G.R. No.

118910 July 17, 1995
KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA,
CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG,
JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO
SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN,
QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN.
WIGBERTO TAADA, REP. JOKER P. ARROYO, petitioners,
vs.
MANUEL L. MORATO, in his capacity as Chairman of the
Philippine Charity Sweepstakes Office, and the PHILIPPINE
GAMING MANAGEMENT CORPORATION, respondents.
DAVIDE, JR., J., dissenting:
I register a dissenting vote.
I
I am disturbed by the sudden reversal of our rulings in Kilosbayan,
Inc., et al. vs. Guingona, et al.1 (hereinafter referred to as the first
lotto case) regarding the application or interpretation of the
exception clause in paragraph B, Section 1 of the Charter of the
PCSO (R.A.. No. 1169), as amended by B.P. Blg. 442, and on the
issue of locus standi of the petitioners to question the contract of
lease involving the on-line lottery system entered into between
the Philippine Charity Sweepstakes Office (PCSO) and the
Philippine Gaming Management Corporation (PGMC). Such
reversal upsets the salutary doctrines of the law of the case, res
judicata, and stare decisis. It puts to jeopardy the faith and
confidence of the people, specially the lawyers and litigants, in
the certainty and stability of the pronouncements of this Court. It
opens the floodgates to endless litigations for re-examination of
such pronouncements and weakens this Court's judicial and
moral authority to demand from lower courts obedience thereto
and to impose sanctions for their opposite conduct.
It must be noted that the decision in the first lotto case was
unconditionally accepted by the PCSO and the PGMC, as can be
gleaned from their separate manifestations that they would not
ask for its reconsideration but would, instead, negotiate a new
equipment lease agreement consistent with the decision and the
PCSO's charter and that they would furnish the Court a copy of
the new agreement. The decision has, thus, become final on 23
May 1994.2
effects of the envisioned on-line lottery system are as
staggering as the billions of pesos its is expected to raise. The
legal standing then of the petitioners deserves recognition
and, in the exercise of its sound discretions, this Court hereby
brushes aside the procedural barrier which the respondents
tried to take advantage of.
In his concurring opinion, Mr. Justice Florentino P. Feliciano
further showed substantive grounds or considerations of
importance which strengthened the legal standing of the
petitioner to bring and maintain the action, namely: (a) the public
character of the funds or other assets involved in the contract of
lease; (b) the presence of a clear case of disregard of a
constitutional or legal provision by the public respondent agency;
(c) the lack of any other party with a more direct and specific
interest in raising the questions involved therein; and (d) the wide
range of impact of the contract of lease and of its implementation.
Only last 6 April 1995, in the decision in Tatad vs. Garcia,3 this
Court, speaking through Mr. Justice Camilo D. Quiason who had
joined in the dissenting opinions in the first lotto case denying the
petitioners' locus standi therein, invoked and applied the ruling on
locus standi in the first lotto case. He stated:
The prevailing doctrines in taxpayer's suits are to allow
taxpayers to question contracts entered into by the national
government or government-owned or controlled corporations
allegedly in contravention of the law (Kilosbayan, Inc. v.
Guingona, 232 SCRA 110 [1994]) and to disallow the same
when only municipal contracts are involved (Bugnay
Construction and Development Corporation v. Laron, 176
SCRA 240 [1989]).
For as long as the ruling in Kilosbayan on locus standi is not
reversed, we have no choice but to follow it and uphold the
legal standing of petitioners as taxpayers to institute the
present action.
Mr. Justice Santiago M. Kapunan, who had also dissented in the
first lotto case on the issue of locus standi; unqualifiedly
concurred with the majority opinion in Tatad. Mr. Justice Vicente
V. Mendoza, the writer of the ponencia in this case, also invoked
the locus standi ruling in the first lotto case to deny legal standing
to Tatad, et al. He said:

