DAR had
they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will
be transferred to DAR for land distribution to the FWBs. We find that the date
of the "taking" is November 21, 1989, when PARC approved HLIs SDP per PARC
Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of
just compensation. We cannot use May 11, 1989 when the SDOA was executed,
since it was the SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01
dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006,
placing the lands subject of HLIs SDP under compulsory coverage on mandated

land acquisition scheme of the CARP, are hereby AFFIRMED with the
MODIFICATION that the original 6,296 qualified FWBs shall have the option to
remain as stockholders of HLI. DAR shall immediately schedule meetings with
the said 6,296 FWBs and explain to them the effects, consequences and legal or
practical implications of their choice, after which the FWBs will be asked to
manifest, in secret voting, their choices in the ballot, signing their signatures
or placing their thumbmarks, as the case may be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is
entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to
him or her is less than 18,804.32 shares, the HLI is ordered to issue or
distribute additional shares to complete said prescribed number of shares at no
cost to the FWB within thirty (30) days from finality of this Decision. Other
FWBs who do not belong to the original 6,296 qualified beneficiaries are not
entitled to land distribution and shall remain as HLI shareholders. All salaries,
benefits, 3% production share and 3% share in the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare SCTEX lot and homelots
already received by the 10,502 FWBs, composed of 6,296 original FWBs and
4,206 non-qualified FWBs, shall be respected with no obligation to refund or
return them.
Within thirty (30) days after determining who from among the original FWBs
will stay as stockholders, DAR shall segregate from the HLI agricultural land
with an area of 4,915.75 hectares subject of PARCs SDP-approving Resolution
No. 89-12-2 the following: (a) the 500-hectare lot subject of the August 14,
l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the
government as part of the SCTEX complex; and (c) the aggregate area of
6,886.5 square meters of individual lots that each FWB is entitled to under the
CARP had he or she not opted to stay in HLI as a stockholder. After the
segregation process, as indicated, is done, the remaining area shall be turned
over to DAR for immediate land distribution to the original qualified FWBs who
opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to
the FWBs who stayed with the corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares
out of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary
Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned
500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases Conversion Development
Authority for the sale of the 80.51-hectare lot used for the construction of the
SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP
500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be
deducted the 3% of the total gross sales from the production of the agricultural

land and the 3% of the proceeds of said transfers that were paid to the FWBs,
the taxes and expenses relating to the transfer of titles to the transferees, and
the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate
corporate purposes. For this purpose, DAR is ordered to engage the services of
a reputable accounting firm approved by the parties to audit the books of HLI
and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds
of the sale of the three (3) aforementioned lots were used or spent for
legitimate corporate purposes. Any unspent or unused balance as determined
by the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be
transferred to DAR to be reckoned from November 21, 1989 per PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report,
quarterly reports on the execution of this judgment to be submitted within the
first 15 days at the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
G.R. No. 91649

May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN

AND LORENZO SANCHEZ, petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.

PARAS, J.:
A TV ad proudly announces:

Charter PD 1869, because it is allegedly contrary to morals, public policy and

order, and because
A. It constitutes a waiver of a right prejudicial to a third person with a
right recognized by law. It waived the Manila City government's right to
impose taxes and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph,
the law has intruded into the local government's right to impose local
taxes and license fees. This, in contravention of the constitutionally
enshrined principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it
legalizes PAGCOR conducted gambling, while most other forms of
gambling are outlawed, together with prostitution, drug trafficking and
other vices;
D. It violates the avowed trend of the Cory government away from
monopolistic and crony economy, and toward free enterprise and
privatization. (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is
contrary to the declared national policy of the "new restored democracy" and
the people's will as expressed in the 1987 Constitution. The decree is said to
have a "gambling objective" and therefore is contrary to Sections 11, 12 and 13
of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present
Constitution (p. 3, Second Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing
lawyers (petitioner Basco being also the Chairman of the Committee on Laws of
the City Council of Manila), can question and seek the annulment of PD 1869 on
the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under
P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain
gambling casinos on land or water within the territorial jurisdiction of the
Philippines." Its operation was originally conducted in the well known floating
casino "Philippine Tourist." The operation was considered a success for it
proved to be a potential source of revenue to fund infrastructure and socioeconomic projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to
fully attain this objective.

"The new PAGCOR responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition
seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR)

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to
enable the Government to regulate and centralize all games of chance

authorized by existing franchise or permitted by law, under the following

declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be the policy
of the State to centralize and integrate all games of chance not
heretofore authorized by existing franchises or permitted by law in
order to attain the following objectives:
(a) To centralize and integrate the right and authority to operate and
conduct games of chance into one corporate entity to be controlled,
administered and supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and
recreation, including sports gaming pools, (basketball, football,
lotteries, etc.) and such other forms of amusement and recreation
including games of chance, which may be allowed by law within the
territorial jurisdiction of the Philippines and which will: (1) generate
sources of additional revenue to fund infrastructure and socio-civic
projects, such as flood control programs, beautification, sewerage and
sewage projects, Tulungan ng Bayan Centers, Nutritional Programs,
Population Control and such other essential public services; (2) create
recreation and integrated facilities which will expand and improve the
country's existing tourist attractions; and (3) minimize, if not totally
eradicate, all the evils, malpractices and corruptions that are normally
prevalent on the conduct and operation of gambling clubs and casinos
without direct government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees, executive
orders, rules and regulations, inconsistent therewith, are accordingly repealed,
amended or modified.
It is reported that PAGCOR is the third largest source of government revenue,
next to the Bureau of Internal Revenue and the Bureau of Customs. In 1989
alone, PAGCOR earned P3.43 Billion, and directly remitted to the National
Government a total of P2.5 Billion in form of franchise tax, government's
income share, the President's Social Fund and Host Cities' share. In addition,
PAGCOR sponsored other socio-cultural and charitable projects on its own or in
cooperation with various governmental agencies, and other private associations
and organizations. In its 3 1/2 years of operation under the present
administration, PAGCOR remitted to the government a total of P6.2 Billion. As
of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9)
casinos nationwide, directly supporting the livelihood of Four Thousand Four
Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege
that the same is "null and void" for being "contrary to morals, public policy and

public order," monopolistic and tends toward "crony economy", and is violative
of the equal protection clause and local autonomy as well as for running
counter to the state policies enunciated in Sections 11 (Personal Dignity and
Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1
(Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV
of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and
the most deliberate consideration by the Court, involving as it does the
exercise of what has been described as "the highest and most delicate function
which belongs to the judicial department of the government." (State v. Manuel,
20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and
coordinate branch of the government We need not be reminded of the timehonored principle, deeply ingrained in our jurisprudence, that a statute is
presumed to be valid. Every presumption must be indulged in favor of its
constitutionality. This is not to say that We approach Our task with diffidence
or timidity. Where it is clear that the legislature or the executive for that
matter, has over-stepped the limits of its authority under the constitution, We
should not hesitate to wield the axe and let it fall heavily, as fall it must, on
the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru
Mr. Justice Zaldivar underscored the
. . . thoroughly established principle which must be followed in all
cases where questions of constitutionality as obtain in the instant
cases are involved. All presumptions are indulged in favor of
constitutionality; one who attacks a statute alleging
unconstitutionality must prove its invalidity beyond a reasonable
doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate
all possible basis; that the courts are not concerned with the wisdom,
justice, policy or expediency of a statute and that a liberal
interpretation of the constitution in favor of the constitutionality of
legislation should be adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539;
Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g.
Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v. Commission on
Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125
SCRA 220, 241-242 [1983] cited in Citizens Alliance for Consumer
Protection v. Energy Regulatory Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning
the legal personality of petitioners to file the instant petition.

Considering however the importance to the public of the case at bar, and in
keeping with the Court's duty, under the 1987 Constitution, to determine
whether or not the other branches of government have kept themselves within
the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of this petition. (Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in
the cases before us, We hold that the same is satisfied by the
petitioners and intervenors because each of them has sustained or is in
danger of sustaining an immediate injury as a result of the acts or
measures complained of. And even if, strictly speaking they are not
covered by the definition, it is still within the wide discretion of the
Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.

efficient and flexible response to conditions and circumstances thus assuming

the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not
owe its origin to the charter. Along with the taxing power and eminent domain,
it is inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions
of governance. Marshall, to whom the expression has been credited, refers to it
succinctly as the plenary power of the state "to govern its citizens". (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a
power co-extensive with self-protection and is most aptly termed the "law of
overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660,
708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell
& Co. v. National, 40 Phil. 136) It is a dynamic force that enables the state to
meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?

In the first Emergency Powers Cases, ordinary citizens and taxpayers

were allowed to question the constitutionality of several executive
orders issued by President Quirino although they were involving only an
indirect and general interest shared in common with the public. The
Court dismissed the objection that they were not proper parties and
ruled that "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside,
if we must technicalities of procedure." We have since then applied
the exception in many other cases. (Association of Small Landowners in
the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive
issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But
the prohibition of gambling does not mean that the Government cannot
regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with
personal liberty or property in order to promote the general welfare." (Edu v.
Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or
restraint upon liberty or property, (2) in order to foster the common good. It is
not capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all-comprehensive embrace. (Philippine Association of
Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to
anticipate the future where it could be done, provides enough room for an

P.D. 1869 was enacted pursuant to the policy of the government to "regulate
and centralize thru an appropriate institution all games of chance authorized
by existing franchise or permitted by law" (1st whereas clause, PD 1869). As
was subsequently proved, regulating and centralizing gambling operations in
one corporate entity the PAGCOR, was beneficial not just to the Government
but to society in general. It is a reliable source of much needed revenue for the
cash strapped Government. It provided funds for social impact projects and
subjected gambling to "close scrutiny, regulation, supervision and control of
the Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR
and the direct intervention of the Government, the evil practices and
corruptions that go with gambling will be minimized if not totally eradicated.
Public welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City
of Manila to impose taxes and legal fees; that the exemption clause in P.D.
1869 is violative of the principle of local autonomy. They must be referring to
Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise
holder from paying any "tax of any kind or form, income or otherwise, as well
as fees, charges or levies of whatever nature, whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No tax of any kind
or form, income or otherwise as well as fees, charges or levies of
whatever nature, whether National or Local, shall be assessed and
collected under this franchise from the Corporation; nor shall any form
or tax or charge attach in any way to the earnings of the Corporation,
except a franchise tax of five (5%) percent of the gross revenues or
earnings derived by the Corporation from its operations under this
franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or

assessments of any kind, nature or description, levied, established or

collected by any municipal, provincial or national government
authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right
to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v.
Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643).
Thus, "the Charter or statute must plainly show an intent to confer that power
or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62).
Its "power to tax" therefore must always yield to a legislative act which is
superior having been passed upon by the state itself which has the "inherent
power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1, 1983
ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should
be stressed that "municipal corporations are mere creatures of Congress"
(Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the power to
"create and abolish municipal corporations" due to its "general legislative
powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541).
Congress, therefore, has the power of control over Local governments (Hebron
v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City of
Manila the power to tax certain matters, it can also provide for exemptions or
even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long
been revoked. As early as 1975, the power of local governments to regulate
gambling thru the grant of "franchise, licenses or permits" was withdrawn by
P.D. No. 771 and was vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the
authority of chartered cities and other local governments to issue
license, permit or other form of franchise to operate, maintain and
establish horse and dog race tracks, jai-alai and other forms of
gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and
establish, horse and dog race tracks, jai-alai and other forms of
gambling shall be issued by the national government upon proper
application and verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or
permits" for the operation of gambling. Necessarily, the power to demand or
collect license fees which is a consequence of the issuance of "licenses or
permits" is no longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National

Government. PAGCOR is a government owned or controlled corporation with an
original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it
also exercises regulatory powers thus:
Sec. 9. Regulatory Power. The Corporation shall maintain a Registry
of the affiliated entities, and shall exercise all the powers, authority
and the responsibilities vested in the Securities and Exchange
Commission over such affiliating entities mentioned under the
preceding section, including, but not limited to amendments of
Articles of Incorporation and By-Laws, changes in corporate term,
structure, capitalization and other matters concerning the operation of
the affiliated entities, the provisions of the Corporation Code of the
Philippines to the contrary notwithstanding, except only with respect
to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The
latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the
Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control
by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over
local governments.
Justice Holmes, speaking for the Supreme Court, made reference to
the entire absence of power on the part of the States to touch, in that
way (taxation) at least, the instrumentalities of the United States
(Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
political subdivision can regulate a federal instrumentality in such a
way as to prevent it from consummating its federal responsibilities, or
even to seriously burden it in the accomplishment of them. (Antieau,
Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as "a tool for regulation" (U.S. v.
Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to
destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power to
wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution
will be violated by P.D. 1869. This is a pointless argument. Article X of the 1987
Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its
own source of revenue and to levy taxes, fees, and other charges
subject to such guidelines and limitation as the congress may provide,
consistent with the basic policy on local autonomy. Such taxes, fees
and charges shall accrue exclusively to the local government.
(emphasis supplied)

As gambling is usually an offense against the State, legislative grant or

express charter power is generally necessary to empower the local
corporation to deal with the subject. . . . In the absence of express
grant of power to enact, ordinance provisions on this subject which
are inconsistent with the state laws are void. (Ligan v. Gadsden, Ala
App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following
in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480,
as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of
the Constitution, because "it legalized PAGCOR conducted gambling, while
most gambling are outlawed together with prostitution, drug trafficking and
other vices" (p. 82, Rollo).

