Cases 1 34 STATCON

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
CASE 1
G.R. No. L-31057 May 29, 1981
INSULAR LUMBER COMPANY, petitioner,

vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. L-31137 May 29, 1981
COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF TAX APPEALS and INSULAR LUMBER COMPANY, respondents.
DE CASTRO, J.: 1wph1. t
These two (2) cases are appeals by way of certiorari from the decision dated July 31, 1969 of the
Court of Tax Appeals ordering the Commissioner of Internal Revenue to refund to the Insular
Lumber Company the amount of P10,560.20 instead of P19,921.37, representing 25% of the specific
tax paid on manufactured oil and motor fuel utilized by said company in the operation of its forest
concession in the year 1963.
The undesputed fats of these cases are as follows:
Insular Lumber Company (Company for short). a corporation organized and existing under the laws
of New York. U.S.A., and duly authorized to do business in the Philippines is a licensed forest
concessionaire. The Company purchase manufactured oil and motor fuel which it used in the
operation of its forest cocession, sawmill, planning mills, power units, vehicles, dry kilns, water
pumps, lawn mowers, and in furnishing free water and light to its employees. on which specific tax
was paid. On December 22, 1964, the Company filed with the Commissioner of Internal Revenue
(Commissioner for short), a claim for refund of P19,921.37 representing 25% of the specific tax paid
on the manufactured oil and fuel used in its operations pursuant to the provisions of Section 5,
Republic Act No. 1435. 1 In a letter dated February 11, 1965, received by the Company on March 31,
1965, the commissioner denied the Company's claim for refund on the ground that the privilege of
partial tax refund granted by Section 5 of Republic Act No. 1435 to those using oil in the operation of
forest and mining concessions is limited to a period of five (5) years from June 14, 1956, the date
effectivity of said Act. Consequently, oil used in such concession after June 14, 1961 are subject to
the full tax prescribed in Section 142 of the National Internal Revenue Code.
Its claim having been denied, the Company filed a petition for review before the respondent court on
April 29, 1965. After hearing, the Court of Tax Appeals ruled that the operation of a sawmill is distinct
from the operation of a forest concession, hence, the refund provision of Section 5 of Republic Act
No. 1435 allowing partial refund to forest and mining concessionaires cannot be extended to the
operators of a sawmill. And out of the P19,921.37 claimed, representing the 25% of specific tax paid,
respondent court found out that only the amount of P14,598.08 was paid on oil utilized in logging
operations. Respondent court, however, did not allow the refund of the full amount of P14,598.08
because the Company's right to claim the refund of a portion thereof, particularly those paid during
the period from January 1, 1963 to April 29, 1963 had already prescribed. Hence, the Company was
credited the refund of P10,560.20 only. Both parties appealed from the decision of the Court of Tax
Appeals.
In his appeal, the Commissioner assigns the following errors: 1w ph1.t
THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE FIRST
PROVISO IN SECTION 5 OF REPUBLIC ACT NO. 1435 INVOKED BY INSULAR
LUMBER COMPANY AS LEGAL BASIS FOR ITS CLAIM FOR TAX REFUND, IS
NULL AND VOID FOR BEING UNCONSTITUTIONAL
II
THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE PARTIAL
EXEMPTION IN FAVOR OF MINERS AND FOREST CONCESSIONAIRES UNDER
REPUBLIC ACT NO. 1435 IS LIMITED TO ONLY FIVE YEARS COUNTED FROM
JUNE 14,1956, THE DATE OF APPROVAL AND EFFECTIVITY OF THE SAID ACT.
III
THE COURT OF' TAX APPEALS ERRED IN NOT HOLDING THAT INSULAR
LUMBER COMPANY USED THE OILS AND FUELS IN QUESTION AFTER THE
EXEMPTION IN FAVOR OF MINERS AND FOREST CONCESSIONAIRES HAD
ALREADY LAPSED OR EXPIRED AND HENCE, NO LONGER IN FORCE.
IV
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT INSULAR LUMBER

COMPANY IS ENTITLED TO THE TAX REFUND OF P10,560.20.
On the other hand, the Company, as appellant, has also assigned the following errors: 1w ph1.t
THE RESPONDENT COURT ERRED IN RULING THAT THE PETITIONER IS NOT

ENTITLED TO CLAIM A PARTIAL REFUND OF THE SPECIFIC TAX PAID ON
MANUFACTURED OILS USED IN THE OPERATION OF ITS SAWMILL.
II
THE RESPONDENT COURT ERRED IN HOLDING THAT PETITIONER'S CLAIM

FOR REFUND OF THE SPECIFIC TAX PAID ON MANUFACTURED OILS USED
DURING THE PERIOD FROM 1 JANUARY 1963 TO 29 APRIL 1963 HAD
ALREADY PRESCRIBED.
III
THE RESPONDENT COURT ERRED IN ORDERING THE RESPONDENT

COMMISSIONER TO REFUND TO THE PETITIONER ONLY THE SUM OF
P10,560.20; INSTEAD, IT SHOULD HAVE ORDERED THE REFUND OF
P19,921.37 AS CLAIMED BY THE PETITIONER.
Appeal by the Commissioner
In the first assignment of error, the Commissioner contends that the first proviso in Section 5 of
Republic Act No. 1435 is unconstitutional. In claiming the unconstitutionality of the aforesaid section,
the Commissioner anchored its argument on Article VI, Section 21(l) of the 1935 Constitution which
provides:1wph1.t
No bill which may be enacted into a law shall embrace more than one subject which
shall be expressed in the title of the bill be
The title of R.A. No. 1435 is "An Act to Provide Means for Increasing The Highway Special Fund."
The Commissioner contends that the subject of R.A. No. 1435 was to increase Highway Special
Fund. However, Section 5 of, the Act deals with another subject which is the partial exemption of
miners and loggers. And tills partial exemption on which the Company based its claim for refund is
clearly not expressed in the title of the aforesaid Act. More importantly, Section 5 provides for a
decrease rather than an increase of the Highway Special Fund.
We find no merit in the argument. Republic Act No. 1435 deals with only one subject and proclaims
just one policy, namely, the necessity for increasing the Highway Special Fund through the
imposition of an increased specific tax on manufactured oils. The proviso Id. Section 5 of the law is
in effect a partial exemption from the imposed increased tax. Said proviso, which has reference to
specific tax on oil and fuel, is nor, a deviation from the general subject of the law. The primary
purpose of the aforequoted constitutional provision is to prohibit duplicity in legislation the title of
which might completely fail to apprise the legislators or the public of the nature, scope and
consequences of the law or its operation. 2 This does not seem to this Court to have been ignored in
the passage of Republic Act No. 1435 since, as the records of its proceedings bear out, a full debate
on precisely the issue of whether its title reflects its complete subject was held by Congress which
passed it. 3 Furthermore, in deciding the constitutionality of a statute alleged to be defectively titled,
every presumption favors the validity of the Act. As is true republic in cases presenting other
constitutional issues, the courts avoid declaring an Act unconstitutional whenever possible. Where
there is any doubt as to the insufficiency of either the title, or the Art, the legislation should be
sustained. 4 In the incident on hand, this Court does not even have any doubt.
As regards the second and third assignment of errors, the commissioner contends that the five-year
limitation period for partial refund of specific tax paid for oil and fuel used in agriculture and aviation
provided in Section 1 of Republic Act No. 1435 is also applicable to Section 5 of said Act which
grants partial refund of specific tax for oil used by miners or forest concessionaires. Such being the
case, the Commissioner said that the tax exemption already expired on June 14,1961.
The pertinent portion of Section 1 of Republic Act. No. 1435 provides: 1wph1.t
Section 1. Section one hundred and forty-two of the National Internal Revenue Code,
as amended, is further amended to read as follow:1wph1.t
Section 142: Specific tax on manufactured oils and other fuels. On
refined and manufactured mineral oils and motor fuels, there shall be
collected the following taxes: 1w ph1.t
(a) x x x
(b) x x x
(c) x x x
(d) x x x
Whenever any of the oils mentioned above are, during the five years
from June eighteen, nineteen hundred and fifty-two, used in
agriculture and aviation, fifty per centrum of the specific tax paid
thereon shall be refunded by the Commissioner of International
Ravenue upon submmission of the following:
1. A sworn affidavit of the producer and two disinterested persons proving that the
said oils were actually used in agriculture, or in lieu thereof.
2. Should the producers belong to any producers' association or federation, duly

registered with the Securities and Exchange Commission, the affidavit of the
president of tile association or federation, attesting to the fact that the oils were
actually used in agriculture.
Section 5 on the other hand provides: 1w ph1.t
Section 5. Provided, however, that whenever any oils mentioned above are used by
miners or forest concessionaires in their operations, twenty-five per centum of the
specific tax paid thereon shall be refunded by the Commissioner of Internal Revenue
upon submission of proof of actual use of oils and under similar conditions
enumerated in subparagraph one and two of section one hereof, amending section
one hundred forty-two of the National Internal Revenue Code: ... .
Based on the aforequoted provisions, it is very apparent that the partial refund of specific tax paid for
oils used in agriculture and aviation is limited to five years while there is no time limit for the partial
refund of specific tax paid for oils used by miners and forest concessionaires. We find no basis in
applying the limitation of the operative period provided for oils used in agriculture and aviation to the
provision on the refund to miners and forest concessionaires. It should be noted that Section 5
makes reference to subparagraphs 1 and 2 of Section 1 only for the purpose of prescribing the
procedure for refund. This express reference cannot be expanded in scope to include the limitation
of the period of refund. If the limitation of the period of refund of specific taxes paid on oils used in
aviation and agriculture is intended to cover similar taxes paid on oil used by miners and forest
concessionaires there would have been no need of dealing with oil used in mining and forest
concessions separately and Section 5 should very well have been included in Section 1 of Republic
Act No. 1435, notwithstanding the different rate of exemption.
Appeal by the Company

Anent the first assignment of error, the Company contends that by express provision of its timber
license, it is required to "maintain a modern sawmill or sawmills of sufficient capacity." Clearly, the
Company said, the operation of the sawmill is not merely incidental to the operation of the forest
concession but is indispensable thereto, or forms part thereof. Within the framework of the terms and
conditions of the timber License the cutting of timber and the processing of the felled logs by the
sawmill constitute one, continuous and integrated operation such that one cannot exists
independently of the other. The Company also relies on Section 5 of Republic Act No. 1435 wherein
it is provided that "whenever any oils ... are used by miners or forest concessionaires in
their operations, they shall be entitled to claim a refund of 25% of the specific tax paid on said oils."
The Company believes that the word operations include all activities of forest concessionaires which
are indispensable to, or required in, the exploitation of their forest concessions and not limited to
purely logging operations.
We agree with respondent court that the operation of sawmill is distinct from the operation of a forest
concessions. By the very nature of their operations, they are entirely two different business ventures.
It is very clear from the language of Section 5 that only miners or forest concessionaries are given
the privilege to claim the partial refund. Sawmill operators are excluded, because they need not be
forest concessionaires nor the latter, always are sawmill operators.
Where the provision of the law is clear and unambiguous. so that there is no occasion for the court's
seeking legislative intent, the law must be taken as it is, devoid of judicial addition or
subtraction. 5 Furthermore, the authorized partial refund under said section partakes of a nature of a
tax exemption and therefore it cannot be allowed unless granted in the most explicit and categorical
language. Well-settled is the rule that exemption from taxation is never presumed. For tax exemption
to be recognized, lie grant Trust be clear and express it cannot be made to rest on vague
implications. 6
As regards prescriptive period in claiming refund, it was ruled by respondent court that the
Company's cause of action for a partial refund of the specific tax paid on the oils used during the
period from January 1, 1963 to April 29, 1963, had already prescribed. In making such
pronouncement, respondent court relied on the doctrine laid down by tax Court in the case
of Commissioner of Internal Revenue vs. Insular Lumber Company 7 where The same Company
herein invoked the same Section 5 of Republic Act No. 1435 to claim partial refund on specific flax
paid on manufactured oils and fuels. This court, in dismissing the Company's claim for refund on the
ground of prescription, said that- in those cases where the tax sought to be refunded was illegally or
erroneously collected, the running of the two year prescriptive period provided for in Section 306 8 of
the National Internal Revenue Code starts from the date the tax was paid. But when the tax is legally
collected as in the present case. the two-year prescriptive period commences to run from the date of
occurrence of the supervening cause which gave rise to the right of refund. The supervening cause
in cases of this nature is the date of use of manufactured of and fuels. Thus, the Court said that
when the supervening cause happened in 1958 but the claim for refund was filed with the
Commissioner op- February 23, 1961 and the petition for review was filed in the Court of Tax
Appeals on February 17, 1962, but later dates being more than two years after 1958, the right to
claim refund of the tax paid has prescribed.
We agree with the respondent court. This Court has consistently adhered to the rule that the claim
for refund should first, be filed with the Commissioner of Internal Revenue, and the subsequent
appeal to the Court of Tax Appeals must be instituted, within the said two-year period. If, however,
the Commissioner takes time in deciding the claim, and the period of two years is about to end, the
suit of proceeding must be started in the Court of Tax Appeals before the end of the two year period
without awaiting the decision of the Commissioner. 9 In the present case, it will be dated that
although the claim for refund was filed with the Commissioner on December 22, 1964, the petition
for review was filed by the Company only on April 29, 1965 praying for the refund of specific tax
covering several period starting from January 1, 1963. As found by respondent court, portions of the
amount claimed by the Company were used during the period from January 1, 1963 to April 29,
1963. This Court is bound by said findings, the same being findings of fact. 10 Following, therefore,
the ruling in Commissioner of Internal Revenue vs. Insular Lumber Company, supra, We hold that
the Company is not entitled to the claim for refund for the oils used from January 1, 1963 to April 29,
1963, on the ground that the right to claim refund of the tax in question paid during the said periods
has prescribed, the petition for review having been filed with the respondent court only on April 29,
1965, which was beyond the two-year prescriptive period provided for in Section 306 of the Tax
Code.
WHEREFORE, judgment is hereby rendered affirming the decision of the Court of Tax Appeals. No
cost
SO ORDERED.
SECOND DIVISION
[G.R. No. 128448. February 1, 2001]
SPOUSES ALEJANDRO MIRASOL and LILIA E. MIRASOL, petitioners,

vs. THE COURT OF APPEALS, PHILIPPINE NATIONAL BANK,
and PHILIPPINE EXCHANGE CO., INC., respondents.
DECISION
QUISUMBING, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals dated July
22, 1996, in CA-G.R. CV No. 38607, as well as of its resolution of January 23, 1997, denying
petitioners motion for reconsideration. The challenged decision reversed the judgment of the
Regional Trial Court of Bacolod City, Branch 42 in Civil Case No. 14725.
The factual background of this case, as gleaned from the records, is as follows:
The Mirasols are sugarland owners and planters. In 1973-1974, they produced 70,501.08
piculs[1] of sugar, 25,662.36 of which were assigned for export. The following crop year, their
acreage planted to the same crop was lower, yielding 65,100 piculs of sugar, with 23,696.40
piculs marked for export.
Private respondent Philippine National Bank (PNB) financed the Mirasols sugar production
venture for crop years, 1973-1974 and 1974-1975 under a crop loan financing scheme. Under
said scheme, the Mirasols signed Credit Agreements, a Chattel Mortgage on Standing Crops, and
a Real Estate Mortgage in favor of PNB. The Chattel Mortgage empowered PNB as the
petitioners attorney-in-fact to negotiate and to sell the latters sugar in both domestic and export
markets and to apply the proceeds to the payment of their obligations to it.
Exercising his law-making powers under Martial Law, then President Ferdinand Marcos
issued Presidential Decree (P.D.) No. 579[2] in November, 1974. The decree authorized private
respondent Philippine Exchange Co., Inc. (PHILEX) to purchase sugar allocated for export to the
United States and to other foreign markets. The price and quantity was determined by the Sugar
Quota Administration, PNB, the Department of Trade and Industry, and finally, by the Office of
the President. The decree further authorized PNB to finance PHILEXs purchases. Finally, the
decree directed that whatever profit PHILEX might realize from sales of sugar abroad was to be
remitted to a special fund of the national government, after commissions, overhead expenses and
liabilities had been deducted. The government offices and entities tasked by existing laws and
administrative regulations to oversee the sugar export pegged the purchase price of export sugar
in crop years 1973-1974 and 1974-1975 at P180.00 per picul.
PNB continued to finance the sugar production of the Mirasols for crop years 1975-1976
and 1976-1977. These crop loans and similar obligations were secured by real estate mortgages
over several properties of the Mirasols and chattel mortgages over standing crops. Believing that
the proceeds of their sugar sales to PNB, if properly accounted for, were more than enough to
pay their obligations, petitioners asked PNB for an accounting of the proceeds of the sale of their
export sugar. PNB ignored the request. Meanwhile, petitioners continued to avail of other loans
from PNB and to make unfunded withdrawals from their current accounts with said bank. PNB
then asked petitioners to settle their due and demandable accounts. As a result of these demands
for payment, petitioners on August 4, 1977, conveyed to PNB real properties valued
at P1,410,466.00 by way of dacion en pago, leaving an unpaid overdrawn account
of P1,513,347.78.
On August 10, 1982, the balance of outstanding sugar crop and other loans owed by
petitioners to PNB stood at P15,964,252.93. Despite demands, the Mirasols failed to settle said
due and demandable accounts. PNB then proceeded to extrajudicially foreclose the mortgaged
properties. After applying the proceeds of the auction sale of the mortgaged realties, PNB still
had a deficiency claim of P12,551,252.93.
Petitioners continued to ask PNB to account for the proceeds of the sale of their export sugar
for crop years 1973-1974 and 1974-1975, insisting that said proceeds, if properly liquidated,
could offset their outstanding obligations with the bank. PNB remained adamant in its stance that
under P.D. No. 579, there was nothing to account since under said law, all earnings from the
export sales of sugar pertained to the National Government and were subject to the disposition of
the President of the Philippines for public purposes.
On August 9, 1979, the Mirasols filed a suit for accounting, specific performance, and
damages against PNB with the Regional Trial Court of Bacolod City, docketed as Civil Case No.
14725.
On June 16, 1987, the complaint was amended to implead PHILEX as party-defendant.
The parties agreed at pre-trial to limit the issues to the following:
1. The constitutionality and/or legality of Presidential Decrees numbered 338, 579,

and 1192;
2. The determination of the total amount allegedly due the plaintiffs from the
defendants corresponding to the allege(d) unliquidated cost price of export sugar
during crop years 1973-1974 and 1974-1975.[3]
After trial on the merits, the trial court decided as follows:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered in

favor of the plaintiffs and against the defendants Philippine National Bank (PNB) and
Philippine Exchange Co., Inc. (PHILEX):
(1)Declaring Presidential Decree 579 enacted on November 12, 1974 and all circulars, as well
as policies, orders and other issuances issued in furtherance thereof, unconstitutional and
therefore, NULL and VOID being in gross violation of the Bill of Rights;
(2) Ordering defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the whole
amount corresponding to the residue of the unliquidated actual cost price of 25,662 piculs in
export sugar for crop year 1973-1974 at an average price of P300.00 per picul, deducting
therefrom however, the amount of P180.00 already paid in advance plus the allowable
deductions in service fees and other charges;
(3) And also, for the same defendants to pay, jointly and severally, same plaintiffs the whole
amount corresponding to the unpaid actual price of 14,596 piculs of export sugar for crop
year 1974-1975 at an average rate of P214.14 per picul minus however, the sum of P180.00
per picul already paid by the defendants in advance and the allowable deducting (sic) in
service fees and other charges.
The unliquidated amount of money due the plaintiffs but withheld by the defendants,
shall earn the legal rate of interest at 12% per annum computed from the date this
action was instituted until fully paid; and, finally
(4) Directing the defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the sum
of P50,000.00 in moral damages and the amount of P50,000.00 as attorneys fees, plus the
costs of this litigation.
SO ORDERED.[4]
The same was, however, modified by a Resolution of the trial court dated May 14, 1992,
which added the following paragraph:
This decision should however, be interpreted without prejudice to whatever benefits

that may have accrued in favor of the plaintiffs with the passage and approval of
Republic Act 7202 otherwise known as the Sugar Restitution Law, authorizing the
restitution of losses suffered by the plaintiffs from Crop year 1974-1975 to Crop year
1984-1985 occasioned by the actuations of government-owned and controlled
agencies. (Underscoring in the original).
SO ORDERED.[5]
The Mirasols then filed an appeal with the respondent court, docketed as CA-G.R. CV No.
38607, faulting the trial court for not nullifying the dacion en pagoand the mortgage contracts, as
well as the foreclosure of their mortgaged properties. Also faulted was the trial courts failure to
award them the full money claims and damages sought from both PNB and PHILEX.
On July 22, 1996, the Court of Appeals reversed the trial court as follows:
WHEREFORE, this Court renders judgment REVERSING the appealed Decision and
entering the following verdict:
1. Declaring the dacion en pago and the foreclosure of the mortgaged properties valid;
2. Ordering the PNB to render an accounting of the sugar account of the Mirasol[s]
specifically stating the indebtedness of the latter to the former and the proceeds of
Mirasols 1973-1974 and 1974-1975 sugar production sold pursuant to and in
accordance with P.D. 579 and the issuances therefrom;
3. Ordering the PNB to recompute in accordance with RA 7202 Mirasols indebtedness

to it crediting to the latter payments already made as well as the auction price of their
foreclosed real estate and stipulated value of their properties ceded to PNB in
the dacon (sic) en pago;
4. Whatever the result of the recomputation of Mirasols account, the outstanding

balance or the excess payment shall be governed by the pertinent provisions of RA
7202.
SO ORDERED.[6]
On August 28, 1996, petitioners moved for reconsideration, which the appellate court denied
on January 23, 1997.
Hence, the instant petition, with petitioners submitting the following issues for our
resolution:
1. Whether the Trial Court has jurisdiction to declare a statute unconstitutional

without notice to the Solicitor General where the parties have agreed to submit such
issue for the resolution of the Trial Court.
2. Whether PD 579 and subsequent issuances[7] thereof are unconstitutional.
3. Whether the Honorable Court of Appeals committed manifest error in not applying
the doctrine of piercing the corporate veil between respondents PNB and PHILEX.
4. Whether the Honorable Court of Appeals committed manifest error in upholding

the validity of the foreclosure on petitioners property and in upholding the validity of
the dacion en pago in this case.
5. Whether the Honorable Court of Appeals committed manifest error in not awarding
damages to petitioners grounds relied upon the allowance of the petition.
(Underscored in the original)[8]
On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction
to consider the constitutionality of a statute, presidential decree, or executive order.[9] The
Constitution vests the power of judicial review or the power to declare a law, treaty, international
or executive agreement, presidential decree, order, instruction, ordinance, or regulation not only
in this Court, but in all Regional Trial Courts.[10] In J.M. Tuason and Co. v. Court of Appeals, 3
SCRA 696 (1961) we held:
Plainly, the Constitution contemplates that the inferior courts should have jurisdiction
in cases involving constitutionality of any treaty or law, for it speaks of appellate
review of final judgments of inferior courts in cases where such constitutionality
happens to be in issue.[11]
Furthermore, B.P. Blg. 129 grants Regional Trial Courts the authority to rule on the
conformity of laws or treaties with the Constitution, thus:
SECTION 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigations is incapable of pecuniary
estimation;
The pivotal issue, which we must address, is whether it was proper for the trial court to have
exercised judicial review.
Petitioners argue that the Court of Appeals erred in finding that it was improper for the trial
court to have declared P.D. No. 579[12] unconstitutional, since petitioners had not complied with
Rule 64, Section 3, of the Rules of Court. Petitioners contend that said Rule specifically refers
only to actions for declaratory relief and not to an ordinary action for accounting, specific
performance, and damages.
Petitioners contentions are bereft of merit. Rule 64, Section 3 of the Rules of Court provides:
SEC. 3. Notice to Solicitor General. In any action which involves the validity of a
statute, or executive order or regulation, the Solicitor General shall be notified by the
party attacking the statute, executive order, or regulation, and shall be entitled to be
heard upon such question.
This should be read in relation to Section 1 [c] of P.D. No. 478,[13] which states in part:
SECTION 1. Functions and Organizations (1) The Office of the Solicitor General
shallhave the following specific powers and functions:
xxx
[c] Appear in any court in any action involving the validity of any treaty, law,
executive order or proclamation, rule or regulation when in his judgment his
intervention is necessary or when requested by the court.
It is basic legal construction that where words of command such as shall, must, or ought are
employed, they are generally and ordinarily regarded as mandatory.[14] Thus, where, as in Rule
64, Section 3 of the Rules of Court, the word shall is used, a mandatory duty is imposed, which
the courts ought to enforce.
The purpose of the mandatory notice in Rule 64, Section 3 is to enable the Solicitor General
to decide whether or not his intervention in the action assailing the validity of a law or treaty is
necessary. To deny the Solicitor General such notice would be tantamount to depriving him of
his day in court. We must stress that, contrary to petitioners stand, the mandatory notice
requirement is not limited to actions involving declaratory relief and similar remedies. The rule
itself provides that such notice is required in any action and not just actions involving declaratory
relief. Where there is no ambiguity in the words used in the rule, there is no room for
construction.[15] In all actions assailing the validity of a statute, treaty, presidential decree, order,
or proclamation, notice to the Solicitor General is mandatory.
In this case, the Solicitor General was never notified about Civil Case No. 14725. Nor did
the trial court ever require him to appear in person or by a representative or to file any pleading
or memorandum on the constitutionality of the assailed decree. Hence, the Court of Appeals did
not err in holding that lack of the required notice made it improper for the trial court to pass upon
the constitutional validity of the questioned presidential decrees.
As regards the second issue, petitioners contend that P.D. No. 579 and its implementing
issuances are void for violating the due process clause and the prohibition against the taking of
private property without just compensation. Petitioners now ask this Court to exercise its power
of judicial review.
Jurisprudence has laid down the following requisites for the exercise of this power: First,
there must be before the Court an actual case calling for the exercise of judicial review. Second,
the question before the Court must be ripe for adjudication. Third, the person challenging the
validity of the act must have standing to challenge. Fourth, the question of constitutionality must
have been raised at the earliest opportunity, and lastly, the issue of constitutionality must be the
very lis motaof the case. [16]
As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be
settled on other grounds.[17] The policy of the courts is to avoid ruling on constitutional questions
and to presume that the acts of the political departments are valid, absent a clear and
unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the
doctrine of separation of powers. This means that the measure had first been carefully studied by
the legislative and executive departments and found to be in accord with the Constitution before
it was finally enacted and approved.[18]
The present case was instituted primarily for accounting and specific performance. The
Court of Appeals correctly ruled that PNBs obligation to render an accounting is an issue, which
can be determined, without having to rule on the constitutionality of P.D. No. 579. In fact there is
nothing in P.D. No. 579, which is applicable to PNBs intransigence in refusing to give an
accounting. The governing law should be the law on agency, it being undisputed that PNB acted
as petitioners agent. In other words, the requisite that the constitutionality of the law in question
be the very lis mota of the case is absent. Thus we cannot rule on the constitutionality of P.D.
No. 579.
Petitioners further contend that the passage of R.A. No. 7202[19] rendered P.D. No. 579
unconstitutional, since R.A. No. 7202 affirms that under P.D. 579, the due process clause of the
Constitution and the right of the sugar planters not to be deprived of their property without just
compensation were violated.
A perusal of the text of R.A. No. 7202 shows that the repealing clause of said law merely
reads:
SEC. 10. All laws, acts, executive orders and circulars in conflict herewith are hereby
repealed or modified accordingly.
The settled rule of statutory construction is that repeals by implication are not
favored.[20] R.A. No. 7202 cannot be deemed to have repealed P.D. No. 579. In addition, the
power to declare a law unconstitutional does not lie with the legislature, but with the
courts.[21] Assuming arguendo that R.A. No. 7202 did indeed repeal P.D. No. 579, said repeal is
not a legislative declaration finding the earlier law unconstitutional.
To resolve the third issue, petitioners ask us to apply the doctrine of piercing the veil of
corporate fiction with respect to PNB and PHILEX. Petitioners submit that PHILEX was a
wholly-owned subsidiary of PNB prior to the latters privatization.
We note, however, that the appellate court made the following finding of fact:
1. PNB and PHILEX are separate juridical persons and there is no reason to pierce the
veil of corporate personality. Both existed by virtue of separate organic acts. They had
separate operations and different purposes and powers.[22]
Findings of fact by the Court of Appeals are conclusive and binding upon this Court unless
said findings are not supported by the evidence.[23] Our jurisdiction in a petition for review under
Rule 45 of the Rules of Court is limited only to reviewing questions of law and factual issues are
not within its province.[24] In view of the aforequoted finding of fact, no manifest error is
chargeable to the respondent court for refusing to pierce the veil of corporate fiction.
On the fourth issue, the appellate court found that there were two sets of accounts between
petitioners and PNB, namely:
1. The accounts relative to the loan financing scheme entered into by the Mirasols
with PNB (PNBs Brief, p. 16) On the question of how much the PNB lent the
Mirasols for crop years 1973-1974 and 1974-1975, the evidence recited by the lower
court in its decision was deficient. We are offered (sic) PNB the amount of FIFTEEN
MILLION NINE HUNDRED SIXTY FOUR THOUSAND TWO HUNDRED FIFTY
TWO PESOS and NINETY THREE Centavos (Ps15,964,252.93) but this is the
alleged balance the Mirasols owe PNB covering the years 1975 to 1982.
2. The account relative to the Mirasols current account Numbers 5186 and 5177
involving the amount of THREE MILLION FOUR HUNDRED THOUSAND Pesos
(P3,400,000.00) PNB claims against the Mirasols. (PNBs Brief, p. 17)
In regard to the first set of accounts, besides the proceeds from PNBs sale of sugar
(involving the defendant PHILEX in relation to the export portion of the stock), the
PNB foreclosed the Mirasols mortgaged properties realizing therefrom in 1982
THREE MILLION FOUR HUNDRED THIRTEEN THOUSAND Pesos
(P3,413,000.00), the PNB itself having acquired the properties as the highest bidder.
As to the second set of accounts, PNB proposed, and the Mirasols accepted,
a dacion en pago scheme by which the Mirasols conveyed to PNB pieces of property
valued at ONE MILLION FOUR HUNDRED TEN THOUSAND FOUR HUNDRED
SIXTY-SIX Pesos (Ps1,410,466.00) (PNBs Brief, pp. 16-17).[25]
Petitioners now claim that the dacion en pago and the foreclosure of their mortgaged
properties were void for want of consideration. Petitioners insist that the loans granted them by
PNB from 1975 to 1982 had been fully paid by virtue of legal compensation. Hence, the
foreclosure was invalid and of no effect, since the mortgages were already fully discharged. It is
also averred that they agreed to the dacion only by virtue of a martial law Arrest, Search, and
Seizure Order (ASSO).
We find petitioners arguments unpersuasive. Both the lower court and the appellate court
found that the Mirasols admitted that they were indebted to PNB in the sum stated in the latters
counterclaim.[26] Petitioners nonetheless insist that the same can be offset by the unliquidated
amounts owed them by PNB for crop years 1973-74 and 1974-75. Petitioners argument has no
basis in law. For legal compensation to take place, the requirements set forth in Articles 1278
and 1279 of the Civil Code must be present. Said articles read as follows:
Art. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated;
(3) That the two debts are due;
(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtor.
In the present case, set-off or compensation cannot take place between the parties because:
First, neither of the parties are mutually creditors and debtors of each other. Under P.D. No.
579, neither PNB nor PHILEX could retain any difference claimed by the Mirasols in the price
of sugar sold by the two firms. P.D. No. 579 prescribed where the profits from the sales are to be
paid, to wit:
SECTION 7. x x x After deducting its commission of two and one-half (2-1/2%)