As the writer of the said decision and as the author of the
exception to paragraph B, Section 1 of R.A. No. 1169, as
amended, I cannot accept the strained and tenuous arguments
adduced in the majority opinion to justify the reversal of our rulings
in the first lotto case. While there are exceptions to the
aforementioned doctrines and I am not inexorably opposed to
upsetting prior decisions if warranted by overwhelming
considerations of justice and irresistible desire to rectify an error,
none of such considerations and nothing of substance or weight
can bring this case within any of the exceptions.
In the said case, we sustained the locus standi of the petitioners,
and in no uncertain terms declared:
We find the instant petition to be of transcendental importance
to the public. The issues it raised are of paramount public
interest and of a category even higher than those involved in
many of the aforecited cases. The ramifications of such
issues immeasurably affect the social, economic, and moral
well-being of the people even in the remotest barangays of
the country and the counter-productive and retrogressive
Nor do petitioners have standing to bring this suit as citizens.
In the cases in which citizens were authorized to sue, this
Court found standing because it thought the constitutional
claims pressed for decision to be of "transcendental
importance," as in fact it subsequently granted relief to
petitioners by invalidating the challenged statutes or
governmental actions. Thus in the Lotto case [Kilosbayan,
Inc. vs. Guingona, 232 SCRA 110 (1994)] relied upon by the
majority for upholding petitioner's standing, this Court took
into account the "paramount public interest" involved which
"immeasurably affect[ed] the social, economic, and moral
well-being of the people. . . and the counter-productive and
retrogressive effects of the envisioned on-line lottery system."
Accordingly, the Court invalidated the contract for the
operation of the lottery.
Chief Justice Andres R. Narvasa and Associate Justices
Abdulwahid A. Bidin, Jose A. R. Melo, Reynato S. Puno, Jose C.
Vitug, and Ricardo J. Francisco, joined him in his concurring
opinion. Except for the Chief Justice who took no part in the first
lotto case and Justice Francisco who was not yet a member of
this Court at the time, the rest of the Justices who joined the
concurring opinion of Justice Mendoza had dissented in the first
lotto case on the said issue.
Furthermore, it must not be forgotten that this Court has defined
the issues in this case and limited them to the following:
1. Whether the challenged ELA constitutes an association,
collaboration, or joint venture within the meaning of
Section 1(B) of R.A. No. 1169, as amended by B.P. Blg.
42;
2. Whether the ELA requires prior public bidding; and
3. Whether the ELA is grossly disadvantageous to the
Government.
In fact, during the oral arguments of this case on 3 March 1993
this Court aborted the attempt of the principal counsel for the
PGMC, Atty. Renato Cayetano, to revive the issue of locus standi.
Since it seemed that he had prepared himself for and had been
assigned to discuss that issue alone, he took his seat without
protest and without a suggestion that he would ask for an
expansion of the scope of the issues.
In the first lotto case, this Court also emphatically ruled that the
language of Section 1 of R.A. No. 1169, as amended by B.P. Blg.
42, is indisputably clear that with respect to its [PCSO's] franchise
or privilege "to hold and conduct charity sweepstakes races,
lotteries and other similar activities," the PCSO cannot exercise it
"in collaboration, association or joint venture" with any other party.
This is the unequivocal meaning and import of the phrase "except
for the activities mentioned in the preceding paragraph (A),"
namely, "charity sweepstakes races, lotteries and other similar
activities.
In support thereof, we explained how the amendment came about
and quoted portions of the Record of the Batasan4 on the
proceedings during the period of amendments to show the
unequivocal intent of the Interim Batasang Pambansa to
proscribe the holding or conducting by the PCSO of sweepstakes
races, lotteries, and other similar activities, "in collaboration,
association, or joint venture with any person, association,
company, or entity, whether domestic or foreign." For
convenience, I quote what this Court stated in the said case:
B.P. Blg. 42 originated from Parliamentary Bill No. 622, which
was covered by Committee Report No. 103 as reported out
by the Committee on Socio-Economic Planning and
Development of the Interim Batasang Pambansa. The
original text of paragraph B, Section 1 of Parliamentary Bill
No. 622 reads as follows:
To engage in any and all investments and related profit-
oriented projects or programs and activities by itself or in
collaboration, association or joint venture with any
person, association, company or entity, whether domestic
or foreign, for the main purpose of raising funds for health
and medical assistance and services and charitable
grants. [Record of the Batasan, vol. Two, 993]
During the period of committee amendments, the Committee
on Socio-Economic Planning and Development, through
Assemblyman Ronaldo B. Zamora, introduced an
amendment by substitution to the said paragraph B such that,
as amended, it should read as follows:
Subject to the approval of the Minister of Human Settlements,
to engage in health-oriented investments, programs, projects
and activities which may be profit-oriented, by itself or in
collaboration, association, or joint venture with any person,
association, company or entity, whether domestic or foreign,
for the purpose of providing for permanent and continuing
sources of funds for health programs, including the expansion
of existing ones, medical assistance and services and/or
charitable grants. [Id., 1006-1007].
Before the motion of Assemblyman Zamora for the approval of
the amendment could be acted upon, Assemblyman Davide
introduced an amendment to the amendment:
MR. DAVIDE:
Mr. Speaker.
THE SPEAKER:
The gentleman from Cebu is recognized.
MR. DAVIDE:
May I introduce an amendment to the committee
amendment? The amendment would be to insert after
"foreign" in the amendment just read the following: EXCEPT
FOR THE ACTIVITY IN LETTER (A) ABOVE.
When it is a joint venture or in collaboration with an entity such
collaboration or joint venture must not include activity Letter
(a) which is the holding and conducting of sweepstakes races,
lotteries and other similar acts.
MR. ZAMORA:
We accept the amendment, Mr. Speaker.
MR. DAVIDE:
Thank you, Mr. Speaker.
THE SPEAKER:
Is there any objection to the amendment? (Silence) The
amendment, as amended, is approved. [Id., 1007, emphasis
supplied]
Further amendments to paragraph B were introduced and
approved. When Assemblyman Zamora read the final text of
paragraph B as further amended, the earlier approved
amendment of Assemblyman Davide became "EXCEPT FOR
THE ACTIVITIES MENTIONED IN PARAGRAPH (A)"; and by
virtue of the amendment introduced by Assemblyman Emmanuel
Pelaez, the word PRECEDING was inserted before
PARAGRAPH. Assemblyman Pelaez introduced other
amendments. Thereafter, the new Paragraph B was approved.
[Id.] This is now paragraph B, Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42.5
This Court further explained the rationale for the prohibition as
follows:
No interpretation of the said provision to relax or circumvent
the prohibition can be allowed since the privilege to hold or
conduct charity sweepstakes races, lotteries, or other similar
activities is a franchise granted by the legislature to the
PCSO. It is a settled rule that "in all grants by the government
to individuals or corporations of rights, privileges and
franchises, the words are to be taken most strongly against
the grantee . . . [o]ne who claims a franchise or privilege in
derogation of the common rights of the public must prove his
title thereto by a grant which is clearly and definitely
expressed, and he cannot enlarge it by equivocal or doubtful
provisions or by probable inferences. Whatever is not
unequivocally granted is withheld. Nothing passes by mere
implication." [36 Am Jur 2d Franchises 26 (1968)].
In short then, by the exception explicitly made in paragraph
B, Section 1 of its charter, the PCSO cannot share its
 franchise with another by way of collaboration, association or
joint venture. Neither can it assign, transfer, or lease such
franchise. It has been said that "the rights and privileges
conferred under a franchise may, without doubt, be assigned
or transferred when the grant is to the grantee and assigns,
or is authorized by statute. On the other hand, the right of
transfer or assignment may be restricted by statute or the
constitution, or be made subject to the approval of the grantor
or a governmental agency, such as a public utilities
commission, except that an existing right of assignment
cannot be impaired by subsequent legislation. [Id., 63].
It may also be pointed out that the franchise granted to the
PCSO to hold and conduct lotteries allows it to hold and
conduct a species of gambling. It is settled that "a statute
which authorizes the carrying on of a gambling activity or
business should be strictly construed and every reasonable
doubt so resolved as to limit the powers and rights claimed
under its authority. (38 Am Jur 2d Gambling 18 [1968]).6
The PCSO and the PGMC never challenged our application or
interpretation of the exception clause and our definitions of the
terms collaboration, association, and joint venture. On the
contrary, they unconditionally accepted the same by not asking
for the reconsideration of our decision in the first lotto case.
Under the principle of either the law of the case or res judicata,
the PCSO and the PGMC are bound by the ruling in the first lotto
case on the locus standi of the petitioners and the application or
interpretation of the exception clause in paragraph B, Section 1
of R.A. No. 1169, as amended. Moreover, that application or
interpretation has been laid to rest under the doctrine of stare
decisis and has also become part of our legal system pursuant to
Article 8 of the Civil Code which provides: "Judicial decisions
applying or interpreting the laws or the constitution shall form part
of the legal system of the Philippines.
These doctrines were not adopted whimsically or capriciously.
They are based on public policy and other considerations of great
importance and should not be discarded or jettisoned in a cavalier
fashion. Yet, they are now put to naught in this case.
The principle of the law of the case "is necessary as a matter of
policy to end litigation. There would be no end to a suit if every
obstinate litigant could, by repeated appeals, compel a court to
listen to criticisms on their opinions, or speculate on chances from
changes in its members.7
It is, however, contended that the law of the case is inapplicable
because that doctrine applies only when a case is before an
appellate court a second time after its remand to a lower court.
While indeed the statement may be correct, it disregards the fact
that this case is nothing but a sequel to and is, therefore, for all
intents and purposes, a continuation of the first lotto case. By their
conduct, the parties admitted that it is, for which reason the
PGMC and the PCSO submitted in the first lotto case a copy of
the ELA in question, and the petitioners commenced the instant
petition also in the said case. Our resolution that the validity of the
ELA could not be decided in the said case because the decision
therein had become final does not detract from the fact that this
case is but a continuation of the first lotto case or a new chapter
in the raging controversy between the petitioners, on the one
hand, and the PCSO and the PGMC, on the other, on the
operation of the on-line lottery system.
Equally unacceptable is the majority opinion's rejection of the
related doctrine of conclusiveness of judgment on the ground that
the question of standing is a legal question, as this case in
involves a different or unrelated contract. The legal question of
locus standi which was resolved in favor of the petitioners in the
first lotto case is the same in this case and in every subsequent
case which would involve contracts relating or incidental to the
conduct or holding of lotteries by the PCSO in collaboration,
association, or joint venture with any person, association,
company, or entity. And, the contract in question is not different
from or unrelated to the first nullified contract, for it is nothing but
a substitute for the latter. Respondent Morato was even candid
enough to admit that no new and separate public bidding was
conducted for the ELA in question because the PCSO was of the
belief that the public bidding for the nullified contract was
sufficient.
Its reliance on the ruling in Montana vs. United States8 that
preclusion of issues or collateral estoppel does not apply to issues
of law, at least when substantially unrelated claims are involved,
is misplaced. For one thing, the question of the petitioners' legal
standing in the first lotto case and in this case is one and the same
issue of law. For another, these cases involve the same and not
substantially unrelated subject matter, viz., the second contract
between the PCSO and the PGMC on the operation of the on-line
lottery system.
The majority opinion likewise failed to consider that in the very
authority it cited regarding the exception to the rule of issue
preclusion (Restatement of the Law, 2d Judgments 28), the
second illustration stated therein is subject to this NOTE: "The
doctrine of the stare decisis may lead the court to refuse to
reconsider the question of sovereign immunity," which simply
means that stare decisis is an effective bar to a re-examination of
a prior judgment.
The doctrine of stare decisis embodies the legal maxim that a
principle or rule of law which has been established by the decision
of a court of controlling jurisdiction will be followed in other cases
involving a similar situation. It is founded on the necessity for
securing certainty and stability in the law and does not require
identity or privity of parties.9 This is explicitly fleshed out in Article
8 of the Civil Code which provides that decisions applying or
interpreting the laws or the constitution shall form part of the legal
system. Such decisions "assume the same authority as the
statute itself and, until authoritatively abandoned, necessarily
become, to the extent that they are applicable, the criteria which
must control the actuations not only of those called upon to abide
thereby but also of those in duty bound to enforce obedience
thereto." 10 Abandonment thereof must be based only on strong
and compelling reasons which I do not find in this case
otherwise, the becoming virtue of predictability which is expected
from this Court would be immeasurably affected and the public's
confidence in the stability of its solemn pronouncements
diminished.
The doctrine of res judicata also bars a relitigation of the issue of
locus standi and a re-examination of the application or
interpretation of the exception clause in paragraph B, Section 1
of R.A. No. 1169, as amended. Section 49 (b), Rule 39 of the
Rules of Court on effects of judgment expressly provides:
(b) In all other cases the judgment or order is, with respect to
the matter directly adjudged or as to other matter that could
have been raised in relation thereto, conclusive between the
parties and their successors in interest by title subsequent to
 the commencement of the action or special proceedings,
litigating for the same thing in the same title and in the same
capacity.
This doctrine has dual aspects:
(1) as a bar to the prosecution of a second action upon the same
claim, demand, or cause of action; and
(2) as preclusion to the relitigation of particular facts or issues in
another action between the same parties on a different claim
or cause of action.11
Public policy, judicial orderliness, economy of judicial time, and
the interest of litigants as well as the peace and order of society,
all require that stability should be accorded judgments; that
controversies once decided on their merits shall remain in repose;
that inconsistent judicial decisions shall not be made on the same
set of facts; and that there be an end to litigation which, without
the said doctrine, would be endless. It not only puts an end to
strife, but recognizes that certainty in legal relations must be
maintained. It produces certainty as to individual rights and gives
dignity and respect to judicial proceedings.12
The justifications given in the majority opinion to underrate the
ruling on locus standi and to ultimately discard it are
unconvincing. It is not at all true, as the majority opinion contends,
that "[t]he previous ruling sustaining petitioners' intervention may
in fact be considered a departure from settled rulings on 'real party
in interest' because no constitutional issues were actually
involved.
It must be pointed out that the rule in ordinary civil procedure on
real party in interest was never put in issue in the previous case.
It was the clear understanding of the Members of the Court that
in the light of the issues raised and the arguments adduced
therein, only locus standi deserved consideration. Accordingly,
the majority opinion and the separate dissenting opinions therein
dwelt lengthily on locus standi and brought in the process a vast
array of authorities on the issue. Moreover, as explicitly stressed
in the concurring opinion of Justice Feliciano, both constitutional
and legal issues were involved therein. Finally, as shall hereafter
be discussed, in public law the rule of real party in interest is
subordinated to the doctrine of locus standi.
Equally unconvincing is the majority opinion's contention that the
ruling on locus standi in the first lotto case may not be preserved
because the majority vote sustaining the petitioners' standing was
a "tenuous one" that may not be maintained in a subsequent
litigation, and that there had been changes in the membership of
the Court due to the retirement of Justices Isagani A. Cruz and
Abdulwahid A. Bidin and the appointment of Justices Vicente V.
Mendoza and Ricardo J. Francisco. It has forgotten that, as earlier
stated, the ruling was reiterated in Tatad vs. Garcia. Additionally,
when in his concurring opinion in the Tatad case, Justice
Mendoza denied locus standi to Tatad, et al., because their case
did not have the same importance as the first lotto case, he
thereby accepted the concession of standing to the petitioners in
the lotto case. I wish to stress the fact that all the Justices who
had dissented in the first lotto case on the issue of locus standi
were either for the majority opinion or for the concurring opinion
in the Tatad case. Hence, I can say that the Tatad case has given
vigor and strength to the "tenuous" majority in the first lotto case.
The majority opinion declares that the real issue in this case is not
whether the petitioners have locus standi but whether they are the
real parties-in-interest. This proposition is a bold move to set up
a bar to taxpayer's suits or cases invested with public interest by
requiring strict compliance with the rule on real party in interest in
ordinary civil actions, thereby effectively subordinating to that rule
the doctrine of locus standi. I am not prepared to be a party to that
proposition.
First. Friedenthal; et al., whose book is cited in the majority
opinion in its discussion of the rule on real party in interest and
the doctrine of locus standi, admit that there is a difference
between the two, and that the former is not strictly applicable in
public law cases, thus:
The evolution of standing doctrine seems to point to greater
freedom of action for plaintiffs. However, the courts still have
not articulated how the balance is to be struck between the
relevant and often competing interests: the plaintiff's right to
relief and the legislature's right to carry out its policies without
judicial interference. Nor has the judiciary's competence to
rule on these interests have analyzed systematically or its
limits defined. Courts essentially continue to be free to
reconcile these competing values on an ad hoc basis.
It is important to note, however, that standing, because of its
constitutional and public policy underpinnings, is very
different from questions relating to whether a particular
plaintiff is the real party in interest or has capacity to sue.
Although all three requirements are directed toward ensuring
that only certain parties can maintain an action, standing
restrictions require a partial consideration of the merits, as
well as of broader policy concerns relating to the proper role
of the judiciary in certain areas. 13
In an earlier book, 14 the same Friedenthal and Miller, with, John
J. Cound as the lead author, expounded that in the realm of public
law, the real party in interest rule is not applicable, thus:
A third problem of proper parties occurs in the realm of public
law. When governmental action is attacked on the ground that
it violates private rights or some constitutional principle, the
courts have tended to analyze the question whether the
challenger is a proper party plaintiff to assert the claim in
terms of the judge-made doctrine of standing to sue
requiring that plaintiff be adversely affected by defendant's
conduct rather than according to real-party-in-interest or
capacity principles. See Davis, Standing: Taxpayers and
Others, 35 U. Chi. L. Rev. 601 (1968); Jaffee, The Citizen as
a Litigant in Public Actions: The Non-Hohfeldian or
Ideological Plaintiff, 116 U. Pa. L. Rev. 1033 (1968); and
Jaffee, Standing Again, 84 Harv. L. Rev. 633 (1971). To the
extent that standing is understood to mean that the litigant
actually must be injured by the governmental action that is
being assailed, it closely resembles the notion of real party in
interest under Rule 17(a). However, several other elements
of the standing doctrine clearly are unrelated to the simple
real-party-in-interest test. One significant context in which the
two concepts diverge is when for standing purposes plaintiff
is required to show both that he has been adversely affected
by the governmental conduct that is under attack and has
suffered an injury to a legally protected right. When standing
is defined in this fashion it may entail a preliminary
consideration of the merits of the case and therefore is quite
different from the real-party-in-interest notion. (emphasis
supplied).
The downgrading of locus standi and its subordination to the
restrictive rule on real party in interest cannot be justified by the
claim that what is involved here is contract law, not constitutional
law. True, contract law is involved. We are not, however, dealing
here with an ordinary contract between private parties, but a
contract between a corporation wholly owned by the government
hence, an instrumentality of the government and a private
corporation for the conduct of the lotto, which is invested with
paramount and transcendental public interest and other public
policy considerations because the lotto has counter-productive
and retrogressive effects which are as staggering as the billions
of pesos it is expected to raise and provokes issues that
immeasurably affect the social, economic, and moral well-being
of the people. We said so in the first lotto case.
Second. The attempt to use the real-party-in-interest rule is to
resurrect the abandoned restrictive application of locus standi.
This Court, speaking through the constitutionalist nonpareil,
Justice and later Chief Justice Enrique Fernando, has already
declared in Tan vs. Macapagal 15 that as far as a taxpayer's suit
is concerned, this Court is not devoid of discretion as to whether
or not it should be entertained. In his concurring opinion in Aquino
vs. Commission on Elections, 16 he said:
Then there is the attack on the standing of petitioners, as
vindicating at most what they consider a public right and not
protecting their rights as individuals. [Respondents'
Comment, 5]. This is to conjure the specter of the public right
dogma as an inhibition to parties intent on keeping public
officials staying on the path of constitutionalism. As was so