The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an
"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of
the power of local governments to impose taxes and fees. It cannot therefore
be violative but rather is consistent with the principle of local autonomy.

We, likewise, find no valid ground to sustain this contention. The petitioners'
posture ignores the well-accepted meaning of the clause "equal protection of
the laws." The clause does not preclude classification of individuals who may
be accorded different treatment under the law as long as the classification is
not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law
does not have to operate in equal force on all persons or things to be
conformable to Article III, Section 1 of the Constitution (DECS v. San Diego,
G.R. No. 89572, December 21, 1989).

Besides, the principle of local autonomy under the 1987 Constitution simply
means "decentralization" (III Records of the 1987 Constitutional Commission,
pp. 435-436, as cited in Bernas, The Constitution of the Republic of the
Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments
sovereign within the state or an "imperium in imperio."

The "equal protection clause" does not prohibit the Legislature from
establishing classes of individuals or objects upon which different rules shall
operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require
situations which are different in fact or opinion to be treated in law as though
they were the same (Gomez v. Palomar, 25 SCRA 827).

Local Government has been described as a political subdivision of a

nation or state which is constituted by law and has substantial control
of local affairs. In a unitary system of government, such as the
government under the Philippine Constitution, local governments can
only be an intra sovereign subdivision of one sovereign nation, it
cannot be an imperium in imperio. Local government in such a system
can only mean a measure of decentralization of the function of
government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated
to local government units remains a matter of policy, which concerns wisdom.
It is therefore a political question. (Citizens Alliance for Consumer Protection
v. Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing
with gambling is a State concern and hence, it is the sole prerogative of the
State to retain it or delegate it to local governments.

Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of

the equal protection is not clearly explained in the petition. The mere fact that
some gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as
amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by
B.P. 42) are legalized under certain conditions, while others are prohibited,
does not render the applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have
been applied. (Gomez v. Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean
that all occupations called by the same name must be treated the
same way; the state may do what it can to prevent which is deemed as
evil and stop short of those cases in which harm to the few concerned
is not less than the harm to the public that would insure if the rule laid
down were made mathematically exact. (Dominican Hotel v. Arizona,
249 US 2651).

Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the
Cory Government away from monopolies and crony economy and toward free
enterprise and privatization" suffice it to state that this is not a ground for this
Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's
policies then it is for the Executive Department to recommend to Congress its
repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare
what the law is and not what the law should be.1wphi1 Under our
system of government, policy issues are within the domain of the
political branches of government and of the people themselves as the
repository of all state power. (Valmonte v. Belmonte, Jr., 170 SCRA
256).

Constitution, not merely a doubtful and equivocal one. In other words, the
grounds for nullity must be clear and beyond reasonable doubt. (Peralta v.
Comelec, supra) Those who petition this Court to declare a law, or parts
thereof, unconstitutional must clearly establish the basis for such a
declaration. Otherwise, their petition must fail. Based on the grounds raised by
petitioners to challenge the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption. The dismissal of this
petition is therefore, inevitable. But as to whether P.D. 1869 remains a wise
legislation considering the issues of "morality, monopoly, trend to free
enterprise, privatization as well as the state principles on social justice, role of
youth and educational values" being raised, is up for Congress to determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 521

On the issue of "monopoly," however, the Constitution provides that:

Sec. 19. The State shall regulate or prohibit monopolies when public
interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed. (Art. XII, National Economy and
Patrimony)
It should be noted that, as the provision is worded, monopolies are not
necessarily prohibited by the Constitution. The state must still decide whether
public interest demands that monopolies be regulated or prohibited. Again, this
is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality
Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social
Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the
1987 Constitution, suffice it to state also that these are merely statements of
principles and, policies. As such, they are basically not self-executing, meaning
a law should be passed by Congress to clearly define and effectuate such
principles.
In general, therefore, the 1935 provisions were not intended to be selfexecuting principles ready for enforcement through the courts. They
were rather directives addressed to the executive and the legislature.
If the executive and the legislature failed to heed the directives of the
articles the available remedy was not judicial or political. The
electorate could express their displeasure with the failure of the
executive and the legislature through the language of the ballot.
(Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v.
Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82
SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be
nullified, it must be shown that there is a clear and unequivocal breach of the

Presidential Decree No. 1956, as amended by Executive Order No. 137

has, in any case, in its favor the presumption of validity and
constitutionality which petitioners Valmonte and the KMU have not
overturned. Petitioners have not undertaken to identify the provisions
in the Constitution which they claim to have been violated by that
statute. This Court, however, is not compelled to speculate and to
imagine how the assailed legislation may possibly offend some
provision of the Constitution. The Court notes, further, in this respect
that petitioners have in the main put in question the wisdom, justice
and expediency of the establishment of the OPSF, issues which are not
properly addressed to this Court and which this Court may not
constitutionally pass upon. Those issues should be addressed rather to
the political departments of government: the President and the
Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this
is precisely so when the gambling resorted to is excessive. This excessiveness
necessarily depends not only on the financial resources of the gambler and his
family but also on his mental, social, and spiritual outlook on life. However,
the mere fact that some persons may have lost their material fortunes, mental
control, physical health, or even their lives does not necessarily mean that the
same are directly attributable to gambling. Gambling may have been the
antecedent, but certainly not necessarily the cause. For the same
consequences could have been preceded by an overdose of food, drink,
exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 80391 February 28, 1989

SULTAN ALIMBUSAR P. LIMBONA, petitioner,

vs.
CONTE MANGELIN, SALIC ALI, SALINDATO ALI, PILIMPINAS CONDING, ACMAD
TOMAWIS, GERRY TOMAWIS, JESUS ORTIZ, ANTONIO DELA FUENTE, DIEGO
PALOMARES, JR., RAUL DAGALANGIT, and BIMBO SINSUAT, respondents.
Ambrosio Padilla, Mempin & Reyes Law Offices for petitioner petitioner.
Makabangkit B. Lanto for respondents.

SARMIENTO, J.:
The acts of the Sangguniang Pampook of Region XII are assailed in this petition.
The antecedent facts are as follows:
1. On September 24, 1986, petitioner Sultan Alimbusar
Limbona was appointed as a member of the Sangguniang
Pampook, Regional Autonomous Government, Region XII,
representing Lanao del Sur.
2. On March 12, 1987 petitioner was elected Speaker of the
Regional Legislative Assembly or Batasang Pampook of Central
Mindanao (Assembly for brevity).
3. Said Assembly is composed of eighteen (18) members. Two
of said members, respondents Acmad Tomawis and Pakil
Dagalangit, filed on March 23, 1987 with the Commission on
Elections their respective certificates of candidacy in the May
11, 1987 congressional elections for the district of Lanao del
Sur but they later withdrew from the aforesaid election and
thereafter resumed again their positions as members of the
Assembly.
4. On October 21, 1987 Congressman Datu Guimid Matalam,
Chairman of the Committee on Muslim Affairs of the House of
Representatives, invited Mr. Xavier Razul, Pampook Speaker of
Region XI, Zamboanga City and the petitioner in his capacity
as Speaker of the Assembly, Region XII, in a letter which
reads:
The Committee on Muslim Affairs well
undertake consultations and dialogues with
local government officials, civic, religious
organizations and traditional leaders on the

recent and present political developments

and other issues affecting Regions IX and XII.
The result of the conference, consultations
and dialogues would hopefully chart the
autonomous governments of the two regions
as envisioned and may prod the President to
constitute immediately the Regional
Consultative Commission as mandated by the
Commission.
You are requested to invite some members of
the Pampook Assembly of your respective
assembly on November 1 to 15, 1987, with
venue at the Congress of the Philippines. Your
presence, unstinted support and cooperation
is (sic) indispensable.
5. Consistent with the said invitation, petitioner sent a
telegram to Acting Secretary Johnny Alimbuyao of the
Assembly to wire all Assemblymen that there shall be no
session in November as "our presence in the house committee
hearing of Congress take (sic) precedence over any pending
business in batasang pampook ... ."
6. In compliance with the aforesaid instruction of the
petitioner, Acting Secretary Alimbuyao sent to the members of
the Assembly the following telegram:
TRANSMITTING FOR YOUR INFORMATION AND
GUIDANCE TELEGRAM RECEIVED FROM
SPEAKER LIMBONA QUOTE CONGRESSMAN
JIMMY MATALAM CHAIRMAN OF THE HOUSE
COMMITTEE ON MUSLIM AFFAIRS REQUESTED
ME TO ASSIST SAID COMMITTEE IN THE
DISCUSSION OF THE PROPOSED AUTONOMY
ORGANIC NOV. 1ST TO 15. HENCE WERE ALL
ASSEMBLYMEN THAT THERE SHALL BE NO
SESSION IN NOVEMBER AS OUR PRESENCE IN
THE HOUSE COMMITTEE HEARING OF
CONGRESS TAKE PRECEDENCE OVER ANY
PENDING BUSINESS IN BATASANG PAMPOOK OF
MATALAM FOLLOWS UNQUOTE REGARDS.
7. On November 2, 1987, the Assembly held session in defiance
of petitioner's advice, with the following assemblymen
present:

1. Sali, Salic

9. Ortiz, Jesus

2. Conding, Pilipinas (sic)

10 Palomares, Diego

3. Dagalangit, Rakil

11. Quijano, Jesus

4. Dela Fuente, Antonio

12. Sinsuat, Bimbo

5. Mangelen, Conte

13. Tomawis, Acmad

6. Ortiz, Jesus

14. Tomawis, Jerry

7. Palomares, Diego

An excerpt from the debates and proceeding of said session

reads:

8. Sinsuat, Bimbo
9. Tomawis, Acmad
10. Tomawis, Jerry
After declaring the presence of a quorum, the Speaker ProTempore was authorized to preside in the session. On Motion
to declare the seat of the Speaker vacant, all Assemblymen in
attendance voted in the affirmative, hence, the chair declared
said seat of the Speaker vacant. 8. On November 5, 1987, the
session of the Assembly resumed with the following
Assemblymen present:
1. Mangelen Conte-Presiding Officer
2. Ali Salic

HON. DAGALANGIT: Mr. Speaker, Honorable Members of the

House, with the presence of our colleagues who have come to
attend the session today, I move to call the names of the new
comers in order for them to cast their votes on the previous
motion to declare the position of the Speaker vacant. But
before doing so, I move also that the designation of the
Speaker Pro Tempore as the Presiding Officer and Mr. Johnny
Evangelists as Acting Secretary in the session last November 2,
1987 be reconfirmed in today's session.
HON. SALIC ALI: I second the motions.
PRESIDING OFFICER: Any comment or objections on the two
motions presented? Me chair hears none and the said motions
are approved. ...

3. Ali Salindatu

Twelve (12) members voted in favor of the motion to declare

the seat of the Speaker vacant; one abstained and none voted
against. 1

4. Aratuc, Malik

Accordingly, the petitioner prays for judgment as follows:

5. Cajelo, Rene

WHEREFORE, petitioner respectfully prays that-

6. Conding, Pilipinas (sic)

(a) This Petition be given due course;

7. Dagalangit, Rakil

(b) Pending hearing, a restraining order or writ of preliminary

injunction be issued enjoining respondents from proceeding
with their session to be held on November 5, 1987, and on any
day thereafter;