percent of gross sales, the balance of the proceeds of sugar trading operations for
every crop year shall be set aside by the Philippine Exchange Company, Inc,. as
profits which shall be paid to a special fund of the National Government subject to the
disposition of the President for public purposes.
Thus, as correctly found by the Court of Appeals, there was nothing with which PNB was
supposed to have off-set Mirasols admitted indebtedness.[27]
Second, compensation cannot take place where one claim, as in the instant case, is still the
subject of litigation, as the same cannot be deemed liquidated.[28]
With respect to the duress allegedly employed by PNB, which impugned petitioners consent
to the dacion en pago, both the trial court and the Court of Appeals found that there was no
evidence to support said claim. Factual findings of the trial court, affirmed by the appellate court,
are conclusive upon this Court.[29]
On the fifth issue, the trial court awarded petitioners P50,000.00 in moral damages
and P50,000.00 in attorneys fees. Petitioners now theorize that it was error for the Court of
Appeals to have deleted these awards, considering that the appellate court found PNB breached
its duty as an agent to render an accounting to petitioners.
An agents failure to render an accounting to his principal is contrary to Article 1891 of the
Civil Code.[30] The erring agent is liable for damages under Article 1170 of the Civil Code, which
states:
Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for
damages.
Article 1170 of the Civil Code, however, must be construed in relation to Article 2217 of
said Code which reads:
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendants wrongful act or omission.
Moral damages are explicitly authorized in breaches of contract where the defendant acted
fraudulently or in bad faith.[31] Good faith, however, is always presumed and any person who
seeks to be awarded damages due to the acts of another has the burden of proving that the latter
acted in bad faith, with malice, or with ill motive. In the instant case, petitioners have failed to
show malice or bad faith[32] on the part of PNB in failing to render an accounting. Absent such
showing, moral damages cannot be awarded.
Nor can we restore the award of attorneys fees and costs of suit in favor of petitioners.
Under Article 2208 (5) of the Civil Code, attorneys fees are allowed in the absence of stipulation
only if the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just, and demandable claim. As earlier stated, petitioners have not proven bad faith
on the part of PNB and PHILEX.
WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent
court in CA-G.R. CV 38607 AFFIRMED. Costs against petitioners.
SO ORDERED.
EN BANC
[G.R. No. 147387. December 10, 2003]
RODOLFO C. FARIAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO,

and AGAPITO A. AQUINO, AS MEMBERS OF THE HOUSE OF
REPRESENTATIVES AND ALSO AS TAXPAYERS, IN THEIR OWN
BEHALF AND IN REPRESENTATION OF THE MEMBERS OF THE
MINORITY IN THE HOUSE OF REPRESENTATIVES, petitioners,
vs. THE EXECUTIVE SECRETARY, COMMISSION ON
ELECTIONS, HON. FELICIANO R. BELMONTE, JR., SECRETARY
OF THE INTERIOR AND LOCAL GOVERNMENT, SECRETARY OF
THE SENATE, AND SECRETARY GENERAL OF THE HOUSE OF
REPRESENTATIVES, respondents.
[G.R. No. 152161. December 10, 2003]
CONG. GERRY A. SALAPUDDIN, petitioner, vs. COMMISSION ON

ELECTIONS, respondent.
DECISION
CALLEJO, SR., J.:
Before the Court are two Petitions under Rule 65 of the Rules of Court, as
amended, seeking to declare as unconstitutional Section 14 of Republic Act
No. 9006 (The Fair Election Act), insofar as it expressly repeals Section 67
of Batas Pambansa Blg. 881 (The Omnibus Election Code) which provides:
SEC. 67. Candidates holding elective office. Any elective official, whether national or
local, running for any office other than the one which he is holding in a permanent
capacity, except for President and Vice-President, shall be considered ipso
facto resigned from his office upon the filing of his certificate of candidacy.
The petition for certiorari and prohibition in G.R. No. 147387 was filed by
Rodolfo C. Farias, Manuel M. Garcia, Francis G. Escudero and Agapito A.
Aquino. At the time of filing of the petition, the petitioners were members of
the minority bloc in the House of Representatives.Impleaded as respondents
are: the Executive Secretary, then Speaker of the House of Representatives
Feliciano R. Belmonte, Jr., the Commission on Elections, the Secretary of the
Department of the Interior and Local Government (DILG), the Secretary of the
Senate and the Secretary General of the House of Representatives.
The petition for prohibition in G.R. No. 152161 was filed by Gerry A.
Salapuddin, then also a member of the House of Representatives.Impleaded
as respondent is the COMELEC.
Legislative History of Republic Act No. 9006
Rep. Act No. 9006, entitled An Act to Enhance the Holding of Free,
Orderly, Honest, Peaceful and Credible Elections through Fair Election
Practices, is a consolidation of the following bills originating from the House of
Representatives and the Senate, respectively:
House Bill (HB) No. 9000 entitled AN ACT ALLOWING THE USE OF MASS
MEDIA FOR ELECTION PROPAGANDA, AMENDING FOR THE PURPOSE
BATAS PAMBANSA BILANG 881, OTHERWISE KNOWN AS THE OMNIBUS
ELECTION CODE, AS AMENDED, AND FOR OTHER PURPOSES; [1]
Senate Bill (SB) No. 1742 entitled AN ACT TO ENHANCE THE HOLDING OF
FREE, ORDERLY, HONEST, PEACEFUL, AND CREDIBLE ELECTIONS
THROUGH FAIR ELECTION PRACTICES. [2]
A Bicameral Conference Committee, composed of eight members of the

Senate and sixteen (16) members of the House of Representatives, was
[3] [4]
formed to reconcile the conflicting provisions of the House and Senate

versions of the bill.
On November 29, 2000, the Bicameral Conference Committee submitted
its Report, signed by its members, recommending the approval of the bill as
[5]
reconciled and approved by the conferees.

During the plenary session of the House of Representatives on February
5, 2001, Rep. Jacinto V. Paras proposed an amendment to the Bicameral
Conference Committee Report. Rep. Didagen P. Dilangalen raised a point of
order commenting that the House could no longer submit an amendment
thereto. Rep. Sergio A.F. Apostol thereupon moved that the House return the
report to the Bicameral Conference Committee in view of the proposed
amendment thereto. Rep. Dilangalen expressed his objection to the
proposal. However, upon viva vocevoting, the majority of the House approved
the return of the report to the Bicameral Conference Committee for proper
action.
[6]
In view of the proposed amendment, the House of Representatives

elected anew its conferees to the Bicameral Conference Committee. Then
[7] [8]
again, for unclear reasons, upon the motion of Rep. Ignacio R. Bunye, the
House elected another set of conferees to the Bicameral Conference
[9]
Committee. [10]
On February 7, 2001, during the plenary session of the House of

Representatives, Rep. Bunye moved that the House consider the Bicameral
Conference Committee Report on the contrasting provisions of HB No. 9000
and SB No. 1742. Rep. Dilangalen observed that the report had been
recommitted to the Bicameral Conference Committee. The Chair responded
that the Bicameral Conference Report was a new one, and was a result of the
reconvening of a new Bicameral Conference Committee. Rep. Dilangalen
then asked that he be given time to examine the new report. Upon motion of
Rep. Apostol, the House deferred the approval of the report until the other
members were given a copy thereof. [11]
After taking up other pending matters, the House proceeded to vote on the
Bicameral Conference Committee Report on the disagreeing provisions of HB
No. 9000 and SB No. 1742. The House approved the report with 125
affirmative votes, 3 negative votes and no abstention. In explaining their
negative votes, Reps. Farias and Garcia expressed their belief that Section 14
thereof was a rider. Even Rep. Escudero, who voted in the affirmative,
expressed his doubts on the constitutionality of Section 14. Prior to casting his
vote, Rep. Dilangalen observed that no senator signed the Bicameral
Conference Committee Report and asked if this procedure was regular. [12]
On the same day, the Senate likewise approved the Bicameral

Conference Committee Report on the contrasting provisions of SB No. 1742
and HB No. 9000.
Thereafter, Rep. Act No. 9006 was duly signed by then Senate President
Aquilino Pimentel, Jr. and then Speaker of the House of Representatives
Feliciano R. Belmonte, Jr. and was duly certified by the Secretary of the
Senate Lutgardo B. Barbo and the Secretary General of the House of
Representatives Robert P. Nazareno as the consolidation of House Bill No.
9000 and Senate Bill No. 1742, and finally passed by both Houses on
February 7, 2001.
President Gloria Macapagal-Arroyo signed Rep. Act No. 9006 into law
on February 12, 2001.
The Petitioners Case
The petitioners now come to the Court alleging in the main that Section 14
of Rep. Act No. 9006, insofar as it repeals Section 67 of the Omnibus Election
Code, is unconstitutional for being in violation of Section 26(1), Article VI of
the Constitution, requiring every law to have only one subject which should be
expressed in its title.
According to the petitioners, the inclusion of Section 14 repealing Section
67 of the Omnibus Election Code in Rep. Act No. 9006 constitutes a
proscribed rider. They point out the dissimilarity in the subject matter of Rep.
Act No. 9006, on the one hand, and Section 67 of the Omnibus Election Code,
on the other. Rep. Act No. 9006 primarily deals with the lifting of the ban on
the use of media for election propaganda and the elimination of unfair election
practices, while Section 67 of the Omnibus Election Code imposes a limitation
on elective officials who run for an office other than the one they are holding in
a permanent capacity by considering them as ipso facto resigned therefrom
upon filing of the certificate of candidacy. The repeal of Section 67 of the
Omnibus Election Code is thus not embraced in the title, nor germane to the
subject matter of Rep. Act No. 9006.
The petitioners also assert that Section 14 of Rep. Act No. 9006 violates
the equal protection clause of the Constitution because it repeals Section 67
only of the Omnibus Election Code, leaving intact Section 66 thereof which
imposes a similar limitation to appointive officials, thus:
SEC. 66. Candidates holding appointive office or position. Any person holding a
public appointive office or position, including active members of the Armed Forces of
the Philippines, and officers and employees in government-owned or controlled
corporations, shall be considered ipso facto resigned from his office upon the filing of
his certificate of candidacy.
They contend that Section 14 of Rep. Act No. 9006 discriminates against
appointive officials. By the repeal of Section 67, an elective official who runs
for office other than the one which he is holding is no longer considered ipso
facto resigned therefrom upon filing his certificate of candidacy. Elective
officials continue in public office even as they campaign for reelection or
election for another elective position. On the other hand, Section 66 has been
retained; thus, the limitation on appointive officials remains - they are still
considered ipso facto resigned from their offices upon the filing of their
certificates of candidacy.
The petitioners assert that Rep. Act No. 9006 is null and void in its entirety
as irregularities attended its enactment into law. The law, not only Section 14
thereof, should be declared null and void. Even Section 16 of the law which
provides that [t]his Act shall take effect upon its approval is a violation of the
due process clause of the Constitution, as well as jurisprudence, which
require publication of the law before it becomes effective.
Finally, the petitioners maintain that Section 67 of the Omnibus Election
Code is a good law; hence, should not have been repealed. The petitioners
cited the ruling of the Court in Dimaporo v. Mitra, Jr., that Section 67 of the
[13]
Omnibus Election Code is based on the constitutional mandate on the

Accountability of Public Officers: [14]
Sec. 1. Public office is a public trust. Public officers and employees must at all times
be accountable to the people, serve them with utmost responsibility, integrity, loyalty
and efficiency, act with patriotism and justice, and lead modest lives.
Consequently, the respondents Speaker and Secretary General of the

House of Representatives acted with grave abuse of discretion amounting to
excess or lack of jurisdiction for not considering those members of the House
who ran for a seat in the Senate during the May 14, 2001 elections as ipso
facto resigned therefrom, upon the filing of their respective certificates of
candidacy.
The Respondents Arguments
For their part, the respondents, through the Office of the Solicitor General,
urge this Court to dismiss the petitions contending, preliminarily, that the
petitioners have no legal standing to institute the present suit. Except for the
fact that their negative votes were overruled by the majority of the members of
the House of Representatives, the petitioners have not shown that they have
suffered harm as a result of the passage of Rep. Act No. 9006. Neither do
petitioners have any interest as taxpayers since the assailed statute does not
involve the exercise by Congress of its taxing or spending power.
Invoking the enrolled bill doctrine, the respondents refute the petitioners
allegations that irregularities attended the enactment of Rep. Act No.
9006. The signatures of the Senate President and the Speaker of the House,
appearing on the bill and the certification signed by the respective Secretaries
of both houses of Congress, constitute proof beyond cavil that the bill was
duly enacted into law.
The respondents contend that Section 14 of Rep. Act No. 9006, as it
repeals Section 67 of the Omnibus Election Code, is not a proscribed rider nor
does it violate Section 26(1) of Article VI of the Constitution. The title of Rep.
Act No. 9006, An Act to Enhance the Holding of Free, Orderly, Honest,
Peaceful and Credible Elections through Fair Election Practices, is so broad
that it encompasses all the processes involved in an election exercise,
including the filing of certificates of candidacy by elective officials.
They argue that the repeal of Section 67 is germane to the general subject
of Rep. Act No. 9006 as expressed in its title as it eliminates the effect of
prematurely terminating the term of an elective official by his filing of a
certificate of candidacy for an office other than the one which he is
permanently holding, such that he is no longer considered ipso facto resigned
therefrom. The legislature, by including the repeal of Section 67 of the
Omnibus Election Code in Rep. Act No. 9006, has deemed it fit to remove the
unfairness of considering an elective official ipso factoresigned from his office
upon the filing of his certificate of candidacy for another elective office. With
the repeal of Section 67, all elective officials are now placed on equal footing
as they are allowed to finish their respective terms even if they run for any
office, whether the presidency, vice-presidency or other elective positions,
other than the one they are holding in a permanent capacity.
The respondents assert that the repeal of Section 67 of the Omnibus
Election Code need not be expressly stated in the title of Rep. Act No. 9006
as the legislature is not required to make the title of the act a complete index
of its contents. It must be deemed sufficient that the title be comprehensive
enough reasonably to include the general subject which the statute seeks to
effect without expressing each and every means necessary for its
accomplishment. Section 26(1) of Article VI of the Constitution merely calls for
all the parts of an act relating to its subject to find expression in its title. Mere
details need not be set forth.
According to the respondents, Section 14 of Rep. Act No. 9006, insofar as
it repeals Section 67, leaving Section 66 of the Omnibus Election Code intact
and effective, does not violate the equal protection clause of the
Constitution. Section 67 pertains to elective officials while Section 66 pertains
to appointive officials. A substantial distinction exists between these two sets
of officials; elective officials occupy their office by virtue of their mandate
based upon the popular will, while the appointive officials are not elected by
popular will. The latter cannot, therefore, be similarly treated as the
former. Equal protection simply requires that all persons or things similarly
situated are treated alike, both as to rights conferred and responsibilities
imposed.
Further, Section 16, or the Effectivity clause, of Rep. Act No. 9006 does
not run afoul of the due process clause of the Constitution as it does not entail
any arbitrary deprivation of life, liberty and property. Specifically, the section
providing for penalties in cases of violations thereof presume that the
formalities of the law would be observed, i.e., charges would first be filed, and
the accused would be entitled to a hearing before judgment is rendered by a
court having jurisdiction. In any case, the issue about lack of due process is
premature as no one has, as yet, been charged with violation of Rep. Act No.
9006.
Finally, the respondents submit that the respondents Speaker and
Secretary General of the House of Representatives did not commit grave
abuse of discretion in not excluding from the Rolls those members thereof
who ran for the Senate during the May 14, 2001 elections. These respondents
merely complied with Rep. Act No. 9006, which enjoys the presumption of
validity until declared otherwise by the Court.
The Courts Ruling
Before resolving the petitions on their merits, the Court shall first rule on
the procedural issue raised by the respondents, i.e., whether the petitioners
have the legal standing or locus standi to file the petitions at bar.
The petitions were filed by the petitioners in their capacities as members
of the House of Representatives, and as taxpayers and registered voters.
Generally, a party who impugns the validity of a statute must have a
personal and substantial interest in the case such that he has sustained, or
will sustain, direct injury as a result of its enforcement. The rationale for
[15]
requiring a party who challenges the constitutionality of a statute to allege

such a personal stake in the outcome of the controversy is to assure that
concrete adverseness which sharpens the presentation of issues upon which
the court so largely depends for illumination of difficult constitutional
questions.[16]
However, being merely a matter of procedure, this Court, in several cases

involving issues of overarching significance to our society, had adopted a
[17]
liberal stance on standing. Thus, in Tatad v. Secretary of the Department of

Energy, this Court brushed aside the procedural requirement of standing,
[18]
took cognizance of, and subsequently granted, the petitions separately filed
by then Senator Francisco Tatad and several members of the House of
Representatives assailing the constitutionality of Rep. Act No. 8180 (An Act
Deregulating the Downstream Oil Industry and For Other Purposes).
The Court likewise took cognizance of the petition filed by then members
of the House of Representatives which impugned as unconstitutional the
validity of a provision of Rep. Act No. 6734 (Organic Act for the Autonomous
Region in Muslim Mindanao) in Chiongbian v. Orbos. Similarly, the Court
[19]
took cognizance of the petition filed by then members of the Senate, joined by
other petitioners, which challenged the validity of Rep. Act No. 7716
(Expanded Value Added Tax Law) in Tolentino v. Secretary of Finance. [20]
Members of Congress, such as the petitioners, were likewise allowed by

this Court to challenge the validity of acts, decisions, rulings, or orders of
various government agencies or instrumentalities in Del Mar v. Philippine
Amusement and Gaming Corporation, Kilosbayan, Inc. v. Guingona,
[21]
Jr., Philippine
[22]
Constitution Association v. Enriquez, Albano v.
[23]
Reyes, and Bagatsing v. Committee on Privatization.

[24] [25]
Certainly, the principal issue posed by the petitions, i.e., whether Section
67 of the Omnibus Election Code, which this Court had declared
in Dimaporo as deriving its existence from the constitutional provision on
[26]
accountability of public officers, has been validly repealed by Section 14 of

Rep. Act No. 9006, is one of overarching significance that justifies this Courts
adoption of a liberal stance vis--vis the procedural matter on
standing. Moreover, with the national elections barely seven months away, it
behooves the Court to confront the issue now and resolve the same
forthrightly. The following pronouncement of the Court is quite apropos:
... All await the decision of this Court on the constitutional question. Considering,
therefore, the importance which the instant case has assumed and to prevent
multiplicity of suits, strong reasons of public policy demand that [its] constitutionality
. . . be now resolved. It may likewise be added that the exceptional character of the
situation that confronts us, the paramount public interest, and the undeniable necessity
for a ruling, the national elections beings barely six months away, reinforce our
stand. [27]
Every statute is presumed valid. The presumption is that the legislature

[28]
intended to enact a valid, sensible and just law and one which operates no
further than may be necessary to effectuate the specific purpose of the law. [29]
It is equally well-established, however, that the courts, as guardians of the
Constitution, have the inherent authority to determine whether a statute
enacted by the legislature transcends the limit imposed by the fundamental
law. And where the acts of the other branches of government run afoul of the
[30]
Constitution, it is the judiciarys solemn and sacred duty to nullify the same. [31]
Proceeding from these guideposts, the Court shall now resolve the
substantial issues raised by the petitions.
Section 14 of Rep. Act

No. 9006 Is Not a Rider [32]
At the core of the controversy is Section 14, the repealing clause of Rep.
Act No. 9006, which provides:
Sec. 14. Sections 67 and 85 of the Omnibus Election Code (Batas Pambansa Blg. 881)
and Sections 10 and 11 of Republic Act No. 6646 are hereby repealed. As a
consequence, the first proviso in the third paragraph of Section 11 of Republic Act
No. 8436 is rendered ineffective. All laws, presidential decrees, executive orders,
rules and regulations, or any part thereof inconsistent with the provisions of this Act
are hereby repealed or modified or amended accordingly.
The repealed provision, Section 67 of the Omnibus Election Code, quoted

earlier, reads:
SEC. 67. Candidates holding elective office. Any elective official, whether national or
local, running for any office other than the one which he is holding in a permanent
capacity, except for President and Vice-President, shall be considered ipso
facto resigned from his office upon the filing of his certificate of candidacy.
Section 26(1), Article VI of the Constitution provides:
SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject which
shall be expressed in the title thereof.
The proscription is aimed against the evils of the so-called omnibus bills
and log-rolling legislation as well as surreptitious and/or unconsidered
encroaches. The provision merely calls for all parts of an act relating to its
subject finding expression in its title.[33]
To determine whether there has been compliance with the constitutional
requirement that the subject of an act shall be expressed in its title, the Court
laid down the rule that
Constitutional provisions relating to the subject matter and titles of statutes should not
be so narrowly construed as to cripple or impede the power of legislation. The
requirement that the subject of an act shall be expressed in its title should receive a
reasonable and not a technical construction. It is sufficient if the title be
comprehensive enough reasonably to include the general object which a statute seeks
to effect, without expressing each and every end and means necessary or convenient
for the accomplishing of that object. Mere details need not be set forth. The title need
not be an abstract or index of the Act.[34]
The title of Rep. Act No. 9006 reads: An Act to Enhance the Holding of
Free, Orderly, Honest, Peaceful and Credible Elections through Fair Election
Practices. Section 2 of the law provides not only the declaration of principles
but also the objectives thereof:
Sec. 2. Declaration of Principles. The State shall, during the election period,
supervise or regulate the enjoyment or utilization of all franchises or permits for the
operation of media of communication or information to guarantee or ensure equal
opportunity for public service, including access to media time and space, and the
equitable right to reply, for public information campaigns and fora among candidates
and assure free, orderly, honest, peaceful and credible elections.
The State shall ensure that bona fide candidates for any public office shall be free
from any form of harassment and discrimination. [35]
The Court is convinced that the title and the objectives of Rep. Act No.
9006 are comprehensive enough to include the repeal of Section 67 of the
Omnibus Election Code within its contemplation. To require that the said
repeal of Section 67 of the Code be expressed in the title is to insist that the
title be a complete index of its content. [36]
The purported dissimilarity of Section 67 of the Omnibus Election Code,

which imposes a limitation on elective officials who run for an office other than
the one they are holding, to the other provisions of Rep. Act No. 9006, which
deal with the lifting of the ban on the use of media for election propaganda,
does not violate the one subject-one title rule. This Court has held that an act
having a single general subject, indicated in the title, may contain any number
of provisions, no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying
out the general subject. [37]
The deliberations of the Bicameral Conference Committee on the