well put by Jaffe [Standing to Secure Judicial Review, 74
Harvard Law Review, 1265 (1961)]: "The protection of private
rights is an essential constituent of public interest and,
conversely, without a well-ordered state there could be no
enforcement of private rights. Private and public interests are,
both in a substantive and procedural sense, aspects of the
totality of the legal order." [Ibid., 1266. Cf. Berger, Standing
to Sue in Public Actions, 78 Yale Law Journal 816 (1969)].
Moreover, petitioners have convincingly shown that in their
capacity as taxpayers, their standing to sue has been amply
demonstrated. There would be a retreat from the liberal
approach followed in Pascual v. Secretary of Public Works
[110 Phil. 331 (1960)], foreshadowed by the very decision of
People v. Vera [65 Phil. 56 (1937)] where the doctrine was
first fully discussed, if we act differently now. I do not think we
are prepared to take that step. Respondents, however, would
hark back to the American Supreme Court doctrine in Mellon
v. Frothingham [262 US 447 (1923)], with their claim that what
petitioners possess "is an interest which is shared in common
by other people and is comparatively so minute and
indeterminate as to afford any basis and assurance that the
judicial process can act on it." [Respondents' Comment, 5].
That is to speak in the language of a bygone era, even in the
United States. For as Chief Justice Warren clearly pointed out
in the later case of Flast v. Cohen [391 US 83 [1968)], the
barrier thus set up if not breached has definitely been
lowered. [Ibid., 92-95]. The weakness of these particular
defenses is thus quite apparent. [Cf. Tan v. Macapagal, 43
SCRA 677].
Third. Such attempt directly or indirectly restricts the exercise of
the judicial authority of this Court in an original action and there
had been many in the past to determine whether or not there
has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the
Government. Only a very limited few may qualify, under the real-
party-in-interest rule, to bring actions to question acts or contracts
tainted with such vice. Where, because of fear of reprisal, undue
pressure, or even connivance with the parties benefited by the
contracts or transactions, the so-called real party in interest
chooses not to sue, the patently unconstitutional and illegal
contracts or transactions will be placed beyond the scrutiny of this
Court, to the irreparable damage of the Government, and
prejudice to public interest and the general welfare.
By way of illustration, the first lotto contracts would not have
reached this Court if only the so-called real party in interest could
bring an action to nullify it. Neither would the ELA in question,
since for reasons only known to them, none of those who had lost
in the bidding for the first lotto contract showed interest to
challenge it.
The majority opinion posits that a denial to the petitioners of the
right to intervene will not leave without remedy any perceived
illegality in the contract because:
[q]uestions as to the nature or validity of public contracts of
the necessity for a public bidding before they may be made
can be raised in an appropriate case before the Commission
on Audit of before the Ombudsman. . . . In addition, the
Solicitor General is authorized to bring an action for quo
warranto if it should be thought that a government
corporation, like the PCSO, has offended against its
corporate charter or misused its franchise.
That proposition delivers the coup de grace to taxpayers' suits,
discourages involvement of citizens in public affairs, and negates
or renders ineffective Section 16, Article XIII of the Constitution
which provides:
The right of the people and their organizations to effective and
reasonable participation at all levels of social, political, and
economic decision-making shall no be abridged. The State
shall, by law, facilitate the establishment of adequate
consultation mechanisms.
Besides, it is fraught with unimaginable danger to public interest
if neither the Commission on Audit (COA), nor the Ombudsman,
or the Office of the Solicitor General, would take any action on the
matter.
In the instant case, the COA refused to directly act on Morato's
request and, instead, referred it to the Department of Justice
(DOJ) which, in turn, merely indorsed an opinion to the COA. On
the other hand, the Office of the Solicitor General is taking the
side of the PCSO, as it did in the first lotto case. The observation
then of Justice Cruz in his concurring opinion in the first lotto case
is apropos:
Locus standi is not such an absolute rule that it cannot admit
of exceptions under certain conditions or circumstances like
those attending this transaction. As I remarked in my dissent
in Guazon vs. De Villa, 181 SCRA 623, "It is not only the
owner of the burning house who has a right to call the firemen.
Every one has the right and responsibility to prevent the fire
from spreading even if he lives in the other block.
The majority opinion does not entirely foreclose the possibility of
according the petitioners locus standi if only they would allege
"that public funds are being misspent so as to make this action a
public one and justify relaxation of the requirement that an action
must be prosecuted by the real party in interest." While it may be
true that there is no such specific allegation, the totality of the
petitioners' allegations points to illegal expenditures of public
funds due to or arising out of violations of the exception clause in
paragraph B, Section 1 of R.A. No. 1169, as amended, and the
public bidding law, and by reason of the grossly disadvantageous
provisions of the contract. The public character of the sums due
the PGMC under the ELA cannot be disputed. The PCSO is solely
owned by the Government and is authorized to raise funds for the
public purposes specified in its Charter. The funds thus raised are
public funds. This Court must take judicial notice of these facts.
Before I take up the defined issues, I find it necessary to meet
squarely the majority opinion's interpretation of paragraph B,
Section 1 of R.A. No. 1169, as amended. This is, of course, on
the assumption that this Court may now disregard the doctrines
of the law of the case, res judicata, and stare decisis.
I respectfully submit that the best authority on the intention or
rationale of a legislative amendment is its author. Fortunately, I
happened to be the author of the exception clause in said
provision. The language of that clause is very short and simple,
and the elaboration given therefor, as earlier shown, is equally
short and simple. The sponsor of the measure, then
Assemblyman, now Congressman, Ronaldo Zamora did not even
ask for an explanation or clarification; he readily accepted the
amendment. Nobody from the floor interpellated me for an
explanation or clarification.
I regret then to say that neither the letter nor the spirit of the
exception clause in paragraph B supports the interpretation
proposed in the majority opinion. The reason given in the majority
opinion for the alleged prohibition from investing in "activities
mentioned in the preceding paragraph (A)" (i.e., the holding or
conducting of charity sweepstakes races, lotteries, and other
similar activities) is that "these are competing activities." In that
aspect alone, the majority opinion has clearly misconstrued the
exception clause. The prohibition is not directed against such
activities, since they are in fact the franchised primary activities of
the PCSO. What is prohibited is the conduct or holding thereof "in
collaboration, association or joint venture with any person,
association, company, or entity, whether domestic or foreign." In
the first lotto case, this Court explained the principal reasons for
such prohibition. If the purpose of the prohibition in the exception
clause is indeed to prevent competition, it would be with more
reason that no other person, natural or juridical, should be allowed
to share in the PCSO's franchise to hold and conduct lotteries. In
short, the argument in the majority opinion sustains the rationale
of the prohibition.
II
As to the defined issues, my answers are in the affirmative. To
better appreciate them, the minute details of the undisputed
operative facts which are crucial to their resolution must have to
be bared.
After its setback n G.R. No. 113375, the PGMC and the PCSO
prepared a draft of a new ELA.
On 26 July 1994, the Board of Directors of the PCSO approved
Resolution No. 445, 17 series of 1994, resolving as follows:
NOW, THEREFORE, BE IT RESOLVED, as it is hereby
resolved, that the draft Equipment Lease Agreement, hereto
attached, is APPROVED, and the Chairman of the Board is
AUTHORIZED to enter into and execute the said Agreement,
SUBJECT to the confirmation by the Commission on Audit
that PCSO can enter in the said Agreement.
On the same date, PCSO Chairman Morato sent a letter to Hon.
Celso D. Gangan, Chairman of the COA, 18 seeking confirmation
on whether the Equipment Lease Agreement is exempt from the
requirements of public bidding imposed under Executive Order
No. 301 (1987) and the pertinent government accounting and
auditing rules. The request was based on the following
submissions:
1. Pursuant to the provisions of Republic Act No. 1169, as
amended, the Philippine Charity Sweepstakes Office
(PCSO), with the approval of the Office of the President,
decided to operate an On-line lottery System.
2. In August 1993, Request for Proposals (Annex "A") were
issued seeking lessors for the On-Line Lottery System
under a build-lease basis at no expense or risk to PCSO.
3. The bids were evaluated by the Special Prequalification
Bids and Awards Committee and its bid report was further
evaluated by a Special Review Committee of the Office
of the President.
4. On 12 October 1993, the Office of the President announced
that it was awarding the Lease Contract to Philippine
Gaming and Management Corporation (PGMC) as
lessor, provided that the contract would similarly be
awarded to two (2) other bidders if they matched the
terms of PGMC.
Morato invoked the following grounds to justify his request for
confirmation:
a. A lease of equipment, with option to purchase, by a
government corporation such as the PCSO, provided
this is approved by its governing board, is not
generally subject to the public bidding requirement
(Section 4.3, second paragraph, COA Circular No.
85-55-A dated 8 September 1985);
b. The new lease contract is still the result of an award
made after public bidding; and
c. In this case, its is apparent that the lease of the needed
equipment through negotiation is the most
advantageous to the Government since so many
studies, plans and procedures had already been
worked out with PGMC since October 1993 as a
result of the previous bidding (Section 1. e, Executive
Order No. 301 [1987]).
The COA indorsed Morato's letter to the DOJ and requested an
opinion on the propriety or legality of the proposed ELA which was
entered into without the benefit of a public bidding under E.O. No.
301 and the pertinent government accounting and auditing rules.
In its Opinion No. 4, series of 1995, 19 contained in a 2nd
Indorsement addressed to the COA, dated 16 January 1995, the
DOJ, through Acting Secretary Demetrio G. Demetria:
(a) Disagreed with the statement of Morato that any of the
three justifications he enumerated in his letter to the COA
may constitute valid basis for the exemption from public
bidding.
(b) Declined to express an opinion on the first justification that
under COA Circular No. 85-55-A of 8 September 1985 a
lease of equipment with option to purchase is not
generally subject to public bidding, since it involves an
interpretation of a COA circular which is best left to the
COA's determination.
(c) Expressed doubts on the accuracy of Morato's statement
that the new lease contract is still the result of the award
made after public bidding and opined that since the
original lease contract was nullified by this Court, such
nullification necessarily implied the nullification of the
public bidding which preceded its execution.
 (d) Agreed, nonetheless, with Morato that the new ELA is
exempt from the public bidding requirement under
Section 1 (e) of E.O. No. 301, and ratiocinates as follows:
The cited provision reads:
Sec. 1. Guidelines for Negotiated Contracts. Any provision
of Law, decree, executive order or other issuances to the
contrary notwithstanding, no contract for public services or for
furnishing supplies, materials and equipment to the
government or any of its branches, agencies or
instrumentalities shall be renewed or entered into without
public bidding except under any of the following situations:
xxx xxx xxx
(e) In cases where it is apparent that the requisition of the
needed supplies through negotiated purchase is most
advantageous to the government to be determined by the
Department Head concerned; and
xxx xxx xxx
It should be noted that while public bidding is generally
required for contracts for public services or for furnishing
supplies, materials and equipment, paragraph (e),
abovequoted, would exempt from the requirement of public
bidding "the requisition of the needed supplies" and would
allow the acquisition thereof through negotiated purchase if
deemed most advantageous to the government as
determined by the Department Head concerned.
In the instant case, it is believed that the new lease
agreement, although denominated, "Equipment Lease
Agreement", may be considered a contract for furnishing
supplies and may fall under the exception provided for in
paragraph (e) if entering into such agreement, through
negotiation, is determined to be the most advantageous by
the Department Head concerned.
The words "supplies" and "equipment" are not synonymous.
The word "equipment" imports "the outfit necessary to enable
the contractor to perform the agreed service, the tools,
implements, and appliances which might have been
previously used or might be subsequently used by the
contractor in carrying on other work of like character"
(Standard Boiler Works v. National Surety Co., 71 Wash. 28,
127 Pac. 573). The word "supplies", on the other hand, is
defined as "any article entirely consumed by its use in the
work" (National Surety Co. v. Bratnober Lumber Co., 67
Wash. 601, 122, Pac. 337).
It has been held, however, that the true distinction between
"supplies" and "equipment" rests on the effect the use has
upon the article, rather than upon the degree of use to which
it is subjected. Thus, a "supply" would be any article furnished
for carrying on the work which from its nature is necessarily
consumed by use in the work, while "equipment" would
consist of those articles that are not necessarily so
consumed, but which may survive the particular work and be
further used on work of like character (United States Rubber
Co. of California v. Washington Engineering Co., 149 P. 706).
In case of lease of equipment, it was held that the rental value
of machinery hired by the contractor for use in carrying on
work within the terms of the contract is recoverable from the
bondsman as a supply, the reason for this being that what
was consumed in the work was the use of the machinery and
not the machinery itself (United States Rubber Co. vs.
Washington Eng'g. Co., supra, citing cases). Applying this
ruling to the instant case, the subject Equipment Lease
Agreement, as observed earlier, may be deemed to be an
agreement for furnishing of supplies because by its terms,
what will be consumed by the PCSO, as Lessee, would be
the use of the equipment, and not the equipment itself.
Based thereon, the aforesaid Equipment Lease Agreement
may be the subject of negotiation pursuant to Section l(e) of
E.O. No. 301 if it be determined to be the most advantageous
to the government by the Department Head concerned.
As earlier stated, on 25 January 1995, the PGMC, represented by
Alfredo C. Ramos, its Vice-Chairman, and the PCSO,
represented by Manuel L. Morato, its Chairman, signed the
assailed ELA.
A. The PGMC avers that the old contract was reformed to
expunge therefrom the features and provisions which were
held by this Court as indicative of the statutorily proscribed
collaboration, association, or joint venture. 20 For their part,
the public respondents claim that "as can be glaringly seen
from the face of the ELA, none of the terms and conditions in
the old contract of lease which this Honorable Court found as
vestiges of a joint venture is present in the subject ELA." 21
I am not persuaded. To my mind, the parties only performed a
superficial surgery on the nullified contract by merely deleting
therefrom provisions which this Court had considered in the first
lotto case to be badges of a joint venture contract and by
engrafting some modifications on rental, which include an option
to purchase. The PGMC and the PCSO conveniently forgot that
per this Court's findings in the first lotto case, they had an
indivisible community of interest in the conception, birth and
growth of the on-line lottery and that each is wed to the other for
better or for worse. The surgery affected only the post-natal
activities of the union, but not the indivisibility of their community
of interest at conception and at the birth of the on-line lottery
system. Put differently, it only separated one from the other from
bed and board but did not dissolve the bonds of such indivisibility
or community of interest. This was confirmed by respondent
Morato when he candidly confessed in his letter to the COA
Chairman that:
[I]t is apparent that the lease of the needed equipment
through negotiations is the most advantageous to the
Government since so many studies, plans and procedures
had already been worked out with PGMC since October 1993
as a result of the previous bidding (Sec. 1.e, Executive Order
No. 301 [1987]). (emphasis supplied)
Although Mr. Morato did not volunteer to disclose what those
studies, plans, and procedures are, it is logical to presume that
they refer to, among other things, (1) the building of the on-line
lottery system, at no expense of or risk to the PCSO, which was
precisely the specific purpose of the Request for Proposals and
which Morato admitted in his "presentation" in his letter to the
COA Chairman; and (2) those that this Court had noted in the first
lotto case, to wit: (a) the preparation of the detailed plan of all
games and the marketing thereof; and (b) the determination of the
number of players, value of winnings, and the logistics required
to introduce the games, including the Master Games Plan. The
indispensable role of the PGMC as a collaborator, associate, or
joint venturer up to that point where actual operation of the on-line
lottery system shall begin was unaffected by the superficial
surgery on the text of the nullified contract. Atty. Eleazar Reyes,
co-counsel of Atty. Cayetano for the PGMC, was candid enough
to admit during the oral arguments that it would be extremely
difficult for the PGMC and the PCSO to avoid the proscribed
"collaboration, association, or joint venture" under the exception
of paragraph B, Section 1 of R.A. No. 1169, as amended. He,
nevertheless, hastened to add that an outright purchase by the
PCSO of the PGMC's equipment would be the best and safest
recourse. Thus:
JUSTICE DAVIDE:
Mr. Counsel you just admitted a while ago that it is extremely
difficult to comply with the revised charter of the Philippine
Charity Sweepstakes Office insofar as collaboration, joint
venture, association are concerned?
ATTY. REYES:
Yes, Your Honor.
JUSTICE DAVIDE:
But if given the chance to rewrite this contract, what proposal
would you give, what recommendation would you give to your
client?
ATTY. REYES:
Your Honor, that is why I said I would leave it to the business
judgment of my client.
JUSTICE DAVIDE:
As a lawyer what kind of a contract would you recommend to
be rewritten, to satisfy the law, to satisfy the judgment of this
Court in the first case?
ATTY. REYES:
The safest, Your Honor, is a sale.
JUSTICE DAVIDE:
Sale, meaning the Philippine Charity Sweepstakes Office will
buy everything?
ATTY. REYES:
Yes, Your Honor.
JUSTICE DAVIDE:
Why did you not recommend that to your client instead you
went into the process [of drafting the] ELA.
ATTY. REYES:
Because, Your Honor, they do not have the money. They are
going to use the proceeds from the gains for the payment of
the rental but they do not have the cash.
JUSTICE DAVIDE:
In the event that this Court will now strike down this
agreement as also void, would you recommend that to your
client as a third contract?
ATTY. REYES:
Yes, Your Honor, if the PCSO can pay for it. 22
Besides, even on the face of the new ELA, the elements of the
proscribed joint venture or, at the very least, collaboration or
association, can be detected, albeit they are hidden behind the
skirt of the following: (a) the Rental Clause; (b) the upgrading
provision under the Repair Services Clause; and (c) the details of
what are embraced in the term Lottery Equipment and
Accessories subject of the contract, which are found in Annex "A"
of the ELA. 23
The Rental Clause provides for a flexible rate based on a
percentage of the gross amount of ticket sales, payable bi-
weekly, with an annual minimum rental fixed at P35,000.00 per
terminal in commercial operation, any shortfall of which shall be
paid out of the proceeds of the current ticket sales. This clause
provides in full as follows:
RENTAL
During the effectivity of this Agreement and the term of this
lease as provided in paragraph 3 hereof, LESSEE shall pay
rental to LESSOR equivalent to FOUR POINT THREE
PERCENT (4.3%) of the gross amount of ticket sales from all
of LESSEE's on-line lottery operations in the Territory, which
rental shall be computed and payable bi-weekly, net of
withholding taxes on income, if any: provided that, in no case
shall the annual aggregate rentals per year during the term of
the lease be less than the annual minimum fixed rental
computed at P35,000.00 per terminal in commercial
operation per annum, provided, further that the annual
minimum fixed rental shall be reduced pro-rata for the number
of days during the year that a terminal is not in commercial
operation due to repairs or breakdown. In the event the
aggregate bi-weekly rentals in any year falls short of the
annual minimum fixed rental computed at P35,000.00 per
terminal in commercial operation, the LESSEE shall pay such
shortfall from out of the proceeds of the then current ticket
sales from LESSEE's on-line lottery operations in the
Territory (after payment first of prizes and agents'
commissions but prior to any other payments, allocations or
disbursements) until said shortfall shall have been fully
settled, but without prejudice to the payment to LESSOR of
the then current bi-weekly rentals in accordance with the
provisions of the first sentence of this paragraph 2.
This is an unusually novel arrangement which insures and
guarantees the PGMC full participation in the gross proceeds of
ticket sales even if, ultimately, a draw could mean losses to the
PCSO. It allots to the PGMC only a very limited share in the losses
since, under any circumstance and the most unfavorable
business climate, the PGMC is assured of an irreducible minimum
"rental" per terminal. The term "rental" is then a very deceptive,
yet poorly contrived, disguise to cloak the real role of the PGMC.
At the hearing, Atty. Eleazar Reyes feigned ignorance on how the
"rental" of 4.3% of the gross amount of ticket sales was arrived
at. This Court should not wait for the end of the world for any
acceptable explanation therefor. The explanation can easily be
had by relating it to the rental of 4.9% of gross receipts from ticket
sales under the nullified contract. The reduction of only 0.6%
(4.9% 4.3%) is negligible considering the PCSO's assumption
of, among other things, all business risks; operation of the
equipment with the use of its own personnel; risks of loss of and
damage to the equipment; responsibility for maintenance and
repairs, all of which were the PGMC's duties, obligations, and
responsibilities under the nullified contract. I am convinced that
such rate was pre-determined to approximate the profits which
the PGMC expected to realize under the nullified contract. The
rental clause is, indeed, a subtle scheme to unconditionally
guaranty PGMC's share in the profits.