8. Dela Fuente, Antonio

(c) After hearing, judgment be rendered declaring the

proceedings held by respondents of their session on November
2, 1987 as null and void;
(d) Holding the election of petitioner as Speaker of said
Legislative Assembly or Batasan Pampook, Region XII held on
March 12, 1987 valid and subsisting, and
(e) Making the injunction permanent.
Petitioner likewise prays for such other relief as may be just
and equitable. 2
Pending further proceedings, this Court, on January 19, 1988, received a
resolution filed by the Sangguniang Pampook, "EXPECTING ALIMBUSAR P.
LIMBONA FROM MEMBERSHIP OF THE SANGGUNIANG PAMPOOK AUTONOMOUS
REGION XII," 3 on the grounds, among other things, that the petitioner "had
caused to be prepared and signed by him paying [sic] the salaries and
emoluments of Odin Abdula, who was considered resigned after filing his
Certificate of Candidacy for Congressmen for the First District of Maguindanao
in the last May 11, elections. . . and nothing in the record of the Assembly will
show that any request for reinstatement by Abdula was ever made . . ." 4 and
that "such action of Mr. Lim bona in paying Abdula his salaries and emoluments
without authority from the Assembly . . . constituted a usurpation of the power
of the Assembly," 5 that the petitioner "had recently caused withdrawal of so
much amount of cash from the Assembly resulting to the non-payment of the
salaries and emoluments of some Assembly [sic]," 6 and that he had "filed a
case before the Supreme Court against some members of the Assembly on
question which should have been resolved within the confines of the Assembly,"
7
for which the respondents now submit that the petition had become "moot
and academic". 8
The first question, evidently, is whether or not the expulsion of the petitioner
(pending litigation) has made the case moot and academic.
We do not agree that the case has been rendered moot and academic by reason
simply of the expulsion resolution so issued. For, if the petitioner's expulsion
was done purposely to make this petition moot and academic, and to preempt
the Court, it will not make it academic.
On the ground of the immutable principle of due process alone, we hold that
the expulsion in question is of no force and effect. In the first place, there is
no showing that the Sanggunian had conducted an investigation, and whether
or not the petitioner had been heard in his defense, assuming that there was
an investigation, or otherwise given the opportunity to do so. On the other
hand, what appears in the records is an admission by the Assembly (at least,
the respondents) that "since November, 1987 up to this writing, the petitioner

has not set foot at the Sangguniang Pampook." 9 "To be sure, the private
respondents aver that "[t]he Assemblymen, in a conciliatory gesture, wanted
him to come to Cotabato City," 10 but that was "so that their differences could
be threshed out and settled." 11 Certainly, that avowed wanting or desire to
thresh out and settle, no matter how conciliatory it may be cannot be a
substitute for the notice and hearing contemplated by law.
While we have held that due process, as the term is known in administrative
law, does not absolutely require notice and that a party need only be given the
opportunity to be heard, 12 it does not appear herein that the petitioner had,
to begin with, been made aware that he had in fact stood charged of graft and
corruption before his collegues. It cannot be said therefore that he was
accorded any opportunity to rebut their accusations. As it stands, then, the
charges now levelled amount to mere accusations that cannot warrant
expulsion.
In the second place, (the resolution) appears strongly to be a bare act of
vendetta by the other Assemblymen against the petitioner arising from what
the former perceive to be abduracy on the part of the latter. Indeed, it (the
resolution) speaks of "a case [having been filed] [by the petitioner] before the
Supreme Court . . . on question which should have been resolved within the
confines of the Assemblyman act which some members claimed unnecessarily
and unduly assails their integrity and character as representative of the people"
13
an act that cannot possibly justify expulsion. Access to judicial remedies is
guaranteed by the Constitution, 14 and, unless the recourse amounts to
malicious prosecution, no one may be punished for seeking redress in the
courts.
We therefore order reinstatement, with the caution that should the past acts
of the petitioner indeed warrant his removal, the Assembly is enjoined, should
it still be so minded, to commence proper proceedings therefor in line with the
most elementary requirements of due process. And while it is within the
discretion of the members of the Sanggunian to punish their erring colleagues,
their acts are nonetheless subject to the moderating band of this Court in the
event that such discretion is exercised with grave abuse.
It is, to be sure, said that precisely because the Sangguniang Pampook(s) are
"autonomous," the courts may not rightfully intervene in their affairs, much
less strike down their acts. We come, therefore, to the second issue: Are the
so-called autonomous governments of Mindanao, as they are now constituted,
subject to the jurisdiction of the national courts? In other words, what is the
extent of self-government given to the two autonomous governments of Region
IX and XII?
The autonomous governments of Mindanao were organized in Regions IX and XII
by Presidential Decree No. 1618 15 promulgated on July 25, 1979. Among other
things, the Decree established "internal autonomy" 16 in the two regions

"[w]ithin the framework of the national sovereignty and territorial integrity of

the Republic of the Philippines and its Constitution," 17 with legislative and
executive machinery to exercise the powers and responsibilities 18 specified
therein.
It requires the autonomous regional governments to "undertake all internal
administrative matters for the respective regions," 19 except to "act on matters
which are within the jurisdiction and competence of the National Government,"
20
"which include, but are not limited to, the following:
(1) National defense and security;
(2) Foreign relations;
(3) Foreign trade;
(4) Currency, monetary affairs, foreign exchange, banking and
quasi-banking, and external borrowing,
(5) Disposition, exploration, development, exploitation or
utilization of all natural resources;
(6) Air and sea transport
(7) Postal matters and telecommunications;
(8) Customs and quarantine;
(9) Immigration and deportation;
(10) Citizenship and naturalization;
(11) National economic, social and educational planning; and
(12) General auditing.

governments "more responsive and accountable," 23 "and ensure their fullest

development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress." 24 At the
same time, it relieves the central government of the burden of managing local
affairs and enables it to concentrate on national concerns. The President
exercises "general supervision" 25 over them, but only to "ensure that local
affairs are administered according to law." 26 He has no control over their acts
in the sense that he can substitute their judgments with his own. 27
Decentralization of power, on the other hand, involves an abdication of
political power in the favor of local governments units declare to be
autonomous . In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central
authorities. According to a constitutional author, decentralization of power
amounts to "self-immolation," since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency. 28
But the question of whether or not the grant of autonomy Muslim Mindanao
under the 1987 Constitution involves, truly, an effort to decentralize power
rather than mere administration is a question foreign to this petition, since
what is involved herein is a local government unit constituted prior to the
ratification of the present Constitution. Hence, the Court will not resolve that
controversy now, in this case, since no controversy in fact exists. We will
resolve it at the proper time and in the proper case.
Under the 1987 Constitution, local government units enjoy autonomy in these
two senses, thus:
Section 1. The territorial and political subdivisions of the
Republic of the Philippines are the provinces, cities,
municipalities, and barangays. Here shall be autonomous
regions in Muslim Mindanao ,and the Cordilleras as hereinafter
provided. 29
Sec. 2. The territorial and political subdivisions shall enjoy
local autonomy. 30

21

xxx xxx xxx

In relation to the central government, it provides that "[t]he President shall
have the power of general supervision and control over the Autonomous
Regions ..." 22
Now, autonomy is either decentralization of administration or decentralization
of power. There is decentralization of administration when the central
government delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process to make local

See. 15. Mere shall be created autonomous regions in Muslim

Mindanao and in the Cordilleras consisting of provinces, cities,
municipalities, and geographical areas sharing common and
distinctive historical and cultural heritage, economic and
social structures, and other relevant characteristics within the
framework of this Constitution and the national sovereignty as
well as territorial integrity of the Republic of the Philippines.
31

An autonomous government that enjoys autonomy of the latter category

[CONST. (1987), art. X, sec. 15.] is subject alone to the decree of the organic
act creating it and accepted principles on the effects and limits of "autonomy."
On the other hand, an autonomous government of the former class is, as we
noted, under the supervision of the national government acting through the
President (and the Department of Local Government). 32 If the Sangguniang
Pampook (of Region XII), then, is autonomous in the latter sense, its acts are,
debatably beyond the domain of this Court in perhaps the same way that the
internal acts, say, of the Congress of the Philippines are beyond our
jurisdiction. But if it is autonomous in the former category only, it comes
unarguably under our jurisdiction. An examination of the very Presidential
Decree creating the autonomous governments of Mindanao persuades us that
they were never meant to exercise autonomy in the second sense, that is, in
which the central government commits an act of self-immolation. Presidential
Decree No. 1618, in the first place, mandates that "[t]he President shall have
the power of general supervision and control over Autonomous Regions." 33 In
the second place, the Sangguniang Pampook, their legislative arm, is made to
discharge chiefly administrative services, thus:
SEC. 7. Powers of the Sangguniang Pampook. The Sangguniang
Pampook shall exercise local legislative powers over regional
affairs within the framework of national development plans,
policies and goals, in the following areas:
(1) Organization of regional administrative system;
(2) Economic, social and cultural development of the
Autonomous Region;
(3) Agricultural, commercial and industrial programs for the
Autonomous Region;
(4) Infrastructure development for the Autonomous Region;
(5) Urban and rural planning for the Autonomous Region;
(6) Taxation and other revenue-raising measures as provided
for in this Decree;
(7) Maintenance, operation and administration of schools
established by the Autonomous Region;
(8) Establishment, operation and maintenance of health,
welfare and other social services, programs and facilities;

(9) Preservation and development of customs, traditions,

languages and culture indigenous to the Autonomous Region;
and
(10) Such other matters as may be authorized by law,including
the enactment of such measures as may be necessary for the
promotion of the general welfare of the people in the
Autonomous Region.
The President shall exercise such powers as may be necessary
to assure that enactment and acts of the Sangguniang
Pampook and the Lupong Tagapagpaganap ng Pook are in
compliance with this Decree, national legislation, policies,
plans and programs.
The Sangguniang Pampook shall maintain liaison with the
Batasang Pambansa. 34
Hence, we assume jurisdiction. And if we can make an inquiry in the validity of
the expulsion in question, with more reason can we review the petitioner's
removal as Speaker.
Briefly, the petitioner assails the legality of his ouster as Speaker on the
grounds that: (1) the Sanggunian, in convening on November 2 and 5, 1987 (for
the sole purpose of declaring the office of the Speaker vacant), did so in
violation of the Rules of the Sangguniang Pampook since the Assembly was then
on recess; and (2) assuming that it was valid, his ouster was ineffective
nevertheless for lack of quorum.
Upon the facts presented, we hold that the November 2 and 5, 1987 sessions
were invalid. It is true that under Section 31 of the Region XII Sanggunian
Rules, "[s]essions shall not be suspended or adjourned except by direction of
the Sangguniang Pampook," 35 but it provides likewise that "the Speaker may,
on [sic] his discretion, declare a recess of "short intervals." 36 Of course, there
is disagreement between the protagonists as to whether or not the recess
called by the petitioner effective November 1 through 15, 1987 is the "recess of
short intervals" referred to; the petitioner says that it is while the respondents
insist that, to all intents and purposes, it was an adjournment and that "recess"
as used by their Rules only refers to "a recess when arguments get heated up so
that protagonists in a debate can talk things out informally and obviate
dissenssion [sic] and disunity. 37 The Court agrees with the respondents on this
regard, since clearly, the Rules speak of "short intervals." Secondly, the Court
likewise agrees that the Speaker could not have validly called a recess since
the Assembly had yet to convene on November 1, the date session opens under
the same Rules. 38 Hence, there can be no recess to speak of that could
possibly interrupt any session. But while this opinion is in accord with the
respondents' own, we still invalidate the twin sessions in question, since at the

time the petitioner called the "recess," it was not a settled matter whether or
not he could. do so. In the second place, the invitation tendered by the
Committee on Muslim Affairs of the House of Representatives provided a
plausible reason for the intermission sought. Thirdly, assuming that a valid
recess could not be called, it does not appear that the respondents called his
attention to this mistake. What appears is that instead, they opened the
sessions themselves behind his back in an apparent act of mutiny. Under the
circumstances, we find equity on his side. For this reason, we uphold the
"recess" called on the ground of good faith.
It does not appear to us, moreover, that the petitioner had resorted to the
aforesaid "recess" in order to forestall the Assembly from bringing about his
ouster. This is not apparent from the pleadings before us. We are convinced
that the invitation was what precipitated it.
In holding that the "recess" in question is valid, we are not to be taken as
establishing a precedent, since, as we said, a recess can not be validly declared
without a session having been first opened. In upholding the petitioner herein,
we are not giving him a carte blanche to order recesses in the future in
violation of the Rules, or otherwise to prevent the lawful meetings thereof.
Neither are we, by this disposition, discouraging the Sanggunian from
reorganizing itself pursuant to its lawful prerogatives. Certainly, it can do so at
the proper time. In the event that be petitioner should initiate obstructive
moves, the Court is certain that it is armed with enough coercive remedies to
thwart them. 39
In view hereof, we find no need in dwelling on the issue of quorum.
WHEREFORE, premises considered, the petition is GRANTED. The Sangguniang
Pampook, Region XII, is ENJOINED to (1) REINSTATE the petitioner as Member,
Sangguniang Pampook, Region XII; and (2) REINSTATE him as Speaker thereof.
No costs.
SO ORDERED.
G.R. No. 161872

April 13, 2004

REV. ELLY CHAVEZ PAMATONG, ESQUIRE, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.
RESOLUTION
TINGA, J.:

Petitioner Rev. Elly Velez Pamatong filed his Certificate of Candidacy for
President on December 17, 2003. Respondent Commission on Elections
(COMELEC) refused to give due course to petitioners Certificate of Candidacy
in its Resolution No. 6558 dated January 17, 2004. The decision, however, was
not unanimous since Commissioners Luzviminda G. Tancangco and Mehol K.
Sadain voted to include petitioner as they believed he had parties or
movements to back up his candidacy.
On January 15, 2004, petitioner moved for reconsideration of Resolution No.
6558. Petitioners Motion for Reconsideration was docketed as SPP (MP) No.
04-001. The COMELEC, acting on petitioners Motion for Reconsideration and
on similar motions filed by other aspirants for national elective positions,
denied the same under the aegis of Omnibus Resolution No. 6604 dated
February 11, 2004. The COMELEC declared petitioner and thirty-five (35) others
nuisance candidates who could not wage a nationwide campaign and/or are not
nominated by a political party or are not supported by a registered political
party with a national constituency. Commissioner Sadain maintained his vote
for petitioner. By then, Commissioner Tancangco had retired.
In this Petition For Writ of Certiorari, petitioner seeks to reverse the
resolutions which were allegedly rendered in violation of his right to "equal
access to opportunities for public service" under Section 26, Article II of the
1987
Constitution,1 by limiting the number of qualified candidates only to those who
can afford to wage a nationwide campaign and/or are nominated by political
parties. In so doing, petitioner argues that the COMELEC indirectly amended
the constitutional provisions on the electoral process and limited the power of
the sovereign people to choose their leaders. The COMELEC supposedly erred in
disqualifying him since he is the most qualified among all the presidential
candidates, i.e., he possesses all the constitutional and legal qualifications for
the office of the president, he is capable of waging a national campaign since
he has numerous national organizations under his leadership, he also has the
capacity to wage an international campaign since he has practiced law in other
countries, and he has a platform of government. Petitioner likewise attacks the
validity of the form for the Certificate of Candidacy prepared by the COMELEC.
Petitioner claims that the form does not provide clear and reasonable
guidelines for determining the qualifications of candidates since it does not ask
for the candidates bio-data and his program of government.
First, the constitutional and legal dimensions involved.
Implicit in the petitioners invocation of the constitutional provision ensuring
"equal access to opportunities for public office" is the claim that there is a
constitutional right to run for or hold public office and, particularly in his case,
to seek the presidency. There is none. What is recognized is merely a privilege
subject to limitations imposed by law. Section 26, Article II of the Constitution

neither bestows such a right nor elevates the privilege to the level of an
enforceable right. There is nothing in the plain language of the provision which
suggests such a thrust or justifies an interpretation of the sort.
The "equal access" provision is a subsumed part of Article II of the Constitution,
entitled "Declaration of Principles and State Policies." The provisions under the
Article are generally considered not self-executing,2 and there is no plausible
reason for according a different treatment to the "equal access" provision. Like
the rest of the policies enumerated in Article II, the provision does not contain
any judicially enforceable constitutional right but merely specifies a guideline
for legislative or executive action.3 The disregard of the provision does not give
rise to any cause of action before the courts.4
An inquiry into the intent of the framers5 produces the same determination
that the provision is not self-executory. The original wording of the present
Section 26, Article II had read, "The State shall broaden opportunities to public
office and prohibit public dynasties."6 Commissioner (now Chief Justice) Hilario
Davide, Jr. successfully brought forth an amendment that changed the word
"broaden" to the phrase "ensure equal access," and the substitution of the word
"office" to "service." He explained his proposal in this wise:
I changed the word "broaden" to "ENSURE EQUAL ACCESS TO" because
what is important would be equal access to the opportunity. If you
broaden, it would necessarily mean that the government would be
mandated to create as many offices as are possible to accommodate
as many people as are also possible. That is the meaning of
broadening opportunities to public service. So, in order that we
should not mandate the State to make the government the number
one employer and to limit offices only to what may be necessary
and expedient yet offering equal opportunities to access to it, I
change the word "broaden."7 (emphasis supplied)
Obviously, the provision is not intended to compel the State to enact positive
measures that would accommodate as many people as possible into public
office. The approval of the "Davide amendment" indicates the design of the
framers to cast the provision as simply enunciatory of a desired policy
objective and not reflective of the imposition of a clear State burden.
Moreover, the provision as written leaves much to be desired if it is to be
regarded as the source of positive rights. It is difficult to interpret the clause
as operative in the absence of legislation since its effective means and reach
are not properly defined. Broadly written, the myriad of claims that can be
subsumed under this rubric appear to be entirely open-ended.8 Words and
phrases such as "equal access," "opportunities," and "public service" are
susceptible to countless interpretations owing to their inherent impreciseness.
Certainly, it was not the intention of the framers to inflict on the people an

operative but amorphous foundation from which innately unenforceable rights

may be sourced.
As earlier noted, the privilege of equal access to opportunities to public office
may be subjected to limitations. Some valid limitations specifically on the
privilege to seek elective office are found in the provisions9 of the Omnibus
Election Code on "Nuisance Candidates" and COMELEC Resolution No. 645210
dated December 10, 2002 outlining the instances wherein the COMELEC may
motu proprio refuse to give due course to or cancel a Certificate of Candidacy.
As long as the limitations apply to everybody equally without discrimination,
however, the equal access clause is not violated. Equality is not sacrificed as
long as the burdens engendered by the limitations are meant to be borne by
any one who is minded to file a certificate of candidacy. In the case at bar,
there is no showing that any person is exempt from the limitations or the
burdens which they create.
Significantly, petitioner does not challenge the constitutionality or validity of
Section 69 of the Omnibus Election Code and COMELEC Resolution No. 6452
dated 10 December 2003. Thus, their presumed validity stands and has to be
accorded due weight.
Clearly, therefore, petitioners reliance on the equal access clause in Section
26, Article II of the Constitution is misplaced.
The rationale behind the prohibition against nuisance candidates and the
disqualification of candidates who have not evinced a bona fide intention to
run for office is easy to divine. The State has a compelling interest to ensure
that its electoral exercises are rational, objective, and orderly. Towards this
end, the State takes into account the practical considerations in conducting
elections. Inevitably, the greater the number of candidates, the greater the
opportunities for logistical confusion, not to mention the increased allocation
of time and resources in preparation for the election. These practical
difficulties should, of course, never exempt the State from the conduct of a
mandated electoral exercise. At the same time, remedial actions should be
available to alleviate these logistical hardships, whenever necessary and
proper. Ultimately, a disorderly election is not merely a textbook example of
inefficiency, but a rot that erodes faith in our democratic institutions. As the
United States Supreme Court held:
[T]here is surely an important state interest in requiring some
preliminary showing of a significant modicum of support before
printing the name of a political organization and its candidates on the
ballot the interest, if no other, in avoiding confusion, deception and
even frustration of the democratic [process].11

The COMELEC itself recognized these practical considerations when it

promulgated Resolution No. 6558 on 17 January 2004, adopting the study
Memorandum of its Law Department dated 11 January 2004. As observed in the
COMELECs Comment:
There is a need to limit the number of candidates especially in the
case of candidates for national positions because the election process
becomes a mockery even if those who cannot clearly wage a national
campaign are allowed to run. Their names would have to be printed in
the Certified List of Candidates, Voters Information Sheet and the
Official Ballots. These would entail additional costs to the government.
For the official ballots in automated counting and canvassing of votes,
an additional page would amount to more or less FOUR HUNDRED FIFTY
MILLION PESOS (P450,000,000.00).
xxx[I]t serves no practical purpose to allow those candidates to
continue if they cannot wage a decent campaign enough to project the
prospect of winning, no matter how slim.12
The preparation of ballots is but one aspect that would be affected by
allowance of "nuisance candidates" to run in the elections. Our election laws
provide various entitlements for candidates for public office, such as watchers
in every polling place,13 watchers in the board of canvassers,14 or even the
receipt of electoral contributions.15 Moreover, there are election rules and
regulations the formulations of which are dependent on the number of
candidates in a given election.
Given these considerations, the ignominious nature of a nuisance candidacy
becomes even more galling. The organization of an election with bona fide
candidates standing is onerous enough. To add into the mix candidates with no
serious intentions or capabilities to run a viable campaign would actually
impair the electoral process. This is not to mention the candidacies which are
palpably ridiculous so as to constitute a one-note joke. The poll body would be
bogged by irrelevant minutiae covering every step of the electoral process,
most probably posed at the instance of these nuisance candidates. It would be
a senseless sacrifice on the part of the State.
Owing to the superior interest in ensuring a credible and orderly election, the
State could exclude nuisance candidates and need not indulge in, as the song
goes, "their trips to the moon on gossamer wings."
The Omnibus Election Code and COMELEC Resolution No. 6452 are cognizant of
the compelling State interest to ensure orderly and credible elections by
excising impediments thereto, such as nuisance candidacies that distract and
detract from the larger purpose. The COMELEC is mandated by the Constitution
with the administration of elections16 and endowed with considerable latitude
in adopting means and methods that will ensure the promotion of free, orderly

and honest elections.17 Moreover, the Constitution guarantees that only bona
fide candidates for public office shall be free from any form of harassment and
discrimination.18 The determination of bona fide candidates is governed by the
statutes, and the concept, to our mind is, satisfactorily defined in the Omnibus
Election Code.
Now, the needed factual premises.
However valid the law and the COMELEC issuance involved are, their proper
application in the case of the petitioner cannot be tested and reviewed by this
Court on the basis of what is now before it. The assailed resolutions of the
COMELEC do not direct the Court to the evidence which it considered in
determining that petitioner was a nuisance candidate. This precludes the Court
from reviewing at this instance whether the COMELEC committed grave abuse
of discretion in disqualifying petitioner, since such a review would necessarily
take into account the matters which the COMELEC considered in arriving at its
decisions.
Petitioner has submitted to this Court mere photocopies of various documents
purportedly evincing his credentials as an eligible candidate for the presidency.
Yet this Court, not being a trier of facts, can not properly pass upon the
reproductions as evidence at this level. Neither the COMELEC nor the Solicitor
General appended any document to their respective Comments.
The question of whether a candidate is a nuisance candidate or not is both
legal and factual. The basis of the factual determination is not before this
Court. Thus, the remand of this case for the reception of further evidence is in
order.
A word of caution is in order. What is at stake is petitioners aspiration and
offer to serve in the government. It deserves not a cursory treatment but a
hearing which conforms to the requirements of due process.
As to petitioners attacks on the validity of the form for the certificate of
candidacy, suffice it to say that the form strictly complies with Section 74 of
the Omnibus Election Code. This provision specifically enumerates what a
certificate of candidacy should contain, with the required information tending
to show that the candidate possesses the minimum qualifications for the
position aspired for as established by the Constitution and other election laws.
IN VIEW OF THE FOREGOING, COMELEC Case No. SPP (MP) No. 04-001 is hereby
remanded to the COMELEC for the reception of further evidence, to determine
the question on whether petitioner Elly Velez Lao Pamatong is a nuisance
candidate as contemplated in Section 69 of the Omnibus Election Code.

The COMELEC is directed to hold and complete the reception of evidence and
report its findings to this Court with deliberate dispatch.
SO ORDERED.
G.R. No. L-72119 May 29, 1987
VALENTIN L. LEGASPI, petitioner,
vs.
CIVIL SERVICE COMMISSION, respondent.

CORTES, J.:
The fundamental right of the people to information on matters of public
concern is invoked in this special civil action for mandamus instituted by
petitioner Valentin L. Legaspi against the Civil Service Commission. The
respondent had earlier denied Legaspi's request for information on the civil
service eligibilities of certain persons employed as sanitarians in the Health
Department of Cebu City. These government employees, Julian Sibonghanoy
and Mariano Agas, had allegedly represented themselves as civil service
eligibles who passed the civil service examinations for sanitarians.
Claiming that his right to be informed of the eligibilities of Julian Sibonghanoy
and Mariano Agas, is guaranteed by the Constitution, and that he has no other
plain, speedy and adequate remedy to acquire the information, petitioner
prays for the issuance of the extraordinary writ of mandamus to compel the
respondent Commission to disclose said information.
This is not the first tune that the writ of mandamus is sought to enforce the
fundamental right to information. The same remedy was resorted to in the case
of Tanada et. al. vs. Tuvera et. al., (G.R. No. L-63915, April 24,1985,136 SCRA
27) wherein the people's right to be informed under the 1973 Constitution
(Article IV, Section 6) was invoked in order to compel the publication in the
Official Gazette of various presidential decrees, letters of instructions and
other presidential issuances. Prior to the recognition of the right in said
Constitution the statutory right to information provided for in the Land
Registration Act (Section 56, Act 496, as amended) was claimed by a newspaper
editor in another mandamus proceeding, this time to demand access to the
records of the Register of Deeds for the purpose of gathering data on real
estate transactions involving aliens (Subido vs. Ozaeta, 80 Phil. 383 [1948]).
The constitutional right to information on matters of public concern first
gained recognition in the Bill of Rights, Article IV, of the 1973 Constitution,
which states:

Sec. 6. The right of the people to information on matters of

public concern shall be recognized. Access to official records,
and to documents and papers pertaining to official acts,
transactions, or decisions, shall be afforded the citizen
subject to such limitations as may be provided by law.
The foregoing provision has been retained and the right therein provided
amplified in Article III, Sec. 7 of the 1987 Constitution with the addition of the
phrase, "as well as to government research data used as basis for policy
development." The new provision reads:
The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to
documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research
data used as basis. for policy development, shall be afforded
the citizen, subject to such stations as may be provided by
law.
These constitutional provisions are self-executing. They supply the rules by
means of which the right to information may be enjoyed (Cooley, A Treatise on
the Constitutional Limitations 167 [1927]) by guaranteeing the right and
mandating the duty to afford access to sources of information. Hence, the
fundamental right therein recognized may be asserted by the people upon the
ratification of the constitution without need for any ancillary act of the
Legislature. (Id. at, p. 165) What may be provided for by the Legislature are
reasonable conditions and limitations upon the access to be afforded which
must, of necessity, be consistent with the declared State policy of full public
disclosure of all transactions involving public interest (Constitution, Art. 11,
Sec. 28). However, it cannot be overemphasized that whatever limitation may
be prescribed by the Legislature, the right and the duty under Art. III Sec. 7
have become operative and enforceable by virtue of the adoption of the New
Charter. Therefore, the right may be properly invoked in a mandamus
proceeding such as this one.
The Solicitor General interposes procedural objections to Our giving due course
to this Petition. He challenges the petitioner's standing to sue upon the ground
that the latter does not possess any clear legal right to be informed of the civil
service eligibilities of the government employees concerned. He calls attention
to the alleged failure of the petitioner to show his actual interest in securing
this particular information. He further argues that there is no ministerial duty
on the part of the Commission to furnish the petitioner with the information he
seeks.
1. To be given due course, a Petition for mandamus must have been instituted
by a party aggrieved by the alleged inaction of any tribunal, corporation, board
or person which unlawfully excludes said party from the enjoyment of a legal

right. (Ant;-Chinese League of the Philippines vs. Felix, 77 Phil. 1012 [1947]).
The petitioner in every case must therefore be an "aggrieved party" in the
sense that he possesses a clear legal right to be enforced and a direct interest
in the duty or act to be performed.
In the case before Us, the respondent takes issue on the personality of the
petitioner to bring this suit. It is asserted that, the instant Petition is bereft of
any allegation of Legaspi's actual interest in the civil service eligibilities of
Julian Sibonghanoy and Mariano Agas, At most there is a vague reference to an
unnamed client in whose behalf he had allegedly acted when he made inquiries
on the subject (Petition, Rollo, p. 3).
But what is clear upon the face of the Petition is that the petitioner has firmly
anchored his case upon the right of the people to information on matters of
public concern, which, by its very nature, is a public right. It has been held
that:
* * * when the question is one of public right and the object of
the mandamus is to procure the enforcement of a public duty,
the people are regarded as the real party in interest and the
relator at whose instigation the proceedings are instituted
need not show that he has any legal or special interest in the
result, it being sufficient to show that he is a citizen and as
such interested in the execution of the laws * * * (Tanada et.
al. vs. Tuvera, et. al., G.R. No. L- 63915, April 24, 1985, 136
SCRA 27, 36).
From the foregoing, it becomes apparent that when a mandamus proceeding
involves the assertion of a public right, the requirement of personal interest is
satisfied by the mere fact that the petitioner is a citizen, and therefore, part
of the general "public" which possesses the right.
The Court had opportunity to define the word "public" in the Subido case,
supra, when it held that even those who have no direct or tangible interest in
any real estate transaction are part of the "public" to whom "(a)ll records
relating to registered lands in the Office of the Register of Deeds shall be open
* * *" (Sec. 56, Act No. 496, as amended). In the words of the Court:
* * * "Public" is a comprehensive, all-inclusive term. Properly
construed, it embraces every person. To say that only those
who have a present and existing interest of a pecuniary
character in the particular information sought are given the
right of inspection is to make an unwarranted distinction. ***
(Subido vs. Ozaeta, supra at p. 387).

The petitioner, being a citizen who, as such is clothed with personality to seek
redress for the alleged obstruction of the exercise of the public right. We find
no cogent reason to deny his standing to bring the present suit.
2. For every right of the people recognized as fundamental, there lies a
corresponding duty on the part of those who govern, to respect and protect
that right. That is the very essence of the Bill of Rights in a constitutional
regime. Only governments operating under fundamental rules defining the
limits of their power so as to shield individual rights against its arbitrary
exercise can properly claim to be constitutional (Cooley, supra, at p. 5).
Without a government's acceptance of the limitations imposed upon it by the
Constitution in order to uphold individual liberties, without an acknowledgment
on its part of those duties exacted by the rights pertaining to the citizens, the
Bill of Rights becomes a sophistry, and liberty, the ultimate illusion.
In recognizing the people's right to be informed, both the 1973 Constitution and
the New Charter expressly mandate the duty of the State and its agents to
afford access to official records, documents, papers and in addition,
government research data used as basis for policy development, subject to
such limitations as may be provided by law. The guarantee has been further
enhanced in the New Constitution with the adoption of a policy of full public
disclosure, this time "subject to reasonable conditions prescribed by law," in
Article 11, Section 28 thereof, to wit:
Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all
its transactions involving public interest. (Art. 11, Sec. 28).
In the Tanada case, supra, the constitutional guarantee was bolstered by what
this Court declared as an imperative duty of the government officials
concerned to publish all important legislative acts and resolutions of a public
nature as well as all executive orders and proclamations of general
applicability. We granted mandamus in said case, and in the process, We found
occasion to expound briefly on the nature of said duty:
* * * That duty must be enforced if the Constitutional right of
the people to be informed on matters of public concern is to
be given substance and reality. The law itself makes a list of
what should be published in the Official Gazette. Such listing,
to our mind, leaves respondents with no discretion whatsoever
as to what must be in included or excluded from such
publication. (Tanada v. Tuvera, supra, at 39). (Emphasis
supplied).
The absence of discretion on the part of government agencia es in allowing the
examination of public records, specifically, the records in the Office of the
Register of Deeds, is emphasized in Subido vs. Ozaeta, supra:

Except, perhaps when it is clear that the purpose of the

examination is unlawful, or sheer, idle curiosity, we do not
believe it is the duty under the law of registration officers to
concern themselves with the motives, reasons, and objects of
the person seeking access to the records. It is not their
prerogative to see that the information which the records
contain is not flaunted before public gaze, or that scandal is
not made of it. If it be wrong to publish the contents of the
records, it is the legislature and not the officials having
custody thereof which is called upon to devise a remedy. ***
(Subido v. Ozaeta, supra at 388). (Emphasis supplied).
It is clear from the foregoing pronouncements of this Court that government
agencies are without discretion in refusing disclosure of, or access to,
information of public concern. This is not to lose sight of the reasonable
regulations which may be imposed by said agencies in custody of public records
on the manner in which the right to information may be exercised by the
public. In the Subido case, We recognized the authority of the Register of
Deeds to regulate the manner in which persons desiring to do so, may inspect,
examine or copy records relating to registered lands. However, the regulations
which the Register of Deeds may promulgate are confined to:
* * * prescribing the manner and hours of examination to the
end that damage to or loss of, the records may be avoided,
that undue interference with the duties of the custodian of
the books and documents and other employees may be
prevented, that the right of other persons entitled to make
inspection may be insured * * * (Subido vs. Ozaeta, 80 Phil.
383, 387)
Applying the Subido ruling by analogy, We recognized a similar authority in a
municipal judge, to regulate the manner of inspection by the public of criminal
docket records in the case of Baldoza vs. Dimaano (Adm. Matter No. 1120-MJ,
May 5, 1976, 71 SCRA 14). Said administrative case was filed against the
respondent judge for his alleged refusal to allow examination of the criminal
docket records in his sala. Upon a finding by the Investigating Judge that the
respondent had allowed the complainant to open and view the subject records,
We absolved the respondent. In effect, We have also held that the rules and
conditions imposed by him upon the manner of examining the public records
were reasonable.
In both the Subido and the Baldoza cases, We were emphatic in Our statement
that the authority to regulate the manner of examining public records does not
carry with it the power to prohibit. A distinction has to be made between the
discretion to refuse outright the disclosure of or access to a particular
information and the authority to regulate the manner in which the access is to
be afforded. The first is a limitation upon the availability of access to the

information sought, which only the Legislature may impose (Art. III, Sec. 6,
1987 Constitution). The second pertains to the government agency charged
with the custody of public records. Its authority to regulate access is to be
exercised solely to the end that damage to, or loss of, public records may be
avoided, undue interference with the duties of said agencies may be
prevented, and more importantly, that the exercise of the same constitutional
right by other persons shall be assured (Subido vs. Ozaetal supra).
Thus, while the manner of examining public records may be subject to
reasonable regulation by the government agency in custody thereof, the duty
to disclose the information of public concern, and to afford access to public
records cannot be discretionary on the part of said agencies. Certainly, its
performance cannot be made contingent upon the discretion of such agencies.
Otherwise, the enjoyment of the constitutional right may be rendered nugatory
by any whimsical exercise of agency discretion. The constitutional duty, not
being discretionary, its performance may be compelled by a writ of mandamus
in a proper case.
But what is a proper case for Mandamus to issue? In the case before Us, the
public right to be enforced and the concomitant duty of the State are
unequivocably set forth in the Constitution. The decisive question on the
propriety of the issuance of the writ of mandamus in this case is, whether the
information sought by the petitioner is within the ambit of the constitutional
guarantee.
3. The incorporation in the Constitution of a guarantee of access to information
of public concern is a recognition of the essentiality of the free flow of ideas
and information in a democracy (Baldoza v. Dimaano, Adm. Matter No. 1120MJ, May 5, 1976, 17 SCRA 14). In the same way that free discussion enables
members of society to cope with the exigencies of their time (Thornhill vs.
Alabama, 310 U.S. 88,102 [1939]), access to information of general interest
aids the people in democratic decision-making (87 Harvard Law Review 1505
[1974]) by giving them a better perspective of the vital issues confronting the
nation.
But the constitutional guarantee to information on matters of public concern is
not absolute. It does not open every door to any and all information. Under the
Constitution, access to official records, papers, etc., are "subject to limitations
as may be provided by law" (Art. III, Sec. 7, second sentence). The law may
therefore exempt certain types of information from public scrutiny, such as
those affecting national security (Journal No. 90, September 23, 1986, p. 10;
and Journal No. 91, September 24, 1986, p. 32, 1986 Constitutional
Commission). It follows that, in every case, the availability of access to a
particular public record must be circumscribed by the nature of the
information sought, i.e., (a) being of public concern or one that involves public
interest, and, (b) not being exempted by law from the operation of the

constitutional guarantee. The threshold question is, therefore, whether or not

the information sought is of public interest or public concern.

all times accountable to the people even as to their eligibilities for their
respective positions.

a. This question is first addressed to the government agency having custody of

the desired information. However, as already discussed, this does not give the
agency concerned any discretion to grant or deny access. In case of denial of
access, the government agency has the burden of showing that the information
requested is not of public concern, or, if it is of public concern, that the same
has been exempted by law from the operation of the guarantee. To hold
otherwise will serve to dilute the constitutional right. As aptly observed, ". . .
the government is in an advantageous position to marshall and interpret
arguments against release . . ." (87 Harvard Law Review 1511 [1974]). To
safeguard the constitutional right, every denial of access by the government
agency concerned is subject to review by the courts, and in the proper case,
access may be compelled by a writ of Mandamus.

b. But then, it is not enough that the information sought is of public interest.
For mandamus to lie in a given case, the information must not be among the
species exempted by law from the operation of the constitutional guarantee.

In determining whether or not a particular information is of public concern

there is no rigid test which can be applied. "Public concern" like "public
interest" is a term that eludes exact definition. Both terms embrace a broad
spectrum of subjects which the public may want to know, either because these
directly affect their lives, or simply because such matters naturally arouse the
interest of an ordinary citizen. In the final analysis, it is for the courts to
determine in a case by case basis whether the matter at issue is of interest or
importance, as it relates to or affects the public.
The public concern invoked in the case of Tanada v. Tuvera, supra, was the
need for adequate notice to the public of the various laws which are to
regulate the actions and conduct of citizens. In Subido vs. Ozaeta, supra, the
public concern deemed covered by the statutory right was the knowledge of
those real estate transactions which some believed to have been registered in
violation of the Constitution.
The information sought by the petitioner in this case is the truth of the claim
of certain government employees that they are civil service eligibles for the
positions to which they were appointed. The Constitution expressly declares as
a State policy that:
Appointments in the civil service shall be made only according
to merit and fitness to be determined, as far as practicable,
and except as to positions which are policy determining,
primarily confidential or highly technical, by competitive
examination. (Art. IX, B, Sec. 2.[2]).
Public office being a public trust, [Const. Art. XI, Sec. 1] it is the legitimate
concern of citizens to ensure that government positions requiring civil service
eligibility are occupied only by persons who are eligibles. Public officers are at

In the instant, case while refusing to confirm or deny the claims of eligibility,
the respondent has failed to cite any provision in the Civil Service Law which
would limit the petitioner's right to know who are, and who are not, civil
service eligibles. We take judicial notice of the fact that the names of those
who pass the civil service examinations, as in bar examinations and licensure
examinations for various professions, are released to the public. Hence, there
is nothing secret about one's civil service eligibility, if actually possessed.
Petitioner's request is, therefore, neither unusual nor unreasonable. And when,
as in this case, the government employees concerned claim to be civil service
eligibles, the public, through any citizen, has a right to verify their professed
eligibilities from the Civil Service Commission.
The civil service eligibility of a sanitarian being of public concern, and in the
absence of express limitations under the law upon access to the register of civil
service eligibles for said position, the duty of the respondent Commission to
confirm or deny the civil service eligibility of any person occupying the position
becomes imperative. Mandamus, therefore lies.
WHEREFORE, the Civil Service Commission is ordered to open its register of
eligibles for the position of sanitarian, and to confirm or deny, the civil service
eligibility of Julian Sibonghanoy and Mariano Agas, for said position in the
Health Department of Cebu City, as requested by the petitioner Valentin L.
Legaspi.
G.R. No. 74930 February 13, 1989
RICARDO VALMONTE, OSWALDO CARBONELL, DOY DEL CASTILLO, ROLANDO
BARTOLOME, LEO OBLIGAR, JUN GUTIERREZ, REYNALDO BAGATSING, JUN
"NINOY" ALBA, PERCY LAPID, ROMMEL CORRO and ROLANDO FADUL,
petitioners,
vs.
FELICIANO BELMONTE, JR., respondent.
Ricardo C. Valmonte for and in his own behalf and his co-petitioners.
The Solicitor General for respondent.