particular matter are particularly instructive:
SEN. LEGARDA-LEVISTE:
Yes, Mr. Chairman, I just wanted to clarify.
So all were looking for now is an appropriate title to make it broader so that it
would cover this provision [referring to the repeal of Section 67 of the Omnibus
Election Code], is that correct? Thats all. Because I believe ...
THE CHAIRMAN (REP. SYJUCO):
We are looking for an appropriate coverage which will result in the nomenclature
or title.
Because I really do not believe that it is out of place. I think that even with the term
fair election practice, it really covers it, because as expressed by Senator Roco,
those conditions inserted earlier seemed unfair and it is an election practice and,
therefore, I think, Im very comfortable with the title Fair Election Practice so that
we can get over with these things so that we dont come back again until we find
the title. I mean, its one provision which I think is fair for everybody. It may seem
like a limitation but this limitation actually provides for fairness in election practices
as the title implies.
Yes.
So I would want to beg the House contingent, lets get it over with. To me, ha, its
not a very touchy issue. For me, its even a very correct provision. I feel very
comfortable with it and it was voted in the Senate, at least, so I would like to
appeal to the ... para matapos na, then we come back as a Bicam just for the title
Is that what youre ...?
Its not the title per se, its the coverage. So if you will just kindly bear with us. Im
happy that there is already one comfortable senator there among ... several of us
were also comfortable with it. But it would be well that when we rise from this
Bicam that were all comfortable with it.
THE CHAIRMAN (SEN. ROCO):
Yes. Anyway, lets listen to Congressman Marcos.
REP. MARCOS:
Mr. Chairman, may I just make the observation that although it is true that the bulk
of provisions deals with the area of propaganda and political advertising, the
complete title is actually one that indulge full coverage. It says An Act to enhance
the holding of free, orderly, honest ... elections through fair election practices. But
as you said, we will put that aside to discuss later one.
Secondly, I think the Declaration of Principles contained in Section 2, paragraph 2
is perfectly adequate in that it says that it shall ensure candidates for public office
that may be free from any form of harassment and discrimination.
Surely this provision in Section 67 of the old Election Code of the existing Omnibus
Election Code is a form of harassment or discrimination.And so I think that in the
effort at leveling the playing field, we can cover this and it should not be
considered a rider.
I agree, Mr. Chairman. I think the Congresswoman from Ilocos had very clearly put
it, that it is covered in the Declaration of Principles and in the objective of this
bill. And therefore, I hope that the House contingent would agree to this so that we
can finish it now. And it expressly provides for fair election practices because ...
Yeah, I think what is on the table is that we are not disputing this, but we are
looking for a title that is more generic so that then we have less of an objection on
constitutionality. I think thats the theory. So, there is acceptance of this.
Maybe we should not call it na limitation on elected officials. Maybe we should say
the special provision on elected officials. So how is that?Alam mo ito ...
REP. MARCOS:
I think we just change the Section 1, the short title.
Also, Then we say - - on the short title of the Act, we say ...
REP. MARCOS:
What if we say fair election practices? Maybe that should be changed...
O, sige, fine, fine. Lets a brainstorm. Equal...
REP. PADILLA:
Mr. Chairman, why dont we use An Act rationalizing the holding of free, orderly,
honest, peaceful and credible elections, amending for the purpose Batasang
Pambansa known as the Omnibus Election Code?
Why dont we remove fair and then this shall be cited as Election Practices Act?
REP. PICHAY:
Thats not an election practice. Thats a limitation.
Ah - - - ayaw mo iyong practice. O, give me another noun.
REP. MARCOS:
The Fair Election.
O, Fair Election Act.
REP. MACARAMBON:
Nagbi-brainstorm tayo dito, eh. How about if we change the title to enhance the
holding of free, orderly, honest, peaceful and ensure equal opportunity for public
service through fair election practices?
REP. PICHAY:
Fair election practices?
REP. MACARAMBON:
Yeah. To ensure equal opportunity for public service through fair ...
Wala nang practices nga.
REP. PICHAY:
Wala nang practices.
It shall be cited as Fair Election Act.
(Informal discussions)
REP. PICHAY:
Approve na iyan.
Done. So, okay na iyon. The title will be Fair Election Act.
The rest wala nang problema ano?
VOICES:
Wala na.
REP. MACARAMBON:
Wala na iyong practices?
Wala na, wala na. Mahina tayo sa practice, eh.
O, wala na? We will clean up.
REP. MARCOS:
Title?
The short title, This Act ...
Youre back to your No. 21 already.
REP. MARCOS:
The full title, the same?
Iyon na nga. The full title is An Act to enhance the holding ... Thats the House
version, eh, dahil pareho, hindi ba? Then the short title This Act shall be known as
the Fair Election Act.[38]
The legislators considered Section 67 of the Omnibus Election Code as a

form of harassment or discrimination that had to be done away with and
repealed. The executive department found cause with Congress when the
President of the Philippines signed the measure into law. For sure, some
sectors of society and in government may believe that the repeal of Section
67 is bad policy as it would encourage political adventurism. But policy
matters are not the concern of the Court. Government policy is within the
exclusive dominion of the political branches of the government. It is not for [39]
this Court to look into the wisdom or propriety of legislative

determination. Indeed, whether an enactment is wise or unwise, whether it is
based on sound economic theory, whether it is the best means to achieve the
desired results, whether, in short, the legislative discretion within its
prescribed limits should be exercised in a particular manner are matters for
the judgment of the legislature, and the serious conflict of opinions does not
suffice to bring them within the range of judicial cognizance. Congress is not
[40]
precluded from repealing Section 67 by the ruling of the Court in Dimaporo

v. Mitra upholding the validity of the provision and by its pronouncement in
[41]
the same case that the provision has a laudable purpose. Over time,
Congress may find it imperative to repeal the law on its belief that the election
process is thereby enhanced and the paramount objective of election laws the
fair, honest and orderly election of truly deserving members of Congress is
achieved.
Moreover, the avowed purpose of the constitutional directive that the
subject of a bill should be embraced in its title is to apprise the legislators of
the purposes, the nature and scope of its provisions, and prevent the
enactment into law of matters which have not received the notice, action and
study of the legislators and the public. In this case, it cannot be claimed that
[42]
the legislators were not apprised of the repeal of Section 67 of the Omnibus
Election Code as the same was amply and comprehensively deliberated upon
by the members of the House. In fact, the petitioners, as members of the
House of Representatives, expressed their reservations regarding its validity
prior to casting their votes.Undoubtedly, the legislators were aware of the
existence of the provision repealing Section 67 of the Omnibus Election Code.
Section 14 of Rep. Act No. 9006

Is Not Violative of the Equal
Protection Clause of the Constitution [43]
The petitioners contention, that the repeal of Section 67 of the Omnibus

Election Code pertaining to elective officials gives undue benefit to such
officials as against the appointive ones and violates the equal protection
clause of the constitution, is tenuous.
The equal protection of the law clause in the Constitution is not absolute,
but is subject to reasonable classification. If the groupings are characterized
by substantial distinctions that make real differences, one class may be
treated and regulated differently from the other. The Court has explained the
[44]
nature of the equal protection guarantee in this manner:
The equal protection of the law clause is against undue favor and individual or class
privilege, as well as hostile discrimination or the oppression of inequality. It is not
intended to prohibit legislation which is limited either in the object to which it is
directed or by territory within which it is to operate. It does not demand absolute
equality among residents; it merely requires that all persons shall be treated
alike, under like circumstances and conditions both as to privileges conferred and
liabilities enforced. The equal protection clause is not infringed by legislation which
applies only to those persons falling within a specified class, if it applies alike to all
persons within such class, and reasonable grounds exist for making a distinction
between those who fall within such class and those who do not. [45]
Substantial distinctions clearly exist between elective officials and

appointive officials. The former occupy their office by virtue of the mandate of
the electorate. They are elected to an office for a definite term and may be
removed therefrom only upon stringent conditions. On the other hand, [46]
appointive officials hold their office by virtue of their designation thereto by an

appointing authority. Some appointive officials hold their office in a permanent
capacity and are entitled to security of tenure while others serve at the
[47]
pleasure of the appointing authority. [48]

Another substantial distinction between the two sets of officials is that
under Section 55, Chapter 8, Title I, Subsection A. Civil Service Commission,
Book V of the Administrative Code of 1987 (Executive Order No. 292),
appointive officials, as officers and employees in the civil service, are strictly
prohibited from engaging in any partisan political activity or take part in any
election except to vote. Under the same provision, elective officials, or officers
or employees holding political offices, are obviously expressly allowed to take
part in political and electoral activities.
[49]
By repealing Section 67 but retaining Section 66 of the Omnibus Election

Code, the legislators deemed it proper to treat these two classes of officials
differently with respect to the effect on their tenure in the office of the filing of
the certificates of candidacy for any position other than those occupied by
them. Again, it is not within the power of the Court to pass upon or look into
the wisdom of this classification.
Since the classification justifying Section 14 of Rep. Act No. 9006, i.e.,
elected officials vis-a-vis appointive officials, is anchored upon material and
significant distinctions and all the persons belonging under the same
classification are similarly treated, the equal protection clause of the
Constitution is, thus, not infringed.
The Enrolled Bill Doctrine

Is Applicable In this Case
Not content with their plea for the nullification of Section 14 of Rep. Act
No. 9006, the petitioners insist that the entire law should be nullified.They
contend that irregularities attended the passage of the said law particularly in
the House of Representatives catalogued thus:
a. Creation of two (2) sets of BCC (Bicameral Conference Committee)

members by the House during its session on February 5, 2001;
b. No communication from the Senate for a conference on the compromise

bill submitted by the BCC on November 29, 2000;
c. The new Report submitted by the 2nd/3rd BCC was presented for approval
on the floor without copies thereof being furnished the members;
d. The 2nd/3rd BCC has no record of its proceedings, and the Report submitted
by it was not signed by the Chairman (Sen. Roco) thereof as well as its
senator-members at the time it was presented to and rammed for
approval by the House;
e. There was no meeting actually conducted by the 2nd/3rd BCC and that its
alleged Report was instantly made and passed around for the signature of
the BCC members;
f. The Senate has no record of the creation of a 2nd BCC but only of the first
one that convened on November 23, 2000;
g. The Effectivity clauses of SB No. 1741 and HB No. 9000, as well as that of
the compromise bill submitted by the BCC that convened on November
20, 2000, were couched in terms that comply with the publication
required by the Civil Code and jurisprudence, to wit:
...
However, it was surreptitiously replaced in its final form as it appears in

16, R.A. No. 9006, with the provision that This Act shall take effect
immediately upon its approval;
h. The copy of the compromise bill submitted by the 2nd/3rd BCC that was
furnished the members during its consideration on February 7, 2001, did
not have the same 16 as it now appears in RA No. 9006, but 16 of the
compromise bill, HB 9000 and SB 1742, reasons for which no objection
thereto was made;
i. The alleged BCC Report presented to the House on February 7, 2001, did
not contain a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure; and
j. The disappearance of the Cayetano amendment, which is Section 12 of the

compromise bill submitted by the BCC. In fact, this was the subject of
the purported proposed amendment to the compromise bill of Member
Paras as stated in paragraph 7 hereof. The said provision states, thusly:
Sec. 12. Limitation on Elected Officials. Any elected

official who runs for president and vice-president shall be
considered ipso facto resigned from his office upon the
filing of the certificate of candidacy.[50]
The petitioners, thus, urge the Court to go behind the enrolled copy of the
bill. The Court is not persuaded. Under the enrolled bill doctrine, the signing of
a bill by the Speaker of the House and the Senate President and the
certification of the Secretaries of both Houses of Congress that it was passed
are conclusive of its due enactment. A review of cases reveals the Courts
[51]
consistent adherence to the rule. The Court finds no reason to deviate from
the salutary rule in this case where the irregularities alleged by the petitioners
mostly involved the internal rules of Congress, e.g., creation of the 2nd or
3rd Bicameral Conference Committee by the House. This Court is not the
proper forum for the enforcement of these internal rules of Congress, whether
House or Senate. Parliamentary rules are merely procedural and with their
observance the courts have no concern. Whatever doubts there may be as
[52]
to the formal validity of Rep. Act No. 9006 must be resolved in its favor. The
Court reiterates its ruling in Arroyo v. De Venecia, viz.:
[53]
But the cases, both here and abroad, in varying forms of expression, all deny to the
courts the power to inquire into allegations that, in enacting a law, a House of
Congress failed to comply with its own rules, in the absence of showing that there was
a violation of a constitutional provision or the rights of private individuals. In Osmea
v. Pendatun, it was held: At any rate, courts have declared that the rules adopted by
deliberative bodies are subject to revocation, modification or waiver at the pleasure of
the body adopting them. And it has been said that Parliamentary rules are merely
procedural, and with their observance, the courts have no concern.They may be
waived or disregarded by the legislative body. Consequently, mere failure to conform
to parliamentary usage will not invalidate the action (taken by a deliberative body)
when the requisite number of members have agreed to a particular measure.
The Effectivity Clause

Is Defective
Finally, the Effectivity clause (Section 16) of Rep. Act No. 9006 which
provides that it shall take effect immediately upon its approval, is
defective. However, the same does not render the entire law invalid. In Taada
v. Tuvera, this Court laid down the rule:
[54]
... the clause unless it is otherwise provided refers to the date of effectivity and not to
the requirement of publication itself, which cannot in any event be omitted. This
clause does not mean that the legislator may make the law effective immediately upon
approval, or on any other date without its previous publication.
Publication is indispensable in every case, but the legislature may in its discretion
provide that the usual fifteen-period shall be shortened or extended. [55]
Following Article 2 of the Civil Code and the doctrine enunciated
[56]
in Taada, Rep. Act No. 9006, notwithstanding its express statement, took
effect fifteen days after its publication in the Official Gazette or a newspaper of
general circulation.
In conclusion, it bears reiterating that one of the firmly entrenched
principles in constitutional law is that the courts do not involve themselves with
nor delve into the policy or wisdom of a statute. That is the exclusive concern
of the legislative branch of the government. When the validity of a statute is
challenged on constitutional grounds, the sole function of the court is to
determine whether it transcends constitutional limitations or the limits of
legislative power. No such transgression has been shown in this case.
[57]
WHEREFORE, the petitions are DISMISSED. No pronouncement as to

costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-23475 April 30, 1974
HERMINIO A. ASTORGA, in his capacity as Vice-Mayor of Manila, petitioner,

vs.
ANTONIO J. VILLEGAS, in his capacity as Mayor of Manila, THE HON., THE EXECUTIVE
SECRETARY, ABELARDO SUBIDO, in his capacity as Commissioner of Civil Service,
EDUARDO QUINTOS, in his capacity as Chief of Police of Manila, MANUEL CUDIAMAT, in his
capacity as City Treasurer of Manila, CITY OF MANILA, JOSE SEMBRANO, FRANCISCO
GATMAITAN, MARTIN ISIDRO, CESAR LUCERO, PADERES TINOCO, LEONARDO FUGOSO,
FRANCIS YUSECO, APOLONIO GENER, AMBROCIO LORENZO, JR., ALFONSO MENDOZA,
JR., SERGIO LOYOLA, GERINO TOLENTINO, MARIANO MAGSALIN, EDUARDO QUINTOS,
JR., AVELINO VILLACORTA, PABLO OCAMPO, FELICISIMO CABIGAO, JOSE BRILLANTES,
JOSE VILLANUEVA and MARINA FRANCISCO, in their capacities as members of the
Municipal Board, respondents.
Artemio V. Panganiban and Renito V. Saguisag and Crispin D. Baizas and Associates for petitioner.
Paredes Poblador, Cruz and Nazareno and Antonio Barredo for respondent Mayor of Manila.
Romeo L. Kahayon for respondents City Treasurer of Manila, etc., et al.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Pacifico P. de Castro,
Solicitor Jorge R. Coquia and Solicitor Ricardo L. Pronove, Jr. for respondents The Executive
Secretary and Commissioner of Civil Service.
Fortunato de Leon and Antonio V. Raquiza as amici curiae.
MAKALINTAL, C.J.:p
The present controversy revolves around the passage of House Bill No. 9266, which became Republic Act 4065, "An Act Defining the
Powers, Rights and Duties of the Vice-Mayor of the City of Manila, Further Amending for the Purpose Sections Ten and Eleven of Republic
Act Numbered Four Hundred Nine, as Amended, Otherwise Known as the Revised Charter of the City of Manila."
The facts as set forth in the pleadings appear undisputed:
On March 30, 1964 House Bill No. 9266, a bill of local application, was filed in the House of
Representatives. It was there passed on third reading without amendments on April 21, 1964.
Forthwith the bill was sent to the Senate for its concurrence. It was referred to the Senate Committee
on Provinces and Municipal Governments and Cities headed by Senator Gerardo M. Roxas. The
committee favorably recommended approval with a minor amendment, suggested by Senator
Roxas, that instead of the City Engineer it be the President Protempore of the Municipal Board who
should succeed the Vice-Mayor in case of the latter's incapacity to act as Mayor.
When the bill was discussed on the floor of the Senate on second reading on May 20, 1964,
substantial amendments to Section 11 were introduced by Senator Arturo Tolentino. Those
amendments were approved in toto by the Senate. The amendment recommended by Senator
Roxas does not appear in the journal of the Senate proceedings as having been acted upon.
On May 21, 1964 the Secretary of the Senate sent a letter to the House of Representatives that
House Bill No. 9266 had been passed by the Senate on May 20, 1964 "with amendments." Attached
to the letter was a certification of the amendment, which was the one recommended by Senator
Roxas and not the Tolentino amendments which were the ones actually approved by the Senate.
The House of Representatives thereafter signified its approval of House Bill No. 9266 as sent back
to it, and copies thereof were caused to be printed. The printed copies were then certified and
attested by the Secretary of the House of Representatives, the Speaker of the House of
Representatives, the Secretary of the Senate and the Senate President. On June 16, 1964 the
Secretary of the House transmitted four printed copies of the bill to the President of the Philippines,
who affixed his signatures thereto by way of approval on June 18, 1964. The bill thereupon became
Republic Act No. 4065.
The furor over the Act which ensued as a result of the public denunciation mounted by respondent
City Mayor drew immediate reaction from Senator Tolentino, who on July 5, 1964 issued a press
statement that the enrolled copy of House Bill No. 9266 signed into law by the President of the
Philippines was a wrong version of the bill actually passed by the Senate because it did not embody
the amendments introduced by him and approved on the Senate floor. As a consequence the
Senate President, through the Secretary of the Senate, addressed a letter dated July 11, 1964 to the
President of the Philippines, explaining that the enrolled copy of House Bill No. 9266 signed by the
secretaries of both Houses as well as by the presiding officers thereof was not the bill duly approved
by Congress and that he considered his signature on the enrolled bill as invalid and of no effect. A
subsequent letter dated July 21, 1964 made the further clarification that the invalidation by the
Senate President of his signature meant that the bill on which his signature appeared had never
been approved by the Senate and therefore the fact that he and the Senate Secretary had signed it
did not make the bill a valid enactment.
On July 31, 1964 the President of the Philippines sent a message to the presiding officers of both
Houses of Congress informing them that in view of the circumstances he was officially withdrawing
his signature on House Bill No. 9266 (which had been returned to the Senate the previous July 3),
adding that "it would be untenable and against public policy to convert into law what was not actually
approved by the two Houses of Congress."
Upon the foregoing facts the Mayor of Manila, Antonio Villegas, issued circulars to the department
heads and chiefs of offices of the city government as well as to the owners, operators and/or
managers of business establishments in Manila to disregard the provisions of Republic Act 4065. He
likewise issued an order to the Chief of Police to recall five members of the city police force who had
been assigned to the Vice-Mayor presumably under authority of Republic Act 4065.
Reacting to these steps taken by Mayor Villegas, the then Vice-Mayor, Herminio A. Astorga, filed a
petition with this Court on September 7, 1964 for "Mandamus, Injunction and/or Prohibition with
Preliminary Mandatory and Prohibitory Injunction" to compel respondents Mayor of Manila, the
Executive Secretary, the Commissioner of Civil Service, the Manila Chief of Police, the Manila City
Treasurer and the members of the municipal board to comply with the provisions of Republic Act
4065.
Respondents' position is that the so-called Republic Act 4065 never became law since it was not the
bill actually passed by the Senate, and that the entries in the journal of that body and not the
enrolled bill itself should be decisive in the resolution of the issue.
On April 28, 1965, upon motion of respondent Mayor, who was then going abroad on an official trip,
this Court issued a restraining order, without bond, "enjoining the petitioner Vice-Mayor Herminio
Astorga from exercising any of the powers of an Acting Mayor purportedly conferred upon the Vice-
Mayor of Manila under the so-called Republic Act 4065 and not otherwise conferred upon said Vice-
Mayor under any other law until further orders from this Court."
The original petitioner, Herminio A. Astorga, has since been succeeded by others as Vice-Mayor of
Manila. Attorneys Fortunato de Leon and Antonio Raquiza, with previous leave of this Court,
appeared as amici curiae, and have filed extensive and highly enlightening memoranda on the
issues raised by the parties.
Lengthy arguments, supported by copious citations of authorities, principally decisions of United

States Federal and State Courts, have been submitted on the question of whether the "enrolled bill"
doctrine or the "journal entry" rule should be adhered to in this jurisdiction. A similar question came
up before this Court and elicited differing opinions in the case of Mabanag, et al. vs. Lopez Vito, et
al. (March 5, 1947), 78 Phil. Reports 1. While the majority of the Court in that case applied the
"enrolled bill" doctrine, it cannot be truly said that the question has been laid to rest and that the
decision therein constitutes a binding precedent.
The issue in that case was whether or not a resolution of both Houses of Congress proposing an
amendment to the (1935) Constitution to be appended as an ordinance thereto (the so-called parity
rights provision) had been passed by "a vote of three-fourths of all the members of the Senate and of
the House of Representatives" pursuant to Article XV of the Constitution.
The main opinion, delivered by Justice Pedro Tuason and concurred in by Justices Manuel V.
Moran, Guillermo F. Pablo and Jose M. Hontiveros, held that the case involved a political question
which was not within the province of the judiciary in view of the principle of separation of powers in
our government. The "enrolled bill" theory was relied upon merely to bolster the ruling on the
jurisdictional question, the reasoning being that "if a political question conclusively binds the judges
out of respect to the political departments, a duly certified law or resolution also binds the judges
under the "enrolled bill rule" born of that respect."
Justice Cesar Bengzon wrote a separate opinion, concurred in by Justice Sabino Padilla, holding
that the Court had jurisdiction to resolve the question presented, and affirming categorically that "the
enrolled copy of the resolution and the legislative journals are conclusive upon us," specifically in
view of Section 313 of Act 190, as amended by Act No. 2210. This provision in the Rules of
Evidence in the old Code of Civil Procedure appears indeed to be the only statutory basis on which
the "enrolled bill" theory rests. It reads:
The proceedings of the Philippine Commission, or of any legislative body that may be
provided for in the Philippine Islands, or of Congress (may be proved) by the journals
of those bodies or of either house thereof, or by published statutes or resolutions, or
by copies certified by the clerk or secretary, printed by their order; provided, that in
the case of acts of the Philippine Commission or the Philippine Legislature, when
there is in existence a copy signed by the presiding officers and secretaries of said
bodies, it shall be conclusive proof of the provisions of such acts and of the due
enactment thereof.
Congress devised its own system of authenticating bills duly approved by both Houses, namely, by
the signatures of their respective presiding officers and secretaries on the printed copy of the
approved bill.2 It has been held that this procedure is merely a mode of authentication,3 to signify to
the Chief Executive that the bill being presented to him has been duly approved by Congress and is
ready for his approval or rejection.4 The function of an attestation is therefore not of approval,
because a bill is considered approved after it has passed both Houses. Even where such attestation
is provided for in the Constitution authorities are divided as to whether or not the signatures are
mandatory such that their absence would render the statute invalid.5 The affirmative view, it is
pointed out, would be in effect giving the presiding officers the power of veto, which in itself is a
strong argument to the contrary6There is less reason to make the attestation a requisite for the
validity of a bill where the Constitution does not even provide that the presiding officers should sign
the bill before it is submitted to the President.
In one case in the United States, where the (State)Constitution required the presiding officers to sign
a bill and this provision was deemed mandatory, the duly authenticated enrolled bill was considered
as conclusive proof of its due enactment.7 Another case however, under the same circumstances,
held that the enrolled bill was not conclusive evidence.8 But in the case of Field vs. Clark,9 the U.S.
Supreme Court held that the signatures of the presiding officers on a bill, although not required by
the Constitution, is conclusive evidence of its passage. The authorities in the United States are thus
not unanimous on this point.
The rationale of the enrolled bill theory is set forth in the said case of Field vs. Clark as follows:
The signing by the Speaker of the House of Representatives, and, by the President
of the Senate, in open session, of an enrolled bill, is an official attestation by the two
houses of such bill as one that has passed Congress. It is a declaration by the two
houses, through their presiding officers, to the President, that a bill, thus attested,
has received, in due form, the sanction of the legislative branch of the government,
and that it is delivered to him in obedience to the constitutional requirement that all
bills which pass Congress shall be presented to him. And when a bill, thus attested,
receives his approval, and is deposited in the public archives, its authentication as a
bill that has passed Congress should be deemed complete and unimpeachable. As
the President has no authority to approve a bill not passed by Congress, an enrolled
Act in the custody of the Secretary of State, and having the official attestations of the
Speaker of the House of Representatives, of the President of the Senate, and of the
President of the United States, carries, on its face, a solemn assurance by the
legislative and executive departments of the government, charged, respectively, with
the duty of enacting and executing the laws, that it was passed by Congress. The
respect due to coequal and independent departments requires the judicial
department to act upon that assurance, and to accept, as having passed Congress,
all bills authenticated in the manner stated; leaving the courts to determine, when the
question properly arises, whether the Act, so authenticated, is in conformity with the
Constitution.
It may be noted that the enrolled bill theory is based mainly on "the respect due to coequal and
independent departments," which requires the judicial department "to accept, as having passed
Congress, all bills authenticated in the manner stated." Thus it has also been stated in other cases
that if the attestation is absent and the same is not required for the validity of a statute, the courts
may resort to the journals and other records of Congress for proof of its due enactment. This was the
logical conclusion reached in a number of decisions, 10although they are silent as to whether the
journals may still be resorted to if the attestation of the presiding officers is present.
The (1935) Constitution is silent as to what shall constitute proof of due enactment of a bill. It does
not require the presiding officers to certify to the same. But the said Constitution does contain the
following provisions:
Sec. 10 (4). "Each House shall keep a Journal of its proceedings, and from time to
time publish the same, excepting such parts as may in its judgment require secrecy;
and the yeas and nays on any question shall, at the request of one-fifth of the
Members present, be entered in the Journal."
Sec. 21 (2). "No bill shall be passed by either House unless it shall have been printed
and copies thereof in its final form furnished its Members at least three calendar days
prior to its passage, except when the President shall have certified to the necessity of
its immediate enactment. Upon the last reading of a bill no amendment thereof shall
be allowed, and the question upon its passage shall be taken immediately thereafter,
and the yeas and nays entered on the Journal."
Petitioner's argument that the attestation of the presiding officers of Congress is conclusive proof of
a bill's due enactment, required, it is said, by the respect due to a co-equal department of the
government, 11 is neutralized in this case by the fact that the Senate President declared his signature
on the bill to be invalid and issued a subsequent clarification that the invalidation of his signature
meant that the bill he had signed had never been approved by the Senate. Obviously this declaration
should be accorded even greater respect than the attestation it invalidated, which it did for a reason
that is undisputed in fact and indisputable in logic.
As far as Congress itself is concerned, there is nothing sacrosanct in the certification made by the
presiding officers. It is merely a mode of authentication. The lawmaking process in Congress ends
when the bill is approved by both Houses, and the certification does not add to the validity of the bill
or cure any defect already present upon its passage. In other words it is the approval by Congress
and not the signatures of the presiding officers that is essential. Thus the (1935) Constitution says
that "[e] very bill passed by the Congress shall, before it becomes law, be presented to the
President. 12 In Brown vs. Morris, supra, the Supreme Court of Missouri, interpreting a similar
provision in the State Constitution, said that the same "makes it clear that the indispensable step is
the final passage and it follows that if a bill, otherwise fully enacted as a law, is not attested by the
presiding officer, of the proof that it has "passed both houses" will satisfy the constitutional
requirement."
Petitioner agrees that the attestation in the bill is not mandatory but argues that the disclaimer
thereof by the Senate President, granting it to have been validly made, would only mean that there
was no attestation at all, but would not affect the validity of the statute. Hence, it is pointed out,
Republic Act No. 4065 would remain valid and binding. This argument begs the issue. It would limit
the court's inquiry to the presence or absence of the attestation and to the effect of its absence upon
the validity of the statute. The inquiry, however, goes farther. Absent such attestation as a result of
the disclaimer, and consequently there being no enrolled bill to speak of, what evidence is there to
determine whether or not the bill had been duly enacted? In such a case the entries in the journal
should be consulted.
The journal of the proceedings of each House of Congress is no ordinary record. The Constitution
requires it. While it is true that the journal is not authenticated and is subject to the risks of
misprinting and other errors, the point is irrelevant in this case. This Court is merely asked to inquire
whether the text of House Bill No. 9266 signed by the Chief Executive was the same text passed by
both Houses of Congress. Under the specific facts and circumstances of this case, this Court can do
this and resort to the Senate journal for the purpose. The journal discloses that substantial and
lengthy amendments were introduced on the floor and approved by the Senate but were not
incorporated in the printed text sent to the President and signed by him. This Court is not asked to
incorporate such amendments into the alleged law, which admittedly is a risky undertaking, 13 but to
declare that the bill was not duly enacted and therefore did not become law. This We do, as indeed
both the President of the Senate and the Chief Executive did, when they withdrew their signatures
therein. In the face of the manifest error committed and subsequently rectified by the President of
the Senate and by the Chief Executive, for this Court to perpetuate that error by disregarding such
rectification and holding that the erroneous bill has become law would be to sacrifice truth to fiction
and bring about mischievous consequences not intended by the law-making body.
In view of the foregoing considerations, the petition is denied and the so-called Republic Act No.
4065 entitled "AN ACT DEFINING THE POWERS, RIGHTS AND DUTIES OF THE VICE-MAYOR
OF THE CITY OF MANILA, FURTHER AMENDING FOR THE PURPOSE SECTIONS TEN AND
ELEVEN OF REPUBLIC ACT NUMBERED FOUR HUNDRED NINE, AS AMENDED, OTHERWISE
KNOWN AS THE REVISED CHARTER OF THE CITY OF MANILA" is declared not to have been
duly enacted and therefore did not become law. The temporary restraining order dated April 28,
1965 is hereby made permanent. No pronouncement as to costs.
SUPREME COURT
Manila
EN BANC
G.R. No. L-19650 September 29, 1966
CALTEX (PHILIPPINES), INC., petitioner-appellee,
vs.
ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant.
Office of the Solicitor General for respondent and appellant.