If read in conjunction with the upgrading provision buried under
the clause "Repair Services" it becomes clear that the parties do
have a different purpose for the use of the term rental.
The Repair Services clause provides as follows:
REPAIR SERVICES
LESSEE shall bear the costs of maintenance and necessary
repairs, except those repairs to correct defective
workmanship or replace defective materials used in the
manufacture of Equipment discovered after delivery of the
Equipment, in which case LESSOR shall bear the costs of
such repairs and, if necessary, the replacements. The
LESSEE may at any time during the term of the lease, request
the LESSOR to upgrade the equipment and/or increase the
number of terminals, in which case the LESSEE and
LESSOR shall agree on an arrangement mutually satisfactory
 to both of them, upon such terms as may be mutually agreed
upon.
The upgrading provision is full of mischief and is, perhaps, the
most deceptive provision in the ELA that puts to naught any
pretense of good faith in expunging from the old contract all
indicia of the statutorily proscribed collaboration, association, or
joint venture. It is a provision which is entirely unrelated to the
clause under which it is placed Repair Services. It should have
been either set forth as a separate clause or at least placed under
the clause on Equipment. 24
It should be stressed here that in the old contract the upgrading
clause is under facilities, which include among other things all
capital equipment, computers, terminals, and softwares. Under
the upgrading provision, new equipment may be used; the
number of terminals may be increased; and new terms and
conditions, including rates of "rentals" and the purchase price in
case of exercise of the option to buy, may be agreed upon. This
makes the ELA not just a sweetheart contract, but one which will
preserve the parties' indivisible union and community of interest,
thereby giving further credence to this Court's observation in the
first lotto case that each is wed to the other for better or for worse.
The term Equipment, which is allegedly the subject of the ELA,
includes, per its definition in Annex "A" thereof, the "associated or
incidental hardware equipment, furnishing and fixtures,
technology, intellectual property rights, knowhow, processes and
systems." Technology, knowhow, processes, and systems
necessarily include transfer of technology and other expertise
which could only be carried out over a number of years of
continuing training and supervision of personnel, which the
PGMC is necessarily and logically required to do. Intellectual
property rights can only refer to, among other things, the detailed
plans of all games and the Master Games Plan which, under the
nullified contract, are to be prepared by the PGMC.
It may be observed that the term facilities in the old contract
included all capital equipment but excluded "technology,
intellectual property rights, knowhow, processes and systems."
As this Court found in the first lotto case, there was a separate
provision on the PGMC's obligations (1) to train PCSO and other
local personnel and (2) to effect the transfer of technology and
other expertise. 25 Clearly, the inclusion of "technology,
intellectual property rights, knowhow, processes and systems" in
the term Equipment was a ploy to hide, again, the continuing
indispensable collaboration of the PGMC in the conduct of the on-
line lottery business.
B. Even assuming that the subject ELA is not a joint venture
contract, still it must be nullified for having been entered into
without public bidding and for being grossly disadvantageous to
the Government. It has been said:
In this jurisdiction, public bidding is the policy and medium
adhered to in Government procurement and construction
contracts under existing laws and regulations. It is the
accepted method for arriving at a fair and reasonable price
and ensures that overpricing, favoritism and other anomalous
practices are eliminated or minimized. And any Government
contract entered into without the required bidding is null and
void and cannot adversely affect the rights of third parties. 26
The opening paragraph of E.O. No. 298, series of 1940, 27 of
President Manuel L. Quezon, entitled "Prohibiting the Automatic
Renewal of Contracts, Requiring Public Bidding Before Entering
Into New Contracts, Providing Exceptions Therefor," states this
policy:
Whereas, as a matter of general policy, it is in the interest of
the public service that Government contracts for public
services or for furnishing of supplies, materials, and
equipment to the Government be submitted to public bidding.
This was restated in E.O No. 301 28 of President Corazon C.
Aquino, entitled "Decentralizing Actions on Government
Negotiated Contracts, Lease Contracts and Records Disposal,"
whose Section 1 reads:
Sec. 1. Guidelines for Negotiated Contracts. Any provision
of law, decree, executive order or other issuances to the
contrary notwithstanding, no contract for public services or for
furnishing supplies, materials and equipment to the
government or any of its branches, agencies or
instrumentalities shall be renewed or entered into without
public bidding, except under any of the following situations:
The Court agrees with DOJ Opinion No. 4, series of 1995, which
states that the bidding conducted for the nullified contract could
be a valid basis for the new ELA and that, therefore, a new bidding
was in order. The DOJ erred, however, when it further stated that
the ELA is exempt under Section 1(e) of E.O. No. 301 from the
public-bidding requirement.
Sections 1 and 2 of E.O. No. 301 under subdivision A
(Decentralization of Negotiated Contracts) read in full as follows:
Sec. 1. Guidelines for Negotiated Contracts. Any provision
of law, decree, executive order or other issuances to the
contrary notwithstanding, no contract for public services or for
furnishing supplies, materials and equipment to the
government or any of its branches, agencies or
instrumentalities shall be renewed or entered into without
public bidding, except under any of the following situations:
a. Whenever the supplies are urgently needed to meet an
emergency which may involve the loss of, or danger
to, life and/or property;
b. Whenever the supplies are to be used in connection
with a project or activity which cannot be delayed
without causing detriment to the public service;
c. Whenever the materials are sold by an exclusive
distributor or manufacturer who does not have
subdealers selling at lower prices and for which no
suitable substitute can be obtained elsewhere at
more advantageous terms to the government;
d. Whenever the supplies under procurement have been
unsuccessfully placed on bid for at least two
consecutive times, either due to lack of bidders or the
offers received in each instance were exorbitant or
non-conforming to specifications;
e. In cases where it is apparent that the requisition of the
needed supplies through negotiated purchase is
most advantageous to the government to be
determined by the Department Head concerned; and
f. Whenever the purchase is made from an agency of the
government.
Sec. 2. Jurisdiction over Negotiated Contracts. In line with
the principles of decentralization and accountability,
negotiated contracts for public services or for furnishing
supplies, materials or equipment may be entered into by the
department or agency head or the governing board of the
government-owned or controlled corporation concerned,
 without need of prior approval by higher authorities, subject
to availability of funds, compliance with the standards or
guidelines prescribed in Section 1 hereof, and to the audit
jurisdiction of the Commission on Audit in accordance with
existing rules and regulations.
Negotiated contracts involving P2,000,000 up to P10,000,000
shall be signed by the Secretary and two other Undersecretaries.
It is clear that Sections 1 and 2 refer to contracts for public
services, or for furnishing supplies, materials, and equipment to
the government. In no uncertain terms, the Executive Order itself
distinguishes the terms supplies, materials, and equipment from
each other, i.e., it did not intend to consider them as synonymous
terms. If such were the intention, there would have been no need
to enumerate them separately and to limit subparagraphs (a), (b),
and (e) to supplies; subparagraph (c) to materials; and
subparagraph (f) to all three (supplies, materials and equipment).
The specific mention of supplies in Subparagraphs (a), (b), and
(e) was clearly intended to exclude therefrom materials and
equipment, and the specific mention of materials in subparagraph
(c) was likewise intended to exclude supplies and equipment.
Expressio unius est exclusio alterius.
Elsewise stated, the Executive Order leaves no room for a
construction that confuses supplies with materials or equipment
or either of the last two with the first or with each other. According
to Sutherland: 29
It is an elementary rule of construction that effect must be
given, if possible, to every word, clause and sentence of a
statute. A statute should be construed so that effect is given
to all its provisions, so that no part will be inoperative or
superfluous, void or insignificant, and so that one section will
not destroy another unless the provision is the result of
obvious mistake or error.
In a last-ditch effort to save the ELA, the DOJ opined that the
subject ELA could be deemed as an agreement for furnishing
supplies and, in support thereof, cited United States Rubber Co.
vs. Washington Eng'g. Co. 30 wherein it was allegedly held that in
a lease of equipment, the rental value of machinery hired by the
contractor for use in carrying on work was the use of the
machinery and not the machinery itself. The DOJ opinion is
outlandish, as the case it cited did not make the attributed
pronouncement. It must have miscomprehended or
misappreciated the ruling in United States Rubber Co. . The said
pronouncement is found in Hurley-Mason Co. vs. American
Bonding Co., 31 which was cited by the appellant in the United
States Rubber Co. case, and which the court did not, in fact,
accept. Thus, the court stated:
But the appellant cites as supporting its contention the case
of Hurley-Mason Co. v. American Bonding Co., 79 Wash.
564, 140 Pac. 575, to which may be added the more recent
case of National Lumber & Box Co. v. Title Guaranty & Surety
Co., 149 Pac. 16, which hold that the rental value of
machinery hired by the contractor for use in carrying on work
within the terms of the contract is recoverable from the
bondsman as a supply furnished the contractor. These cases
proceed on the theory that it was the use of the machinery
that was consumed in the work, not the machinery itself, and
that this use being distinguishable from the machinery could
be recovered for against the bondsman as a supply. If this
distinction is sound, then the cases are in line with the other
cases cited, as such "use" was necessarily consumed in
carrying on the work. The appellant argues, however, that the
distinction is not sound; that there is no just ground for holding
that one who rents to a contractor the tools and working
appliances necessary for the prosecution of a particular work
may have recovery against the contractor's bondsmen for the
rental value of the articles furnished, while one who sells the
contractor the same character of articles on credit has no
claim against the bondsmen for any part of the purchase
price. But, if this be true, and it be true that the contractor's
working equipment is not to be deemed a supply, it argues
that the decisions cited are erroneous, rather than that the
appellant's goods fall within the meaning of the term
supplies."
On the contrary, United States Rubber Co. explicitly distinguished
supplies from equipment, thus:
So construing the statute, the definitions of "equipment" and
"supply" coincide, and a certain and natural dividing line is
found between them. A "supply" would be any article
furnished for carrying on the work which from its nature is
necessarily consumed by use in the work, while "equipment"
would consist of those articles that are not necessarily so
consumed, but which may survive the particular work and be
further used on work of like character. In this view also the
question actually decided in the case of National Surety Co.
v. Bratnober Lumber Co. harmonizes with the other cases
cited, since coal, like powder and other explosives, and like
electricity used for power and other forms of energy used for
the same purpose, is necessarily consumed by its use, and
cannot survive for like uses in a similar character of work.
Tested by these rules, it is plain that the articles furnished by
the appellant are not supplies, but are a part of the
contractor's equipment. While they were actually worn out by
use in carrying on the work, they were not articles of such a
nature as to be necessarily consumed by such use, and might
have survived, had their use therein been of less duration, for
use in subsequent work of like character.
Besides, subparagraph (e) of Section 1 unequivocally refers to a
contract of purchase of supplies. The ELA in question is not a
contract of purchase of supplies. The parties themselves proclaim
to the whole world and solemnly represent to this Court that it is
a contract of lease of equipment. They titled it, in bold big letters,
"EQUIPMENT LEASE AGREEMENT," and devote the first clause
thereof to EQUIPMENT. Accordingly, since the ELA is not a
contract of purchase of supplies, we are unable to understand
why the DOJ applied Section 1(e) of E.O. No. 301 to exempt the
ELA from the public-bidding requirement.
The submission of the petitioners that the ELA violates paragraph
4.3 of the COA Rules and Regulations for the Prevention of
Irregular, Unnecessary, Excessive, and Extravagant
Expenditures is not persuasive. The said paragraph covers Lease
Purchase contracts. It reads:
4.3 LEASE PURCHASE
The national government may enter into agreement for the
lease purchase of equipment subject to public bidding, the
approval of the Office of the Management, and to other
pertinent accounting and auditing religions. Details of the
payments shall be indicated in the lease purchase agreement
and accompanied with a certification of availability of
equipment outlay authorized for the agency to cover the full
 contract cost. The lease purchase agreement may be entered
into only for specialized equipment such as typewriters,
adding machines and automobiles, the purchase price of
which is at least P50,000.00. All lease purchase agreement
of equipment the total value of which exceeds P200,000.00
shall be subject to the approval of the President.
Corporations/local governments may adopt the mechanisms
of these lease-purchase agreement subject to the approval of
their legislative or governing boards.
The ELA in question hardly qualifies as a lease purchase contract
because there is no perfected agreement to purchase (sale) but
only an option on the part of PCSO to purchase the equipment for
P25 million. It is, in fact, an option which is not supported by a
separate and distinct consideration, hence, not really binding
upon the PGMC.
An optional contract is a privilege existing in one person, for which
he had paid a consideration, which gives him the right to buy
certain specified property from another person, if he choses, at
any time within the agreed period, at a fixed price. Said contract
is separate and distinct contract from the contract which the
parties may enter into upon the consummation of the option. 32
The second paragraph of Article 1479 of the Civil Code expressly
provides that "[an accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the promissor
if the promise is supported by a consideration distinct from the
price.
C. A comparison between the nullified contract and the assailed
ELA to prove that the latter is grossly disadvantageous to the
PCSO is not at all hampered by any perceived difficulty. As to the
almost unrestricted benefits and advantages which the PCSO
were supposed to obtain under the former, the following findings
of this Court in the first lotto case bind the parties:
The contemporaneous acts of the PCSO and the PGMC
reveal that the PCSO had neither funds of its own nor the
expertise to operate and manage an on-line lottery system,
and that although it wished to have the system, it would have
it "at no expense or risks to the government." Because of
these serious constraints and unwillingness to bear expenses
and assume risks, the PCSO was candid enough to state in
its RFP that it is seeking for "a suitable contractor which shall
build, at its own expense, all the facilities needed to operate
and maintain" the system; exclusively bear "all capital,
operating expenses and expansion expenses and risks"; and
submit a comprehensive nationwide lottery development plan
. . . which will include the game, the marketing of the games,
and the logistics to introduce the game to all the cities and
municipalities of the country within five (5) years"; and that the
operation of the on-line lottery system should be "at no
expense or risk to the government" meaning itself, since it
is a government-owned and controlled agency. The facilities
referred to means "all capital equipment, computers,
terminals, software, nationwide telecommunications network,
ticket sales offices, furnishings and fixtures, printing costs,
costs of salaries and wages, advertising and promotions
expenses, maintenance costs, expansion and replacement
costs, security and insurance, and all other related expenses
needed to operate a nationwide on-line lottery system.
In short, the only contribution the PCSO would have is its
franchise or authority to operate the on-line lottery system;
with the rest, including the risks of the business, being borne
by the proponent or bidder. It could be for this reason that it
warned that "the proponent must be able to stand to the acid
test of proving that it is an entity able to take on the role of
responsible maintainer of the on-line lottery system." The
PCSO, however, makes it clear in its RFP that the proponent
can propose a period of the contract which shall not exceed
fifteen years, during which time it is assured of a "rental"
which shall not exceed 12% of gross receipts. As admitted by
the PGMC, upon learning of the PCSO's decision, the Berjaya
Group Berhad, with its affiliates, wanted to offer its services
and resources to the PCSO. Forthwith, it organized the
PGMC as "a medium through which the technical and
management services required for the project would be
offered and delivered to PCSO.
Undoubtedly, then, the Berjaya Group Berhad knew all along
that in connection with an on-line lottery system, the PCSO
had nothing but its franchise, which it solemnly guaranteed it
had in the General Information of the RFP. Howsoever
viewed then, from the very inception, the, PCSO and the
PGMC mutually understood that any arrangement between
them would necessarily leave to the PGMC the technical,
operations, and management aspects of the on-line lottery
system while the PCSO would, primarily, provide the
franchise. The words Gaming and Management in the
corporate name of respondent Philippine Gaming
Management Corporation could not have been conceived just
for euphemistic purposes. Of course, the RFP cannot
substitute for the Contract of Lease which was subsequently
executed by the PCSO and the PGMC. Nevertheless, the
Contract of Lease incorporates their intention and
understanding.
xxx xxx xxx
Consistent with the above observations on the RFP, the
PCSO has only its franchise to offer, while the PGMC
represents and warrants that it has access to all managerial
and technical expertise to promptly and effectively carry out
the terms of the contract. And, for the period of eight years,
the PGMC is under obligation to keep all the Facilities in safe
condition and if necessary, upgrade, replace, and improve
them from time to time as new technology develops to make
the on-line lottery system more cost-effective and
competitive; exclusively bear all costs and expenses relating
to the printing, manpower, salaries and wages, advertising
and promotion, maintenance, expansion and replacement,
security and insurance, and all other related expenses
needed to operate the on-line lottery system; undertake a
positive advertising and promotions campaign for both
institutional and product lines without engaging in negative
advertising against other lessors; bear the salaries and
related costs of skilled and qualified personnel for
administrative and technical operations; comply with
procedural and coordinating rules issued by the PCSO; and
to train PCSO and other local personnel and to effect the
transfer of technology and other expertise, such that at the
end of the term of the contract, the PCSO will be able to
effectively take over the Facilities and efficiently operate the
on-line lottery system. The latter simply means that indeed,
the managers, technicians or employees who shall operate
the on-line lottery system are not managers, technicians or
employees of the PCSO, but of the PGMC and that it is only
after the expiration of the contract that the PCSO will operate
the system. After eight years, the PCSO would automatically
become the owner of the Facilities without any other further
consideration.
For all the above representations, duties, obligations, and which the PCSO concluded with the PGMC, is
responsibilities, as well as the automatic loss of its ownership over disadvantageous to the government.
the facilities without any further consideration in favor of the
PCSO after the expiration of only eight years, the PGMC gets only That postulation is flawed. It forgets that no other contract
a so-called rental of 4.9% of gross receipts from ticket sales, proposed by other parties were available for comparison precisely
payable net of taxes required by law to be withheld, which may, because no public bidding was conducted. To demand a
however, be drastically reduced, or in extreme cases, totally comparison with non-existing contracts would be unreasonable.
obliterated because the PGMC bears "all risks if the revenue from
ticket sales, on an annualized basis, are insufficient to pay the The challenged ELA must then be declared void for the following
entire prize money. reasons: (1) it is a joint venture contract prohibited under the
exception in paragraph B, Section 1 of R.A. No. 1169, as
Under the assailed ELA, however, the PGMC is entitled to receive amended by B.P. Blg. 42; (2) it was entered into without the
a flexible rental equivalent to 4.3% of the gross ticket sales (or mandatory public bidding; and (3) it is grossly disadvantageous
only 0.6% lower than it was entitled to under the old contract) for to the PCSO and, ultimately, the Government.
the use of its on-line lottery system equipment (as distinguished
from facilities in the old contract), which does not anymore include I therefore vote to GRANT the instant petition and to declare VOID
the nationwide telecommunications network, without any and INVALID the challenged EQUIPMENT LEASE AGREEMENT
assumption of business risks and the obligations (1) to keep the (ELA) entered into between the public respondent Philippine
facilities in safe condition and if necessary, to upgrade, replace, Charity Sweepstakes Office (PCSO) and the private respondent
and improve them from time to time as technology develops, and Philippine Gaming Management Corporation (PGMC).
bear all expenses relating thereto; (2) to undertake advertising
and promotions campaign; (3) to bear all taxes, amusements, or Romero and Bellosillo, JJ., concur.
other charges imposed on the activities covered by the contract;
(4) to pay the premiums for third party or comprehensive
insurance on the facilities: (5) to pay all expenses for water, light,
fuel, lubricants, electric power, gas, and other utilities used and
necessary for the operation of the facilities; and to pay the salaries
and related costs of skilled and qualified personnel for
administrative and technical operations and maintenance crew.
The PGMC is also given thereunder a special privilege of
receiving P25 million as purchase price for the equipment at the
expiration of eight years should the PCSO exercise its option to
purchase.