CORTES, J.:

If we could not secure the above documents could we have

access to them?

Petitioners in this special civil action for mandamus with preliminary injunction
invoke their right to information and pray that respondent be directed:

(a) to furnish petitioners the list of the names

of the Batasang Pambansa members belonging
to the UNIDO and PDP-Laban who were able
to secure clean loans immediately before the
February 7 election thru the
intercession/marginal note of the then First
Lady Imelda Marcos; and/or
(b) to furnish petitioners with certified true
copies of the documents evidencing their
respective loans; and/or
(c) to allow petitioners access to the public
records for the subject information. (Petition,
pp. 4-5; paragraphing supplied.]
The controversy arose when petitioner Valmonte wrote respondent Belmonte
the following letter:
June 4, 1986
Hon. Feliciano Belmonte
GSIS General Manager
Arroceros, Manila
Sir:
As a lawyer, member of the media and plain citizen of our
Republic, I am requesting that I be furnished with the list of
names of the opposition members of (the) Batasang Pambansa
who were able to secure a clean loan of P2 million each on
guarranty (sic) of Mrs. Imelda Marcos. We understand that OIC
Mel Lopez of Manila was one of those aforesaid MPs. Likewise,
may we be furnished with the certified true copies of the
documents evidencing their loan. Expenses in connection
herewith shall be borne by us.

We are premising the above request on the following provision

of the Freedom Constitution of the present regime.
The right of the people to information on
matters of public concern shall be
recognized. Access to official records, and to
documents and papers pertaining to official
acts, transactions or decisions, shall be
afforded the citizen subject to such limitation
as may be provided by law. (Art. IV, Sec. 6).
We trust that within five (5) days from receipt hereof we will
receive your favorable response on the matter.

[Rollo, p. 7.]

On June 26, 1986, Valmonte, joined by the other petitioners, filed the instant
suit.

To the aforesaid letter, the Deputy General Counsel of the GSIS replied:
June 17, 1986
Atty. Ricardo C. Valmonte
108 E. Benin Street
Caloocan City
Dear Compaero:
Possibly because he must have thought that it contained
serious legal implications, President & General Manager
Feliciano Belmonte, Jr. referred to me for study and reply
your letter to him of June 4, 1986 requesting a list of the
opposition members of Batasang Pambansa who were able to
secure a clean loan of P2 million each on guaranty of Mrs.
Imelda Marcos.
My opinion in this regard is that a confidential relationship
exists between the GSIS and all those who borrow from it,
whoever they may be; that the GSIS has a duty to its
customers to preserve this confidentiality; and that it would
not be proper for the GSIS to breach this confidentiality unless
so ordered by the courts.
As a violation of this confidentiality may mar the image of the
GSIS as a reputable financial institution, I regret very much
that at this time we cannot respond positively to your request.
Very truly yours,
(Sgd.) MEYNARDO A. TIRO
Deputy General Counsel
[Rollo, p. 40.]
On June 20, 1986, apparently not having yet received the reply of the
Government Service and Insurance System (GSIS) Deputy General Counsel,
petitioner Valmonte wrote respondent another letter, saying that for failure to
receive a reply, "(W)e are now considering ourselves free to do whatever action
necessary within the premises to pursue our desired objective in pursuance of
public interest." [Rollo, p. 8.]

On July 19, 1986, the Daily Express carried a news item reporting that 137
former members of the defunct interim and regular Batasang Pambansa,
including ten (10) opposition members, were granted housing loans by the GSIS
[Rollo, p. 41.]
Separate comments were filed by respondent Belmonte and the Solicitor
General. After petitioners filed a consolidated reply, the petition was given
due course and the parties were required to file their memoranda. The parties
having complied, the case was deemed submitted for decision.
In his comment respondent raises procedural objections to the issuance of a
writ of mandamus, among which is that petitioners have failed to exhaust
administrative remedies.
Respondent claims that actions of the GSIS General Manager are reviewable by
the Board of Trustees of the GSIS. Petitioners, however, did not seek relief
from the GSIS Board of Trustees. It is therefore asserted that since
administrative remedies were not exhausted, then petitioners have no cause of
action.
To this objection, petitioners claim that they have raised a purely legal issue,
viz., whether or not they are entitled to the documents sought, by virtue of
their constitutional right to information. Hence, it is argued that this case falls
under one of the exceptions to the principle of exhaustion of administrative
remedies.
Among the settled principles in administrative law is that before a party can be
allowed to resort to the courts, he is expected to have exhausted all means of
administrative redress available under the law. The courts for reasons of law,
comity and convenience will not entertain a case unless the available
administrative remedies have been resorted to and the appropriate authorities
have been given opportunity to act and correct the errors committed in the
administrative forum. However, the principle of exhaustion of administrative
remedies is subject to settled exceptions, among which is when only a question
of law is involved [Pascual v. Provincial Board, 106 Phil. 466 (1959); Aguilar v.
Valencia, et al., G.R. No. L-30396, July 30, 1971, 40 SCRA 210; Malabanan v.
Ramento, G.R. No. L-2270, May 21, 1984, 129 SCRA 359.] The issue raised by
petitioners, which requires the interpretation of the scope of the constitutional
right to information, is one which can be passed upon by the regular courts
more competently than the GSIS or its Board of Trustees, involving as it does a
purely legal question. Thus, the exception of this case from the application of
the general rule on exhaustion of administrative remedies is warranted. Having
disposed of this procedural issue, We now address ourselves to the issue of

whether or not mandamus hes to compel respondent to perform the acts

sought by petitioners to be done, in pursuance of their right to information.

is denied, except under limitations prescribed by implementing legislation

adopted pursuant to the Constitution.

We shall deal first with the second and third alternative acts sought to be
done, both of which involve the issue of whether or not petitioners are entitled
to access to the documents evidencing loans granted by the GSIS.

Petitioners are practitioners in media. As such, they have both the right to
gather and the obligation to check the accuracy of information the
disseminate. For them, the freedom of the press and of speech is not only
critical, but vital to the exercise of their professions. The right of access to
information ensures that these freedoms are not rendered nugatory by the
government's monopolizing pertinent information. For an essential element of
these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of
the State that the channels for free political discussion be maintained to the
end that the government may perceive and be responsive to the people's will.
Yet, this open dialogue can be effective only to the extent that the citizenry is
informed and thus able to formulate its will intelligently. Only when the
participants in the discussion are aware of the issues and have access to
information relating thereto can such bear fruit.

This is not the first time that the Court is confronted with a controversy
directly involving the constitutional right to information. In Taada v. Tuvera,
G.R. No. 63915, April 24,1985, 136 SCRA 27 and in the recent case of Legaspi v.
Civil Service Commission, G.R. No. 72119, May 29, 1987,150 SCRA 530, the
Court upheld the people's constitutional right to be informed of matters of
public interest and ordered the government agencies concerned to act as
prayed for by the petitioners.
The pertinent provision under the 1987 Constitution is Art. 111, Sec. 7 which
states:
The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to
documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research
data used as basis for policy development, shall be afforded
the citizen, subject to such limitations as may be provided by
law.
The right of access to information was also recognized in the 1973 Constitution,
Art. IV Sec. 6 of which provided:
The right of the people to information on 'matters of public
concern shall be recognized. Access to official records, and to
documents and papers pertaining to official acts, transactions,
or decisions, shall be afforded the citizen subject to such
limitations as may be provided by law.
An informed citizenry with access to the diverse currents in political, moral and
artistic thought and data relative to them, and the free exchange of ideas and
discussion of issues thereon, is vital to the democratic government envisioned
under our Constitution. The cornerstone of this republican system of
government is delegation of power by the people to the State. In this system,
governmental agencies and institutions operate within the limits of the
authority conferred by the people. Denied access to information on the inner
workings of government, the citizenry can become prey to the whims and
caprices of those to whom the power had been delegated. The postulate of
public office as a public trust, institutionalized in the Constitution (in Art. XI,
Sec. 1) to protect the people from abuse of governmental power, would
certainly be were empty words if access to such information of public concern

The right to information is an essential premise of a meaningful right to speech

and expression. But this is not to say that the right to information is merely an
adjunct of and therefore restricted in application by the exercise of the
freedoms of speech and of the press. Far from it. The right to information goes
hand-in-hand with the constitutional policies of full public disclosure * and
honesty in the public service. ** It is meant to enhance the widening role of
the citizenry in governmental decision-making as well as in checking abuse in
government.
Yet, like all the constitutional guarantees, the right to information is not
absolute. As stated in Legaspi, the people's right to information is limited to
"matters of public concern," and is further "subject to such limitations as may
be provided by law." Similarly, the State's policy of full disclosure is limited to
"transactions involving public interest," and is "subject to reasonable conditions
prescribed by law."
Hence, before mandamus may issue, it must be clear that the information
sought is of "public interest" or "public concern," and is not exempted by law
from the operation of the constitutional guarantee [Legazpi v. Civil Service
Commission, supra, at p. 542.]
The Court has always grappled with the meanings of the terms "public interest"
and "public concern". As observed in Legazpi:
In determining whether or not a particular information is of
public concern there is no rigid test which can be applied.
"Public concern" like "public interest" is a term that eludes
exact definition. Both terms embrace a broad spectrum of
subjects which the public may want to know, either because

these directly affect their lives, or simply because such

matters naturally arouse the interest of an ordinary citezen. In
the final analysis, it is for the courts to determine on a case by
case basis whether the matter at issue is of interest or
importance, as it relates to or affects the public. [Ibid. at p.
541]
In the Taada case the public concern deemed covered by the constitutional
right to information was the need for adequate notice to the public of the
various laws which are to regulate the actions and conduct of citezens. In
Legaspi, it was the "legitimate concern of citezensof ensure that government
positions requiring civil service eligibility are occupied only by persons who are
eligibles" [Supra at p. 539.]
The information sought by petitioners in this case is the truth of reports that
certain Members of the Batasang Pambansa belonging to the opposition were
able to secure "clean" loans from the GSIS immediately before the February 7,
1986 election through the intercession of th eformer First Lady, Mrs. Imelda
Marcos.
The GSIS is a trustee of contributions from the government and its employees
and the administrator of various insurance programs for the benefit of the
latter. Undeniably, its funds assume a public character. More particularly,
Secs. 5(b) and 46 of P.D. 1146, as amended (the Revised Government Service
Insurance Act of 1977), provide for annual appropriations to pay the
contributions, premiums, interest and other amounts payable to GSIS by the
government, as employer, as well as the obligations which the Republic of the
Philippines assumes or guarantees to pay. Considering the nature of its funds,
the GSIS is expected to manage its resources with utmost prudence and in strict
compliance with the pertinent laws or rules and regulations. Thus, one of the
reasons that prompted the revision of the old GSIS law (C.A. No. 186, as
amended) was the necessity "to preserve at all times the actuarial solvency of
the funds administered by the System" [Second Whereas Clause, P.D. No.
1146.] Consequently, as respondent himself admits, the GSIS "is not supposed
to grant 'clean loans.'" [Comment, p. 8.] It is therefore the legitimate concern
of the public to ensure that these funds are managed properly with the end in
view of maximizing the benefits that accrue to the insured government
employees. Moreover, the supposed borrowers were Members of the defunct
Batasang Pambansa who themselves appropriated funds for the GSIS and were
therefore expected to be the first to see to it that the GSIS performed its tasks
with the greatest degree of fidelity and that an its transactions were above
board.
In sum, the public nature of the loanable funds of the GSIS and the public
office held by the alleged borrowers make the information sought clearly a
matter of public interest and concern.