Ross, Selph and Carrascoso for petitioner and appellee.
DECISION
CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the
groundwork for a promotional scheme calculated to drum up patronage for its oil products.
Denominated Caltex Hooded Pump Contest, it calls for participants therein to estimate the actual
number of liters a hooded gas pump at each Caltex station will dispense during a specified period.
Employees of the Caltex (Philippines) Inc., its dealers and its advertising agency, and their immediate
families excepted, participation is to be open indiscriminately to all motor vehicle owners and/or
licensed drivers. For the privilege to participate, no fee or consideration is required to be paid, no
purchase of Caltex products required to be made. Entry forms are to be made available upon request at
each Caltex station where a sealed can will be provided for the deposit of accomplished entry stubs.
A three-staged winner selection system is envisioned. At the station level, called Dealer Contest, the
contestant whose estimate is closest to the actual number of liters dispensed by the hooded pump
thereat is to be awarded the first prize; the next closest, the second; and the next, the third. Prizes at
this level consist of a 3-burner kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern
for second; and an Everready Magnet-lite flashlight with batteries and a screwdriver set for third. The
first-prize winner in each station will then be qualified to join in the Regional Contest in seven
different regions. The winning stubs of the qualified contestants in each region will be deposited in a
sealed can from which the first-prize, second-prize and third-prize winners of that region will be drawn.
The regional first-prize winners will be entitled to make a three-day all-expenses-paid round trip to
Manila, accompanied by their respective Caltex dealers, in order to take part in the National Contest.
The regional second-prize and third-prize winners will receive cash prizes of P500 and P300,
respectively. At the national level, the stubs of the seven regional first-prize winners will be placed inside
a sealed can from which the drawing for the final first-prize, second-prize and third-prize winners will be
made. Cash prizes in store for winners at this final stage are: P3,000 for first; P2,000 for second; P1,500
for third; and P650 as consolation prize for each of the remaining four participants.
Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but
also for the transmission of communications relative thereto, representations were made by Caltex with
the postal authorities for the contest to be cleared in advance for mailing, having in view sections
1954(a), 1982 and 1983 of the Revised Administrative Code, the pertinent provisions of which read as
follows:
SECTION 1954. Absolutely non-mailable matter. No matter belonging to any of the following classes,
whether sealed as first-class matter or not, shall be imported into the Philippines through the mails, or
to be deposited in or carried by the mails of the Philippines, or be delivered to its addressee by any
officer or employee of the Bureau of Posts:
Written or printed matter in any form advertising, describing, or in any manner pertaining to, or
conveying or purporting to convey any information concerning any lottery, gift enterprise, or similar
scheme depending in whole or in part upon lot or chance, or any scheme, device, or enterprise for
obtaining any money or property of any kind by means of false or fraudulent pretenses, representations,
or promises.
SECTION 1982. Fraud orders.Upon satisfactory evidence that any person or company is engaged in
conducting any lottery, gift enterprise, or scheme for the distribution of money, or of any real or
personal property by lot, chance, or drawing of any kind, or that any person or company is conducting
any scheme, device, or enterprise for obtaining money or property of any kind through the mails by
means of false or fraudulent pretenses, representations, or promises, the Director of Posts may instruct
any postmaster or other officer or employee of the Bureau to return to the person, depositing the same
in the mails, with the word fraudulent plainly written or stamped upon the outside cover thereof, any
mail matter of whatever class mailed by or addressed to such person or company or the representative
or agent of such person or company.
SECTION 1983. Deprivation of use of money order system and telegraphic transfer service.The Director
of Posts may, upon evidence satisfactory to him that any person or company is engaged in conducting
any lottery, gift enterprise or scheme for the distribution of money, or of any real or personal property
by lot, chance, or drawing of any kind, or that any person or company is conducting any scheme, device,
or enterprise for obtaining money or property of any kind through the mails by means of false or
fraudulent pretenses, representations, or promise, forbid the issue or payment by any postmaster of
any postal money order or telegraphic transfer to said person or company or to the agent of any such
person or company, whether such agent is acting as an individual or as a firm, bank, corporation, or
association of any kind, and may provide by regulation for the return to the remitters of the sums
named in money orders or telegraphic transfers drawn in favor of such person or company or its agent.
The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in
which the Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its
position that the contest does not violate the anti-lottery provisions of the Postal Law. Unimpressed, the
then Acting Postmaster General opined that the scheme falls within the purview of the provisions
aforesaid and declined to grant the requested clearance. In its counsels letter of December 7, 1960,
Caltex sought a reconsideration of the foregoing stand, stressing that there being involved no
consideration in the part of any contestant, the contest was not, under controlling authorities,
condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of Justice on an
unrelated case seven years before (Opinion 217, Series of 1953), the Postmaster General maintained his
view that the contest involves consideration, or that, if it does not, it is nevertheless a gift enterprise
which is equally banned by the Postal Law, and in his letter of December 10, 1960 not only denied the
use of the mails for purposes of the proposed contest but as well threatened that if the contest was
conducted, a fraud order will have to be issued against it (Caltex) and all its representatives.
Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief against
Postmaster General Enrico Palomar, praying that judgment be rendered declaring its Caltex Hooded
Pump Contest not to be violative of the Postal Law, and ordering respondent to allow petitioner the use
of the mails to bring the contest to the attention of the public. After issues were joined and upon the
respective memoranda of the parties, the trial court rendered judgment as follows:
In view of the foregoing considerations, the Court holds that the proposed Caltex Hooded Pump
Contest announced to be conducted by the petitioner under the rules marked as Annex B of the
petitioner does not violate the Postal Law and the respondent has no right to bar the public distribution
of said rules by the mails.
The respondent appealed.
The parties are now before us, arrayed against each other upon two basic issues: first, whether the
petition states a sufficient cause of action for declaratory relief; and second, whether the proposed
Caltex Hooded Pump Contest violates the Postal Law. We shall take these up in seriatim.
1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal
basis for the remedy at the time it was invoked, declaratory relief is available to any person whose
rights are affected by a statute . . . to determine any question of construction or validity arising under
the . . . statute and for a declaration of his rights thereunder (now section 1, Rule 64, Revised Rules of
Court). In amplification, this Court, conformably to established jurisprudence on the matter, laid down
certain conditionssine qua nontherefor, to wit: (1) there must be a justiciable controversy; (2) the
controversy must be between persons whose interests are adverse; (3) the party seeking declaratory
relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial
determination (Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062, September 28,
1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-579; Edades vs.
Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the appellants stand being that the
petition herein states no sufficient cause of action for declaratory relief, our duty is to assay the factual
bases thereof upon the foregoing crucible.
As we look in retrospect at the incidents that generated the present controversy, a number of significant
points stand out in bold relief. The appellee (Caltex), as a business enterprise of some consequence,
concededly has the unquestioned right to exploit every legitimate means, and to avail of all appropriate
media to advertise and stimulate increased patronage for its products. In contrast, the appellant, as the
authority charged with the enforcement of the Postal Law, admittedly has the power and the duty to
suppress transgressions thereof particularly thru the issuance of fraud orders, under Sections 1982
and 1983 of the Revised Administrative Code, against legally non-mailable schemes. Obviously pursuing
its right aforesaid, the appellee laid out plans for the sales promotion scheme hereinbefore detailed. To
forestall possible difficulties in the dissemination of information thereon thru the mails, amongst other
media, it was found expedient to request the appellant for an advance clearance therefor. However,
likewise by virtue of his jurisdiction in the premises and construing the pertinent provisions of the Postal
Law, the appellant saw a violation thereof in the proposed scheme and accordingly declined the request.
A point of difference as to the correct construction to be given to the applicable statute was thus
reached. Communications in which the parties expounded on their respective theories were exchanged.
The confidence with which the appellee insisted upon its position was matched only by the obstinacy
with which the appellant stood his ground. And this impasse was climaxed by the appellants open
warning to the appellee that if the proposed contest was conducted, a fraud order will have to be
issued against it and all its representatives.
Against this backdrop, the stage was indeed set for the remedy prayed for. The appellees insistent
assertion of its claim to the use of the mails for its proposed contest, and the challenge thereto and
consequent denial by the appellant of the privilege demanded, undoubtedly spawned a live controversy.
The justiciability of the dispute cannot be gainsaid. There is an active antagonistic assertion of a legal
right on one side and a denial thereof on the other, concerning a real not a mere theoretical
question or issue. The contenders are as real as their interests are substantial. To the appellee, the
uncertainty occasioned by the divergence of views on the issue of construction hampers or disturbs its
freedom to enhance its business. To the appellant, the suppression of the appellees proposed contest
believed to transgress a law he has sworn to uphold and enforce is an unavoidable duty. With the
appellees bent to hold the contest and the appellants threat to issue a fraud order therefor if carried
out, the contenders are confronted by the ominous shadow of an imminent and inevitable litigation
unless their differences are settled and stabilized by a tranquilizing declaration (Pablo y Sen, et al. vs.
Republic of the Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of the
appellant, the time is long past when it can rightly be said that merely the appellees desires are
thwarted by its own doubts, or by the fears of others which admittedly does not confer a cause of
action. Doubt, if any there was, has ripened into a justiciable controversy when, as in the case at bar, it
was translated into a positive claim of right which is actually contested (III Moran, Comments on the
Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Coast Theaters, 36 Ariz., 251, 284
Pac. 350).
We cannot hospitably entertain the appellants pretense that there is here no question of construction
because the said appellant simply applied the clear provisions of the law to a given set of facts as
embodied in the rules of the contest, hence, there is no room for declaratory relief. The infirmity of this
pose lies in the fact that it proceeds from the assumption that, if the circumstances here presented, the
construction of the legal provisions can be divorced from the matter of their application to the
appellees contest. This is not feasible. Construction, verily, is the art or process of discovering and
expounding the meaning and intention of the authors of the law with respect to its application to a
given case, where that intention is rendered doubtful, amongst others, by reason of the fact that the
given case is not explicitly provided for in the law (Black, Interpretation of Laws, p. 1). This is precisely
the case here. Whether or not the scheme proposed by the appellee is within the coverage of the
prohibitive provisions of the Postal Law inescapably requires an inquiry into the intended meaning of
the words used therein. To our mind, this is as much a question of construction or interpretation as any
other.
Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can
amount to nothing more than an advisory opinion the handing down of which is anathema to a
declaratory relief action. Of course, no breach of the Postal Law has as yet been committed. Yet, the
disagreement over the construction thereof is no longer nebulous or contingent. It has taken a fixed and
final shape, presenting clearly defined legal issues susceptible of immediate resolution. With the battle
lines drawn, in a manner of speaking, the propriety nay, the necessity of setting the dispute at rest
before it accumulates the asperity distemper, animosity, passion and violence of a full-blown battle
which looms ahead (III Moran, Comments on the Rules of Court, 1963 ed., p. 132 and cases cited),
cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59 Cal., 2d., 901, 31 Cal.
Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory relief to the appellee in
the situation into which it has been cast, would be to force it to choose between undesirable
alternatives. If it cannot obtain a final and definitive pronouncement as to whether the anti-lottery
provisions of the Postal Law apply to its proposed contest, it would be faced with these choices: If it
launches the contest and uses the mails for purposes thereof, it not only incurs the risk, but is also
actually threatened with the certain imposition, of a fraud order with its concomitant stigma which may
attach even if the appellee will eventually be vindicated; if it abandons the contest, it becomes a self-
appointed censor, or permits the appellant to put into effect a virtual fiat of previous censorship which
is constitutionally unwarranted. As we weigh these considerations in one equation and in the spirit of
liberality with which the Rules of Court are to be interpreted in order to promote their object (section 1,
Rule 1, Revised Rules of Court) which, in the instant case, is to settle, and afford relief from
uncertainty and insecurity with respect to, rights and duties under a law we can see in the present
case any imposition upon our jurisdiction or any futility or prematurity in our intervention.
The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this
case if he believes that it will not have the final and pacifying function that a declaratory judgment is
calculated to subserve. At the very least, the appellant will be bound. But more than this, he obviously
overlooks that in this jurisdiction, Judicial decisions applying or interpreting the law shall form a part of
the legal system (Article 8, Civil Code of the Philippines). In effect, judicial 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. Accordingly, we entertain
no misgivings that our resolution of this case will terminate the controversy at hand.
It is not amiss to point out at this juncture that the conclusion we have herein just reached is not
without precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation
engaged in promotional advertising was advised by the county prosecutor that its proposed sales
promotion plan had the characteristics of a lottery, and that if such sales promotion were conducted,
the corporation would be subject to criminal prosecution, it was held that the corporation was entitled
to maintain a declaratory relief action against the county prosecutor to determine the legality of its sales
promotion plan. In pari materia, see also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d.,
435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A. 2d., 903.
In fine, we hold that the appellee has made out a case for declaratory relief.
2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology in
sections 1954(a), 1982 and 1983 thereof,supra, condemns as absolutely non-mailable, and empowers
the Postmaster General to issue fraud orders against, or otherwise deny the use of the facilities of the
postal service to, any information concerning any lottery, gift enterprise, or scheme for the distribution
of money, or of any real or personal property by lot, chance, or drawing of any kind. Upon these words
hinges the resolution of the second issue posed in this appeal.
Happily, this is not an altogether untrodden judicial path. As early as in 1922, in El Debate, Inc. vs.
Topacio, 44 Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under
the abovementioned provisions of the Postal Law, this Court declared that
While countless definitions of lottery have been attempted, the authoritative one for this jurisdiction is
that of the United States Supreme Court, in analogous cases having to do with the power of the United
States Postmaster General, viz.: The term lottery extends to all schemes for the distribution of prizes
by chance, such as policy playing, gift exhibitions, prize concerts, raffles at fairs, etc., and various forms
of gambling. The three essential elements of a lottery are: First, consideration; second, prize; and third,
chance. (Horner vs. States [1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S.,
497; U.S. vs. Filart and Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S.
vs. Baguio [1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.)
Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious
in the disputed scheme to be the subject of contention. Consequently as the appellant himself
concedes, the field of inquiry is narrowed down to the existence of the element of consideration
therein. Respecting this matter, our task is considerably lightened inasmuch as in the same case just
cited, this Court has laid down a definitive yard-stick in the following terms
In respect to the last element of consideration, the law does not condemn the gratuitous distribution of
property by chance, if no consideration is derived directly or indirectly from the party receiving the
chance, but does condemn as criminal schemes in which a valuable consideration of some kind is paid
directly or indirectly for the chance to draw a prize.
Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which the
invitation to participate therein is couched. Thus
No puzzles, no rhymes? You dont need wrappers, labels or boxtops? You dont have to buy anything?
Simply estimate the actual number of liter the Caltex gas pump with the hood at your favorite Caltex
dealer will dispense from to , and win valuable prizes . . . . .
Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any
service be rendered, or any value whatsoever be given for the privilege to participate. A prospective
contestant has but to go to a Caltex station, request for the entry form which is available on demand,
and accomplish and submit the same for the drawing of the winner. Viewed from all angles or turned
inside out, the contest fails to exhibit any discernible consideration which would brand it as a lottery.
Indeed, even as we head the stern injunction, look beyond the fair exterior, to the substance, in order
to unmask the real element and pernicious tendencies which the law is seeking to prevent (El Debate,
Inc. vs. Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not only appear to be,
but actually is, a gratuitous distribution of property by chance.
There is no point to the appellants insistence that non-Caltex customers who may buy Caltex products
simply to win a prize would actually be indirectly paying a consideration for the privilege to join the
contest. Perhaps this would be tenable if the purchase of any Caltex product or the use of any Caltex
service were a pre-requisite to participation. But it is not. A contestant, it hardly needs reiterating, does
not have to buy anything or to give anything of value.
Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would
naturally benefit the sponsor in the way of increased patronage by those who will be encouraged to
prefer Caltex products if only to get the chance to draw a prize by securing entry blanks. The required
element of consideration does not consist of the benefit derived by the proponent of the contest. The
true test, as laid down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is whether the
participant pays a valuable consideration for the chance, and not whether those conducting the
enterprise receive something of value in return for the distribution of the prize. Perspective properly
oriented, the standpoint of the contestant is all that matters, not that of the sponsor. The following,
culled from Corpus Juris Secundum, should set the matter at rest:
The fact that the holder of the drawing expects thereby to receive, or in fact does receive, some benefit
in the way of patronage or otherwise, as a result of the drawing; does not supply the element of
consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98 S.W., 2d., 844 (54 C.J.S., p. 849).
Thus enlightened, we join the trial court in declaring that the Caltex Hooded Pump Contest proposed
by the appellee is not a lottery that may be administratively and adversely dealt with under the Postal
Law.
But it may be asked: Is it not at least a gift enterprise, or scheme for the distribution of money, or of
any real or personal property by lot, chance, or drawing of any kind, which is equally prescribed?
Incidentally, while the appellants brief appears to have concentrated on the issue of consideration, this
aspect of the case cannot be avoided if the remedy here invoked is to achieve its tranquilizing effect as
an instrument of both curative and preventive justice. Recalling that the appellants action was
predicated, amongst other bases, upon Opinion 217, Series 1953, of the Secretary of Justice, which
opined in effect that a scheme, though not a lottery for want of consideration, may nevertheless be a
gift enterprise in which that element is not essential, the determination of whether or not the proposed
contest wanting in consideration as we have found it to be is a prohibited gift enterprise, cannot
be passed over sub silencio.
While an all-embracing concept of the term gift enterprise is yet to be spelled out in explicit words,
there appears to be a consensus among lexicographers and standard authorities that the term is
commonly applied to a sporting artifice of under which goods are sold for their market value but by way
of inducement each purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654;
Black, Law Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with Pronunciations, 2nd ed., p.
55; Retail Section of Chamber of Commerce of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker
vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus
conceived, the term clearly cannot embrace the scheme at bar. As already noted, there is no sale of
anything to which the chance offered is attached as an inducement to the purchaser. The contest is
open to all qualified contestants irrespective of whether or not they buy the appellees products.
Going a step farther, however, and assuming that the appellees contest can be encompassed within the
broadest sweep that the term gift enterprise is capable of being extended, we think that the
appellants pose will gain no added comfort. As stated in the opinion relied upon, rulings there are
indeed holding that a gift enterprise involving an award by chance, even in default of the element of
consideration necessary to constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178 So.
73; Russell vs. Equitable Loan & Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-Great Falls
Theater Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only one side of the coin.
Equally impressive authorities declare that, like a lottery, a gift enterprise comes within the prohibitive
statutes only if it exhibits the tripartite elements of prize, chance and consideration (E.g.: Bills vs. People,
157 P. 2d., 139, 142, 113 Colo., 326; DOrio vs. Jacobs, 275 P. 563, 565, 151 Wash., 297; People vs.
Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs. Frueauff, 88 P., 389, 394, 39 Colo., 20, 7 L.R.A.,
N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing: Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705;
18, Words and Phrases, perm. ed., pp. 590-594). The apparent conflict of opinions is explained by the
fact that the specific statutory provisions relied upon are not identical. In some cases, as pointed out in
54 C.J.S., 851, the terms lottery and gift enterprise are used interchangeably (Bills vs. People, supra);
in others, the necessity for the element of consideration or chance has been specifically eliminated by
statute. (54 C.J.S., 351-352, citing Barker vs. State, supra; State ex rel. Stafford vs. Fox-Great Falls
Theater Corporation, supra). The lesson that we derive from this state of the pertinent jurisprudence is,
therefore, that every case must be resolved upon the particular phraseology of the applicable statutory
provision.
Taking this cue, we note that in the Postal Law, the term in question is used in association with the word
lottery. With the meaning of lottery settled, and consonant to the well-known principle of legal
hermeneutics noscitur a sociis which Opinion 217 aforesaid also relied upon although only insofar as
the element of chance is concerned it is only logical that the term under a construction should be
accorded no other meaning than that which is consistent with the nature of the word associated
therewith. Hence, if lottery is prohibited only if it involves a consideration, so also must the term gift
enterprise be so construed. Significantly, there is not in the law the slightest indicium of any intent to
eliminate that element of consideration from the gift enterprise therein included.
This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the
determination thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is
axiomatic, are designed to prevent the use of the mails as a medium for disseminating printed matters
which on grounds of public policy are declared non-mailable. As applied to lotteries, gift enterprises and
similar schemes, justification lies in the recognized necessity to suppress their tendency to inflame the
gambling spirit and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in
gambling it is inherent that something of value be hazarded for a chance to gain a larger amount, it
follows ineluctably that where no consideration is paid by the contestant to participate, the reason
behind the law can hardly be said to obtain. If, as it has been held
Gratuitous distribution of property by lot or chance does not constitute lottery, if it is not resorted to
as a device to evade the law and no consideration is derived, directly or indirectly, from the party
receiving the chance, gambling spirit not being cultivated or stimulated thereby. City of Roswell vs.
Jones, 67 P. 2d., 286, 41 N.M., 258. (25 Words and Phrases, perm. ed., p. 695, emphasis supplied).
we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to hold
that, under the prohibitive provisions of the Postal Law which we have heretofore examined, gift
enterprises and similar schemes therein contemplated are condemnable only if, like lotteries, they
involve the element of consideration. Finding none in the contest here in question, we rule that the
appellee may not be denied the use of the mails for purposes thereof.
Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief,
and that the Caltex Hooded Pump Contest as described in the rules submitted by the appellee does
not transgress the provisions of the Postal Law.
ACCORDINGLY, the judgment appealed from is AFFIRMED. No costs.

SUPREME COURT
Manila
EN BANC
G.R. No. 166471 March 22, 2011
TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,

vs.
LA TRINIDAD WATER DISTRICT, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition1 challenges
the 1 October 2004 Judgment2 and 6 November 2004 Order3 of the Regional Trial Court (RTC),
Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-CV-1878.
The Facts
Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the Cooperative