Unlike in the old contract where nothing may at all be due the
PGMC in the event that the ticket sales, computed on an annual
basis, are insufficient to pay the entire prize money, under the
new ELA the PCSO is under obligation to pay rental equivalent to
4.3% of the gross receipts from ticket sales, the aggregate
amount of which per year should not be less than the minimum
annual rental of P35,000.00 per terminal in commercial operation.
Any shortfall shall be paid out of the proceeds of the then current
ticket sales after payment of prizes and agents' commissions but
prior to any other payments, allocations, or disbursements. The
grossness of the disadvantage to the PCSO is all too obvious and
why the PCSO accepted such unreasonable, unconscionable,
and inequitable terms and conditions confounds us.

The majority opinion, however, glosses over these considerations

because it believes that the determination of the issue of gross
disadvantage should not be done through a comparison of the
first lotto contract and the ELA in question.

It says:
Indeed the question is not whether compared with the former
joint venture agreement the present lease contract is "[more]
advantageous to the government." The question is whether
under the circumstances, the ELA is the most advantageous
contract that could be obtained compared with similar lease
agreements which the PCSO could have made with the other
parties.

It then concludes:
Petitioners have not shown that more favorable terms could
have been obtained by the PCSO or that at any rate the ELA,
G.R. No. L-17931 February 28, 1963
CASCO PHILIPPINE CHEMICAL CO., INC., petitioner,
vs.
HON. PEDRO GIMENEZ, in his capacity as Auditor General
of the Philippines,
and HON. ISMAEL MATHAY, in his capacity as Auditor of the
Central Bank, respondents.
CONCEPCION, J.:
This is a petition for review of a decision of the Auditor General
denying a claim for refund of petitioner Casco Philippine Chemical
Co., Inc.
The main facts are not disputed. Pursuant to the provisions of
Republic Act No. 2609, otherwise known as the Foreign
Exchange Margin Fee Law, the Central Bank of the Philippines
issued on July 1, 1959, its Circular No. 95. fixing a uniform margin
fee of 25% on foreign exchange transactions. To supplement the
circular, the Bank later promulgated a memorandum establishing
the procedure for applications for exemption from the payment of
said fee, as provided in said Republic Act No. 2609. Several times
in November and December 1959, petitioner Casco Philippine
Chemical Co., Inc. which is engaged in the manufacture of
synthetic resin glues, used in bonding lumber and veneer by
plywood and hardwood producers bought foreign exchange for
the importation of urea and formaldehyde which are the main
raw materials in the production of said glues and paid therefor
the aforementioned margin fee aggregating P33,765.42. In May,
1960, petitioner made another purchase of foreign exchange and
paid the sum of P6,345.72 as margin fee therefor.
Prior thereto, petitioner had sought the refund of the first sum of
P33,765.42, relying upon Resolution No. 1529 of the Monetary
Board of said Bank, dated November 3, 1959, declaring that the
separate importation of urea and formaldehyde is exempt from
said fee. Soon after the last importation of these products,
petitioner made a similar request for refund of the sum of
P6,345.72 paid as margin fee therefor. Although the Central Bank
issued the corresponding margin fee vouchers for the refund of
said amounts, the Auditor of the Bank refused to pass in audit and
approve said vouchers, upon the ground that the exemption
granted by the Monetary Board for petitioner's separate
importations of urea and formaldehyde is not in accord with the
provisions of section 2, paragraph XVIII of Republic Act No. 2609.
On appeal taken by petitioner, the Auditor General subsequently
affirmed said action of the Auditor of the Bank. Hence, this petition
for review.
The only question for determination in this case is whether or not
"urea" and "formaldehyde" are exempt by law from the payment
of the aforesaid margin fee. The pertinent portion of Section 2 of
Republic Act No. 2609 reads:
The margin established by the Monetary Board pursuant to
the provision of section one hereof shall not be imposed upon
the sale of foreign exchange for the importation of the
following:.
xxx xxx xxx
XVIII. Urea formaldehyde for the manufacture of plywood and
hardboard when imported by and for the exclusive use of end-
users.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing
other evidence to prove their case not covered by this
stipulation of facts.
Petitioner maintains that the term "urea formaldehyde" appearing
in this provision should be construed as "urea and formaldehyde"
(emphasis supplied) and that respondents herein, the Auditor
General and the Auditor of the Central Bank, have erred in holding
otherwise. In this connection, it should be noted that, whereas
"urea" and "formaldehyde" are the principal raw materials in the
manufacture of synthetic resin glues, the National Institute of
Science and Technology has expressed, through its
Commissioner, the view that:
Urea formaldehyde is not a chemical solution. It is the
synthetic resin formed as a condensation product from
definite proportions of urea and formaldehyde under certain
conditions relating to temperature, acidity, and time of
reaction. This produce when applied in water solution and
extended with inexpensive fillers constitutes a fairly low cost
adhesive for use in the manufacture of plywood.
Hence, "urea formaldehyde" is clearly a finished product, which is
patently distinct and different from urea" and "formaldehyde", as
separate articles used in the manufacture of the synthetic resin
known as "urea formaldehyde". Petitioner contends, however,
that the bill approved in Congress contained the copulative
conjunction "and" between the terms "urea" and "formaldehyde",
and that the members of Congress intended to exempt "urea" and
"formaldehyde" separately as essential elements in the
manufacture of the synthetic resin glue called "urea"
formaldehyde", not the latter as a finished product, citing in
support of this view the statements made on the floor of the
Senate, during the consideration of the bill before said House, by
members thereof. But, said individual statements do not
necessarily reflect the view of the Senate. Much less do they
indicate the intent of the House of Representatives (see Song Kiat
Chocolate Factory vs. Central Bank, 54 Off. Gaz., 615; Mayon
Motors Inc. vs. Acting Commissioner of Internal Revenue, L-
15000 [March 29, 1961]; Manila Jockey Club, Inc. vs. Games &
Amusement Board, L-12727 [February 29, 1960]). Furthermore,
it is well settled that the enrolled bill which uses the term "urea
formaldehyde" instead of "urea and formaldehyde" is
conclusive upon the courts as regards the tenor of the measure
passed by Congress and approved by the President (Primicias
vs. Paredes, 61 Phil. 118, 120; Mabanag vs. Lopez Vito, 78 Phil.
1; Macias vs. Comm. on Elections, L-18684, September 14,
1961). If there has been any mistake in the printing ofthe bill
before it was certified by the officers of Congress and approved
by the Executive on which we cannot speculate, without
jeopardizing the principle of separation of powers and
undermining one of the cornerstones of our democratic system
the remedy is by amendment or curative legislation, not by judicial
decree.
WHEREFORE, the decision appealed from is hereby affirmed,
with costs against the petitioner. It is so ordered.
G.R. No. 106724 February 9, 1994
THE NATIONAL POLICE COMMISSION, represented by its
Acting Chairman, Cesar Sarino, Teodolo C. Natividad, Vice-
Chairman and Executive Officer, Brig. Gen. Virgilio H. David,
Edgar Dula Torre, Guillermo P. Enriquez, Commissioners,
and Chief Supt. Levy D. Macasiano Director for Personnel,
petitioners,
vs.
Honorable Judge Salvador de Guzman, Jr., Chief Supt.
Norberto M. Lina, Chief Supt. Ricardo Trinidad, Jr., Sr. Supt.
Manuel Suarez, Supt. Justito B. Tagum, Sr. Supt. Tranquilino
Aspiras, Sr., Supt. Ramon I. Navarro,
Sr. Supt. Ramon I. Navarro, Sr. Supt. Jose P. Suria, Sr. Supt.
Agaton Abiera, Chief Insp. Bienvenido Torres, and the
National (ROTC) Alumni Association Inc. (NARRA),
represented by its President Col. Benjamin Gundran, and
Director Hermogenes Peralta, Jr., respondents.
BIDIN, J.:
The case at bar had its origin in the implementation of the
compulsory retirement of PNP officers as mandated in Sec. 39,
RA 6975, otherwise known as "An Act Establishing the Philippine
National Police Under a Reorganized Department of the Interior
and Local Government", which took effect on January 2, 1991.
Among others, RA 6975 provides for a uniform retirement system
for PNP members. Section 39 thereof reads:
Sec. 39. Compulsory Retirement. Compulsory retirement,
for officer and non-officer, shall be upon the attainment of age
fifty-six (56); Provided, That, in case of any officer with the
rank of chief superintendent, director or deputy director
general, the Commission may allow his retention in the
service for an unextendible period of one (1) year.
Based on the above provision, petitioners sent notices of
retirement to private respondents who are all members of the
defunct Philippine Constabulary and have reached the age of
fifty-six (56).
In response, private respondents filed a complaint on December
19, 1991 for declaratory relief with prayer for the issuance of an
ex parte restraining order and/or injunction (docketed as Civil
Case No. 91-3498) before the Regional Trial Court of Makati,
Branch 142. In their complaint, respondents aver that the age of
retirement set at fifty-six (56) by Section 39 of RA 6975 cannot be
applied to them since they are also covered by Sec. 89 thereof
which provides:
Any provision hereof to the contrary notwithstanding, and
within the transition period of four (4) years following the
effectivity of this Act, the following members of the INP shall
be considered compulsorily retired:
a) Those who shall attain the age of sixty (60) on the first year
of the effectivity of this Act.
b) Those who shall attain the age of fifty-nine (59) on the
second year of the effectivity of this Act.
c) Those who shall attain the age of fifty-eight (58) on the third
year of the effectivity of this Act.
d) Those who shall attain the age of fifty-seven (57) on the
fourth year of the effectivity of this Act.
It is the submission of respondents that the term "INP" includes
both the former members of the Philippine Constabulary and the
local police force who were earlier constituted as the Integrated
National Police (INP) by virtue of PD 765 in 1975.
On the other hand, it is the belief of petitioners that the 4-year
transition period provided in Section 89 applies only to the local
police forces who previously retire, compulsorily, at age sixty (60)
for those in the ranks of Police/Fire Lieutenant or higher (Sec. 33,
PD 1184); while the retirement age for the PC had already been
set at fifty-six (56) under the AFP law.
On December 23, 1991, respondent judge issued a restraining
order followed by a writ of injunction on January 8, 1992 upon
posting of a P100,000.00 bond by private respondents.
After the parties have submitted their respective pleadings, the
case was submitted for resolution and on August 14, 1992, the
respondent judge rendered the assailed decision, the decretal
portion of which reads:
WHEREFORE, the court hereby declares that the term "INP"
in Section 89 of the PNP Law includes all members of the
present Philippine National Police, irrespective of the original
status of the present members of the Philippine National
Police before its creation and establishment, and that Section
39 thereof shall become operative after the lapse of the four-
year transition period.
The preliminary injunction issued is made permanent.
SO ORDERED. (Rollo, pp. 29-30)
Petitioners filed the instant petition on October 8, 1992 seeking
the reversal of the above judgment. On January 12, 1993, the
Court resolved to treat the respondents' Comment as Answer and
gave due course to the petition.
In ruling in favor of private respondents, respondent judge
observed, among others, that:
It may have been the intention of Congress to refer to the local
police forces as the "INP" but the PNP Law failed to define
who or what constituted the INP. The natural recourse of the
court is to trace the source of the "INP" as courts are
permitted to look to prior laws on the same subject and to
investigate the antecedents involved. There is nothing extant
in the statute books except that which was created and
established under PD 765 pursuant to the mandate of Article
XV of the 1973 Constitution providing that the "State shall
establish and maintain an integrated national police force
whose organization, administration and operation shall be
provided by law." Heretofore, INP was unknown. And the said
law categorically declared the PC "as the principal component
of the Integrated National Police" (Sec. 5, PD 765).
The court was supplied by respondents (petitioners herein)
with excerpts taken from the discussion amongst the
members of Congress concerning the particular provision of
Section 89. The court is not persuaded by said discussion; it
was a simple matter for the members of the legislature to
state precisely in clear and unequivocal terms their meaning,
such as "integrated police" as used in PD 765. Instead, they
employed "INP", a generic term that includes the PC as the
principal component of the INP, supra. In failing to
categorically restrict the application of Section 89 as the
members of legislature are said to have intended, it gave rise
to the presumption that it has not limited nor intended to limit
the meaning of the word when the bill was finally passed into
law. It is not difficult for the court to also presume that in
drafting the wording of the PNP Law, the legislators were
aware of the historical legislative origin of the "INP".
xxx xxx xxx
 The court takes particular note of the fact that Section 89 is
found in the Transitory Provisions of the law which do not
provide for any distinction between the former PC officers and
those belonging to the civilian police forces. These provision
are specifically enacted to regulate the period covering the
dissolution of the PC and the creation of the PNP, a period
that necessarily would be attended by imbalances and or
confusion occasioned by the wholesale and mass integration.
In fact, the retirement payment scheme of the INP is still to be
formulated, leaving the impression that nothing is really
settled until after the transition of four years has lapsed.
Section 89 therefore prevails over Section 39 up to the year
1995 when the retirement age for the members of the PNP
shall then be age 56; after the year 1995, Section 39 shall
then be the applicable law on retirement of PNP members.
(Rollo, pp. 27-28; emphasis supplied)
Petitioners disagree and claim that the use of the term INP in Sec.
89 does not imply the same meaning contemplated under PD 765
wherein it is provided:
Sec. 1. Constitution of the Integrated National Police.
There is hereby established and constituted the Integrated
National Police (INP) which shall be composed of the
Philippine Constabulary as the nucleus, and the integrated
police forces as established by Presidential Decrees Nos.
421, 482, 531, 585 and 641, as components, under the
Department of National Defense.
On the other hand, private respondents assert that being the
nucleus of the Integrated National Police (INP) under PD 765,
former members of the Philippine Constabulary (PC) should not
be discriminated against from the coverage of the term "INP" in
Sec. 89, RA 6975. Clearly, it is argued, the term "INP" found in
Section 89 of RA 6975 refers to the INP in PD 765. Thus, where
the law does not distinguish, the courts should not distinguish.
Does the law, RA 6975, distinguish INP from the PC? Petitioners
submit that it does and cite Sections 23 and 85 to stress the point,
viz.:
Sec. 23. Composition. Subject to the limitations provided
for in this Act, the Philippine National Police, hereinafter
referred to as the PNP, is hereby established, initially
consisting of the members of the police forces who were
integrated into the Integrated National Police (INP) pursuant
to Presidential Decree No. 765, and the officers and enlisted
personnel of the Philippine Constabulary (PC). . .
xxx xxx xxx
The permanent civilian employees of the present PC, INP,
Narcotics Command, CIS and the technical command of the
AFP assigned with the PC, including NAPOLCOM hearing
officers holding regular items as such, shall be absorbed by
the Department as employees thereof, subject to existing
laws and regulations.
xxx xxx xxx
Sec. 85. Phase of Implementation. The implementation of
this Act shall be undertaken in three (3) phases, to wit:
Phase I Exercise of option by the uniformed members of
the Philippine Constabulary, the PC elements assigned with
the Narcotics Command, CIS, and the personnel of the
technical services of the AFP assigned with the PC to include
the regular CIS investigating agents and the operatives and
agents of the NAPOLCOM Inspection, Investigation and
Intelligence Branch, and the personnel of the absorbed
National Action Committee on Anti-Hijacking (NACAH) of the
Department of National Defense, to be completed within six
(6) months from the date of the effectivity of this Act. At the
end of this phase, all personnel from the INP, PC, technical
Services, NACAH, and NAPOLCOM Inspection, Investigation
and Intelligence Branch shall have been covered by official
orders assigning them to the PNP . . .
xxx xxx xxx
. . . Any PC-INP officer or enlisted personnel may, within the
twelve-month period from the effectivity of this Act, retire . .
.Phase III . . . To accomplish the tasks of Phase III, the
Commission shall create a Board of Officers composed of the
following: NAPOLCOM Commissioner as Chairman and one
(1) representative each from the PC, INP, Civil Service
Commission and the Department of Budget and
Management.
Section 86 of the same law further provides:
Sec. 86. Assumption by the PNP of Police Functions. The
PNP shall absorb the functions of the PC, the INP and the
Narcotics Command upon the effectivity of this Act.
From a careful perusal of the above provisions, it appears
therefore that the use of the term INP is not synonymous with the
PC. Had it been otherwise, the statute could have just made a
uniform reference to the members of the whole Philippine
National Police (PNP) for retirement purposes and not just the
INP. The law itself distinguishes INP from the PC and it cannot be
construed that "INP" as used in Sec. 89 includes the members of
the PC.
And contrary to the pronouncement of respondent judge that the
law failed to define who constitutes the INP, Sec. 90 of RA 6975
has in fact defined the same. Thus,
Sec. 90. Status of Present NAPOLCOM, PC-INP. Upon
the effectivity of this Act, the present National Police
Commission and the Philippine Constabulary-Integrated
National Police shall cease to exist. The Philippine
Constabulary, which is the nucleus of the Philippine
Constabulary-Integrated National Police shall cease to be a
major service of the Armed Forces of the Philippines. The
Integrated National Police, which is the civilian component of
the Philippine Constabulary-Integrated National Police, shall
cease to be the national police force and lieu thereof, a new
police force shall be established and constituted pursuant to
this Act. (emphasis supplied)
It is not altogether correct to state, therefore, that the legislature
failed to define who the members of the INP are. In this regard, it
is of no moment that the legislature failed to categorically restrict
the application of the transition period in Sec. 89 specifically in
favor of the local police forces for it would be a mere superfluity
as the PC component of the INP was already retirable at age fifty-
six (56).
Having defined the meaning of INP, the trial court need not have
belabored on the supposed dubious meaning of the term.
Nonetheless, if confronted with such a situation, courts are not
without recourse in determining the construction of the statute
with doubtful meaning for they may avail themselves of the actual
proceedings of the legislative body. In case of doubt as to what a
provision of a statute means, the meaning put to the provision
during the legislative deliberations may be adopted (De Villa v.
Court of Appeals, 195 SCRA 722 [1991] citing Palanca v. City of
Manila, 41 Phil. 125 [1920]; Arenas v. City of San Carlos, 82 real intent of the legislators based on the deliberations of the
SCRA 318 [1978]). Bicameral Conference Committee that preceded the enactment
of RA 6975.
Courts should not give a literal interpretation to the letter of the The legislative intent to classify the INP in such manner that
law if it runs counter to the legislative intent (Yellow Taxi and Section 89 of RA 6975 is applicable only to the local police force
Pasay Transportation Workers' Association v. Manila Yellow Taxi is clear. The question now is whether the classification is valid.
Cab. Co., 80 Phil. 83 [1948]). The test for this is reasonableness such that it must conform to
the following requirements:
Examining the records of the Bicameral Conference Committee, (1) It must be based upon substantial distinctions;
we find that the legislature did intent to exclude the members of (2) It must be germane to the purpose of the law;
the PC from the coverage of Sec. 89 insofar as the retirement age (3) It must not be limited to existing conditions only;
is concerned, thus: (4) It must apply equally to all members of the same class (People
vs. Cayat, 68 Phil. 12 [1939]).
THE CHAIRMAN. (SEN. MACEDA). Well, it seems what
people really want is one common rule, so if it is fifty-six, fifty- The classification is based upon substantial distinctions. The PC,
six; of course, the PC wants sixty for everybody. Of course, it before the effectivity of the law (RA 6975), were already retirable
is not acceptable to us in the sense that we tied this up really at age 56 while the local police force were retirable at 60, and
to the question of: If you are lax in allowing their (the PC) entry governed by different laws (P.D. 1184, Sec. 33 and Sec. 50). The
into the PNP, then tighten up the retirement. If we will be strict distinction is relevant for the purpose of the statute, which is to
in, like requiring examinations and other conditions for their enable the local police force to plan for their retirement which
original entry, then since we have sifted out a certain amount would be earlier than usual because of the new law. Section 89 is
of undesirables, then we can allow a longer retirement age. merely transitory, remedial in nature, and loses its force and effect
That was the rationale, that was the tie-up. Since we are once the four-year transitory period has elapsed. Finally, it applies
relaxing the entry, we should speed up . . . not only to some but to all local police officers.
THE CHAIRMAN. (REP. GUTANG). Exit.
THE CHAIRMAN. (SEN. MACEDA) . . . the retirement, the It may be appropriate to state at this point that it seems absurd
exit. that a law will grant an extension to PC officers' retirable age from
THE CHAIRMAN. (REP. GUTANG). So let me get it very 56 to 60 and then gradually lower it back to 56 without any cogent
clear, Mr. Chairman. Fifty-six, let's say, that will not make any reason at all. Why should the retirement age of PC officers be
adjustment in the PC because there (they) are (retirable at increased during the transitory period to the exclusion of other PC
age) fifty-six. officers who would retire at age 56 after such period? Such
THE CHAIRMAN. (SEN. MACEDA). Kaya nga, wala na silang absurdity was never contemplated by the law and would defeat
masasabi. its purpose of providing a uniform retirement age for PNP
THE CHAIRMAN. (REP. GUTANG). In the case of the Police, members.
since they are retireable now at sixty, for the officers, it will be
applicable to them on a one-year every year basis for a total WHEREFORE, the petition is GRANTED. The writ of injunction
period of four years transition. (Bicameral Conference issued on January 8, 1992 is hereby LIFTED and the assailed
Committee on National Defense, March 12, 1990) decision of respondent judge is REVERSED and SET ASIDE.
REP. GUTANG. On the first year of effectivity, the police will SO ORDERED.
retire at 60 years.
THE CHAIRMAN. (SEN. MACEDA). Sixty.
REP. GUTANG. On the second year, 59.
THE CHAIRMAN. (SEN. MACEDA). Oo.
REP. GUTANG. On the third year, 58.
THE CHAIRMAN. (SEN. MACEDA). Fifty-eight. So 'yung 55,
on the third year, 58, doon siya re-retire.
REP. GUTANG. Oo.
SEN. SAGUISAG. So kung 55, when the law becomes
effective . . .
THE CHAIRMAN. (SEN. MACEDA). He will retire at 58, doon
siya aabot.
REP. UNICO. Pwede.
SEN. SAGUISAG. Dahil 'yon, may time to . . .
THE CHAIRMAN. (SEN. MACEDA). Walang problema dito
sa transition ng pulis, acceptable ito, eh.
THE CHAIRMAN. (REP. COJUANGCO). Sa PC?
THE CHAIRMAN. (SEN. MACEDA). PC, walang mawawala
sa kanila, 56 ang retirement age nilang talaga, eh. Kaya ayaw
ko
ngang dagdagan 'yung 56 nila at 'yon din ang sa Armed
Forces, 56. (Ibid., May 22, 1990)