A second requisite must be met before the right to information may be

enforced through mandamus proceedings, viz., that the information sought
must not be among those excluded by law.
Respondent maintains that a confidential relationship exists between the GSIS
and its borrowers. It is argued that a policy of confidentiality restricts the
indiscriminate dissemination of information.
Yet, respondent has failed to cite any law granting the GSIS the privilege of
confidentiality as regards the documents subject of this petition. His position is
apparently based merely on considerations of policy. The judiciary does not
settle policy issues. The Court can only declare what the law is, and not what
the law should be. Under our system of government, policy issues are within
the domain of the political branches of the government, and of the people
themselves as the repository of all State power.
Respondent however contends that in view of the right to privacy which is
equally protected by the Constitution and by existing laws, the documents
evidencing loan transactions of the GSIS must be deemed outside the ambit of
the right to information.
There can be no doubt that right to privacy is constitutionally protected. In the
landmark case of Morfe v. Mutuc [130 Phil. 415 (1968), 22 SCRA 424], this
Court, speaking through then Mr. Justice Fernando, stated:
... The right to privacy as such is accorded recognition
independently of its identification with liberty; in itself, it is
fully deserving of constitutional protection. The language of
Prof. Emerson is particularly apt: "The concept of limited
government has always included the idea that governmental
powers stop short of certain intrusions into the personal life of
the citizen. This is indeed one of the basic distinctions
between absolute and limited government. UItimate and
pervasive control of the individual, in all aspects of his life, is
the hallmark of the absolute. state, In contrast, a system of
limited government safeguards a private sector, which belongs
to the individual, firmly distinguishing it from the public
sector, which the state can control. Protection of this private
sector protection, in other words, of the dignity and
integrity of the individual has become increasingly
important as modem society has developed. All the forces of
technological age industrialization, urbanization, and
organization operate to narrow the area of privacy and
facilitate intrusion into it. In modern terms, the capacity to
maintain and support this enclave of private life marks the
difference between a democratic and a totalitarian society."
[at pp. 444-445.]

When the information requested from the government intrudes into the privacy
of a citizen, a potential conflict between the rights to information and to
privacy may arise. However, the competing interests of these rights need not
be resolved in this case. Apparent from the above-quoted statement of the
Court in Morfe is that the right to privacy belongs to the individual in his
private capacity, and not to public and governmental agencies like the GSIS.
Moreover, the right cannot be invoked by juridical entities like the GSIS. As
held in the case of Vassar College v. Loose Wills Biscuit Co. [197 F. 982 (1912)],
a corporation has no right of privacy in its name since the entire basis of the
right to privacy is an injury to the feelings and sensibilities of the party and a
corporation would have no such ground for relief.
Neither can the GSIS through its General Manager, the respondent, invoke the
right to privacy of its borrowers. The right is purely personal in nature [Cf.
Atkinson v. John Doherty & Co., 121 Mich 372, 80 N.W. 285, 46 L.RA. 219
(1899); Schuyler v. Curtis, 147 N.Y. 434, 42 N.E. 22, 31 L.R.A. 286 (1895)), and
hence may be invoked only by the person whose privacy is claimed to be
violated.
It may be observed, however, that in the instant case, the concerned
borrowers themselves may not succeed if they choose to invoke their right to
privacy, considering the public offices they were holding at the time the loans
were alleged to have been granted. It cannot be denied that because of the
interest they generate and their newsworthiness, public figures, most
especially those holding responsible positions in government, enjoy a more
limited right to privacy as compared to ordinary individuals, their actions being
subject to closer public scrutiny [Cf. Ayer Productions Pty. Ltd. v. Capulong,
G.R. Nos. 82380 and 82398, April 29, 1988; See also Cohen v. Marx, 211 P. 2d
321 (1949).]
Respondent next asserts that the documents evidencing the loan transactions
of the GSIS are private in nature and hence, are not covered by the
Constitutional right to information on matters of public concern which
guarantees "(a)ccess to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions" only.
It is argued that the records of the GSIS, a government corporation performing
proprietary functions, are outside the coverage of the people's right of access
to official records.
It is further contended that since the loan function of the GSIS is merely
incidental to its insurance function, then its loan transactions are not covered
by the constitutional policy of full public disclosure and the right to
information which is applicable only to "official" transactions.
First of all, the "constituent ministrant" dichotomy characterizing
government function has long been repudiated. In ACCFA v. Confederation of

Unions and Government Corporations and Offices (G.R. Nos. L-21484 and L23605, November 29, 1969, 30 SCRA 6441, the Court said that the government,
whether carrying out its sovereign attributes or running some business,
discharges the same function of service to the people.
Consequently, that the GSIS, in granting the loans, was exercising a proprietary
function would not justify the exclusion of the transactions from the coverage
and scope of the right to information.
Moreover, the intent of the members of the Constitutional Commission of 1986,
to include government-owned and controlled corporations and transactions
entered into by them within the coverage of the State policy of fun public
disclosure is manifest from the records of the proceedings:
xxx xxx xxx
THE PRESIDING OFFICER (Mr. Colayco).
Commissioner Suarez is recognized.
MR. SUAREZ. Thank you. May I ask the Gentleman a few
question?
MR. OPLE. Very gladly.
MR. SUAREZ. Thank you.
When we declare a "policy of full public
disclosure of all its transactions" referring
to the transactions of the State and when
we say the "State" which I suppose would
include all of the various agencies,
departments, ministries and instrumentalities
of the government....
MR. OPLE. Yes, and individual public officers, Mr. Presiding
Officer.
MR. SUAREZ. Including government-owned and controlled
corporations.
MR. OPLE. That is correct, Mr. Presiding Officer.
MR. SUAREZ. And when we
say "transactions" which

should be distinguished from

contracts, agreements, or
treaties or whatever, does
the Gentleman refer to the
steps leading to the
consummation of the
contract, or does he refer to
the contract itself?
MR. OPLE. The "transactions"
used here I suppose is
generic and, therefore, it
can cover both steps leading
to a contract, and already a
consummated contract, Mr.
Presiding Officer.
MR. SUAREZ. This
contemplates inclusion of
negotiations leading to the
consummation of the
transaction.
MR. OPLE. Yes, subject only
to reasonable safeguards on
the national interest.
MR. SUAREZ. Thank you. [V
Record of the Constitutional
Commission 24-25.]
(Emphasis supplied.)
Considering the intent of the framers of the Constitution which, though not
binding upon the Court, are nevertheless persuasive, and considering further
that government-owned and controlled corporations, whether performing
proprietary or governmental functions are accountable to the people, the Court
is convinced that transactions entered into by the GSIS, a governmentcontrolled corporation created by special legislation are within the ambit of
the people's right to be informed pursuant to the constitutional policy of
transparency in government dealings.
In fine, petitioners are entitled to access to the documents evidencing loans
granted by the GSIS, subject to reasonable regulations that the latter may
promulgate relating to the manner and hours of examination, to the end that
damage to or loss of the records may be avoided, that undue interference with
the duties of the custodian of the records may be prevented and that the right
of other persons entitled to inspect the records may be insured [Legaspi v. Civil

Service Commission, supra at p. 538, quoting Subido v. Ozaeta, 80 Phil. 383,

387.] The petition, as to the second and third alternative acts sought to be
done by petitioners, is meritorious.
However, the same cannot be said with regard to the first act sought by
petitioners, i.e., "to furnish petitioners the list of the names of the Batasang
Pambansa members belonging to the UNIDO and PDP-Laban who were able to
secure clean loans immediately before the February 7 election thru the
intercession/marginal note of the then First Lady Imelda Marcos."
Although citizens are afforded the right to information and, pursuant thereto,
are entitled to "access to official records," the Constitution does not accord
them a right to compel custodians of official records to prepare lists, abstracts,
summaries and the like in their desire to acquire information on matters of
public concern.
It must be stressed that it is essential for a writ of mandamus to issue that the
applicant has a well-defined, clear and certain legal right to the thing
demanded and that it is the imperative duty of defendant to perform the act
required. The corresponding duty of the respondent to perform the required
act must be clear and specific [Lemi v. Valencia, G.R. No. L-20768, November
29,1968,126 SCRA 203; Ocampo v. Subido, G.R. No. L-28344, August 27, 1976,
72 SCRA 443.] The request of the petitioners fails to meet this standard, there
being no duty on the part of respondent to prepare the list requested.
WHEREFORE, the instant petition is hereby granted and respondent General
Manager of the Government Service Insurance System is ORDERED to allow
petitioners access to documents and records evidencing loans granted to
Members of the former Batasang Pambansa, as petitioners may specify, subject
to reasonable regulations as to the time and manner of inspection, not
incompatible with this decision, as the GSIS may deem necessary.
SO ORDERED.
G.R. No. 92541 November 13, 1991
MA. CARMEN G. AQUINO-SARMIENTO, petitioner,
vs.
MANUEL L. MORATO (in his capacity as Chairman of the MTRCB) and the
MOVIE & TELEVISION REVIEW AND CLASSIFICATION BOARD, respondents.
Araullo, Zambrano, Gruba, Chua Law Firm for petitioner.
Francisco Ma. Chanco for respondents.

BIDIN, J.:p
At issue in this petition is the citizen's right of access to official records as
guaranteed by the constitution.
In February 1989, petitioner, herself a member of respondent Movie and
Television Review and Classification Board (MTRCB), wrote its records officer
requesting that she be allowed to examine the board's records pertaining to the
voting slips accomplished by the individual board members after a review of
the movies and television productions. It is on the basis of said slips that films
are either banned, cut or classified accordingly.
Acting on the said request, the records officer informed petitioner that she has
to secure prior clearance from respondent Manuel Morato, as chairman of
MTRCB, to gain access to the records sought to be examined.
Petitioner's request was eventually denied by respondent Morato on the ground
that whenever the members of the board sit in judgment over a film, their
decisions as reflected in the individual voting slips partake the nature of
conscience votes and as such, are purely and completely private and personal.
It is the submission of respondents that the individual voting slips is the
exclusive property of the member concerned and anybody who wants access
thereto must first secure his (the member's) consent, otherwise, a request
therefor may be legally denied.
Petitioner argues, on the other hand, that the records she wishes to examine
are public in character and other than providing for reasonable conditions
regulating the manner and hours of examination, respondents Morato and the
classification board have no authority to deny any citizen seeking examination
of the board's records.
On February 27, 1989, respondent Morato called an executive meeting of the
MTRCB to discuss, among others, the issue raised by petitioner. In said
meeting, seventeen (17) members of the board voted to declare their
individual voting records as classified documents which rendered the same
inaccessible to the public without clearance from the chairman. Thereafter,
respondent Morato denied petitioner's request to examine the voting slips.
However, it was only much later, i.e., on July 27, 1989, that respondent Board
issued Resolution No. 10-89 which declared as confidential, private and
personal, the decision of the reviewing committee and the voting slips of the
members.
Petitioner brought the matter to the attention of the Executive Secretary,
which in turn, referred the same to respondent Morato for appropriate
comment.

Another incident which gave rise to this petition occurred in a board meeting
held on June 22, 1989. In that meeting, respondent Morato told the board that
he has ordered some deletions on the movie "Mahirap ang Magmahal"
notwithstanding the fact that said movie was earlier approved for screening by
the Board with classification "R-18 without cuts". He explained that his power
to unilaterally change the decision of the Review Committee is authorized by
virtue of MTRCB Resolution No. 88-1-25 (dated June 22,1988) which allows the
chairman of the board "to downgrade a film (already) reviewed especially those
which are controversial."
Petitioner informed the Board, however, that respondent Morato possesses no
authority to unilaterally reverse a decision of the review committee under PD
1986 (Creating the Movie and Television Review and Classification Board).
After the matter was referred by the Deputy Executive Secretary to the Justice
Secretary, the latter opined that PD 1896 does not vest respondent Morato any
authority to unilaterally reverse the decision of the review committee but
declined to comment on the constitutionality of Res. No. 10-89 on the ground
that the resolution thereof is a judicial prerogative (Rollo, pp. 38-42).
The Justice Secretary's opinion to the contrary notwithstanding, respondent
Morato opted to ignore it.
Hence, this petition anchored on the following:
A. MORATO AND THE MTRCB BY APPROVING AND ENFORCING RESOLUTION NO.
10-89 ACTED WITH GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF
JURISDICTION BECAUSE THE SAME VIOLATES ARTICLE III SECTION 7 OF THE 1987
CONSTITUTION.
B. MTRCB RESOLUTION NO. 88-1-25 HAS NO LEGAL BASIS AND CONSTITUTES AN
UNLAWFUL DELEGATION OF DISCRETIONARY POWERS.
C. MORATO AND THE MTRCB BY REFUSING TO ABIDE BY OPINION NO. 1 SERIES
OF 1990 OF THE SECRETARY OF JUSTICE AND BY INSISTING ON THE VALIDITY OF
RESOLUTION NO. 88-1-25 ACTED CAPRICIOUSLY, ARBITRARILY, IN BAD FAITH, IN
EXCESS OF THEIR JURISDICTION, AND WITH GRAVE ABUSE OF DISCRETION.
Petitioner therefore seeks the nullification of 1) MTRCB Resolution No. 88-1-25
which allows the Chairman of the Board to unilaterally downgrade a film
(already) reviewed especially those which are controversial and 2) MTRCB
RESOLUTION No. 10-89 (dated July 27, 1989) declaring as strictly confidential,
private and personal a) the decision of a reviewing committee which previously
reviewed a certain film and b) the individual voting slips of the members of the
committee that reviewed the film.