Development Authority, and organized to provide domestic water services in Barangay Tawang, La
Trinidad, Benguet.
La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No.
198, as amended. It is authorized to supply water for domestic, industrial and commercial purposes
within the municipality of La Trinidad, Benguet.
On 9 October 2000, TMPC filed with the National Water Resources Board (NWRB) an application for
a certificate of public convenience (CPC) to operate and maintain a waterworks system in Barangay
Tawang. LTWD opposed TMPCs application. LTWD claimed that, under Section 47 of PD No. 198,
as amended, its franchise is exclusive. Section 47 states that:
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for
domestic, industrial or commercial water service within the district or any portion thereof unless and
except to the extent that the board of directors of said district consents thereto by resolution duly
adopted, such resolution, however, shall be subject to review by the Administration.
In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPCs application for a
CPC. In its 15 August 2002 Decision,4 the NWRB held that LTWDs franchise cannot be exclusive
since exclusive franchises are unconstitutional and found that TMPC is legally and financially
qualified to operate and maintain a waterworks system. NWRB stated that:
With respect to LTWDs opposition, this Board observes that:
1. It is a substantial reproduction of its opposition to the application for water permits previously filed
by this same CPC applicant, under WUC No. 98-17 and 98-62 which was decided upon by this
Board on April 27, 2000. The issues being raised by Oppositor had been already resolved when this
Board said in pertinent portions of its decision:
"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay Tawang is
within their territorial jurisdiction, this does not mean that all others are excluded in engaging in such
service, especially, if the district is not capable of supplying water within the area. This Board has
time and again ruled that the "Exclusive Franchise" provision under P.D. 198 has misled most water
districts to believe that it likewise extends to be [sic] the waters within their territorial boundaries.
Such ideological adherence collides head on with the constitutional provision that "ALL WATERS
AND NATURAL RESOURCES BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise,
certificate or authorization for the operation of public [sic] shall be exclusive in character".
xxxx
All the foregoing premises all considered, and finding that Applicant is legally and financially qualified
to operate and maintain a waterworks system; that the said operation shall redound to the benefit of
the homeowners/residents of the subdivision, thereby, promoting public service in a proper and
suitable manner, the instant application for a Certificate of Public Convenience is, hereby,
GRANTED.5
LTWD filed a motion for reconsideration. In its 18 November 2002 Resolution,6 the NWRB denied
the motion.
LTWD appealed to the RTC.
The RTCs Ruling
In its 1 October 2004 Judgment, the RTC set aside the NWRBs 23 July 2002 Resolution and 15
August 2002 Decision and cancelled TMPCs CPC. The RTC held that Section 47 is valid. The RTC
stated that:
The Constitution uses the term "exclusive in character". To give effect to this provision, a
reasonable, practical and logical interpretation should be adopted without disregard to the ultimate
purpose of the Constitution. What is this ultimate purpose? It is for the state, through its authorized
agencies or instrumentalities, to be able to keep and maintain ultimate control and supervision over
the operation of public utilities. Essential part of this control and supervision is the authority to grant
a franchise for the operation of a public utility to any person or entity, and to amend or repeal an
existing franchise to serve the requirements of public interest. Thus, what is repugnant to the
Constitution is a grant of franchise "exclusive in character" so as to preclude the State itself from
granting a franchise to any other person or entity than the present grantee when public interest so
requires. In other words, no franchise of whatever nature can preclude the State, through its duly
authorized agencies or instrumentalities, from granting franchise to any person or entity, or to repeal
or amend a franchise already granted. Consequently, the Constitution does not necessarily prohibit
a franchise that is exclusive on its face, meaning, that the grantee shall be allowed to exercise this
present right or privilege to the exclusion of all others. Nonetheless, the grantee cannot set up its
exclusive franchise against the ultimate authority of the State.7
TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied the motion.
Hence, the present petition.
Issue
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198, as amended, is
valid.
The Courts Ruling
The petition is meritorious.
What cannot be legally done directly cannot be done indirectly. This rule is basic and, to a
reasonable mind, does not need explanation. Indeed, if acts that cannot be legally done directly can
be done indirectly, then all laws would be illusory.
In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do directly, he cannot
do indirectly."9In Akbayan Citizens Action Party v. Aquino,10 quoting Agan, Jr. v. Philippine
International Air Terminals Co., Inc.,11the Court held that, "This Court has long and consistently
adhered to the legal maxim that those that cannot be done directly cannot be done
indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas,13 the Court
held that, "No one is allowed to do indirectly what he is prohibited to do directly."14
The President, Congress and the Court cannot create directly franchises for the operation of a public
utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly
prohibit the creation of franchises that are exclusive in character. Section 8, Article XIII of the 1935
Constitution states that:
No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or other entities organized under the
laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the
Philippines, nor shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Empahsis supplied)
Section 5, Article XIV of the 1973 Constitution states that:
granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of the capital of which is owned by such
citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Emphasis supplied)
Section 11, Article XII of the 1987 Constitution states that:
laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens, nor
shall such franchise, certificate or authorization be exclusive in character or for a longer period
than fifty years. (Emphasis supplied)
Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear
franchises for the operation of a public utility cannot be exclusive in character. The 1935, 1973 and
1987 Constitutions expressly and clearly state that, "nor shall such franchise x x x be exclusive
in character." There is no exception.
When the law is clear, there is nothing for the courts to do but to apply it. The duty of the Court is to
apply the law the way it is worded. In Security Bank and Trust Company v. Regional Trial Court of
Makati, Branch 61,15 the Court held that:
Basic is the rule of statutory construction that when the law is clear and unambiguous, the court
is left with no alternative but to apply the same according to its clear language. As we have
held in the case of Quijano v. Development Bank of the Philippines:
"x x x We cannot see any room for interpretation or construction in the clear and unambiguous
language of the above-quoted provision of law. This Court had steadfastly adhered to the
doctrine that its first and fundamental duty is the application of the law according to its
express terms, interpretation being called for only when such literal application is impossible. No
process of interpretation or construction need be resorted to where a provision of law peremptorily
calls for application. Where a requirement or condition is made in explicit and unambiguous
terms, no discretion is left to the judiciary. It must see to it that its mandate is
obeyed."16 (Emphasis supplied)
In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the Court held that, "The
Constitution is quite emphatic that the operation of a public utility shall not be exclusive."18 In Pilipino
Telephone Corporation v. National Telecommunications Commission,19 the Court held that, "Neither
Congress nor the NTC can grant an exclusive franchise, certificate, or any other form of
authorization to operate a public utility."20 In National Power Corp. v. Court of Appeals,21 the Court
held that, "Exclusivity of any public franchise has not been favored by this Court such that in most, if
not all, grants by the government to private corporations, the interpretation of rights, privileges or
franchises is taken against the grantee."22 In Radio Communications of the Philippines, Inc. v.
National Telecommunications Commission,23 the Court held that, "The Constitution mandates that a
franchise cannot be exclusive in nature."24
Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in
character. What the President, Congress and the Court cannot legally do directly they cannot do
indirectly. Thus, the President, Congress and the Court cannot create indirectly franchises that are
exclusive in character by allowing the Board of Directors (BOD) of a water district and the Local
Water Utilities Administration (LWUA) to create franchises that are exclusive in character.
In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos) created
indirectly franchises that are exclusive in character by allowing the BOD of LTWD and the LWUA to
create directly franchises that are exclusive in character. Section 47 of PD No. 198, as amended,
allows the BOD and the LWUA to create directly franchises that are exclusive in character. Section
47 states:
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for
domestic, industrial or commercial water service within the district or any portion thereof unless and
except to the extent that the board of directors of said district consents thereto by resolution
duly adopted, such resolution, however, shall be subject to review by the Administration.
(Emphasis supplied)
In case of conflict between the Constitution and a statute, the Constitution always prevails because
the Constitution is the basic law to which all other laws must conform to. The duty of the Court is to
uphold the Constitution and to declare void all laws that do not conform to it.
In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that if a law or
an administrative rule violates any norm of the Constitution, that issuance is null and void and has no
effect. The Constitution is the basic law to which all laws must conform; no act shall be valid if it
conflicts with the Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution is the
highest law of the land. It is the basic and paramount law to which all other laws must
conform."28 In Atty. Macalintal v. Commission on Elections,29 the Court held that, "The Constitution is
the fundamental and paramount law of the nation to which all other laws must conform and in
accordance with which all private rights must be determined and all public authority administered.
Laws that do not conform to the Constitution shall be stricken down for being
unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance System,31 the Court held
that:
Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the
constitution that law or contract whether promulgated by the legislative or by the executive
branch or entered into by private persons for private purposes is null and void and without any
force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law
of the nation, it is deemed written in every statute and contract."32 (Emphasis supplied)
To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation of franchises that
are exclusive in character. They uniformly command that "nor shall such franchise x x x be
exclusive in character." This constitutional prohibition is absolute and accepts no exception. On the
other hand, PD No. 198, as amended, allows the BOD of LTWD and LWUA to create franchises that
are exclusive in character. Section 47 states that, "No franchise shall be granted to any other person
or agency x x x unless and except to the extent that the board of directors consents thereto x x
x subject to review by the Administration." Section 47 creates a glaring exception to the absolute
prohibition in the Constitution. Clearly, it is patently unconstitutional.
Section 47 gives the BOD and the LWUA the authority to make an exception to the absolute
prohibition in the Constitution. In short, the BOD and the LWUA are given the discretion to create
franchises that are exclusive in character. The BOD and the LWUA are not even legislative bodies.
The BOD is not a regulatory body but simply a management board of a water district. Indeed, neither
the BOD nor the LWUA can be granted the power to create any exception to the absolute prohibition
in the Constitution, a power that Congress itself cannot exercise.
In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared Section 47 void. The
Court held that:
Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of CPCs for the
reasons discussed above, the same provision must be deemed void ab initio for being
irreconcilable with Article XIV, Section 5 of the 1973 Constitution which was ratified on January
17, 1973 the constitution in force when P.D. 198 was issued on May 25, 1973. Thus, Section 5 of
Art. XIV of the 1973 Constitution reads:
"SECTION 5. No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per centum of the capital of which is owned
by such citizens, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such franchise or right be granted
except under the condition that it shall be subject to amendment, alteration, or repeal by the
Batasang Pambansa when the public interest so requires. The State shall encourage equity
participation in public utiltities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their proportionate share in the
capital thereof."
This provision has been substantially reproduced in Article XII Section 11 of the 1987 Constitution,
including the prohibition against exclusive franchises.
xxxx
Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is
clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, it is unconstitutional and
may not, therefore, be relied upon by petitioner in support of its opposition against respondents
application for CPC and the subsequent grant thereof by the NWRB.
WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied)
The dissenting opinion declares Section 47 valid and constitutional. In effect, the dissenting opinion
holds that (1) President Marcos can create indirectly franchises that are exclusive in character; (2)
the BOD can create directly franchises that are exclusive in character; (3) the LWUA can create
directly franchises that are exclusive in character; and (4) the Court should allow the creation of
franchises that are exclusive in character.
Stated differently, the dissenting opinion holds that (1) President Marcos can violate indirectly the
Constitution; (2) the BOD can violate directly the Constitution; (3) the LWUA can violate directly the
Constitution; and (4) the Court should allow the violation of the Constitution.
The dissenting opinion states that the BOD and the LWUA can create franchises that are exclusive
in character "based on reasonable and legitimate grounds," and such creation "should not be
construed as a violation of the constitutional mandate on the non-exclusivity of a franchise" because
it "merely refers to regulation" which is part of "the governments inherent right to exercise police
power in regulating public utilities" and that their violation of the Constitution "would carry with it the
legal presumption that public officers regularly perform their official functions." The dissenting
opinion states that:
To begin with, a government agencys refusal to grant a franchise to another entity, based on
reasonable and legitimate grounds, should not be construed as a violation of the constitutional
mandate on the non-exclusivity of a franchise; this merely refers to regulation, which the Constitution
does not prohibit. To say that a legal provision is unconstitutional simply because it enables a
government instrumentality to determine the propriety of granting a franchise is contrary to the
governments inherent right to exercise police power in regulating public utilities for the protection of
the public and the utilities themselves. The refusal of the local water district or the LWUA to consent
to the grant of other franchises would carry with it the legal presumption that public officers regularly
perform their official functions.
The dissenting opinion states two "reasonable and legitimate grounds" for the creation of exclusive
franchise: (1) protection of "the governments investment,"35 and (2) avoidance of "a situation where
ruinous competition could compromise the supply of public utilities in poor and remote areas."36
There is no "reasonable and legitimate" ground to violate the Constitution. The Constitution should
never be violated by anyone. Right or wrong, the President, Congress, the Court, the BOD and the
LWUA have no choice but to follow the Constitution. Any act, however noble its intentions, is void if it
violates the Constitution. This rule is basic.
In Social Justice Society,37 the Court held that, "In the discharge of their defined functions, the three
departments of government have no choice but to yield obedience to the commands of the
Constitution. Whatever limits it imposes must be observed."38 In Sabio,39 the Court held that,
"the Constitution is the highest law of the land. It is the basic and paramount law to which x x
x all persons, including the highest officials of the land, must defer. No act shall be valid,
however noble its intentions, if it conflicts with the Constitution."40 In Bengzon v. Drilon,41 the
Court held that, "the three branches of government must discharge their respective functions within
the limits of authority conferred by the Constitution."42 In Mutuc v. Commission on Elections,43 the
Court held that, "The three departments of government in the discharge of the functions with
which it is [sic] entrusted have no choice but to yield obedience to [the
Constitutions] commands. Whatever limits it imposes must be observed."44
Police power does not include the power to violate the Constitution. Police power is the plenary
power vested in Congress to make laws not repugnant to the Constitution. This rule is basic.
In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,45 the Court held that,
"Police power is the plenary power vested in the legislature to make, ordain, and establish
wholesome and reasonable laws, statutes and ordinances, not repugnant to the
Constitution."46 In Carlos Superdrug Corp. v. Department of Social Welfare and Development,47 the
Court held that, police power "is the power vested in the legislature by the constitution to make,
ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances x x
x not repugnant to the constitution."48 In Metropolitan Manila Development Authority v.
Garin,49 the Court held that, "police power, as an inherent attribute of sovereignty, is the power
vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes and ordinances x x x not repugnant to the Constitution."50
There is no question that the effect of Section 47 is the creation of franchises that are exclusive in
character. Section 47 expressly allows the BOD and the LWUA to create franchises that are
exclusive in character.
The dissenting opinion explains why the BOD and the LWUA should be allowed to create franchises
that are exclusive in character to protect "the governments investment" and to avoid "a situation
where ruinous competition could compromise the supply of public utilities in poor and remote areas."
The dissenting opinion declares that these are "reasonable and legitimate grounds." The dissenting
opinion also states that, "The refusal of the local water district or the LWUA to consent to the grant of
other franchises would carry with it the legal presumption that public officers regularly perform their
official functions."
When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held that, "A statute may
be declared unconstitutional because it is not within the legislative power to enact; or it creates or
establishes methods or forms that infringe constitutional principles; or its purpose or effect violates
the Constitution or its basic principles."52 The effect of Section 47 violates the Constitution, thus, it
is void.
In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the Court held that,
"This Court must perform its duty to defend and uphold the Constitution."54 In Bengzon,55 the Court
held that, "The Constitution expressly confers on the judiciary the power to maintain inviolate what it
decrees."56 In Mutuc,57 the Court held that:
The concept of the Constitution as the fundamental law, setting forth the criterion for the validity of
any public act whether proceeding from the highest official or the lowest functionary, is a postulate of
our system of government. That is to manifest fealty to the rule of law, with priority accorded to that
which occupies the topmost rung in the legal hierarchy. The three departments of government in the
discharge of the functions with which it is [sic] entrusted have no choice but to yield obedience to its
commands. Whatever limits it imposes must be observed. Congress in the enactment of statutes
must ever be on guard lest the restrictions on its authority, whether substantive or formal, be
transcended. The Presidency in the execution of the laws cannot ignore or disregard what it ordains.
In its task of applying the law to the facts as found in deciding cases, the judiciary is called upon to
maintain inviolate what is decreed by the fundamental law. Even its power of judicial review to pass
upon the validity of the acts of the coordinate branches in the course of adjudication is a logical
corollary of this basic principle that the Constitution is paramount. It overrides any governmental
measure that fails to live up to its mandates. Thereby there is a recognition of its being the supreme
law.58
Sustaining the RTCs ruling would make a dangerous precedent. It will allow Congress to do
indirectly what it cannot do directly. In order to circumvent the constitutional prohibition on franchises
that are exclusive in character, all Congress has to do is to create a law allowing the BOD and the
LWUA to create franchises that are exclusive in character, as in the present case.
WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential Decree No.

198 UNCONSTITUTIONAL. We SET ASIDE the 1 October 2004 Judgment and 6 November 2004
Order of the Regional Trial Court, Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case
No. 03-CV-1878 and REINSTATE the 23 July 2002 Resolution and 15 August 2002 Decision of the
National Water Resources Board.
SO ORDERED
DISSENTING OPINION
BRION, J.:
I dissent.
Lest this Dissent be misunderstood, I shall clarify at the outset that I do not dispute the majority
position that an exclusive franchise is forbidden by the Constitution. The prohibition is in an express
words of the Constitution and cannot be disputed.
My misgiving arises from the majoritys failure to properly resolve the issue of whether or not Section
47 of P.D. No. 198 embodies a prohibited exclusive franchise. I believe that the Court must carefully
examine and analyze the application of the constitutional command to Section 47 and explain the
exact legal basis for its conclusion. We must determine what an exclusive franchise really means to
avoid overextending the prohibition to unintended areas. In the process, we must determine whether
government instead of the grant of an exclusive franchise can regulate the grant of subsequent
franchises. In the present case, I take the view that the law can so allow in order to efficiently and
effectively provide its citizens with the most basic utility.
Respondent La Trinidad Water District (LTWD) is a local water utility created under Presidential
Decree (P.D.) No. 198.1 It is a government-owned and controlled corporation2 authorized by law to
supply water for domestic, industrial, and commercial purposes within the Municipality of La
Trinidad. On the other hand, the petitioner Tawang Multi-Purpose Cooperative (TMPC) is an
applicant for a certificate of public convenience (CPC) to operate and maintain a waterworks system
in Barangay Tawang in the Municipality of La Trinidad.
The RTC ruled that a CPC in favor of TMPC cannot be issued without the latter having applied for
the consent of the local water district in accordance with Section 47 of P.D. No. 198. In effect, the
RTC ruled that Section 47 does not involve the grant of an exclusive franchise. Thus, the TMPC filed
the present petition for review on certiorariunder Rule 45 of the Rules of Court, questioning the
validity of Section 47 of P.D. No. 198, which provides:
Sec. 47. Exclusive Franchise No franchise shall be granted to any other person or agency for
domestic, industrial, or commercial water service within the district or any portion thereof unless and
adopted, such resolution, however, shall be subject to review by the Administration.3 [Emphasis
supplied]
The invalidity of exclusive franchises is not in dispute
I reiterate that, contrary to the majoritys statements, I do not dispute that both the 1973 and the
1987 Constitutions clearly mandate that no franchise certificate, or any other form of authorization,
for the operation of a public utility shall be exclusive in character. I fully support the position that the
legislative entity that enacted Section 47 of P.D. 198 (in this case, former President Ferdinand E.
Marcos in the exercise of his martial law legislative powers) must comply with Article XIV, Section 5
of the 1973 Constitution4 (the Constitution in force when P.D. No. 198 was enacted). This
constitutional provision has been carried over to the 1987 Constitution as Article XII, Section 11 and
states:
laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor
shall such franchise, certificate, or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by the Congress when the
common good so requires. The State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be citizens of the Philippines.
For the majority to characterize the Dissent as an argument for the grant of exclusive franchises by
former President Marcos, by the water districts board of directors, by the LWUA, and by this Court
would be to misread the Dissent and blur the issues that it raises.5
Section 47 of P.D. 198 does not violate Section 5, Article XIV of the 1973 Constitution
The majority insists that Section 47 of P.D. 198 indirectly grants an exclusive franchise in favor of
local water districts. In their reading, the law "allows the board of directors of a water district and the
Local Water Utilities Administrator (LWUA) to create franchises that are exclusive in character."6 I
disagree, as the majority opinion does not at all specify and is unclear on how any franchise can be
indirectly exclusive. What the law allows is merely the regulation of the grant of subsequent
franchises so that the government through government-owned and controlled corporations can
protect itself and the general public it serves in the operation of public utilities.
An exclusive franchise, in its plainest meaning, signifies that no other entity, apart from the grantee,
could be given a franchise. Section 47 of P.D. No. 198, by its clear terms, does not provide for an
exclusive franchise in stating that:
Sec. 47. Exclusive Franchise No franchise shall be granted to any other person or agency for
domestic, industrial, or commercial water service within the district or any portion thereof unless and
adopted, such resolution, however, shall be subject to review by the Administration.7
Despite its title, the assailed provision does not absolutely prohibit other franchises for water service
from being granted to other persons or agencies. It merely requires the consent of the local water
districts Board of Directors before another franchise within the district is granted. Thus, it is a
regulation on the grant of any subsequent franchise where the local water district, as original
grantee, may grant or refuse its consent. If it consents, the non-exclusive nature of its franchise
becomes only too clear. Should it refuse, its action does not remain unchecked as the franchise
applicant may ask the LWUA to review the local water districts refusal. It is thus the LWUA (on the
Office of the President in case of further appeal) that grants a subsequent franchise if one will be
allowed.
Under this arrangement, I submit that the prerogative of the local water districts board of directors or
the LWUA to give or refuse its consent to the application for a CPC cannot be considered as a
constitutional infringement. A government agencys refusal to consent to the grant of a franchise to
another entity, based on reasonable and legitimate grounds, should not be construed as a violation
of the constitutional mandate on the non-exclusivity of a franchise where the standards for the grant
or refusal are clearly spelled out in the law. Effectively, what the law and the State (acting through its
own agency or a government-owned or controlled corporation) thereby undertake is merely an act of
regulation that the Constitution does not prohibit. To say that a legal provision is unconstitutional
simply because it enables a grantee, a government instrumentality, to determine the soundness of
granting a subsequent franchise in its area is contrary to the governments inherent right to exercise
police power in regulating public utilities for the protection of the public and the utilities themselves.8
It should also be noted that even after the Marcos regime, constitutional experts have taken the view
that the government can and should take a strong active part in ensuring public access to basic
utilities. The deliberations of the Constitutional Commission for the 1987 Constitution (which contains
the same provision found in the 1973 Constitution on the non-exclusivity of public utility franchises)
regarding monopolies regulated by the state may guide, though not necessarily bind, us:
MR. DAVIDE: If the idea is really to promote the private sector, may we not provide here that the
government can, in no case, practice monopoly except in certain areas?
MR. VILLEGAS. No, because in the economic field, there are definitely areas where the State can
intervene and can actually get involved in monopolies for the public good.
MR. DAVIDE. Yes, we have provisions here allowing such a monopoly in times of national
emergency.
MR. VILLEGAS. Not even in emergency; for the continuing welfare of consumers.
MR. MONSOD. May we just make a distinction? As we know, there are natural monopolies or what
we call "structural monopolies." Structural monopolies are monopolies not by the nature of their
activities, like electric power, for example, but by the nature of the market. There may be instances
when the market has not developed to such extent that it will only allow, say, one steel company.
Structural monopoly is not by the nature of the business itself. It is possible under these
circumstances that the State may be the appropriate vehicle for such a monopoly.9
If, indeed, the Constitutional Commission in discussing the non-exclusivity clause had accepted the
merits of government monopolies, should this Court consider unconstitutional a provision that allows
a lesser degree of regulationi.e., a government agency giving its consent to the application of a
CPC with the protection of the viability of the government agency and public good as the standards
of its action?
Safeguards against abuse of authority by the water districts board of directors and the LWUA
The refusal of the local water district or the LWUA to consent to other franchises would carry with it
the legal presumption that public officers regularly perform their official functions.10 If, on the other
hand, the officers, directors or trustees of the local water districts and the LWUA act arbitrarily and
unjustifiably refuse their consent to an applicant of a franchise, they may be held liable for their
actions. The local water districts11 and the LWUA12are government-owned and controlled
corporations (GOCCs). The directors of the local water districts and the trustees of the LWUA are
government employees subject to civil service laws and anti-graft laws.13 Moreover, the LWUA is
attached to the Office of the President14 which has the authority to review its acts. Should these acts
in the Executive Department constitute grave abuse of discretion, the Courts may strike them down
under its broad powers of review.15
Any abuse of authority that the local water districts may be feared to commit is balanced by the
control that the government exerts in their creation and operations. The government creates and
organizes local water districts in accordance with a specific law, P.D. No. 198.16 There is no private
party involved as a co-owner in the creation of local water districts. Prior to the local water districts
creation, the national or local government directly owns and controls all their assets. The
governments control over them is further asserted through their board of directors, who are
appointed by the municipal or city mayor or by the provincial governor. The directors are not co-
owners of the local water district but, like other water district personnel, are government employees
subject to civil service laws and anti-graft laws.17 Under this set-up, the control that exists over the
grant of franchises, which originally belongs to the State, simply remained and is maintained with the
State acting through the local government units and the government-owned and controlled
corporations under them.
Because of the governments extensive financial support to these entities, it is part of the laws policy
to scrutinize their expenditures and outlays. Section 20 of P.D. No. 198 states that the local water
districts are subject to annual audits performed by independent auditors and conducted by the
LWUA.18 Section 41 of P.D. No. 198 even limits the authority of the board of directors of local water
districts in the manner in which it can dispose of their income: (1) as payment for obligations and
essential current operating expenses; (2) as a reserve for debt service, and for operations and
maintenance to be used during periods of calamities, force majeure or unforeseen events; and (3) as
a reserve exclusively for the expansion and improvement of their facilities. In this manner, the law
ensures that their officers or directors do not profit from local water districts and that the operations
thereof would be focused on improving public service. The possibility that the officers would refuse
their consent to another franchise applicant for reasons of personal gain is, thus, eliminated.
Public policy behind Section 47 of P.D. No. 198
Without a clear showing that the Constitution was violated by the enactment of Section 47 of P.D.
198, the Court cannot invalidate it without infringing on government policy, especially when
Congress had not seen fit to repeal the law and when the law appears to be based on sound public
policy. P.D. No. 198 requires an applicant to first obtain the consent of the local water district and the
LWUA for important reasons. First, it aims to protect the governments investment. Second, it avoids
a situation where ruinous competition could compromise the supply of public utilities in poor and
remote areas.
A first reason the government seeks to prioritize local water districts is the protection of its
investments - it pours its scarce financial resources into these water districts. The law primarily
establishes the LWUA as a specialized lending institution for the promotion, development and
financing of water utilities.19 Section 73 of P.D. No. 198 also authorizes the LWUA to contract loans
and credits, and incur indebtedness with foreign governments or international financial institutions for
the accomplishment of its objectives. Moreover, the President of the Philippines is empowered not
only to negotiate or contract with foreign governments or international financial institutions on behalf
of the LWUA; he or she may also absolutely and unconditionally guarantee, in the name of the
Republic of the Philippines, the payment of the loans. In addition, the law provides that the General
Appropriations Act shall include an outlay to meet the financial requirements of non-viable local
water districts or the special projects of local water districts.20
The law also adopts a policy to keep the operations of local water districts economically secure and
viable. The "whereas" clauses of the law explain the need to establish local water districts: the lack
of water utilities in provincial areas and the poor quality of the water found in some areas. The law
sought to solve these problems by encouraging the creation of local water districts that the national
government would support through technical advisory services and financing.21 These local water
districts are heavily regulated and depend on government support for their subsistence. If a private
entity provides stiff competition against a local water district, causes it to close down and, thereafter,
chooses to discontinue its business, the problem of finding a replacement water supplier for a poor,
remote area will recur. Not only does the re-organization of a local water district drain limited public
funds; the residents of these far-flung areas would have to endure the absence of water supply
during the considerable time it would take to find an alternative water supply.
Thus, as a matter of foresight, Section 47 of P.D. No. 198 and other provisions within the law aim to
avert the negative effects of competition on the financial stability of local water districts. These
sections work hand in hand with Section 47 of P.D. No. 198. Section 31 of P.D. No. 198, which is
very similar to Section 47 of P.D. No. 198, directly prohibits persons from selling or disposing water
for public purposes within the service area of the local water district:
Section 31. Protection of Waters and Facilities of District. A district shall have the right to:
xxxx
(c) Prohibit any person, firm or corporation from vending selling, or otherwise disposing of water for
public purposes within the service area of the district where district facilities are available to provide
such service, or fix terms and conditions by permit for such sale or disposition of water.
Thus, Section 47 of P.D. No. 198 provides that before a person or entity is allowed to provide water
services where the local water districts facilities are already available, one must ask for the consent
of the board of directors of the local water district, whose action on the matter may be reviewed by
the LWUA.
Even after a CPC is granted and the entity becomes qualified to provide water services, Section 39
of P.D. No. 198 still allows a local water district to charge other entities producing water for
commercial or industrial uses with a production assessment, to compensate for financial reverses
brought about by the operations of the water provider; failure to pay this assessment results in
liability for damages and/or the issuance of an order of injunction.
Section 39. Production Assessment.In the event the board of a district finds, after notice and
hearing, that production of ground water by other entities within the district for commercial or
industrial uses i[s] injuring or reducing the districts financial condition, the board may adopt and levy
a ground water production assessment to compensate for such loss. In connection therewith, the
district may require necessary reports by the operator of any commercial or industrial well. Failure to
pay said assessment shall constitute an invasion of the waters of the district and shall entitle this
district to an injunction and damages pursuant to Section [31] of this Title.
From these, it can be seen that Article XIV, Section 5 of the 1973 Constitution and P.D. No. 198
share the same purpose of seeking to ensure regular water supply to the whole country, particularly
to the remote areas. By requiring a prospective franchise applicant to obtain the consent of the local
water district or the LWUA, the law does not thereby grant it an exclusive franchise; it simply gives
the water district the opportunity to have a say on the entry of a competitor whose operations can
adversely affect its viability and the service it gives to consumers. This is far from an exclusive
franchise that allows no other entity, apart from the only grantee, to have a franchise. Section 47 of
P.D. No. 198 does not bar other franchise applicants; it merely regulates the grant of subsequent
franchises to ensure that the market is not too saturated to the point of adversely affecting existing
government water suppliers, all with the end of ensuring the public the water supply it needs.
Revisiting Metropolitan Cebu Water District (MCWD) v. Margarita A. Adala
Based on the foregoing discussion, I submit that there exists ample justification to reverse our ruling
in Metropolitan Cebu Water District (MCWD) v. Margarita A. Adala.22 As in the present ponencia,
there was no discussion in Metro Cebu Water District of what constitutes a grant of an exclusive
franchise as opposed to a valid regulation of franchises by the government or how the questioned
provision violated the constitutional mandate against exclusive franchises. It was simply presumed
that there was a violation. It is worth noting that the Court disposed of the issue in just one
paragraph that stated:
Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is clearly
repugnant to Article XIV, Section 5 of the 1973 Constitution, it is unconstitutional and may not,
therefore, be relied upon by [MCWD] in support of its opposition against [Adalas] application for
CPC and the subsequent grant thereof by the NWRB.23
In a legal system that rests heavily on precedents, this manner of reasoning would not only be unfair
to the parties; it would also confuse and bewilder the legal community and the general public
regarding the interpretation of an important constitutional provision. This kind of approach should
always be subject to our continuing review and examination.
In reversing a previous ruling issued by the Court, we are not unmindful of the legal maxim stare
decisis et non quieta movere (literally, to stand by the decision and disturb not what is settled). This
maxim is a very convenient practice that the conclusion reached in one case can be applied to
subsequent cases where the facts are substantially the same, even though the parties are different.
However, the doctrine is not set in stone; the Court may wisely set it aside upon a showing that
circumstances attendant in a particular case override the benefits brought about by stare decisis.24
In our Resolution in de Castro v. Judicial and Bar Council,25 we explained why stare decisis is not
considered inflexible with respect to this Court:
The Court, as the highest court of the land, may be guided but is not controlled by precedent. Thus,
the Court, especially with a new membership, is not obliged to follow blindly a particular decision that
it determines, after re-examination, to call for a rectification. The adherence to precedents is strict
and rigid in a common-law setting like the United Kingdom, where judges make law as binding as an
Act of Parliament. But ours is not a common law system; hence judicial precedents are not always
strictly and rigidly followed. A judicial pronouncement in an earlier decision may be followed as a
precedent in subsequent case only when its reasoning and justification are relevant, and the Court in
the latter case accepts such reasoning and justification to be applicable in the case. The application
of the precedent is for the sake of convenience and stability.
For the intervenors to insist that Valenzuela ought not to be disobeyed, or abandoned, or reversed,
and that its wisdom should guide, if not control, the Court in this case is, therefore, devoid of
rationality and foundation. They seem to conveniently forget that the Constitution itself recognizes
the innate authority of the Court en banc to modify or reverse a doctrine or principle of law laid down
in any decision rendered en banc or in division.
Thus, this Court had seen it fit to overturn or abandon the rulings set in its previous
decisions. In Philippine Guardians Brotherhood, Inc. v. Commission on Elections,26 we reversed our
earlier ruling in Philippine Mines Safety Environment Association v. Commission on Elections.27 And
in De Castro,28 we re-examined our decision in In re appointments of Hon. Valenzuela and Hon.
Vallarta29 although the re-examination failed for lack of the necessary supporting votes.
During the deliberations of the present case, a respected colleague hesitated at the idea of
overturning a former ruling that has declared a law unconstitutional on the ground that this Court,
once it declares a law null, cannot breathe life into its already dead provisions. It raises fears that the
people and the other branches of government will not treat the Courts declarations of nullity of laws
seriously.30
We cannot hold that the Court is empowered to reverse its established doctrines but is powerless to
review laws that have been declared void; no justification simply exists for such distinctions. In
reversing its decisions, this Courts primary consideration is to arrive at a just and judicious ruling
and avoiding the ill effects of a previous ruling. It is by pursuing such objectives that this Court earns
the respect of the people and the other branches of government. Precisely, this Court has taken a
contrary view in Kilosbayan, Inc. v. Morato,31 when it noted that the US Supreme Court declared the
Legal Tender Acts void in Hepburn v. Griswold,32 but subsequently declared these statutes as valid
in Knox v. Lee.33 We lauded the American jurists who voted for the validity of the Legal Tender Acts,
which had been formerly declared void, and noted that a change of composition in the Court could
prove the means of undoing an erroneous decision.34
In all, Section 47 of P.D. No. 198 does not violate the constitutional proscription against exclusive
franchises as other persons and entities may still obtain franchises for water utilities within the
district upon the consent of the local water district or upon a favorable finding by the LWUA, which,
in turn, is accountable to the Office of the President. By granting this privilege to local water districts,
the law does not seek to favor private interests as these districts are GOCCs whose profits are
exclusively for public use and whose expenditures the law subjects to the strictest scrutiny. The
restrictions applied to other private persons or entities are intended to protect the governments
considerable investment in local water districts and to promote its policy of prioritizing local water
districts as a means of providing water utilities throughout the country. The protectionist approach
that the law has taken towards local water districts is not per se illegal as the Constitution does not
promote a total deregulation in the operation of public utilities and is a proper exercise by the
government of its police power.
Thus, the TMPC should have first sought the consent of LTWDs Board of Directors, as directed
under Section 47 of P.D. No. 198. Had the Board of Directors refused to give its consent, this action
may still be reviewed by the LWUA, the entity most able to determine the financial and technical
capacity of LTWD in order to decide whether another water service provider is needed in the
municipality. Accordingly, it is my view that TMPCs CPC is invalid as it was issued without notice to
the LTWDs Board of Directors.
ARTURO D. BRION
Associate Justice
CONCURRING OPINION
ABAD, J.:
On October 9, 2000 petitioner Tawang Multi-Purpose Cooperative (TMPC), a registered cooperative