In applying the provisions of Sec. 89 in favor of the local police

force as established in PD 765, the Court does not, in any
manner, give any undue preferential treatment in favor of the
other group. On the contrary, the Court is merely giving life to the
G.R. No. L-43760 August 21, 1976
PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS
(PAFLU), petitioner
vs.
BUREAU OF LABOR RELATIONS, HONORABLE CARMELO
C. NORIEL, NATIONAL FEDERATION OF FREE LABOR
UNIONS (NAFLU), and PHILIPPINE BLOOMING MILLS CO.,
INC., respondents.
FERNANDO, Acting C.J.:
A certification by respondent Director of Labor Relations, Carmelo
C. Noriel, that respondent National Federation of Free Labor
Unions (NAFLU) as the exclusive bargaining agent of all the
employees in the Philippine Blooming Mills, Company, Inc.
disregarding the objection raised by petitioner, the Philippine
Association of Free Labor Unions (PAFLU), is assailed in this
certiorari proceeding. Admittedly, in the certification election held
on February 27, 1976, respondent Union obtained 429 votes as
against 414 of petitioner Union. Again, admittedly, under the
Rules and Regulations implementing the present Labor Code, a
majority of the valid votes cast suffices for certification of the
victorious labor union as the sole and exclusive bargaining
agent.1 There were four votes cast by employees who did not
want any union. 2 On its face therefore, respondent Union ought
to have been certified in accordance with the above applicable
rule. Petitioner, undeterred, would seize upon the doctrine
announced in the case of Allied Workers Association of the
Philippines v. Court of Industrial Relations3 that spoiled ballots
should be counted in determining the valid votes cast.
Considering there were seventeen spoiled ballots, it is the
submission that there was a grave abuse of discretion on the part
of respondent Director. Implicit in the comment of respondent
Director of Labor Relations, 4 considered as an answer, is the
controlling weight to be accorded the implementing rule above-
cited, no inconsistency being shown between such rule and the
present Labor Code. Under such a view, the ruling in the Allied
Workers Association case that arose during the period when it
was the Industrial Peace Act 5, that was in effect and not the
present law, no longer possesses relevance. It cannot and should
not be applied. It is not controlling. There was no abuse of
discretion then, much less a grave one.
This Court is in agreement. The law is on the side of respondent
Director, not to mention the decisive fact appearing in the Petition
itself that at most, only ten of the spoiled ballots "were intended
for the petitioner Union,"6 thus rendering clear that it would on its
own showing obtain only 424 votes as against 429 for respondent
Union. certiorari does not lie.
1. What is of the essence of the certification process, as noted
in Lakas Ng Manggagawang Pilipino v. Benguet
Consolidated, Inc.7 "is that every labor organization be given
the opportunity in a free and honest election to make good its
claim that it should be the exclusive collective bargaining
representative."8 Petitioner cannot complain. It was given that
opportunity. It lost in a fair election. It came out second best.
The implementing rule favors, as it should, respondent Union,
It obtained a majority of the valid votes cast. So our law
Prescribes. It is equally the case in the United States as this
excerpt from the work of Cox and Bok makes clear: "It is a
well-settled rule that a representative will he certified even
though less than a majority of all the employees in the unit
cast ballots in favor of the union. It is enough that the union
be designated by a majority of the valid ballots, and this is so
even though only a small proportion of the eligible voters
participates. Following the analogy of political elections, the
courts have approved this practice of the Board.9
2. There is this policy consideration. The country is at present
embarked on a wide-scale industrialization project. As a
matter of fact, respondent firm is engaged in such activity.
Industrialization, as noted by Professor Smith, Merrifield and
Rothschild, "can thrive only as there is developed a. stable
structure of law and order in the productive sector."10 That
objective is best attained in a collective bargaining regime,
which is a manifestation of industrial democracy at work, if
there be no undue obstacles placed in the way of the choice
of a bargaining representative. To insist on the absolute
majority where there are various unions and where the
possibility of invalid ballots may not be ruled out, would be to
frustrate that goal. For the probability of a long drawn-out,
protracted process is not easy to dismiss. That is not unlikely
given the intensity of rivalry among unions capable of enlisting
the allegiance of a group of workers. It is to avoid such a
contingency that there is this explicit pronouncement in the
implementing rule. It speaks categorically. It must be obeyed.
That was what respondent Director did.
3. Nor can fault of a grave and serious character be imputed to
respondent Director presumably because of failure to abide
by the doctrine or pronouncement of this Court in the
aforesaid Allied Workers Association case. The reliance is on
this excerpt from the opinion: "However, spoiled ballots, i.e.,
those which are defaced, torn or marked (Rules for
Certification Elections, Rule II, sec. 2[j]) should be counted in
determining the majority since they are nevertheless votes
cast by those who are qualified to do so." 11 Nothing can be
clearer than that its basis is a paragraph in a section of the
then applicable rules for certification elections. 12 They were
promulgated under the authority of the then prevailing
Industrial Peace Act. 13 That Legislation is no longer in force,
having been superseded by the present Labor Code which
took effect on November 1, 1974. This certification election is
governed therefore, as was made clear, by the present Labor
Code and the Rules issued thereunder. Absent a showing that
such rules and regulations -are violative of the Code, this
Court cannot ignore their existence. When, as should be the
case, a public official acts in accordance with a norm therein
contained, no infraction of the law is committed. Respondent
Director did, as he ought to, comply with its terms. He took
into consideration only the "valid votes" as was required by
the Rules. He had no choice as long as they remain in force.
In a proper showing, the judiciary can nullify any rule it found
in conflict with the governing statute. 14 That was not even
attempted here. All that petitioner did was to set forth in two
separate paragraphs the applicable rule followed by
respondent Director 15 and the governing article. 16 It did not
even bother to discuss why such rule was in conflict with the
present Labor Code. It failed to point out any repugnancy.
Such being the case, respondent Director must be upheld.
4. The conclusion reached by us derives further support from the
deservedly high repute attached to the construction placed by
the executive officials entrusted with the responsibility of
applying a statute. The Rules and Regulations implementing
the present Labor Code were issued by Secretary Blas Ople
of the Department of Labor and took effect on February 3,
1975, the present Labor Code having been made known to
the public as far back as May 1, 1974, although its date of
effectivity was postponed to November 1, 1974, although its
date of effectivity was postponed to November 1, 1974. It
would appear then that there was more than enough time for
 a really serious and careful study of such suppletory rules and
regulations to avoid any inconsistency with the Code. This
Court certainly cannot ignore the interpretation thereafter
embodied in the Rules. As far back as In re Allen," 17 a 1903
decision, Justice McDonough, as ponente, cited this excerpt
from the leading American case of Pennoyer v.
McConnaughy, decided in 1891: "The principle that the
contemporaneous construction of a statute by the executive
officers of the government, whose duty it is to execute it, is
entitled to great respect, and should ordinarily control the
construction of the statute by the courts, is so firmly
embedded in our jurisprudence that no authorities need be
cited to support it." 18 There was a paraphrase by Justice
Malcolm of such a pronouncement in Molina v. Rafferty," 19 a
1918 decision: "Courts will and should respect the
contemporaneous construction placed upon a statute by the
executive officers whose duty it is to enforce it, and unless
such interpretation is clearly erroneous will ordinarily be
controlled thereby." 20 Since then, such a doctrine has been
reiterated in numerous decisions . 21 As was emphasized by
Chief Justice Castro, "the construction placed by the office
charged with implementing and enforcing the provisions of a
Code should he given controlling weight. " 22