Respondents argue at the outset that the instant petition should be dismissed
outright for having failed to comply with the doctrine of exhaustion of
administrative remedies.

individual voting slips of its members, as violative of petitioner's constitutional

right of access to public records. More specifically, Sec. 7, Art. III of the
Constitution provides that:

We disagree. The doctrine of exhaustion of administrate remedies simply

provides that before a party litigant is allowed resort to the courts, he is
required to comply with all administrative remedies available under the law
(Rosales v. Court of Appeals, 165 SCRA 344 [1988]). The rationale behind this
salutory principle is that for reasons of practical considerations, comity and
convenience, the courts of law will not entertain a case until all the available
administrative remedies provided by law have been resorted to and the
appropriate authorities have been given ample opportunity to act and to
correct the errors committed in the administrative level. If the error is
rectified, judicial intervention would then be unnecessary.

The right of the people to information on matters of public

concern shall be recognized. Access to official records, and to
documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research
data used as basis for policy development, shall be afforded
the citizen, subject to such limitations as may be provided by
law. (emphasis supplied)

Nonetheless, the doctrine of exhaustion of administrative remedies is not

absolute. The applicability of the principle admits of certain exceptions, such
as: 1) when no administrative review is provided by law; 2) when the only
question involved is one of law (Valmonte v. Valmonte, 170 SCRA 256 [1989],
citing Aguilar v. Valencia, 40 SCRA 210 [1971]; Malabanan v. Ramento, 129
SCRA 359 [1984]; Bagatsing v. Ramirez, 74 SCRA 306; Del Mar v. Philippine
Veterans Administration, 51 SCRA 340 [1973]; Pascual v. Provincial Board, 106
Phil. 466 [1959]; 3) where the party invoking the doctrine is guilty of estoppel
(Vda. de Tan v. Veterans' Backpay Commission [1969]; 4) where the challenged
administrative action is patently illegal, arbitrary and oppressive (Azur v.
Provincial Board, 27 SCRA 50 [1969]; National Development Co. v. Collector of
Customs of Manila, 9 SCRA 429 [1963]; 5) where there is unreasonable delay or
official inaction that would greatly prejudice the complainant (Gravador v.
Mamigo, 20 SCRA 742 [1967]; Azuelo v. Arnaldo, 108 Phil. 293 [1960]; 6) where
to exhaust administrative review is impractical and unreasonable (Cipriano v.
Marcelino, 43 SCRA 291); and 7) where the rule of qualified political agency
applies (Demaisip v. Court of Appeals, 106 Phil. 237 [1906]).
The issue raised in the instant petition is one of law, hence the doctrine of
non-exhaustion of administrative remedy relied upon by respondents is
inapplicable and cannot be given any effect. At any rate, records are replete
with events pointing to the fact that petitioner adhered to the administrative
processes in the disposition of the assailed resolutions of public respondents
prior to filing the instant petition by, among others, writing the Executive
Secretary and bringing the matter to the attention of the Office of the
President (Rollo, pp. 145-147). Respondents' claim that petitioner failed to
exhaust administrative remedies must therefore fail.
Having disposed of the procedural objection raised by respondents, We now
proceed to resolve the issues raised by petitioner. In this regard, We find
respondents' refusal to allow petitioner to examine the records of respondent
MTRCB, pertaining to the decisions of the review committee as well as the

As We held in Legaspi v. Civil Service Commission (150 SCRA 530 [1987]), this
constitutional provision is self-executory and supplies "the rules by means of
which the right to information may be enjoyed (Cooley, A Treatise on
Constitutional Limitations 167 [1927]) by guaranteeing the right and mandating
the duty to afford access to sources of information. Hence, the fundamental
right therein recognized may be asserted by the people upon the ratification of
the constitution without need for any ancillary act of the Legislature (Id. at
165). What may be provided for by the Legislature are reasonable conditions
and limitations upon the access to be afforded which must, of necessity, be
consistent with the declared State Policy of full public disclosure of all
transactions involving public interest (Constitution, Art. II, Sec. 28)." (See also
Taada v. Tuvera, 136 SCRA 27 [1985]; Valmonte v. Belmonte, Jr., 170 SCRA
256 [1989]).
Respondents contend, however, that what is rendered by the members of the
board in reviewing films and reflected in their individual voting slip is their
individual vote of conscience on the motion picture or television program and
as such, makes the individual voting slip purely private and personal; an
exclusive property of the member concerned.
The term private has been defined as "belonging to or concerning, an individual
person, company, or interest"; whereas, public means "pertaining to, or
belonging to, or affecting a nation, state, or community at large" (People v.
Powell, 274 NW 372 [1937]). May the decisions of respondent Board and the
individual members concerned, arrived at in an official capacity, be considered
private? Certainly not. As may be gleaned from the decree (PD 1986) creating
the respondent classification board, there is no doubt that its very existence is
public is character; it is an office created to serve public interest. It being the
case, respondents can lay no valid claim to privacy. The right to privacy
belongs to the individual acting in his private capacity and not to a
governmental agency or officers tasked with, and acting in, the discharge of
public duties (See Valmonte v. Belmonte, Jr., supra.) There can be no invasion
of privacy in the case at bar since what is sought to be divulged is a product of
action undertaken in the course of performing official functions. To declare

otherwise would be to clothe every public official with an impregnable mantle

of protection against public scrutiny for their official acts.
Further, the decisions of the Board and the individual voting slips accomplished
by the members concerned are acts made pursuant to their official functions,
and as such, are neither personal nor private in nature but rather public in
character. They are, therefore, public records access to which is guaranteed to
the citizenry by no less than the fundamental law of the land. Being a public
right, the exercise thereof cannot be made contingent on the discretion, nay,
whim and caprice, of the agency charged with the custody of the official
records sought to be examined. The constitutional recognition of the citizen's
right of access to official records cannot be made dependent upon the consent
of the members of the board concerned, otherwise, the said right would be
rendered nugatory. As stated by this Court in Subido v. Ozaeta (80 Phil. 383
[1948]):
Except, perhaps when it is clear that the purpose of the
examinations is unlawful, or sheer, idle curiosity, we do not
believe it is the duty under the law of registration officers to
concern themselves with the motives, reasons, and objects of
the person seeking access to the records. It is not their
prerogative to see that the information which the records
contain is not flaunted before public gaze, or that scandal is
not made of it. If it be wrong to publish the contents of the
records, it is the legislature and not the officials having
custody thereof which is called upon to devise a remedy.
(emphasis supplied)
It is significant to point out that this Court in the 1948 case of Subido v.
Ozaeta, supra, upheld the right to information based on the statutory right
then provided in Sec. 56 of the Land Registration Act (Act 496, as amended).
Consequently, We see no cogent reason why said right, now constitutionalized,
should be given less efficacy and primacy than what the fundament law
mandates.
The Court is not unaware of RA 6713 (Code of Conduct and Ethical Standards
for Public Officials and Employees) which provides, among others, certain
exceptions as regards the availability of official records or documents to the
requesting public, e.g., closed door Cabinet sessions and deliberations of this
Court. Suffice it to state, however, that the exceptions therein enumerated
find no application in the case at bar. Petitioner request is not concerned with
the deliberations of respondent Board but with its documents or records made
after a decision or order has been rendered. Neither will the examination
involve disclosure of trade secrets or matters pertaining to national security
which would otherwise limit the right of access to official records (See Legaspi
v. Civil Service Commission, supra).

We are likewise not impressed with the proposition advanced by respondents

that respondent Morato is empowered by PD 1986 to unilaterally downgrade or
upgrade a film reviewed especially those which are controversial. The
pertinent provisions of said decree provides:
Sec 4. Decision. The decision of the BOARD either approving
or disapproving for exhibition in the Philippines a motion
picture, television program, still and other pictorial
advertisement submitted to it for examination and preview
must be rendered within a period of ten (10) days which shall
be counted from the date of receipt by the BOARD of an
application for the purpose . . .
For each review session, the Chairman of the Board shall
designate a sub-committee composed of at least three BOARD
members to undertake the work of review. Any disapproval or
deletion must be approved by a majority of the sub-committee
members so designated. After receipt of the written decision
of the sub-committee, a motion for reconsideration in writing
may be made, upon which the Chairman of the Board shall
designate a sub-committee of five BOARD members to
undertake a second review session, whose decision on behalf
of the Board shall be rendered through a majority of the subcommittee members so designated and present at the second
review session. This second review session shall be presided
over by the Chairman, or the Vice-Chairman. The decision of
the BOARD in the second review session shall be rendered
within five (5) days from the date of receipt of the motion for
reconsideration.
Every decision of the BOARD disapproving a motion picture,
television program or publicity material for exhibition in the
Philippines must be in writing, and shall state the reasons or
grounds for such disapproval. No film or motion picture
intended for exhibition at the moviehouses or theaters or on
television shall be disapproved by reason of its topic, theme or
subject matter, but upon the merits of each picture or
program considered in its entirety.
The second decision of the BOARD shall be final, with the
exception of a decision disapproving or prohibiting a motion
picture or television program in its entirety which shall be
appealable to the President of the Philippines, who may
himself decide the appeal, or be assisted either by an ad hoe
committee he may create or by the Appeals Committee herein
created.

An Appeals Committee in the Office of the President of the

Philippines is hereby created composed of a Chairman and four
(4) members to be appointed by the President of the
Philippines, which shall submit its recommendation to the
President. The Office of the Presidential Assistant for Legal
Affairs shall serve as the Secretariat of the Appeals
Committee.
The decision of the President of the Philippines on any
appealed matter shall be final.
Implementing Rules and Regulations
Sec 11. Review by Sub-Committee of Three. a) A proper
application having been filed, the Chairman of the Board shall,
as the exigencies of the service may permit, designate a SubCommittee of at least three Board Members who shall meet,
with notice to the applicant, within ten days from receipt of
the completed application. The Sub-Committee shall then
preview the motion picture subject of the application.
b) Immediately after the preview, the applicant or his
representative shall withdraw to await the results of the
deliberation of the Sub-Committee. After reaching a decision,
the Sub-Committee shall summon the applicant or his
representative and inform him of its decision giving him an
opportunity either to request reconsideration or to offer
certain cuts or deletions in exchange for a better
classification. The decision shall be in writing, stating, in case
of disapproval of the film or denial of the classification rating
desired or both, the reason or reasons for such disapproval or
denial and the classification considered by the Sub-Committee
member dissenting from the majority opinion may express his
dissent in writing.
c) The decision including the dissenting opinion, if any, shall
immediately be submitted to the Chairman of the Board for
transmission to the applicant.
Sec 12. Review by Sub-Committee of Five. Within five days
from receipt of a copy of the decision of the Sub-Committee
referred to in the preceding section, the applicant may file a
motion for reconsideration in writing of that decision. On
receipt of the motion, the Chairman of the Board shall
designate a Sub-Committee of Five Board Members which shall
consider the motion and, within five days of receipt of such
motion, conduct a second preview of the film. The review

shall, to the extent applicable, follow the same procedure

provided in the preceding section.
Sec 13. Reclassification. An applicant desiring a change in
the classification rating given his film by either the SubCommittee of Three? or Committee of Five mentioned in the
immediately preceeding two sections may re-edit such film
and apply anew with the Board for its review and
reclassification.
Sec 14. Appeal. The decision of the Committee of Five
Board Members in the second review shall be final, with the
exception of a decision disapproving or prohibiting a motion
picture in its entirety which shall be appealable to the
President of the Philippines who may himself decide the
appeal or refer it to the Appeals Committee in the Office of
the President for adjudication.
On the other hand, the powers and functions of the MTRCB Chairman are found
in Section 5 of the same decree as follows:
Sec. 5. Executive Officer. The Chairman of the BOARD shall
be the Chief Executive Officer of the BOARD. He shall exercise
the following functions, powers and duties:
(a) Execute, implement and enforce the decisions, orders,
awards, rules and regulations issued by the BOARD;
(b) Direct and supervise the operations and the internal affairs
of the BOARD;
(c) Establish the internal organization and administrative
procedures of the BOARD, and recommend to the BOARD the
appointment of the necessary administrative and subordinate
personnel; and
(d) Exercise such other powers and functions and perform such
duties as are not specifically lodged in the BOARD.
It is at once apparent from a reading of the above provisions of PD 1986 that
respondent Morato, as Chairman of the MTRCB, is not vested with any authority
to reverse or overrule by himself alone a decision rendered by a committee
which conducted a review of motion pictures or television programs.
The power to classify motion pictures into categories such as "General
Patronage" or "For Adults Only" is vested with the respondent Board itself and

not with the Chairman thereof (Sec. 3 [e], PD 1986). As Chief Executive
Officer, respondent Morato's function as Chairman of the Board calls for the
implementation and execution, not modification or reversal, of the decisions or
orders of the latter (Sec. 5 [a], Ibid.). The power of classification having been
reposed by law exclusively with the respondent Board, it has no choice but to
exercise the same as mandated by law, i.e., as a collegial body, and not
transfer it elsewhere or discharge said power through the intervening mind of
another. Delegata potestas non potest delegari a delegated power cannot be
delegated. And since the act of classification involves an exercise of the Board's
discretionary power with more reason the Board cannot, by way of the assailed
resolution, delegate said power for it is an established rule in administrative
law that discretionary authority cannot be a subject of delegation.
WHEREFORE, the instant petition is GRANTED. Resolution Nos. 10-89 and 88-125 issued by the respondent Board are hereby declared null and void.
SO ORDERED.