established by Barangay Tawang, La Trinidad residents for the purpose of operating a domestic
drinking water service, applied with the National Water Resources Board (the Board) for a Certificate
of Public Convenience (CPC) to maintain and operate a waterworks system within its barangay.
But respondent La Trinidad Water District (LTWD), a government-owned corporation1 that supplied
water within La Trinidad for domestic, industrial, and commercial purposes, opposed the application.
LTWD claimed that its franchise was exclusive in that its charter provides that no separate franchise
can be granted within its area of operation without its prior written consent. Still, the Board granted
TMPCs application on July 23, 2002, resulting in the issuance of a five-year CPC in its favor.
LTWD contested the grant before the Regional Trial Court (RTC) of La Trinidad which, after hearing,
rendered judgment setting aside the Boards decision and canceling the CPC it issued to TMPC. The
RTC denied TMPCs motion for reconsideration, prompting the latter to come to this Court on
petition for review.
The Court has previously held in Metropolitan Cebu Water District v. Adala2 that Section 473 of P.D.
198,4 is unconstitutional for being contrary to Article XIV, Section 5 of the 1973 Constitution and
Article XII, Section 11 of the 1987 Constitution. Some in the Court would, however, have its above
ruling reexamined based on the view that Section 47 does not actually provide for an exclusive
franchise which would violate the Constitution.
The Courts conclusion and ruling in the Adala case read:
Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is clearly
repugnant to Article XIV, Section 5 of the 1973 Constitution, it is unconstitutional and may not,
therefore, be relied upon by petitioner in support of its opposition against respondents application for
CPC and the subsequent grant thereof by the NWRB.
WHEREFORE, Section 47 of P.D. 198 is unconstitutional.
Paragraph 2, Article 7 of the New Civil Code provides that "when the courts declared a law to be
inconsistent with the Constitution, the former shall be void and the latter shall govern."
Since the Court, exercising its Constitutional power of judicial review, has declared Section 47 of
P.D. 198 void and unconstitutional, such section ceased to become law from the beginning. The
Supreme Courts power of review does not permit it to rewrite P.D. 198 in a subsequent case and
breathe life to its dead provisions. Only Congress can.
Besides, such course of action is unwise. The Court will be establishing a doctrine whereby people
and the other branches of government will not need to treat the Courts declaration of nullity of law
too seriously. They can claim an excuse for continuing to enforce such law since even the Court
concedes that it can in another case change its mind regarding its nullity.
I fully subscribe to the majority opinion, penned by Justice Antonio T. Carpio that there exists no
justification for abandoning the Courts previous ruling on the matter.
I vote to GRANT TMPCs petition for review and SET ASIDE the decision of the trial court.
ROBERTO A. ABAD
Associate Justice
Supreme Court
Baguio City
FIRST DIVISION
SOCIAL SECURITY COMMISSION G.R. No. 170195

and SOCIAL SECURITY SYSTEM,
Petitioner, Present:
CORONA, C. J., Chairperson,

VELASCO, JR.,
- versus- LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
TERESA G. FAVILA, Promulgated:

Respondent. March 28, 2011
x-----------------------------------------------------------------
--x
DECISION
DEL CASTILLO, J.:
A spouse who claims entitlement to death benefits as a primary beneficiary under the
Social Security Law must establish two qualifying factors, to wit: (1) that he/she is the
legitimate spouse; and (2) that he/she is dependent upon the member for support.[1]
This Petition for Review on Certiorari assails the Decision[2] dated May 24, 2005 of the
Court of Appeals (CA) in CA-G.R. SP No. 82763 which reversed and set aside the
Resolution[3] dated June 4, 2003 and Order[4] dated January 21, 2004 of the Social
Security Commission (SSC) in SSC Case No. 8-15348-02. Likewise assailed is the CA
Resolution[5] dated October 17, 2005 denying the Motion for Reconsideration thereto.
Factual Antecedents
On August 5, 2002, respondent Teresa G. Favila (Teresa) filed a Petition[6] before
petitioner SSC docketed as SSC Case No. 8-15348-02. She averred therein that after she
was married to Florante Favila (Florante) on January 17, 1970, the latter designated her
as the sole beneficiary in the E-1 Form he submitted before petitioner Social Security
System (SSS), Quezon City Branch on June 30, 1970. When they begot their children
Jofel, Floresa and Florante II, her husband likewise designated each one of them as
beneficiaries. Teresa further averred that when Florante died on February 1, 1997, his
pension benefits under the SSS were given to their only minor child at that time, Florante
II, but only until his emancipation at age 21. Believing that as the surviving legal wife she
is likewise entitled to receive Florantes pension benefits, Teresa subsequently filed her
claim for said benefits before the SSS. The SSS, however, denied the claim in a letter
dated January 31, 2002, hence, the petition.
In its Answer,[7] SSS averred that on May 6, 1999, the claim for Florantes pension
benefits was initially settled in favor of Teresa as guardian of the minor Florante II. Per its
records, Teresa was paid the monthly pension for a total period of 57 months or from
February 1997 to October 2001 when Florante II reached the age of 21. The claim was,
however, re-adjudicated on July 11, 2002 and the balance of the five-year guaranteed
pension was again settled in favor of Florante II.[8] SSS also alleged that Estelita Ramos,
sister of Florante, wrote a letter[9] stating that her brother had long been separated from
Teresa. She alleged therein that the couple lived together for only ten years and then
decided to go their separate ways because Teresa had an affair with a married man with
whom, as Teresa herself allegedly admitted, she slept with four times a week. SSS also
averred that an interview conducted in Teresas neighborhood in Tondo, Manila on
September 18, 1998 revealed that although she did not cohabit with another man after her
separation with Florante, there were rumors that she had an affair with a police officer.To
support Teresas non-entitlement to the benefits claimed, SSS cited the provisions of
Sections 8(k) and 13 of Republic Act (RA) No. 1161, as amended otherwise known as
Social Security (SS) Law.[10]
Ruling of the Social Security Commission
In a Resolution[11] dated June 4, 2003, SSC held that the surviving spouses entitlement to
an SSS members death benefits is dependent on two factors which must concur at the
time of the latters death, to wit: (1) legality of the marital relationship; and (2)
dependency for support. As to dependency for support, the SSC opined that same is
affected by factors such as separation de facto of the spouses, marital infidelity and such
other grounds sufficient to disinherit a spouse under the law. Thus, although Teresa is the
legal spouse and one of Florantes designated beneficiaries, the SSC ruled that she is
disqualified from claiming the death benefits because she was deemed not dependent for
support from Florante due to marital infidelity. Under Section 8(k) of the SS Law, the
dependent spouse until she remarries is entitled to death benefits as a primary beneficiary,
together with the deceased members legitimate minor children. According to SSC, the
word remarry under said provision has been interpreted as to include a spouse who
cohabits with a person other than his/her deceased spouse or is in an illicit
relationship. This is for the reason that no support is due to such a spouse and to allow
him/her to enjoy the members death benefits would be tantamount to circumvention of
the law. Even if a spouse did not cohabit with another, SSC went on to state that for
purposes of the SS Law, it is sufficient that the separation in-fact of the spouses was
precipitated by an adulterous act since the actual absence of support from the member is
evident from such separation. Notable in this case is that while Teresa denied having
remarried or cohabited with another man, she did not, however, deny her having an
adulterous relationship. SSC therefore concluded that Teresa was not dependent upon
Florante for support and consequently disqualified her from enjoying her husbands death
benefits.
SSC further held that Teresa did not timely contest her non-entitlement to the
award of benefits. It was only when Florante IIs pension was stopped that she deemed it
wise to file her claim. For SSC, Teresas long silence led SSS to believe that she really
suffered from a disqualification as a beneficiary, otherwise she would have immediately
protested her non-entitlement. It thus opined that Teresa is now estopped from claiming
the benefits. Hence, SSC dismissed the petition for lack of merit.
As Teresas Motion for Reconsideration[12] of said Resolution was also denied by SSC in
an Order[13] dated January 21, 2004, she sought recourse before the CA through a Petition
for Review[14] under Rule 43.
Ruling of the Court of Appeals
Before the CA, Teresa insisted that SSS should have granted her claim for death benefits
because she is undisputedly the legal surviving spouse of Florante and is therefore
entitled to such benefits as primary beneficiary. She claimed that the SSCs finding that
she was not dependent upon Florante for support is unfair because the fact still remains
that she was legally married to Florante and that her alleged illicit affair with another man
was never sufficiently established. In fact, SSS admitted that there was no concrete
evidence or proof of her amorous relationship with another man. Moreover, Teresa found
SSSs strict interpretation of the SS Law as not only anti-labor but also anti-family. It is
anti-labor in the sense that it does not work to the benefit of a deceased employees
primary beneficiaries and anti-family because in denying benefits to surviving spouses, it
destroys family solidarity. In sum, Teresa prayed for the reversal and setting aside of the
assailed Resolution and Order of the SSC.
The SSC and the SSS through the Office of the Solicitor General (OSG) filed their
respective Comments[15] to the petition.
SSC contended that the word spouse under Section 8(k) of the SS Law is qualified
by the word dependent. Thus, to be entitled to death benefits under said law, a surviving
spouse must have been dependent upon the member spouse for support during the latters
lifetime including the very moment of contingency. According to it, the fact of
dependency is a mandatory requirement of law. If it is otherwise, the law would have
simply used the word spouse without the descriptive word dependent. In this case, SSC
emphasized that Teresa never denied the fact that she and Florante were already
separated and living in different houses when the contingency happened. Given this fact
and since the conduct of investigation is standard operating procedure for SSS, it being
under legal obligation to determine prior to the award of death benefit whether the
supposed beneficiary is actually receiving support from the member or if such support
was rightfully withdrawn prior to the contingency, SSS conducted an investigation with
respect to the couples separation. And as said investigation revealed tales of Teresas
adulterous relationship with another man, SSS therefore correctly adjudicated the entire
death benefits in favor of Florante II.
To negate Teresas claim that SSS failed to establish her marital infidelity, SSC
enumerated the following evidence: (1) the letter[16] of Florantes sister, Estelita Ramos,
stating that the main reasons why Teresa and Florante separated after only 10 years of
marriage were Teresas adulterous relationship with another man and her propensity for
gambling; (2) the Memorandum[17] dated August 30, 2002 of SSS Senior Analysts Liza
Agilles and Jana Simpas which ran through the facts in connection with the claim for
death benefits accruing from Florantes death. It indicates therein, among others, that
based on interviews conducted in Teresas neighborhood, she did not cohabit with another
man after her separation from her husband although there were rumors that she and a
certain police officer had an affair. However, there is not enough proof to establish their
relationship as Teresa and her paramour did not live together as husband and wife; and
(3) the field investigation report[18] of SSS Senior Analyst Fernando F. Nicolas which
yielded the same findings. The SSC deemed the foregoing evidence as substantial to
support the conclusion that Teresa indeed had an illicit relationship with another man.
SSC also defended SSSs interpretation of the SS law and argued that it is neither
anti-labor nor anti-family. It is not anti-labor because the subject matter of the case is
covered by the SS Law and hence, Labor Law has no application. It is likewise not anti-
family because SSS has nothing to do with Teresas separation from her husband which
resulted to the latters withdrawal of support for her. At any rate, SSC advanced that even
if Teresa is entitled to the benefits claimed, same have already been received in its
entirety by Florante II so that no more benefits are due to Florantes other
beneficiaries. Hence, SSC prayed for the dismissal of the petition.
For its part, the OSG likewise believed that Teresa is not entitled to the benefits claimed
as she lacks the requirement that the wife must be dependent upon the member for
support. This is in view of the rule that beneficiaries under the SS Law need not be the
legal heirs but those who are dependent upon him for support. Moreover, it noted that
Teresa did not file a protest before the SSS to contest the award of the five-year
guaranteed pension to their son Florante II. It posited that because of this, Teresa cannot
raise the matter for the first time before the courts. The OSG also believed that no further
benefits are due to Florantes other beneficiaries considering that the balance of the five-
year guaranteed pension has already been settled.
In a Decision[19] dated May 24, 2005, the CA found Teresas petition impressed with
merit. It gave weight to the fact that she is a primary beneficiary because she is the lawful
surviving spouse of Florante and in addition, she was designated by Florante as such
beneficiary. There was no legal separation or annulment of marriage that could have
disqualified her from claiming the death benefits and that her designation as beneficiary
had not been invalidated by any court of law. The CA cited Social Security System v.
Davac[20] where it was held that it is only when there is no designation of beneficiary or
when the designation is void that the SSS would have to decide who is entitled to claim
the benefits. It opined that once a spouse is designated by an SSS member as his/her
beneficiary, same forecloses any inquiry as to whether the spouse is indeed a dependent
deriving support from the member. Thus, when SSS conducted an investigation to
determine whether Teresa is indeed dependent upon Florante, SSS was unilaterally
adding a requirement not imposed by law which makes it very difficult for designated
primary beneficiaries to claim for benefits. To make things worse, the result of said
investigation which became the basis of Teresas non-entitlement to the benefits claimed
was culled from unfounded rumors.
Moreover, the CA saw SSSs conduct of investigations to be violative of the

constitutional right to privacy. It lamented that SSS has no power to investigate and pry
into the members and his/her familys personal lives and should cease and desist from
conducting such investigations. Ultimately, the CA reversed and set aside the assailed
Resolution and Order of the SSC and directed SSS to pay Teresas monetary claims
which included the monthly pension due her as the surviving spouse and the lump sum
benefit equivalent to thirty-six times the monthly pension.
SSC filed its Motion for Reconsideration[21] of said Decision but same was denied in a
Resolution[22] dated October 17, 2005. Impleading SSS as co-petitioner, SSC thus filed
this petition for review on certiorari.
Issue
Is Teresa a primary beneficiary in contemplation of the Social Security Law as to be

entitled to death benefits accruing from the death of Florante?
Petitioners Arguments
SSC reiterates the argument that to be entitled to death benefits, a surviving spouse must
have been actually dependent for support upon the member spouse during the latters
lifetime including the very moment of contingency. To it, this is clearly the intention of
the legislature; otherwise, Section 8(k) of the SS law would have simply stated spouse
without the descriptive word dependent. Here, although Teresa is without question
Florantes legal spouse, she is not the dependent spouse referred to in the said provision of
the law. Given the reason for the couples separation for about 17 years prior to Florantes
death and in the absence of proof that during said period Teresa relied upon Florante for
support, there is therefore no reason to infer that Teresa is a dependent spouse entitled to
her husbands death benefits.
SSC adds that in the process of determining non-dependency status of a spouse,
conviction of a crime involving marital infidelity is not an absolute necessity. It is
sufficient for purposes of the award of death benefits that a thorough investigation was
conducted by SSS through interviews of impartial witnesses and that same showed that
the spouse-beneficiary committed an act of marital infidelity which caused the member to
withdraw support from his spouse. In this case, no less than Florantes sister, who does not
stand to benefit from the present controversy, revealed that Teresa frequented a casino
and was disloyal to her husband so that they separated after only 10 years of
marriage.This was affirmed through the interview conducted in Teresas
neighborhood. Hence, it is not true that Teresas marital infidelity was not sufficiently
proven.
Likewise, SSC contends that contrary to the CAs posture, a members designation
of a primary beneficiary does not guarantee the latters entitlement to death benefits
because such entitlement is determined only at the time of happening of the
contingency. This is because there may have been events which supervened subsequent
to the designation which would otherwise disqualify the person designated as beneficiary
such as emancipation of a members child or separation from his/her spouse. This is
actually the same reason why SSS must conduct an investigation of all claims for
benefits.
Moreover, SSC justifies SSSs conduct of investigation and argues that said office
did not intrude into Florantes and his familys personal lives as the investigation did not
aggravate the situation insofar as Teresas relationship with her deceased husband was
concerned. It merely led to the discovery of the true state of affairs between them so that
based on it, the death benefits were awarded to the rightful primary beneficiary, Florante
II. Clearly, such an investigation is an essential part of adjudication process, not only in
this case but also in all claims for benefits filed before SSS. Thus, SSC prays for the
setting aside of the assailed CA Decision and Resolution.
Respondents Arguments
To support her entitlement to the death benefits claimed, Teresa cited Ceneta v.
Social Security System,[23] a case decided by the CA which declared, viz:
Clearly then, the term dependent spouse, who must not re-marry in order to be
entitled to the SSS death benefits accruing from the death of his/her spouse,
refers to the legal spouse who, under the law, is entitled to receive support
from the other spouse.
Indubitably, petitioner, having been legally married to the deceased SSS

member until the latters death and despite his subsequent marriage to
respondent Carolina, is deemed dependent for support under Article 68 of the
Family Code. Said provision reads:
The husband and wife are obliged to live together, observe mutual love, respect and
fidelity, and render mutual help and support
Based on said law, petitioner is, therefore, entitled to the claimed death
benefits. Her marriage to the deceased not having been lawfully severed, the
law disputably presumes her to be continually dependent for support.
No evidence or even a mere inference can be adduced to prove that

petitioner ceased to derive all her needs indispensable for her sustenance, and
thus, she remains a legal dependent. A dependent spouse is primary
beneficiary entitled to the death benefits of a deceased SSS member spouse
unless he or she remarries. A mere allegation of adultery not substantially
proven can not validly deprive petitioner of the support referred to under the
law, and consequently, of her claim under the SSS Law.
Thus, being the legal wife, Teresa asserts that she is presumed to be dependent upon
Florante for support. The bare allegation of Estelita that she had an affair with another
man is insufficient to deprive her of support from her husband under the law and,
conversely, of the death benefits from SSS. Moreover, Teresa points out that despite their
separation and the rumors regarding her infidelity, Florante did not withdraw her
designation as primary beneficiary. Under this circumstance, Teresa believes that
Florante really intended for her to receive the benefits from SSS.
Teresa also agrees with the CAs finding that SSS unilaterally added to the
requirements of the law the condition that a surviving spouse must be actually dependent
for support upon the member spouse during the latters lifetime. She avers that this could
not have been the lawmakers intention as it would make it difficult or even impossible for
beneficiaries to claim for benefits under the SS Law. She stresses that courts (or quasi-
judicial agencies for that matter), may not, in the guise of interpretation, enlarge the scope
of a statute and include therein situations not provided nor intended by lawmakers. Courts
are not authorized to insert into the law what they think should be in it or to supply what
they think the legislature would have supplied if its attention had been called to the
omission. Hence, Teresa prays that the assailed CA Decision and Resolution be affirmed
in toto.
Our Ruling
We find merit in the petition.
The law in force at the time of Florantes death was RA 1161. Section 8 (e) and (k)
of said law provides:
Section 8. Terms Defined. For the purposes of this Act, the following
terms shall, unless the context indicates otherwise, have the following
meanings:
xxxx
(e) Dependent The legitimate, legitimated or legally adopted child who

is unmarried, not gainfully employed and not over twenty-one years of age, or
over twenty-one years of age, provided that he is congenitally incapacitated
and incapable of self-support, physically or mentally; the legitimate spouse
dependent for support upon the employee; and the legitimate parents
wholly dependent upon the covered employee for regular support.
xxxx
(k) Beneficiaries The dependent spouse until he remarries and

dependent children, who shall be the primary beneficiaries. In their absence,
the dependent parents and, subject to the restrictions imposed on dependent
children, the legitimate descendants and illegitimate children who shall be the
secondary beneficiaries. In the absence of any of the foregoing, any other
person designated by the covered employee as secondary
beneficiary. (Emphasis ours.)
From the above-quoted provisions, it is plain that for a spouse to qualify as a primary
beneficiary under paragraph (k) thereof, he/she must not only be a legitimate spouse but
also a dependent as defined under paragraph (e), that is, one who is dependent upon the
member for support.Paragraphs (e) and (k) of Section 8 of RA 1161 are very
clear. Hence, we need only apply the law. Under the principles of statutory construction,
if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.This plain meaning rule or verba legis, derived
from the maxim index animo sermo est (speech is the index of intention), rests on the
valid presumption that the words employed by the legislature in a statute correctly
express its intent by the use of such words as are found in the statute. Verba legis non est
recedendum, or, from the words of a statute there should be no departure.[24]
Thus, in Social Security System v. Aguas[25] we held that:
[I]t bears stressing that for her (the claimant) to qualify as a primary
beneficiary, she must prove that she was the legitimate spouse dependent for
support from the employee. The claimant-spouse must therefore establish two
qualifying factors: (1) that she is the legitimate spouse, and (2) that she is
dependent upon the member for support. x x x
Here, there is no question that Teresa was Florantes legal wife. What is at point, however,
is whether Teresa is dependent upon Florante for support in order for her to fall under the
term dependent spouse under Section 8(k) of RA 1161.
What the SSC relies on in concluding that Teresa was not dependent upon Florante for
support during their separation for 17 years was its findings that Teresa maintained an
illicit relationship with another man. Teresa however counters that such illicit relationship
has not been sufficiently established and,
hence, as the legal wife, she is presumed to be continually dependent upon
Florante for support.
We agree with Teresa that her alleged affair with another man was not sufficiently
established. The Memorandum of SSS Senior Analysts Liza Agilles and Jana Simpas
reveals that it was Florante who was in fact living with a common law wife, Susan Favila
(Susan) and their three minor children at the time of his death. Susan even filed her own
claim for death benefits with the SSS but same was, however, denied. With respect to
Teresa, we quote the pertinent portions of said Memorandum, viz:
SUSAN SUBMITTED A LETTER SIGNED BY ESTELITA RAMOS,

ELDER SISTER OF THE DECEASED STATING THAT MEMBER WAS
SEPARATED FROM TERESA AFTER 10 YEARS OF LIVING IN FOR
THE REASONS THAT HIS WIFE HAD COHABITED WITH A
MARRIED MAN. ALSO, PER ESTELITA, THE WIFE HERSELF
ADMITTED THAT THE MAN SLEPT WITH HER 4 TIMES A WEEK.
TERESA SUBMITTED AN AFFIDAVIT EXECUTED BY NAPOLEON

AND JOSEFINA, BROTHER AND SISTER (IN) LAW, RESPECTIVELY,
OF THE DECEASED THAT TERESA HAS NEVER RE-MARRIED NOR
COHABITED WITH ANOTHER MAN.
BASED ON THE INTERVIEW (DATED 9/18/98) CONDUCTED FROM

THE NEIGHBORHOOD OF TERESA AND BGY. KAGAWAD IN
TONDO, MANILA, IT WAS ESTABLISHED THAT TERESA DID
NOT COHABIT WITH ANOTHER MAN AFTER THE
SEPARATION ALTHOUGH THERE ARE RUMORS THAT SHE
AND A CERTAIN POLICE OFFICER HAD AN AFFAIR. BUT [NOT]
ENOUGH PROOF TO ESTABLISH THEIR RELATIONSHIP SINCE
THEY DID NOT LIVE-IN AS HUSBAND AND WIFE.
BASED ON THE INTERVIEW WITH JOSEFINA FAVILA, MEMBER