WHEREFORE, the petition for certiorari is dismissed. Costs

against petitioner Philippine Association of Free Labor Unions
(PAFLU).
G.R. No. L-33693-94 May 31, 1979
MISAEL P. VERA, as Commissioner of Internal Revenue, and
THE FAIR TRADE BOARD, petitioner,
vs.
HON. SERAFIN R. CUEVAS, as Judge of the Court of First
Instance of Manila, Branch IV, INSTITUTE OF EVAPORATED
FILLED MILK MANUFACTURERS OF THE PHILIPPINES, INC.,
CONSOLIDATED MILK COMPANY (PHIL.) INC., and MILK
INDUSTRIES, INC., respondents.
DE CASTRO, J.:
This is a petition for certiorari with preliminary injunction to review
the decision rendered by respondent judge, in Civil Case No.
52276 and in Special Civil Action No. 52383 both of the Court of
First Instance of Manila.
Plaintiffs, in Civil Case No. 52276 private respondents herein, are
engaged in the manufacture, sale and distribution of filled milk
products throughout the Philippines. The products of private
respondent, Consolidated Philippines Inc. are marketed and sold
under the brand Darigold whereas those of private respondent,
General Milk Company (Phil.), Inc., under the brand "Liberty;" and
those of private respondent, Milk Industries Inc., under the brand
"Dutch Baby." Private respondent, Institute of Evaporated Filled
Milk Manufacturers of the Philippines, is a corporation organized
for the principal purpose of upholding and maintaining at its
highest the standards of local filled milk industry, of which all the
other private respondents are members.
Civil Case No. 52276 is an action for declaratory relief with ex-
parte petition for preliminary injunction wherein plaintiffs pray for
an adjudication of their respective rights and obligations in
relation to the enforcement of Section 169 of the Tax Code
against their filled milk products.
The controversy arose from the order of defendant,
Commissioner of Internal Revenue now petitioner herein,
requiring plaintiffs- private respondents to withdraw from the
market all of their filled milk products which do not bear the
inscription required by Section 169 of the Tax Code within fifteen
(15) days from receipt of the order with the explicit warning that
failure of plaintiffs' private respondents to comply with said order
will result in the institution of the necessary action against any
violation of the aforesaid order. Section 169 of the Tax Code
reads as follows:
Section 169. Inscription to be placed on skimmed milk. All
condensed skimmed milk and all milk in whatever form, from
which the fatty part has been removed totally or in part, sold
or put on sale in the Philippines shall be clearly and legibly
marked on its immediate containers, and in all the language
in which such containers are marked, with the words, "This
milk is not suitable for nourishment for infants less than one
year of age," or with other equivalent words.
The Court issued a writ of preliminary injunction dated February
16, 1963 restraining the Commissioner of Internal Revenue from
requiring plaintiffs' private respondents to print on the labels of
their rifled milk products the words, "This milk is not suitable for
nourishment for infants less than one year of age or words of
similar import, " as directed by the above quoted provision of Law,
and from taking any action to enforce the above legal provision
against the plaintiffs' private respondents in connection with their
rifled milk products, pending the final determination of the case,
Civil Case No. 52276, on the merits.
On July 25, 1969, however, the Office of the Solicitor General
brought an appeal from the said order by way of certiorari to the
Supreme Court. 1 In view thereof, the respondent court in the
meantime suspended disposition of these cases but in view of the
absence of any injunction or restraining order from the Supreme
Court, it resumed action on them until their final disposition
therein.
Special Civil Action No. 52383, on the other hand, is an action for
prohibition and injunction with a petition for preliminary injunction.
Petitioners therein pray that the respondent Fair Trade Board
desist from further proceeding with FTB I.S. No. I . entitled
"Antonio R. de Joya vs. Institute of Evaporated Milk
Manufacturers of the Philippines, etc." pending final determination
of Civil Case No. 52276. The facts of this special civil action show
that on December 7, 1962, Antonio R. de Joya and Sufronio
Carrasco, both in their individual capacities and in their capacities
as Public Relations Counsel and President of the Philippine
Association of Nutrition, respectively, filed FTB I.S. No. 1 with Fair
Trade Board for misleading advertisement, mislabeling and/or
misbranding. Among other things, the complaint filed include the
charge of omitting to state in their labels any statement sufficient
to Identify their filled milk products as "imitation milk" or as an
imitation of genuine cows milk. and omitting to mark the
immediate containers of their filled milk products with the words:
"This milk is not suitable for nourishment for infants less than one
year of age or with other equivalent words as required under
Section 169 of the Tax Code. The Board proceeded to hear the
complaint until it received the writ of preliminary injunction issued
by the Court of First Instance on March 19, 1963.
Upon agreement of the parties, Civil Case No. 52276 and Special
Civil Action No. 52383 were heard jointly being intimately related
with each other, with common facts and issues being also
involved therein. On April 16, 1971, the respondent court issued
its decision, the dispositive part of which reads as follows:
Wherefore, judgment is hereby rendered:
In Civil Case No. 52276:
(a) Perpetually restraining the defendant, Commissioner of
Internal Revenue, his agents, or employees from requiring
plaintiffs to print on the labels of their filled milk products the
words: "This milk is not suitable for nourishment for infants
less than one year of age" or words with equivalent import and
declaring as nun and void and without authority in law, the
order of said defendant dated September 28, 1961, Annex A
of the complaint, and the Ruling of the Secretary of Finance,
dated November 12, 1962, Annex G of the complaint; and
In Special Civil Action No. 52383:
(b) Restraining perpetually the respondent Fair Trade Board, its
agents or employees from continuing in the investigation of
the complaints against petitioners docketed as FTB I.S. No.
2, or any charges related to the manufacture or sale by the
petitioners of their filled milk products and declaring as null
the proceedings so far undertaken by the respondent Board
on said complaints. (pp. 20- 21, Rollo).
From the above decision of the respondent court, the
Commissioner of Internal Revenue and the Fair Trade Board
joined together to file the present petition for certiorari with
preliminary injunction, assigning the following errors:
I. THE LOWER COURT ERRED IN RULING THAT SEC. TION
169 OF THE TAX CODE HAS BEEN REPEALED BY
IMPLICATION.
II. THE LOWER COURT ERRED IN RULING THAT SECTION
169 OF THE TAX CODE HAS LOST ITS TAX PURPOSE, AND
THAT COMMISSIONER NECESSARILY LOST HIS
AUTHORITY TO ENFORCE THE SAME AND THAT THE
PROPER AUTHORITY TO PROMOTE THE HEALTH OF
INFANTS IS THE FOOD AND DRUG ADMINISTRATION, THE
SECRETARY OF HEALTH AND THE SECRETARY OF
JUSTICE, AS PROVIDED FOR IN RA 3720, NOT THE
COMMISSIONER OF INTERNAL REVENUE.
III. THE LOWER COURT ERRED IN RULING THAT THE
POWER TO INVESTIGATE AND TO PROSECUTE
VIOLATIONS OF FOOD LAWS IS ENTRUSTED TO THE FOOD
AND DRUG INSPECTION, THE FOOD AND DRUG
ADMINISTRATION, THE SECRETARY OF HEALTH AND THE
SECRETARY OF JUSTICE, AND THAT THE FAIR TRADE
BOARD IS WITHOUT JURISDICTION TO INVESTIGATE AND
PROSECUTE ALLEGED MISBRANDING, MISLABELLING
AND/OR MISLEADING ADVERTISEMENT OF FILLED MILK
PRODUCTS. (pp, 4-5, Rollo).
The lower court did not err in ruling that Section 169 of the Tax
Code has been repealed by implication. Section 169 was enacted
in 1939, together with Section 141 (which imposed a Specific tax
on skimmed milk) and Section 177 (which penalized the sale of
skimmed milk without payment of the specific tax and without the
legend required by Section 169). However, Section 141 was
expressly repealed by Section 1 of Republic Act No. 344, and
Section 177, by Section 1 of Republic Act No. 463. By the express
repeal of Sections 141 and 177, Section 169 became a merely
declaratory provision, without a tax purpose, or a penal sanction.
Moreover, it seems apparent that Section 169 of the Tax Code
does not apply to filled milk. The use of the specific and qualifying
terms "skimmed milk" in the headnote and "condensed skimmed
milk" in the text of the cited section, would restrict the scope of
the general clause "all milk, in whatever form, from which the fatty
pat has been removed totally or in part." In other words, the
general clause is restricted by the specific term "skimmed milk"
under the familiar rule of ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms
they follow in the statute.
Skimmed milk is different from filled milk. According to the
"Definitions, Standards of Purity, Rules and Regulations of the
Board of Food Inspection," skimmed milk is milk in whatever form
from which the fatty part has been removed. Filled milk, on the
other hand, is any milk, whether or not condensed, evaporated
concentrated, powdered, dried, dessicated, to which has been
added or which has been blended or compounded with any fat or
oil other than milk fat so that the resulting product is an imitation
or semblance of milk cream or skim milk." The difference,
therefore, between skimmed milk and filled milk is that in the
former, the fatty part has been removed while in the latter, the
fatty part is likewise removed but is substituted with refined
coconut oil or corn oil or both. It cannot then be readily or safely
assumed that Section 169 applies both to skimmed milk and filled
milk.
The Board of Food Inspection way back in 1961 rendered an
opinion that filled milk does not come within the purview of Section
169, it being a product distinct from those specified in the said
Section since the removed fat portion of the milk has been
replaced with coconut oil and Vitamins A and D as fortifying
substances (p. 58, Rollo). This opinion bolsters the Court's stand
as to its interpretation of the scope of Section 169. Opinions and
rulings of officials of the government called upon to execute or
implement administrative laws command much respect and
weight. (Asturias Sugar Central Inc. vs. Commissioner of
Customs, G. R. No. L-19337, September 30, 1969, 29 SCRA 617;
Tan, et. al. vs. The Municipality of Pagbilao et. al., L-14264, April
30, 1963, 7 SCRA 887; Grapilon vs. Municipal Council of Carigara
L-12347, May 30, 1961, 2 SCRA 103).
This Court is, likewise, induced to the belief that filled milk is
suitable for nourishment for infants of all ages. The Petitioners
themselves admitted that: "the filled milk products of the
petitioners (now private respondents) are safe, nutritious,
wholesome and suitable for feeding infants of all ages" (p. 44,
Rollo) and that "up to the present, Filipino infants fed since birth
with filled milk have not suffered any defects, illness or disease
attributable to their having been fed with filled milk." (p. 45, Rollo).
There would seem, therefore, to be no dispute that filled milk is
suitable for feeding infants of all ages. Being so, the declaration
required by Section 169 of the Tax Code that filled milk is not
suitable for nourishment for infants less than one year of age
would, in effect, constitute a deprivation of property without due.
process of law.
Section 169 is being enforced only against respondent
manufacturers of filled milk product and not as against
manufacturers, distributors or sellers of condensed skimmed milk
such as SIMILAC, SMA, BREMIL, ENFAMIL, OLAC, in which, as
admitted by the petitioner, the fatty part has been removed and
substituted with vegetable or corn oil. The enforcement of Section
169 against the private respondents only but not against other
persons similarly situated as the private respondents amounts to
an unconstitutional denial of the equal pro petition of the laws, for
the law, equally enforced, would similarly offend against the
Constitution. Yick Wo vs. Hopkins, 118 U.S. 356,30 L. ed. 220).
As stated in the early part of this decision, with the repeal of
Sections 141 and 177 of the Tax Code, Section 169 has lost its
tax purpose. Since Section 169 is devoid of any tax purpose,
petitioner Commissioner necessarily lost his authority to enforce
the same. This was so held by his predecessor immediately after
Sections 141 and 177 were repealed in General Circular No. V-
85 as stated in paragraph IX of the Partial Stipulation of facts
entered into by the parties, to wit:
... As the act of sewing skimmed milk without first paying the
specific tax thereon is no longer unlawful and the enforcement
of the requirement in regard to the placing of the proper
legend on its immediate containers is a subject which does
not come within the jurisdiction of the Bureau of Internal
Revenue, the penal provisions of Section 177 of the said
Code having been repealed by Republic Act No. 463. (p. 102,
Rollo).
Petitioner's contention that he still has jurisdiction to enforce
Section 169 by virtue of Section 3 of the Tax Code which provides
that the Bureau of Internal Revenue shall also "give effect to and
administer the supervisory and police power conferred to it by this
Code or other laws" is untenable. The Bureau of Internal Revenue
may claim police power only when necessary in the enforcement
of its principal powers and duties consisting of the "collection of
all national internal revenue taxes, fees and charges, and the
enforcement of all forfeitures, penalties and fines connected
therewith." The enforcement of Section 169 entails the promotion
of the health of the nation and is thus unconnected with any tax
purpose. This is the exclusive function of the Food and Drug
Administration of the Department of Health as provided for in
Republic Act No. 3720. In particular, Republic Act No. 3720
provides:

Section 9. ... It shall be the duty of the Board (Food and Drug
Inspection), conformably with the rules and regulations, to
hold hearings and conduct investigations relative to matters
touching the Administration of this Act, to investigate
processes of food, drug and cosmetic manufacture and to
subject reports to the Food and Drug Administrator,
recommending food and drug standards for adoption. Said
Board shall also perform such additional functions, properly
within the scope of the administration thereof, as maybe
assigned to it by the Food and Drug Administrator. The
decisions of the Board shall be advisory to the Food and Drug
Administrator.

Section 26. ...

xxx xxx xxx
(c) Hearing authorized or required by this Act shall be
conducted by the Board of Food and Drug Inspection which
shall submit recommendation to the Food and Drug
Administrator.
(d) When it appears to the Food and Drug Administrator from
the reports of the Food and Drug Laboratory that any article
of food or any drug or cosmetic secured pursuant to Section
28 of this Act is adulterated or branded he shall cause notice
thereof to be given to the person or persons concerned and
such person or persons shall be given an opportunity to
subject evidence impeaching the correctness of the finding or
charge in question.
(e) When a violation of any provisions of this Act comes to the
knowledge of the Food and Drug Administrator of such
character that a criminal prosecution ought to be instituted
against the offender, he shall certify the facts to the Secretary
of Justice through the Secretary of Health, together with the
chemists' report, the findings of the Board of Food and Drug
Inspection, or other documentary evidence on which the
charge is based.
(f) Nothing in this Act shall be construed as requiring the Food
and Drug Administrator to certify for prosecution pursuant to
subparagraph (e) hereof, minor violations of this Act
whenever he believes that public interest will be adequately
served by a suitable written notice or warning.

The aforequoted provisions of law clearly show that petitioners,

Commissioner of Internal Revenue and the Fair Trade Board, are
without jurisdiction to investigate and to prosecute alleged
misbranding, mislabeling and/or misleading advertisements of
filled milk. The jurisdiction on the matters cited is vested upon the
Board of Food and Drug inspection and the Food and Drug
Administrator, with the Secretary of Health and the Secretary of
Justice, also intervening in case criminal prosecution has to be
instituted. To hold that the petitioners have also jurisdiction as
would be the result were their instant petition granted, would only
cause overlapping of powers and functions likely to produce
confusion and conflict of official action which is neither practical
nor desirable.

WHEREFORE, the decision appealed from is hereby affirmed en

toto. No costs.
SO ORDERED.
G.R. No. L-28329 August 17, 1975
COMMISSIONER OF CUSTOMS, petitioner,
vs.
ESSO STANDARD EASTERN, INC., (Formerly: Standard-
Vacuum Refining Corp. (Phil.), respondent.
ESGUERRA, J.:
Appeal from the decision of the Court of Tax Appeals reversing
the Commissioner of Customs' decision holding respondent
ESSO Standard Eastern, Inc., (formerly the Standard-Vacuum
Refining Corporation (Phil.) and hereinafter referred to as ESSO)
liable in the total sum of P775.62 as special import tax on certain
articles imported by the latter under Republic Act No. 387,
otherwise known as the Petroleum Act of 1949.
Respondent ESSO is the holder of Refining Concession No. 2,
issued by the Secretary of Agriculture and Natural Resources on
December 9, 1957, and operates a petroleum refining plant in
Limay Bataan. Under Article 103 of Republic Act No. 387 which
provides: "During the five years following the granting of any
concession, the concessionaire may import free of customs duty,
all equipment, machinery, material, instruments, supplies and
accessories," respondent imported and was assessed the special
import tax (which it paid under protest) on the following separate
importations:
1) One carton, scientific instruments with C & F value of
assessed a special import tax in the amount of P31.98
(Airport Protest No. 10);
2) One carton of recorder parts with C & F value of $221.56;
assessed special import tax in the amount of P43.82
(Airport Protest No. 11);
3) One carton of valves with C & F value of $310.58;
assessed special import tax in the amount of P60.72
(Airport Protest No. 12);
4) One box of parts for Conversion boilers and Auxiliary
Equipment with C & F value of $2,389.69; assessed
special import tax in the amount of P467.00 (Airport
Protest No. 15);
5) One carton of X-ray films with C & F value of $132.80;
assessed special import tax in the amount of P26.00
(Airport Protest No. 16); and
6) One carton of recorder parts with C & F value of $750.39;
assessed special import tax in the amount of P147.00
(Airport Protest No. 17).1
The Collector of Customs on February 16, 1962, held that
respondent ESSO was subject to the payment of the special
import tax provided in Republic Act No. 1394, as amended by
R.A. No. 2352, and dismissed the protest.2
On March 1, 1962, respondent appealed the ruling of the
Collector of Customs to the Commissioner of Customs who, on
March 19, 1965, affirmed the decision of said Collector of
Customs.3
On July 2, 1965, respondent ESSO filed a petition with the Court
of Tax Appeals for review of the decision of the Commissioner of
Customs.
The Court of Tax Appeals, on September 30, 1967, reversed the
decision of herein petitioner Commissioner of Customs and
ordered refund of the amount of P775.62 to respondent ESSO
which the latter had paid under protest.4
This decision of the Court of Tax Appeals is now before this Court
for review.
Petitioner contends that the special import tax under Republic Act
No. 1394 is separate and distinct from the customs duty
prescribed by the Tariff and Customs Code, and that the
exemption enjoyed by respondent ESSO from the payment of
customs duties under the Petroleum net of 1949 does not include
exemption from the payment of the special import tax provided in
R.A. No. 1394.5
For its stand petitioner puts forward this rationale:
A perusal of the provisions of R.A. No. 1394 will show that the
legislature considered the special import tax as a tax distinct
from customs duties as witness the fact that Section 2(a) of
the said law made separate mention of customs duties and
special import tax when it provided that ... if as a result of the
application of the schedule therein, the total revenue derived
from the customs duties and from the special import tax on
goods, ... imported from the United States is less in any
calendar year than the proceeds from the exchange tax
imposed under Republic Act Numbered Six Hundred and
One, as amended, on such goods, articles or products during
the calendar year 1955, the President may, by proclamation,
suspend the reduction of the special import tax for the next
succeeding calendar year .
If it were the intention of Congress to exempt the holders of
petroleum refinery concessions like the protestant
(respondent herein), such exemption should have been
clearly stated in the statute. Exemptions are never presumed.
They must be expressed in the clearest and most
unambiguous language and not left to mere implication.6
Specifically, petitioner in his brief submitted two assignment of
errors allegedly committed by the Court of Tax Appeals in the
controverted decision, to wit:
1st assignment of error:
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT
THE TERM "CUSTOMS DUTY" IN ARTICLE 103 OF
REPUBLIC ACT NO. 387 INCLUDES THE SPECIAL
IMPORT TAX IMPOSED BY REPUBLIC ACT NO. 1394;
2nd assignment of error:
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT
EXEMPTION FROM PAYMENT OF CUSTOMS DUTIES
UNDER REPUBLIC ACT NO. 387 INCLUDES EXEMPTION
FROM PAYMENT OF THE SPECIAL IMPORT TAX.
On the other hand, the Court of Tax Appeals rationalized the
ground for its ruling thus:
If we are to adhere, as we should, to the plain and obvious
meaning of words in consonance with settled rules of
interpretation, it seems clear that the special import tax is an
impost or a charge on the importation or bringing into the
Philippines of all goods, articles or products subject thereto,
for the phrase "import tax on all goods, articles or products
imported or brought into the Philippines" in explicit and
unambiguous terms simply means customs duties. It is hardly
necessary to add that "customs duties" are simply taxes
assessed on merchandise imported from, or exported to a
foreign country.
 And being a charge upon importation, the special import tax
is essentially a customs duty, or at least partakes of the
character thereof.
Citing numberous American decisions and definitions of terms
"customs duties," "duties," "imposts," "levies," "tax," and "tolls,"
and their distinctions, including some pronouncements of this
Court on the subject, the Court of Tax Appeals in its decision,
went to great lengths to show that the term "special import tax" as
used in R.A. No. 1394 includes customs duties. It sees the special
import tax as nothing but an impost or a charge on the importation
or bringing into the Philippines of goods, articles or products.7
To clinch its theory the Court of Tax Appeals cited the similarity in
the basis of computation of the customs duty as well as the
similarity in the phraseology of Section 3 of Republic Act No. 1394
(which established the special import tax) and Section 9-01 of the
Tariff & Customs code (the basic law providing for and regulating
the imposition of customs duties and imposts on importations).8
For its part, private respondent, ESSO, in its answer to the
petition, leaned heavily on the same arguments as those given by
the Tax Court, the burden of which is that the special import tax
law is a customs law. 9
It is clear that the only issue involved in this case is whether or
not the exemption enjoyed by herein private respondent ESSO
Standard Eastern, Inc. from customs duties granted by Republic
Act No. 387, or the Petroleum Act of 1949, should embrace or
include the special import tax imposed by R.A. No. 1394, or the
Special Import Tax Law.
We have examined the records of this case thoroughly and
carefully considered the arguments presented by both parties and
We are convinced that the only thing left to this Court to do is to
determine the intention of the legislature through interpretation of
the two statutes involved, i.e., Republic Act No. 1394 and
Republic Act No. 387.
It is a well accepted principle that where a statute is ambiguous,
as Republic Act No. 1394 appears to be, courts may examine
both the printed pages of the published Act as well as those
extrinsic matters that may aid in construing the meaning of the
statute, such as the history of its enactment, the reasons for the
passage of the bill and purposes to be accomplished by the
measure. 10
Petitioner in the first assignment of error took exception to the
finding of the Court of Tax Appeals that "The language of Republic
Act No. 1394 seems to leave no room for doubt that the law
intends that the phrase 'Special import tax' is taken to include
customs duties" and countered with the argument that "An
examination of the provisions of Republic Act No. 1394 will
indubitably reveal that Congress considered the special import
tax as a tax different from customs duties, as may be seen from
the fact that Section 2(a) of said law made separate mention of
customs duties and special import tax ..." Thus:
... if as a result of the application of the schedule therein the
total revenue derived from the customs duties and from the
special import tax on goods, ... imported from the United
States is less in any calendar year than the proceeds from the
exchange tax imposed under Republic Act Numbered Six
Hundred and One, as amended, on such goods, articles or
products during the calendar year 1955, the President may,
by proclamation, suspend the reduction of the special import
tax for the next succeeding calendar year
Petitioner further argues:
Customs duties are prescribed by the Tariff and Customs
Code, while the special import tax is provided for by Republic
Act No. 1394. If our legislature had intended to classify the
special import tax as customs duty, the said Art would not
have expressly exempted from payment of the special Import
tax importations of machinery, equipment, accessories, and
spare parts for use of industries, without distinguishing
whether the industries referred to are the industries exempt
from the payment of Customs duties or the non-exempt ones
(Sec. 6). It is sufficient that the imported machinery, etc., is
for the use of any industry. 11
A study of petitioner's two assignments of errors shows that one
is anchored on practically the same ground as the other: both
involve the interpretation of R.A. No. 387 (The Petroleum Act of
1949) in relation with R.A. No. 1394 (The Special Import Tax
Law).
While the petitioner harps on particular clauses and phrases
found in the two cited laws, which in a way was likewise resorted
to by the respondent ESSO, it would do Us well to restate the
fundamental rule in the construction of a statute.
In order to determine the true intent of the legislature, the
particular clauses and phrases of the statute should not be taken
as detached and isolated expressions, but the whole and every
part thereof must be considered in fixing the meaning of any of its
parts. In fact every statute should receive such construction as
will make it harmonize with the pre-existing body of laws.
Antagonism between the Act to be interpreted and existing or
previous laws is to be avoided, unless it was clearly the intention
of the legislature that such antagonism should arise and one
amends or repeals the other, either expressly or by implication.
Another rule applied by this Court is that the courts may take
judicial notice of the origin and history of the statutes which they
are called upon to construe and administer, and of facts which
affect their derivation, validity and operation. 12
Applying the above stated rules and principles, let us consider the
history, the purpose and objectives of Republic Act No. 387 as it
relates to Republic Act No. 1394 and other laws passed by the
Congress of the Philippines insofar as they relate to each other.
Republic Act No. 387, the Petroleum Act of 1949, has this for its
title, to wit:
AN ACT TO PROMOTE THE EXPLORATION,
DEVELOPMENT, EXPLOITATION, AND UTILIZATION OF
THE PETROLEUM RESOURCES OF THE PHILIPPINES;
TO ENCOURAGE THE CONSERVATION OF SUCH
PETROLEUM RESOURCES; TO AUTHORIZE THE
SECRETARY OF AGRICULTURE AND NATURAL
RESOURCES TO CREATE AN ADMINISTRATION UNIT
AND A TECHNICAL BOARD IN THE BUREAU OF MINES;
TO APPROPRIATE FUNDS THEREFORE; AND FOR
OTHER PURPOSES.
Art. 103 of said Act reads:
ART. 103. Customs duties. During the five years following
the granting of any concessions, the concessionaire may
import free of customs duty, all equipment, machinery,
material, instruments, supplies and accessories.
 xxx xxx xxx
Art. 102 of the Same law insofar as pertinent, provides:
ART. 102. Work obligations, taxes, royalties not to be
charged. ...; nor shall any other special taxes or levies be
applied to such concessions, nor shall concessionaires under
this Act be subjected to any provincial, municipal, or other
local taxes or levies; nor shall any sales tax be charged on
any petroleum produced from the concession or portion
thereof, manufactured by the concessionaire and used in the
working of his concession. .
Art. 104, still of the same Act, reads:
ART. 104. No export to be imposed. No export tax shall be
levied upon petroleum produced from concessions granted
under this Act.
The title of Republic Act No. 387 and the provisions of its three
articles just cited give a clue to the intent of the Philippine
legislature, which is to encourage the exploitation and
development of the petroleum resources of the country. Through
the instrumentality of said law, it declared in no uncertain terms
that the intensification of the exploration for petroleum must be
carried on unflinchingly even if, for the time being, no taxes, both
national and local, may be collected from the industry. This is the
unequivocal intention of the Philippine Congress when the
language of the Petroleum Act is examined. Until this law or any
substantial portion thereof is clearly amended or repealed by
subsequent statutes, the intention of the legislature must be
upheld.
Against this unambiguous language of R.A. No. 387, there is the
subsequent legislation, R.A. No. 1394, the Special Import Tax
Law, which, according to the herein petitioner, shows that the
legislature considered the special import tax as a tax distinct from
customs duties.
Republic Act No. 1394, otherwise known as the Special Import
Tax Law, is entitled as follows:
AN ACT TO IMPOSE A SPECIAL IMPORT TAX ON ALL
GOODS, ARTICLES OR PRODUCTS IMPORTED OR
BROUGHT INTO THE PHILIPPINES, AND TO REPEAL
REPUBLIC ACTS NUMBERED SIX HUNDRED AND ONE,
EIGHT HUNDRED AND FOURTEEN, EIGHT HUNDRED
AND SEVENTY-ONE, ELEVEN HUNDRED AND SEVENTY-
FIVE. ELEVEN HUNDRED AND NINETY-SEVEN AND
THIRTEEN HUNDRED AND SEVENTY FIVE.
The title indicates unmistakably that it is repealing six prior
statutes. As will be seen later, all these laws dealt with the
imposition of a special excise tax on foreign exchange or other
form of levy on importation of goods into the country.
Section I of Republic Act No. 1394 reads as follows:
SECTION 1. Except as herein otherwise provided, there shall
be levied, collected and paid as special import tax on all
goods, articles or products imported or brought into the
Philippines, irrespective of source, during the period and in
accordance with the rates provided for in the following
schedule:
xxx xxx xxx
It would appear that by the provision of Section 1 of this Act, the
pertinent provision of the Petroleum Law, for which there appears
to be no proviso to the contrary has been modified or altered.
Section 6 of Republic Act No. 1394 declares that the tax provided
for in its Section I shall not be imposed against importation into
the Philippines of machinery and/or raw materials to be used by
new and necessary industries as determined in accordance with
R A. No. 901 and a long list of other goods, articles, machinery,
equipment, accessories and others.
We shall now examine the six statutes repealed by R.A. No. 1394,
namely:
R.A. No. 601 is an Act imposing a special excise tax of 17%
on foreign exchange sold by the Central Bank or its agents.
This is known as the Exchange Tax Law;
R.A. No. 814 amended Sections one, two and five and
repealed Sections three and four of R.A. No. 601;
R.A. No. 871 amended Sections one and two of R.A. No. 601,
as amended earlier by R.A. No. 814;
R.A. No. 1175 amended further Sections one and two of R.A.
No. 601, as amended;
R.A. No. 1197 amended furthermore R.A. No. 601 as
amended previously by R.A. No. 1175;
R.A. No. 1375 amended Sections one and two of R.A. No.
601 as amended by R.A. Nos. 1175 and 1197.
As can be seen from the foregoing, in one fell swoop,
Republic Act No. 1394 repealed and revoked six earlier
statutes which had something to do with the imposition of
special levies and/or exemption of certain importations from
the burden of the special import taxes or levies. On the other
hand, it is apparent that R.A. No. 387, the Petroleum Act, had
been spared from the pruning knife of Congress, although this
latter law had granted more concessions and tax exemption
privileges than any of the statutes that were amended,
repealed or revoked by R.A. No. 1394. The answer must be
that the Congress of the Philippine saw fit to preserve the
privileges granted under the Petroleum Law of 1949 in order
to keep the door open to the exploitation and development of
the petroleum resources of the country with such incentives
as are given under that law.
This ascertained will and intention of the legislature finds a
parallelism in a case brought earlier before this Court.
A fishpond owner was slapped with taxes as a "merchant" by the
Collector of Internal Revenue. He paid under protest and filed an
action to recover the taxes paid, claiming that he was an
agriculturist and not a merchant. When this Court was called upon
to interpret the provisions of the Internal Revenue Law on whether
fish is an agricultural product which falls under the exemption
provisions of said law, it inquired into the purpose of the
legislature in establishing the exemption for agricultural products.
We held:
The first inquiry, therefore, must relate to the purpose the
legislature had in mind in establishing the exemption
contained in the clause now under consideration. It seems
reasonable to assume that it was due to the belief on the part
 of the law-making body that by exempting agricultural
products from this tax the farming industry would be favored
and the development of the resources of the country
encouraged. .... 13

Having this in mind, particularly the manner in which extrinsic aids

the history of the enactment of the statute and purpose of the
legislature in employing a clause or provision in the law had been
applied in determining the true intent of the lawmaking body, We
are convinced that R.A. No. 387, The Petroleum Act of 1949, was
intended to encourage the exploitation, exploration and
development of the petroleum resources of the country by giving
it the necessary incentive in the form of tax exemptions. This is
the raison d etre for the generous grant of tax exemptions to those
who would invest their financial resources towards the
achievement of this national economic goal.

On the contention of herein petitioner that the exemptions

enjoyed by respondent ESSO under R.A. No. 387 have been
abrogated by R.A. No. 1394, We hold that repeal by implication is
not favored unless it is manifest that the legislature so intended.
As laws are presumed to be passed with deliberation and with full
knowledge of all existing ones on the subject, it is logical to
conclude that in passing a statute it was not intended to interfere
with or abrogate any former law relating to the same matter,
unless the repugnancy between the two is not only irreconcilable
but also clear and convincing as a result of the language used, or
unless the latter act fully embraces the subject matter of the
earlier. 14

As observed earlier, Congress lined up for revocation by Republic

Act No. 1394 six statutes dealing with the imposition of special
imposts or levies or the granting of exemptions from special
import taxes. Yet, considering the tremendous amount of
revenues it was losing under the Petroleum Law of 1949, it failed
to include the latter statute among those it chose to bury by the
Special Import Taw Law. The reason for this is very clear: The
legislature wanted to continue the incentives for the continuing
development of the petroleum industry.

It is not amiss to mention herein passing that contrary to the

theory of the herein petitioner, R.A. No. 387 had not been
repealed by R.A. No. 2352 which expressly abrogated Section 6
of R.A. No. 1394 but did not repeal any part of R.A. No. 387.
Therefore, the exemption granted by Republic Act No. 387 still
stands.

WHEREFORE, taking into consideration the weight given by this

Court to the findings and conclusions of the Court of Tax Appeals
on a matter it is well-equipped to handle, which findings and
conclusions We find no reason to overturn, the petition of the
Commissioner of Customs to reverse the decision of the Court of
Tax Appeals should be, as it is hereby, denied.

No costs.
SO ORDERED.