AND TERESA WERE SEPARATED FOR A NUMBER OF YEARS AND
THAT SHE HAD NO KNOWLEDGE IF TERESA COHABITED
WITH ANOTHER MAN ALTHOUGH SHE HEARD OF THE
RUMORS THAT SAID WIFE HAD AN AFFAIR WITH ANOTHER
MAN. NAPOLEON WAS NOT INTERVIEWED. (Emphasis ours)
While SSC believes that the foregoing constitutes substantial evidence of Teresas
amorous relationship, we, however, find otherwise. It is not hard to see that Estelitas
claim of Teresas cohabitation with a married man is a mere allegation without
proof. Likewise, the interviews conducted by SSS revealed rumors only that Teresa had
an affair with a certain police officer. Notably, not one from those interviewed confirmed
that such an affair indeed existed. The basic rule is that mere allegation is not evidence
and is not equivalent to proof. Charges based on mere suspicion and speculation likewise
cannot be given credence.[26] Mere uncorroborated hearsay or rumor does not constitute
substantial evidence.[27] Remarkably, the Memorandum itself stated that there is not
enough proof to establish Teresas alleged relationship with another man since they did
not live as husband and wife.
This notwithstanding, we still find untenable Teresas assertion that being the legal wife,
she is presumed dependent upon Florante for support. In Re: Application for Survivors
Benefits of Manlavi,[28] this Court defined dependent as one who derives his or her main
support from another [or] relying on, or subject to, someone else for support; not able to
exist or sustain oneself, or to perform anything without the will, power or aid of someone
else. Although therein, the wifes marriage to the deceased husband was not dissolved
prior to the latters death, the Court denied the wifes claim for survivorship benefits from
the Government Service Insurance System (GSIS) because the wife abandoned her
family to live with other men for more than 17 years until her husband died. Her
whereabouts was unknown to her family and she never attempted to communicate with
them or even check up on the well-being of her daughter with the deceased. From these,
the Court concluded that the wife during said period was not dependent on her husband
for any support, financial or otherwise, hence, she is not a dependent within the
contemplation of RA 8291[29] as to be entitled to survivorship benefits. It is worthy to
note that under Section 2(f) RA 8291, a legitimate spouse dependent for support is
likewise included in the enumeration of dependents and under Section 2(g), the legal
dependent spouse in the enumeration of primary beneficiaries.
Under this premise, we declared in Aguas that the obvious conclusion is that a wife who
is already separated de facto from her husband cannot be said to be dependent for support
upon the husband, absent any showing to the contrary. Conversely, if it is proved that the
husband and wife were still living together at the time of his death, it would be safe to
presume that she was dependent on the husband for support, unless it is shown that she is
capable of providing for herself.[30] Hence, we held therein that the wife-claimant had the
burden to prove that all the statutory requirements have been complied with, particularly
her dependency on her husband at the time of his death. And, while said wife-claimant
was the legitimate wife of the deceased, we ruled that she is not qualified as a primary
beneficiary since she failed to present any proof to show that at the time of her husbands
death, she was still dependent on him for support even if they were already living
separately.
In this case, aside from Teresas bare allegation that she was dependent upon her husband
for support and her misplaced reliance on the presumption of dependency by reason of
her valid and then subsisting marriage with Florante, Teresa has not presented sufficient
evidence to discharge her burden of proving that she was dependent upon her husband
for support at the time of his death. She could have done this by submitting affidavits of
reputable and disinterested persons who have knowledge that during her separation with
Florante, she does not have a known trade, business, profession or lawful occupation
from which she derives income sufficient for her support and such other evidence tending
to prove her claim of dependency. While we note from the abovementioned SSS
Memorandum that Teresa submitted affidavits executed by Napoleon Favila and Josefina
Favila, same only pertained to the fact that she never remarried nor cohabited with
another man. On the contrary, what is clear is that she and Florante had already been
separated for about 17 years prior to the latters death as Florante was in fact, living with
his common law wife when he died. Suffice it to say that [w]hoever claims entitlement to
the benefits provided by law should establish his or her right thereto by substantial
evidence.[31] Hence, for Teresas failure to show that despite their separation she was
dependent upon Florante for support at the time of his death, Teresa cannot qualify as a
primary beneficiary. Hence, she is not entitled to the death benefits accruing on account
of Florantes death.
As a final note, we do not agree with the CAs pronouncement that the
investigations conducted by SSS violate a persons right to privacy. SSS, as the primary
institution in charge of extending social security protection to workers and their
beneficiaries is mandated by Section 4(b)(7) of RA 8282[32] to require reports,
compilations and analyses of statistical and economic data and to make an investigation
as may be needed for its proper administration and development. Precisely, the
investigations conducted by SSS are appropriate in order to ensure that the benefits
provided under the SS Law are received by the rightful beneficiaries. It is not hard to see
that such measure is necessary for the systems proper administration, otherwise, it will be
swamped with bogus claims that will pointlessly deplete its funds. Such scenario will
certainly frustrate the purpose of the law which is to provide covered employees and their
families protection against the hazards of disability, sickness, old age and death, with a
view to promoting their well-being in the spirit of social justice. Moreover and as
correctly pointed out by SSC, such investigations are likewise necessary to carry out the
mandate of Section 15 of the SS Law which provides in part, viz:
Sec. 15. Non-transferability of Benefits. The SSS shall pay the benefits
provided for in this Act to such [x x x] persons as may be entitled thereto in
accordance with the provisions of this Act x x x. (Emphasis ours.)
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The
assailed Decision and Resolution of the Court of Appeals dated May 24, 2005 and
October 17, 2005 in CA-G.R. SP No. 82763 are hereby REVERSED and SET
ASIDE. Respondent Teresa G. Favila is declared to be not a dependent spouse within the
contemplation of Republic Act No. 1161 and is therefore not entitled to death benefits
accruing from the death of Florante Favila.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND

HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND
CONSTRUCTION SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345
which affirmed with modification the Decision2 of the Regional Trial Court, Branch 41, San Fernando,
Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and
Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January
27, 1992. Respondent, doing business under the name and style Carwin Construction and
Construction Supply (Carwin Construction), was pre-qualified together with two other contractors.
Since respondent submitted the lowest bid, he was awarded the contract for the concreting
of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract Agreement was executed by respondent
and petitioner.4 On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to
Proceed with the concreting of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works,
made advances for the purchase of the materials and payment for labor costs.6
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga
conducted a final inspection of the project and found it 100% completed in accordance with the
approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates
of Final Inspection and Final Acceptance.7
Thereafter, respondent sought to collect payment for the completed project.8 The DPWH prepared
the Disbursement Voucher in favor of petitioner.9 However, the DPWH withheld payment from
respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release
of funds on the ground that the contractors license of respondent had expired at the time of the
execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department
on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects
were valid and effective although its contractors license had already expired when the projects were
contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal
Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the
Contractors License Law, does not provide that a contract entered into after the license has expired
is void and there is no law which expressly prohibits or declares void such contract, the contract is
enforceable and payment may be paid, without prejudice to any appropriate administrative liability
action that may be imposed on the contractor and the government officials or employees
concerned.11
In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal
Department on whether Carwin Construction should be paid for works accomplished despite an
expired contractors license at the time the contracts were executed.12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department,
recommended that payment should be made to Carwin Construction, reiterating his earlier legal
opinion.13 Despite such recommendation for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages
against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion
to Dismiss the complaint on the grounds that the complaint states no cause of action and that the
RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the
decision of the District Auditor to disapprove the claim.15
Following the submission of respondents Opposition to Motion to Dismiss,16 the RTC issued an
Order dated March 11, 1996 denying the Motion to Dismiss.17 The OSG filed a Motion for
Reconsideration18 but it was likewise denied by the RTC in its Order dated May 23, 1996.19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of
administrative remedies and the doctrine of non-suability of the State.20
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which
reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the
plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San
Fernando, Pampanga, to pay the following:
a) 457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare,
Candaba, Pampanga plus interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price since it has accepted the
completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long
standing and consistent pronouncement against enriching oneself at the expense of another.22
Dissatisfied, petitioner filed an appeal with the CA.23 On April 28, 2003, the CA rendered its Decision
sustaining the Decision of the RTC. It held that since the case involves the application of the
principle of estoppel against the government which is a purely legal question, then the principle of
exhaustion of administrative remedies does not apply; that by its actions the government is estopped
from questioning the validity and binding effect of the Contract Agreement with the respondent; that
denial of payment to respondent on purely technical grounds after successful completion of the
project is not countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which
reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the
interest shall be six percent (6%) per annum computed from June 21, 1995.
SO ORDERED.24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF
ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO

RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT.25
Petitioner contends that respondents recourse to judicial action was premature since the proper
remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section
48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing
Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim
against the government under Section 2(1),26 Article IX of the 1987 Constitution and Section 2627 of
P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the
principle of primary jurisdiction results in a lack of cause of action.
Respondent, on the other hand, in his Memorandum28 limited his discussion to Civil Code provisions
relating to human relations. He submits that equity demands that he be paid for the work performed;
otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered
nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its
inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the court, he should first avail of
all the means afforded him by administrative processes.29 The issues which administrative agencies
are authorized to decide should not be summarily taken from them and submitted to a court without
first giving such administrative agency the opportunity to dispose of the same after due
deliberation.30
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary

jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of
primary jurisdiction, which are based on sound public policy and practical considerations, are not
inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the
part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will
irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to
make the rule impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice;32 (f) where judicial intervention is urgent; (g)
when its application may cause great and irreparable damage; (h) where the controverted acts
violate due process; (i) when the issue of non-exhaustion of administrative remedies has been
rendered moot;33 (j) when there is no other plain, speedy and adequate remedy; (k) when strong
public interest is involved; and, (l) in quo warranto proceedings.34 Exceptions (c) and (e) are
applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that
payment to a contractor with an expired contractors license is proper, respondent remained unpaid
for the completed work despite repeated demands. Clearly, there was unreasonable delay and
official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of its contract
is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an
examination of the probative value of the evidence presented by the parties. There is a question of
law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to
the truth or the falsehood of alleged facts.35Said question at best could be resolved
only tentatively by the administrative authorities. The final decision on the matter rests not with them
but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing
of an administrative nature is to be or can be done.36 The issue does not require technical knowledge
and experience but one that would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim
against the Government, and, under Section 4837 of P.D. No. 1445, the administrative remedy
available to respondent is an appeal of the denial of his claim by the District Auditor to the COA
itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for
specific performance and damages was not prematurely filed and within the jurisdiction of the RTC
to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in
Rocamora v. RTC-Cebu (Branch VIII):38
The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the
Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by
the government. The road had been completed; the Pope had come and gone; but the plaintiffs had
yet to be paid for the properties taken from them. Given this official indifference, which apparently
would continue indefinitely, the private respondents had to act to assert and protect their interests.39
On the question of whether a contractor with an expired license is entitled to be paid for completed
projects, Section 35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to
submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a
supervisory capacity of a construction work within the purview of this Act, without first securing a
license to engage in the business of contracting in this country; or who shall present or file the
license certificate of another, give false evidence of any kind to the Board, or any member thereof in
obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or
license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a
fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain
and free from ambiguity, it must be given its literal meaning and applied without interpretation.40 This
rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by the legislature in a statute correctly express its
intention or will and preclude the court from construing it differently. The legislature is presumed to
know the meaning of the words, to have used words advisedly, and to have expressed its intent by
use of such words as are found in the statute.41 Verba legis non est recedendum, or from the words
of a statute there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void
contracts entered into by a contractor whose license had already expired. Nonetheless, such
contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for
the projects he completed. Such payment, however, is without prejudice to the payment of the fine
prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of anothers injury) states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as "basic principles to be observed for the rightful relationship between human beings
and for the stability of the social order, x x x designed to indicate certain norms that spring from the
fountain of good conscience, x x x guides human conduct [that] should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice."43 The rules thereon apply equally well to the Government.44Since respondent
had rendered services to the full satisfaction and acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the finished project at no cost would
undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such
unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court
of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 125183 September 29, 1997
MUNICIPALITY OF SAN JUAN, METRO MANILA, petitioner,

vs.
COURT OF APPEALS, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES,
CORAZON DE JESUS HOMEOWNERS ASSOCIATION, INC., ADRIANO A. DELAMIDA, SR.
CELSO T. TORRES, TARCILA V. ZATA, QUIRICO T. TORRES, CATALINA BONGAT,
MILAGROS A. HERBOLARIO, ROSALINDA A. PIMENTEL, PURIFICACION MORELLA,
FRANCISCO RENION, SR., MARCELINA CORPUZ, BENEDICTO FALCON, MAXIMO FALCON,
MARIO BOLANOS, VICENTE T. SURIAO, ROSARIO GREGORIA G. DORADO, JEREMIAS Z.
PATRON, ALEX RODRIGUEZ, MARIA LUISA ALPAPARA, HERMINIA C. RODRIGUEZ,
VICTORIANO ESPANOL, MARIO L. AGUILAR, FREDDIE AMADOR, SILVERIO PURISIMA, JR.,
PROCOPIO B. PENARANDA, ELADIO MAGLUYAN, HELENITA GUEI, CELESTINO MONTANO,
ROMEO GOMEZ, OFELIA LOGO, JIMMY MACION, DAISY A. MANGA, MAURO MANGA,
ARTHUR HERBOLARIO, MANOLITO HERBOLARIO, ROSARIO ANCHETA, TERESITA A.
VICTORIA, ROSALINA SAMPAGA, MARIQUITA RUADO, FELIPE ANCHETA, MAGDALENA
CABREZA, MARIA BIANDILLA, NILDA ARENSOL, LORENZO S. TOLEDO, and NAPOLEON D.
VILORIA, SR., respondents.
MELO, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing and
seeking to reverse and set aside: a) the decision dated November 23, 1995 of the Court of Appeals
reversing the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 159; and b) the
resolution dated May 28, 1996 denying reconsideration of said decision.
The generative facts of the case are as follows:
On February 17, 1978, then President Ferdinand Marcos issued Proclamation No. 1716 reserving
for Municipal Government Center Site Purposes certain parcels of land of the public domain located
in the Municipality of San Juan, Metro Manila.
Considering that the land covered by the above-mentioned proclamation was occupied by squatters,
the Municipality of San Juan purchased an 18-hectare land in Taytay, Rizal as resettlement center
for the said squatters. Only after resettling these squatters would the municipality be able to develop
and construct its municipal government center on the subject land.
After hundreds of squatter families were resettled, the Municipality of San Juan started to develop its
government center by constructing the INP Building, which now serves as the PNP Headquarters,
the Fire Station Headquarters, and the site to house the two salas of the Municipal Trial Courts and
the Office of the Municipal Prosecutors. Also constructed thereon are the Central Post Office
Building and the Municipal High School Annex Building.
On October 6, 1987, after Congress had already convened on July 26, 1987, former President
Corazon Aquino issued Proclamation No. 164, amending Proclamation No. 1716. Said amendatory
proclamation pertinently reads as follows:
PROCLAMATION NO. 164
AMENDING PROCLAMATION NO. 1716, DATED FEBRUARY 17,

1978, WHICH RESERVED FOR MUNICIPAL GOVERNMENT
CENTER SITE PURPOSES CERTAIN PARCELS OF LAND OF THE
PUBLIC DOMAIN SITUATED IN THE MUNICIPALITY OF SAN
JUAN, METROPOLITAN MANILA, ISLAND OF LUZON, BY
EXCLUDING FROM ITS OPERATION THE PARCELS OF LAND
NOT BEING UTILIZED FOR GOVERNMENT CENTER SITES
PURPOSES BUT ACTUALLY OCCUPIED FOR RESIDENTIAL
PURPOSES AND DECLARING THE LAND OPEN TO DISPOSITION
UNDER THE PROVISIONS OF THE PUBLIC LAND ACT, AS
AMENDED.
Upon recommendation of the Secretary of Environment and Natural Resources and

by virtue of the powers vested in me by law, I, CORAZON C. AQUINO, President of
the Philippines, do hereby amend Proclamation No. 1716, dated February 17, 1978,
which established for municipal government center site purposes certain parcels of
land mentioned therein situated in the Municipality of San Juan, Metro Manila, by
excluding from its operation the parcels of land not being utilized for government
center site purposes but actually occupied for residential purposes and declaring the
land so excluded, together with other parcels of land not covered by Proclamation
No. 1716 but nevertheless occupied for residential purposes, open to disposition
under the provisions of the Public Land Act, as amended, subject to future survey,
which are hereunder particularly described as follows:
Lot 1 (Port.) Psu-73270
xxx xxx xxx
Lot 4 (Port.) Psd-740

and Psd-810
xxx xxx xxx
Lot 5 (Port.) Psu-73270
xxx xxx xxx
IN WITNESS WHEREOF, I have hereunto set my hand and caused

the seal of the Republic of the Philippines to be affixed.
Done in the City of Manila, this 6th day of October in the year of Our
Lord, nineteen hundred and eighty-seven.
(Sgd.) CORAZON C. AQUINO

By the President:
(Sgd.) CATALINO MACARAIG, JR.

Acting Executive Secretary
(Rollo, pp. 148-151.)
On June 1, 1988, the Corazon de Jesus Homeowners Association, Inc., one of herein private
respondents, filed with the Regional Trial Court of the National Capital Judicial Region (Pasig,
Branch 159) a petition for prohibition with urgent prayer for restraining order against the Municipal
Mayor and Engineer of San Juan and the Curator of Pinaglabanan Shrine, to enjoin them from either
removing or demolishing the houses of the association members who were claiming that the lots
they occupied have been awarded to them by Proclamation No. 164.
On September 14, 1990, the regional trial court dismissed the petition, ruling that the property in
question is being utilized by the Municipality of San Juan for government purposes and thus, the
condition set forth in Proclamation No. 164 is absent.
The appeal before the Court of Appeals was dismissed in a decision dated July 17, 1991. This
decision became final and the said judgment was duly entered on April 8, 1992.
Disregarding the ruling of the court in this final judgment, private respondents hired a private
surveyor to make consolidation-subdivision plans of the land in question, submitting the same to
respondent Department of Environment and Natural Resources (DENR) in connection with their
application for a grant under Proclamation No. 164.
To prevent DENR from issuing any grant to private respondents, petitioner municipality filed a
petition for prohibition with prayer for issuance of a temporary restraining order and preliminary
injunction against respondent DENR and private respondent Corazon de Jesus Homeowners
Association.
The regional trial court sustained petitioner municipality, enjoining the DENR from disposing and
awarding the parcels of land covered by Proclamation No. 164.
The Court of Appeals reversed, hence, the present recourse.
Cutting through the other issues, it would appear that ultimately, the central question and bone of
contention in the petition before us boils down to the correct interpretation of Proclamation No. 164
in relation to Proclamation No. 1716.
Petitioner municipality assails the decision of the Court of Appeals by hammering on the issue of res
judicata in view of the fact that an earlier judgment, which had become final and executory, had
already settled the respective rights of the parties under Proclamation No. 164. This notwithstanding,
petitioner reiterates the reasons why the court had previously ruled in favor of petitioner's rights over
the subject property against the claims of private respondents.
We find good legal basis to sustain petitioner's position on the issue of res judicata insofar as the
particular area covered by Proclamation No. 164, which was the subject matter of the earlier case, is
concerned.
The basic elements of res judicata are: (a) the former judgment must be final; (b) the court which
rendered it had jurisdiction over the subject matter and the parties; (c) it must be a judgment on the
merits; and (d) there must be between the first and second actions identity of parties, subject matter,
and cause of action (Mangoma vs. Court of Appeals, 241 SCRA 21 [1995]).
The existence of the first three elements can not be disputed. As to identity of parties, we have ruled
that only substantial identity is required and not absolute identity of parties (Suarez vs. Municipality
of Naujan, 18 SCRA 682 [1966]). The addition of public respondent DENR in the second case will
thus be of no moment. Likewise, there is identity of cause of action since the right of the municipality
over the subject property, the corresponding obligation of private respondents to respect such right
and the resulting violation of said right all remain to be the same in both the first and the second
actions despite the fact that in the first action, private respondents were the plaintiff while in the
second action, they were the respondents.
The last requisite is identity of subject matter. Res judicata only extends to such portion of land
covered by Proclamation No. 164 which the court ruled may not be automatically segregated from
the land covered by Proclamation No. 1716. It does not include those portions which are outside the
coverage of Proclamation No. 1716.
Withal, reversal of the decision of the Court of Appeals would be justified upon the above premise
and our discussion may properly end here. However, there exists a more basic reason for setting
aside the appealed decision and this has reference to a fundamental and gross error in the issuance
of Proclamation No. 164 on October 16, 1987 by then President Aquino.
Proclamation No. 1716 was issued by the late President Ferdinand E. Marcos on February 17, 1978
in the due exercise of legislative power vested upon him by Amendment No. 6 introduced in 1976.
Being a valid act of legislation, said Proclamation may only be amended by an equally valid act of
legislation. Proclamation No. 164 is obviously not a valid act of legislation. After the so-called
bloodless revolution of February 1986, President Corazon Aquino took the reigns of power under a
revolutionary government. On March 24, 1986, she issued her historic Proclamation No. 3,
promulgating the Provisional Constitution, or more popularly referred to as the Freedom Constitution.
Under Article II, Section 1 of the Freedom Constitution, the President shall continue to exercise
legislative power until a legislature is elected and convened under a new constitution. Then came
the ratification of the draft constitution, to be known later as the 1987 Constitution. When Congress
was convened on July 26, 1987, President Aquino lost this legislative power under the Freedom
Constitution. Proclamation No. 164, amending Proclamation No. 1716 was issued on October 6,
1987 when legislative power was already solely on Congress.
Although quite lamentably, this matter has escaped the attention of petitioner as well as the courts
before which this case has already passed through, this Court cannot help noticing this basic flaw in
the issuance of Proclamation No. 164. Because this unauthorized act by the then president
constitutes a direct derogation of the most basic principle in the separation of powers between the
three branches of government enshrined in our Constitution, we cannot simply close our eyes and
rely upon the principle of the presumption of validity of a law.
There is a long standing principle that every statute is presumed to be valid (Salas vs. Jarencio, 48
SCRA 734 [1970]; Peralta vs. Comelec, 82 SCRA 30 [1978]). However, this rests upon the premise
that the statute was duly enacted by legislature. This presumption cannot apply when there is clear
usurpation of legislative power by the executive branch. For this Court to allow such disregard of the
most basic of all constitutional principles by reason of the doctrine of presumption of validity of a law
would be to turn its back to its sacred duty to uphold and defend the Constitution. Thus, also, it is in
the discharge of this task that we take this exception from the Court's usual practice of not
entertaining constitutional questions unless they are specifically raised, insisted upon, and
adequately argued.
We, therefore, hold that the issuance of Proclamation No. 164 was an invalid exercise of legislative
power. Consequently, said Proclamation is hereby declared NULL and VOID.
WHEREFORE, the appealed decision of the Court of Appeals is hereby SET ASIDE. Public
respondent Department of Environment and Natural Resources is hereby permanently ENJOINED
from enforcing Proclamation No. 164.
SO ORDERED.
EN BANC
LOUIS BAROK C. BIRAOGO, G.R. No. 192935

Petitioner,
- versus -
THE PHILIPPINE TRUTH

COMMISSION OF 2010,
Respondent.
x-----------------------x
REP. EDCEL C. LAGMAN, G.R. No. 193036
REP. RODOLFO B. ALBANO, JR.,
REP. SIMEON A. Present:
DATUMANONG, and REP.
ORLANDO B. FUA, SR., CORONA, C.J.,
Petitioners, CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
- versus - LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
EXECUTIVE SECRETARY SERENO, JJ.
PAQUITO N. OCHOA, JR. and
DEPARTMENT OF BUDGET AND Promulgated:
MANAGEMENT SECRETARY
FLORENCIO B. ABAD, December 7, 2010
Respondents.
x -------------------------------------------------------------------------------------- x
DECISION
MENDOZA, J.:
When the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act of the
legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of
authority under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument secures and
guarantees to them.
--- Justice Jose P. Laurel[1]

The role of the Constitution cannot be overlooked. It is through the Constitution
that the fundamental powers of government are established, limited and defined,
and by which these powers are distributed among the several departments. [2] The
Constitution is the basic and paramount law to which all other laws must conform
and to which all persons, including the highest officials of the land, must
defer.[3] Constitutional doctrines must remain steadfast no matter what may be the
tides of time. It cannot be simply made to sway and accommodate the call of
situations and much more tailor itself to the whims and caprices of government and
the people who run it.[4]
For consideration before the Court are two consolidated cases[5] both of which
essentially assail the validity and constitutionality of Executive Order No. 1, dated
July 30, 2010, entitled Creating the Philippine Truth Commission of 2010.
The first case is G.R. No. 192935, a special civil action for prohibition
instituted by petitioner Louis Biraogo (Biraogo) in his capacity as a citizen and
taxpayer. Biraogo assails Executive Order No. 1 for being violative of the
legislative power of Congress under Section 1, Article VI of the Constitution[6] as it
usurps the constitutional authority of the legislature to create a public office and to
appropriate funds therefor.[7]
The second case, G.R. No. 193036, is a special civil action for certiorari and
prohibition filed by petitioners Edcel C. Lagman, Rodolfo B. Albano Jr., Simeon
A. Datumanong, and Orlando B. Fua, Sr. (petitioners-legislators) as incumbent
members of the House of Representatives.
The genesis of the foregoing cases can be traced to the events prior to the historic
May 2010 elections, when then Senator Benigno Simeon Aquino III declared his
staunch condemnation of graft and corruption with his slogan, Kung walang
corrupt, walang mahirap. The Filipino people, convinced of his sincerity and of
his ability to carry out this noble objective, catapulted the good senator to the
presidency.
To transform his campaign slogan into reality, President Aquino found a

need for a special body to investigate reported cases of graft and corruption
allegedly committed during the previous administration.
Thus, at the dawn of his administration, the President on July 30, 2010,
signed Executive Order No. 1 establishing the Philippine Truth Commission of
2010 (Truth Commission). Pertinent provisions of said executive order read:
EXECUTIVE ORDER NO. 1
CREATING THE PHILIPPINE TRUTH COMMISSION OF 2010
WHEREAS, Article XI, Section 1 of the 1987 Constitution of the Philippines

solemnly enshrines the principle that a public office is a public trust and
mandates that public officers and employees, who are servants of the people,
must at all times be accountable to the latter, serve them with utmost
responsibility, integrity, loyalty and efficiency, act with patriotism and justice,
and lead modest lives;
WHEREAS, corruption is among the most despicable acts of defiance of this

principle and notorious violation of this mandate;
WHEREAS, corruption is an evil and scourge which seriously affects the political,
economic, and social life of a nation; in a very special way it inflicts untold
misfortune and misery on the poor, the marginalized and underprivileged sector
of society;
WHEREAS, corruption in the Philippines has reached very alarming levels, and
undermined the peoples trust and confidence in the Government and its
institutions;
WHEREAS, there is an urgent call for the determination of the truth regarding
certain reports of large scale graft and corruption in the government and to put a
closure to them by the filing of the appropriate cases against those involved, if
warranted, and to deter others from committing the evil, restore the peoples faith
and confidence in the Government and in their public servants;
WHEREAS, the Presidents battlecry during his campaign for the Presidency in
the last elections kung walang corrupt, walang mahirapexpresses a solemn
pledge that if elected, he would end corruption and the evil it breeds;
WHEREAS, there is a need for a separate body dedicated solely to investigating

and finding out the truth concerning the reported cases of graft and corruption
during the previous administration, and which will recommend the prosecution
of the offenders and secure justice for all;
WHEREAS, Book III, Chapter 10, Section 31 of Executive Order No. 292,
otherwise known as the Revised Administrative Code of the Philippines, gives the
President the continuing authority to reorganize the Office of the President.
NOW, THEREFORE, I, BENIGNO SIMEON AQUINO III, President of the

Republic of the Philippines, by virtue of the powers vested in me by law, do
hereby order:
SECTION 1. Creation of a Commission. There is hereby created

the PHILIPPINE TRUTH COMMISSION, hereinafter referred to as
the COMMISSION, which shall primarily seek and find the truth on, and toward
this end, investigate reports of graft and corruption of such scale and magnitude
that shock and offend the moral and ethical sensibilities of the people, committed
by public officers and employees, their co-principals, accomplices and accessories
from the private sector, if any, during the previous administration; and thereafter
recommend the appropriate action or measure to be taken thereon to ensure that
the full measure of justice shall be served without fear or favor.
The Commission shall be composed of a Chairman and four (4) members who
will act as an independent collegial body.
SECTION 2. Powers and Functions. The Commission, which shall have all the
powers of an investigative body under Section 37, Chapter 9, Book I of the
Administrative Code of 1987, is primarily tasked to conduct a thorough fact-
finding investigation of reported cases of graft and corruption referred to in
Section 1, involving third level public officers and higher, their co-principals,
accomplices and accessories from the private sector, if any, during the previous
administration and thereafter submit its finding and recommendations to the
President, Congress and the Ombudsman.
In particular, it shall:
a) Identify and determine the reported cases of such graft and corruption
which it will investigate;
b) Collect, receive, review and evaluate evidence related to or regarding the
cases of large scale corruption which it has chosen to investigate, and to this end
require any agency, official or employee of the Executive Branch, including
government-owned or controlled corporations, to produce documents, books,
records and other papers;
c) Upon proper request or representation, obtain information and documents

from the Senate and the House of Representatives records of investigations
conducted by committees thereof relating to matters or subjects being
investigated by the Commission;
d) Upon proper request and representation, obtain information from the

courts, including the Sandiganbayan and the Office of the Court Administrator,
information or documents in respect to corruption cases filed with the
Sandiganbayan or the regular courts, as the case may be;
e) Invite or subpoena witnesses and take their testimonies and for that
purpose, administer oaths or affirmations as the case may be;
f) Recommend, in cases where there is a need to utilize any person as a state

witness to ensure that the ends of justice be fully served, that such person who
qualifies as a state witness under the Revised Rules of Court of the Philippines be
admitted for that purpose;
g) Turn over from time to time, for expeditious prosecution, to the appropriate
prosecutorial authorities, by means of a special or interim report and
recommendation, all evidence on corruption of public officers and employees and
their private sector co-principals, accomplices or accessories, if any, when in the
course of its investigation the Commission finds that there is reasonable ground
to believe that they are liable for graft and corruption under pertinent applicable
laws;
h) Call upon any government investigative or prosecutorial agency such as the

Department of Justice or any of the agencies under it, and the Presidential Anti-
Graft Commission, for such assistance and cooperation as it may require in the
discharge of its functions and duties;
i) Engage or contract the services of resource persons, professionals and other

personnel determined by it as necessary to carry out its mandate;
j) Promulgate its rules and regulations or rules of procedure it deems

necessary to effectively and efficiently carry out the objectives of this Executive
Order and to ensure the orderly conduct of its investigations, proceedings and
hearings, including the presentation of evidence;
k) Exercise such other acts incident to or are appropriate and necessary in

connection with the objectives and purposes of this Order.
SECTION 3. Staffing Requirements. x x x.
SECTION 4. Detail of Employees. x x x.

SECTION 5. Engagement of Experts. x x x
SECTION 6. Conduct of Proceedings. x x x.
SECTION 7. Right to Counsel of Witnesses/Resource Persons. x x x.
SECTION 8. Protection of Witnesses/Resource Persons. x x x.
SECTION 9. Refusal to Obey Subpoena, Take Oath or Give Testimony. Any
government official or personnel who, without lawful excuse, fails to appear upon
subpoena issued by the Commission or who, appearing before the Commission
refuses to take oath or affirmation, give testimony or produce documents for
inspection, when required, shall be subject to administrative disciplinary action.
Any private person who does the same may be dealt with in accordance with law.
SECTION 10. Duty to Extend Assistance to the Commission. x x x.
SECTION 11. Budget for the Commission. The Office of the President shall
provide the necessary funds for the Commission to ensure that it can exercise its
powers, execute its functions, and perform its duties and responsibilities as
effectively, efficiently, and expeditiously as possible.
SECTION 12. Office. x x x.
SECTION 13. Furniture/Equipment. x x x.
SECTION 14. Term of the Commission. The Commission shall accomplish its
mission on or before December 31, 2012.
SECTION 15. Publication of Final Report. x x x.
SECTION 16. Transfer of Records and Facilities of the Commission. x x x.
SECTION 17. Special Provision Concerning Mandate. If and when in the

judgment of the President there is a need to expand the mandate of the
Commission as defined in Section 1 hereof to include the investigation of cases
and instances of graft and corruption during the prior administrations, such
mandate may be so extended accordingly by way of a supplemental Executive
Order.
SECTION 18. Separability Clause. If any provision of this Order is declared

unconstitutional, the same shall not affect the validity and effectivity of the other
provisions hereof.
SECTION 19. Effectivity. This Executive Order shall take effect immediately.
DONE in the City of Manila, Philippines, this 30th day of July 2010.
(SGD.) BENIGNO S. AQUINO III
By the President:
(SGD.) PAQUITO N. OCHOA, JR.

Executive Secretary
Nature of the Truth Commission
As can be gleaned from the above-quoted provisions, the Philippine Truth

Commission (PTC) is a mere ad hoc body formed under the Office of the President
with the primary task to investigate reports of graft and corruption committed by
third-level public officers and employees, their co-principals, accomplices and
accessories during the previous administration, and thereafter to submit its finding
and recommendations to the President, Congress and the Ombudsman. Though it
has been described as an independent collegial body, it is essentially an entity
within the Office of the President Proper and subject to his control. Doubtless, it
constitutes a public office, as an ad hoc body is one.[8]
To accomplish its task, the PTC shall have all the powers of an investigative
body under Section 37, Chapter 9, Book I of the Administrative Code of 1987. It is
not, however, a quasi-judicial body as it cannot adjudicate, arbitrate, resolve, settle,
or render awards in disputes between contending parties. All it can do is gather,
collect and assess evidence of graft and corruption and make recommendations. It
may have subpoena powers but it has no power to cite people in contempt, much
less order their arrest.Although it is a fact-finding body, it cannot determine from
such facts if probable cause exists as to warrant the filing of an information in our
courts of law. Needless to state, it cannot impose criminal, civil or administrative
penalties or sanctions.
The PTC is different from the truth commissions in other countries which
have been created as official, transitory and non-judicial fact-finding bodies to
establish the facts and context of serious violations of human rights or of
international humanitarian law in a countrys past.[9] They are usually established by
states emerging from periods of internal unrest, civil strife or authoritarianism to
serve as mechanisms for transitional justice.
Truth commissions have been described as bodies that share the following
characteristics: (1) they examine only past events; (2) they investigate patterns of
abuse committed over a period of time, as opposed to a particular event; (3) they
are temporary bodies that finish their work with the submission of a report
containing conclusions and recommendations; and (4) they are officially
sanctioned, authorized or empowered by the State. [10] Commissions members are
usually empowered to conduct research, support victims, and propose policy
recommendations to prevent recurrence of crimes. Through their investigations, the
commissions may aim to discover and learn more about past abuses, or formally
acknowledge them. They may aim to prepare the way for prosecutions and
recommend institutional reforms.[11]
Thus, their main goals range from retribution to reconciliation. The

Nuremburg and Tokyo war crime tribunals are examples of a retributory or
vindicatory body set up to try and punish those responsible for crimes against
humanity. A form of a reconciliatory tribunal is the Truth and Reconciliation
Commission of South Africa, the principal function of which was to heal the
wounds of past violence and to prevent future conflict by providing a cathartic
experience for victims.
The PTC is a far cry from South Africas model. The latter placed more
emphasis on reconciliation than on judicial retribution, while the marching order of
the PTC is the identification and punishment of perpetrators. As one writer [12] puts
it:
The order ruled out reconciliation. It translated the

Draconian code spelled out by Aquino in his inaugural speech: To
those who talk about reconciliation, if they mean that they would
like us to simply forget about the wrongs that they have
committed in the past, we have this to say: There can be no
reconciliation without justice. When we allow crimes to go
unpunished, we give consent to their occurring over and over
again.
The Thrusts of the Petitions
Barely a month after the issuance of Executive Order No. 1, the petitioners
asked the Court to declare it unconstitutional and to enjoin the PTC from
performing its functions. A perusal of the arguments of the petitioners in both
cases shows that they are essentially the same. The petitioners-legislators
summarized them in the following manner:
(a) E.O. No. 1 violates the separation of powers as it arrogates
the power of the Congress to create a public office and appropriate
funds for its operation.
(b) The provision of Book III, Chapter 10, Section 31 of the

Administrative Code of 1987 cannot legitimize E.O. No. 1 because the
delegated authority of the President to structurally reorganize the
Office of the President to achieve economy, simplicity and efficiency
does not include the power to create an entirely new public office
which was hitherto inexistent like the Truth Commission.
(c) E.O. No. 1 illegally amended the Constitution and pertinent

statutes when it vested the Truth Commission with quasi-judicial
powers duplicating, if not superseding, those of the Office of the
Ombudsman created under the 1987 Constitution and the Department
of Justice created under the Administrative Code of 1987.
(d) E.O. No. 1 violates the equal protection clause as it

selectively targets for investigation and prosecution officials and
personnel of the previous administration as if corruption is their
peculiar species even as it excludes those of the other administrations,
past and present, who may be indictable.
(e) The creation of the Philippine Truth Commission of 2010

violates the consistent and general international practice of four
decades wherein States constitute truth commissions to exclusively
investigate human rights violations, which customary practice forms
part of the generally accepted principles of international law which the
Philippines is mandated to adhere to pursuant to the Declaration of
Principles enshrined in the Constitution.
(f) The creation of the Truth Commission is an exercise in

futility, an adventure in partisan hostility, a launching pad for
trial/conviction by publicity and a mere populist propaganda to
mistakenly impress the people that widespread poverty will altogether
vanish if corruption is eliminated without even addressing the other
major causes of poverty.
(g) The mere fact that previous commissions were not

constitutionally challenged is of no moment because neither laches
nor estoppel can bar an eventual question on the constitutionality and
validity of an executive issuance or even a statute.[13]
In their Consolidated Comment,[14] the respondents, through the Office of the

Solicitor General (OSG), essentially questioned the legal standing of petitioners
and defended the assailed executive order with the following arguments:
1] E.O. No. 1 does not arrogate the powers of Congress to create

a public office because the Presidents executive power and power of
control necessarily include the inherent power to conduct
investigations to ensure that laws are faithfully executed and that, in
any event, the Constitution, Revised Administrative Code of 1987
(E.O. No. 292), [15]Presidential Decree (P.D.) No. 1416[16] (as
amended by P.D. No. 1772), R.A. No. 9970,[17] and settled
jurisprudence that authorize the President to create or form such
bodies.
2] E.O. No. 1 does not usurp the power of Congress to

appropriate funds because there is no appropriation but a mere
allocation of funds already appropriated by Congress.
3] The Truth Commission does not duplicate or supersede the

functions of the Office of the Ombudsman (Ombudsman) and the
Department of Justice (DOJ), because it is a fact-finding body and not
a quasi-judicial body and its functions do not duplicate, supplant or
erode the latters jurisdiction.
4] The Truth Commission does not violate the equal protection

clause because it was validly created for laudable purposes.
The OSG then points to the continued existence and validity of other
executive orders and presidential issuances creating similar bodies to justify the
creation of the PTC such as Presidential Complaint and Action
Commission (PCAC) by President Ramon B. Magsaysay, Presidential Committee
on Administrative Performance Efficiency (PCAPE) by President Carlos P. Garcia
and Presidential Agency on Reform and Government Operations (PARGO) by
President Ferdinand E. Marcos.[18]
From the petitions, pleadings, transcripts, and memoranda, the following are
the principal issues to be resolved:
1. Whether or not the petitioners have the legal standing

to file their respective petitions and question Executive Order No. 1;
2. Whether or not Executive Order No. 1 violates the

principle of separation of powers by usurping the powers of Congress
to create and to appropriate funds for public offices, agencies and
commissions;
3. Whether or not Executive Order No. 1 supplants the powers
of the Ombudsman and the DOJ;
4. Whether or not Executive Order No. 1 violates the equal

protection clause; and
5. Whether or not petitioners are entitled to injunctive relief.
Essential requisites for judicial review
Before proceeding to resolve the issue of the constitutionality of Executive

Order No. 1, the Court needs to ascertain whether the requisites for a valid exercise
of its power of judicial review are present.
Like almost all powers conferred by the Constitution, the power of judicial review
is subject to limitations, to wit: (1) there must be an actual case or controversy
calling for the exercise of judicial power; (2) the person challenging the act must
have the standing to question the validity of the subject act or issuance; otherwise
stated, he must have a personal and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its enforcement; (3) the
question of constitutionality must be raised at the earliest opportunity; and (4) the
issue of constitutionality must be the very lis mota of the case.[19]
Among all these limitations, only the legal standing of the petitioners has been put
at issue.
Legal Standing of the Petitioners
The OSG attacks the legal personality of the petitioners-legislators to file

their petition for failure to demonstrate their personal stake in the outcome of the
case. It argues that the petitioners have not shown that they have sustained or are
in danger of sustaining any personal injury attributable to the creation of the PTC.
Not claiming to be the subject of the commissions investigations, petitioners will
not sustain injury in its creation or as a result of its proceedings.[20]
The Court disagrees with the OSG in questioning the legal standing of the
petitioners-legislators to assail Executive Order No. 1. Evidently, their petition
primarily invokes usurpation of the power of the Congress as a body to which they
belong as members.This certainly justifies their resolve to take the cudgels for
Congress as an institution and present the complaints on the usurpation of their
power and rights as members of the legislature before the Court. As held
in Philippine Constitution Association v. Enriquez,[21]
To the extent the powers of Congress are impaired, so is the

power of each member thereof, since his office confers a right to
participate in the exercise of the powers of that institution.
An act of the Executive which injures the institution of
Congress causes a derivative but nonetheless substantial injury,
which can be questioned by a member of Congress. In such a case,
any member of Congress can have a resort to the courts.
Indeed, legislators have a legal standing to see to it that the prerogative,

powers and privileges vested by the Constitution in their office remain
inviolate. Thus, they are allowed to question the validity of any official action
which, to their mind, infringes on their prerogatives as legislators.[22]
With regard to Biraogo, the OSG argues that, as a taxpayer, he has no

standing to question the creation of the PTC and the budget for its operations.[23] It
emphasizes that the funds to be used for the creation and operation of the
commission are to be taken from those funds already appropriated by Congress.
Thus, the allocation and disbursement of funds for the commission will not entail
congressional action but will simply be an exercise of the Presidents power over
contingent funds.
As correctly pointed out by the OSG, Biraogo has not shown that he
sustained, or is in danger of sustaining, any personal and direct injury attributable
to the implementation of Executive Order No. 1. Nowhere in his petition is an
assertion of a clear right that may justify his clamor for the Court to exercise
judicial power and to wield the axe over presidential issuances in defense of the
Constitution. The case of David v. Arroyo[24] explained the deep-seated rules
on locus standi. Thus:
Locus standi is defined as a right of appearance in a court of

justice on a given question. In private suits, standing is governed
by the real-parties-in interest rule as contained in Section 2, Rule
3 of the 1997 Rules of Civil Procedure, as amended. It provides
that every action must be prosecuted or defended in the name of the
real party in interest. Accordingly, the real-party-in interest is the
party who stands to be benefited or injured by the judgment in the
suit or the party entitled to the avails of the suit. Succinctly put,
the plaintiffs standing is based on his own right to the relief
sought.
The difficulty of determining locus standi arises in public

suits. Here, the plaintiff who asserts a public right in assailing an
allegedly illegal official action, does so as a representative of the
general public. He may be a person who is affected no differently
from any other person. He could be suing as a stranger, or in the
category of a citizen, or taxpayer. In either case, he has to
adequately show that he is entitled to seek judicial protection. In
other words, he has to make out a sufficient interest in the
vindication of the public order and the securing of relief as a
citizen or taxpayer.
Case law in most jurisdictions now allows both citizen and

taxpayer standing in public actions. The distinction was first laid
down in Beauchamp v. Silk, where it was held that the plaintiff in
a taxpayers suit is in a different category from the plaintiff in a
citizens suit. In the former, the plaintiff is affected by the
expenditure of public funds, while in the latter, he is but the mere
instrument of the public concern. As held by the New York
Supreme Court in People ex rel Case v. Collins: In matter of mere
public right, howeverthe people are the real partiesIt is at least the
right, if not the duty, of every citizen to interfere and see that a
public offence be properly pursued and punished, and that a
public grievance be remedied. With respect to taxpayers
suits, Terr v. Jordan held that the right of a citizen and a taxpayer
to maintain an action in courts to restrain the unlawful use of
public funds to his injury cannot be denied.
However, to prevent just about any person from seeking

judicial interference in any official policy or act with which he
disagreed with, and thus hinders the activities of governmental
agencies engaged in public service, the United State Supreme
Court laid down the more stringent direct injury test in Ex Parte
Levitt, later reaffirmed in Tileston v. Ullman. The same Court
ruled that for a private individual to invoke the judicial power to
determine the validity of an executive or legislative action, he must
show that he has sustained a direct injury as a result of that action,
and it is not sufficient that he has a general interest common to all
members of the public.
This Court adopted the direct injury test in our

jurisdiction. In People v. Vera, it held that the person who
impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained, or will
sustain direct injury as a result. The Vera doctrine was upheld in a
litany of cases, such as, Custodio v. President of the
Senate, Manila Race Horse Trainers Association v. De la
Fuente, Pascual v. Secretary of Public Works and Anti-Chinese
League of the Philippines v. Felix. [Emphases included. Citations
omitted]
Notwithstanding, the Court leans on the doctrine that the rule on standing is
a matter of procedure, hence, can be relaxed for nontraditional plaintiffs like
ordinary citizens, taxpayers, and legislators when the public interest so requires,
such as when the matter is of transcendental importance, of overreaching
significance to society, or of paramount public interest.[25]
Thus, in Coconut Oil Refiners Association, Inc. v. Torres,[26] the Court held
that in cases of paramount importance where serious constitutional questions are
involved, the standing requirements may be relaxed and a suit may be allowed to
prosper even where there is no direct injury to the party claiming the right of
judicial review. In the first Emergency Powers Cases,[27] ordinary citizens and
taxpayers were allowed to question the constitutionality of several executive orders
although they had only an indirect and general interest shared in common with the
public.
The OSG claims that the determinants of transcendental importance [28] laid
down in CREBA v. ERC and Meralco[29] are non-existent in this case. The Court,
however, finds reason in Biraogos assertion that the petition covers matters of
transcendental importance to justify the exercise of jurisdiction by the Court. There
are constitutional issues in the petition which deserve the attention of this Court in
view of their seriousness, novelty and weight as precedents. Where the issues are
of transcendental and paramount importance not only to the public but also to the
Bench and the Bar, they should be resolved for the guidance of all.[30]Undoubtedly,
the Filipino people are more than interested to know the status of the Presidents
first effort to bring about a promised change to the country. The Court takes
cognizance of the petition not due to overwhelming political undertones that clothe
the issue in the eyes of the public, but because the Court stands firm in its oath to
perform its constitutional duty to settle legal controversies with overreaching
significance to society.
Power of the President to Create the Truth Commission
In his memorandum in G.R. No. 192935, Biraogo asserts that the Truth
Commission is a public office and not merely an adjunct body of the Office of the
President.[31] Thus, in order that the President may create a public office he must be
empowered by the Constitution, a statute or an authorization vested in him by law.
According to petitioner, such power cannot be presumed[32]since there is no
provision in the Constitution or any specific law that authorizes the President to
create a truth commission.[33] He adds that Section 31 of the Administrative Code
of 1987, granting the President the continuing authority to reorganize his office,
cannot serve as basis for the creation of a truth commission considering the
aforesaid provision merely uses verbs such as reorganize, transfer, consolidate,
merge, and abolish.[34] Insofar as it vests in the President the plenary power to
reorganize the Office of the President to the extent of creating a public office,
Section 31 is inconsistent with the principle of separation of powers enshrined in
the Constitution and must be deemed repealed upon the effectivity thereof.[35]
Similarly, in G.R. No. 193036, petitioners-legislators argue that the creation

of a public office lies within the province of Congress and not with the executive
branch of government. They maintain that the delegated authority of the President
to reorganize under Section 31 of the Revised Administrative Code: 1) does not
permit the President to create a public office, much less a truth commission; 2) is
limited to the reorganization of the administrative structure of the Office of the
President; 3) is limited to the restructuring of the internal organs of the Office of
the President Proper, transfer of functions and transfer of agencies; and 4) only to
achieve simplicity, economy and efficiency.[36] Such continuing authority of the
President to reorganize his office is limited, and by issuing Executive Order No. 1,
the President overstepped the limits of this delegated authority.
The OSG counters that there is nothing exclusively legislative about the
creation by the President of a fact-finding body such as a truth commission.
Pointing to numerous offices created by past presidents, it argues that the authority
of the President to create public offices within the Office of the President Proper
has long been recognized.[37] According to the OSG, the Executive, just like the
other two branches of government, possesses the inherent authority to create fact-
finding committees to assist it in the performance of its constitutionally mandated
functions and in the exercise of its administrative functions.[38] This power, as the
OSG explains it, is but an adjunct of the plenary powers wielded by the President
under Section 1 and his power of control under Section 17, both of Article VII of
the Constitution.[39]
It contends that the President is necessarily vested with the power to conduct
fact-finding investigations, pursuant to his duty to ensure that all laws are enforced
by public officials and employees of his department and in the exercise of his
authority to assume directly the functions of the executive department, bureau and
office, or interfere with the discretion of his officials.[40] The power of the President
to investigate is not limited to the exercise of his power of control over his
subordinates in the executive branch, but extends further in the exercise of his other
powers, such as his power to discipline subordinates,[41] his power for rule making,
adjudication and licensing purposes [42] and in order to be informed on matters
which he is entitled to know.[43]
The OSG also cites the recent case of Banda v. Ermita,[44] where it was held
that the President has the power to reorganize the offices and agencies in the
executive department in line with his constitutionally granted power of control and
by virtue of a valid delegation of the legislative power to reorganize executive
offices under existing statutes.
Thus, the OSG concludes that the power of control necessarily includes the
power to create offices. For the OSG, the President may create the PTC in order to,
among others, put a closure to the reported large scale graft and corruption in the
government.[45]
The question, therefore, before the Court is this: Does the creation of the
PTC fall within the ambit of the power to reorganize as expressed in Section 31 of
the Revised Administrative Code? Section 31 contemplates reorganization as
limited by the following functional and structural lines: (1) restructuring the
internal organization of the Office of the President Proper by abolishing,
consolidating or merging units thereof or transferring functions from one unit to
another; (2) transferring any function under the Office of the President to any other
Department/Agency or vice versa; or (3) transferring any agency under the Office
of the President to any other Department/Agency or vice versa. Clearly, the
provision refers to reduction of personnel, consolidation of offices, or abolition
thereof by reason of economy or redundancy of functions. These point to situations
where a body or an office is already existent but a modification or alteration
thereof has to be effected. The creation of an office is nowhere mentioned, much
less envisioned in said provision. Accordingly, the answer to the question is in the
negative.
To say that the PTC is borne out of a restructuring of the Office of the
President under Section 31 is a misplaced supposition, even in the plainest
meaning attributable to the term restructure an alteration of an existing
structure. Evidently, the PTC was not part of the structure of the Office of the
President prior to the enactment of Executive Order No. 1. As held in Buklod ng
Kawaning EIIB v. Hon. Executive Secretary,[46]
But of course, the list of legal basis authorizing the President
to reorganize any department or agency in the executive branch
does not have to end here. We must not lose sight of the very
source of the power that which constitutes an express grant of
power. Under Section 31, Book III of Executive Order No. 292
(otherwise known as the Administrative Code of 1987), "the
President, subject to the policy in the Executive Office and in
order to achieve simplicity, economy and efficiency, shall have the
continuing authority to reorganize the administrative structure of
the Office of the President." For this purpose, he may transfer the
functions of other Departments or Agencies to the Office of the
President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we
ruled that reorganization "involves the reduction of personnel,
consolidation of offices, or abolition thereof by reason of economy
or redundancy of functions." It takes place when there is an
alteration of the existing structure of government offices or units
therein, including the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to the Department of
Finance. It falls under the Office of the President. Hence, it is
subject to the Presidents continuing authority to reorganize.
[Emphasis Supplied]
In the same vein, the creation of the PTC is not justified by the Presidents
power of control. Control is essentially the power to alter or modify or nullify or
set aside what a subordinate officer had done in the performance of his duties and
to substitute the judgment of the former with that of the latter.[47] Clearly, the
power of control is entirely different from the power to create public offices. The
former is inherent in the Executive, while the latter finds basis from either a valid
delegation from Congress, or his inherent duty to faithfully execute the laws.
The question is this, is there a valid delegation of power from Congress,

empowering the President to create a public office?
According to the OSG, the power to create a truth commission pursuant to

the above provision finds statutory basis under P.D. 1416, as amended by P.D. No.
1772.[48] The said law granted the President the continuing authority to reorganize
the national government, including the power to group, consolidate bureaus and
agencies, to abolish offices, to transfer functions, to create and classify functions,
services and activities, transfer appropriations, and to standardize salaries and
materials. This decree, in relation to Section 20, Title I, Book III of E.O. 292 has
been invoked in several cases such as Larin v. Executive Secretary.[49]
The Court, however, declines to recognize P.D. No. 1416 as a justification

for the President to create a public office. Said decree is already stale,
anachronistic and inoperable. P.D. No. 1416 was a delegation to then President
Marcos of the authority to reorganize the administrative structure of the national
government including the power to create offices and transfer appropriations
pursuant to one of the purposes of the decree, embodied in its last Whereas clause:
WHEREAS, the transition towards the parliamentary form

of government will necessitate flexibility in the organization of the
national government.
Clearly, as it was only for the purpose of providing manageability and

resiliency during the interim, P.D. No. 1416, as amended by P.D. No.
1772, became functus oficio upon the convening of the First Congress, as expressly
provided in Section 6, Article XVIII of the 1987 Constitution. In fact, even the
Solicitor General agrees with this view. Thus:
ASSOCIATE JUSTICE CARPIO: Because P.D. 1416 was enacted

was the last whereas clause of P.D.
1416 says it was enacted to prepare
the transition from presidential to
parliamentary. Now, in a
parliamentary form of
government, the legislative and
executive powers are fused,
correct?
SOLICITOR GENERAL CADIZ: Yes, Your Honor.

ASSOCIATE JUSTICE CARPIO: That is why, that P.D. 1416 was
issued. Now would you agree with
me that P.D. 1416 should not be
considered effective anymore
upon the promulgation, adoption,
ratification of the 1987
Constitution.
SOLICITOR GENERAL CADIZ: Not the whole of P.D. [No.] 1416,

Your Honor.
ASSOCIATE JUSTICE CARPIO: The power of the President to

reorganize the entire National
Government is deemed repealed,
at least, upon the adoption of the
1987 Constitution, correct.
SOLICITOR GENERAL CADIZ: Yes, Your Honor.[50]
While the power to create a truth commission cannot pass muster on the basis of
P.D. No. 1416 as amended by P.D. No. 1772, the creation of the PTC finds
justification under Section 17, Article VII of the Constitution, imposing upon the
President the duty to ensure that the laws are faithfully executed. Section 17 reads:
Section 17. The President shall have control of all the executive
departments, bureaus, and offices. He shall ensure that the laws be
faithfully executed. (Emphasis supplied).
As correctly pointed out by the respondents, the allocation of power in the

three principal branches of government is a grant of all powers inherent in them.
The Presidents power to conduct investigations to aid him in ensuring the faithful
execution of laws in this case, fundamental laws on public accountability and
transparency is inherent in the Presidents powers as the Chief Executive. That the
authority of the President to conduct investigations and to create bodies to execute
this power is not explicitly mentioned in the Constitution or in statutes does not
mean that he is bereft of such authority.[51] As explained in the landmark case
of Marcos v. Manglapus:[52]
x x x. The 1987 Constitution, however, brought back the
presidential system of government and restored the separation of
legislative, executive and judicial powers by their actual
distribution among three distinct branches of government with
provision for checks and balances.
It would not be accurate, however, to state that "executive

power" is the power to enforce the laws, for the President is head
of state as well as head of government and whatever powers
inhere in such positions pertain to the office unless the
Constitution itself withholds it. Furthermore, the Constitution
itself provides that the execution of the laws is only one of the
powers of the President. It also grants the President other powers
that do not involve the execution of any provision of law, e.g., his
power over the country's foreign relations.
On these premises, we hold the view that although the 1987

Constitution imposes limitations on the exercise of specificpowers
of the President, it maintains intact what is traditionally
considered as within the scope of "executive power."Corollarily,
the powers of the President cannot be said to be limited only to
the specific powers enumerated in the Constitution.In other
words, executive power is more than the sum of specific powers so
enumerated.
It has been advanced that whatever power inherent in the

government that is neither legislative nor judicial has to be
executive. x x x.
Indeed, the Executive is given much leeway in ensuring that our laws are faithfully
executed. As stated above, the powers of the President are not limited to those
specific powers under the Constitution.[53] One of the recognized powers of the
President granted pursuant to this constitutionally-mandated duty is the power to
create ad hoc committees. This flows from the obvious need to ascertain facts and
determine if laws have been faithfully executed. Thus, in Department of Health v.
Camposano,[54] the authority of the President to issue Administrative Order No.
298, creating an investigative committee to look into the administrative charges
filed against the employees of the Department of Health for the anomalous
purchase of medicines was upheld. In said case, it was ruled:
The Chief Executives power to create the Ad hoc Investigating

Committee cannot be doubted. Having been constitutionally
granted full control of the Executive Department, to which
respondents belong, the President has the obligation to ensure
that all executive officials and employees faithfully comply with
the law. With AO 298 as mandate, the legality of the investigation
is sustained. Such validity is not affected by the fact that the
investigating team and the PCAGC had the same composition, or
that the former used the offices and facilities of the latter in
conducting the inquiry. [Emphasis supplied]
It should be stressed that the purpose of allowing ad hoc investigating bodies

to exist is to allow an inquiry into matters which the President is entitled to know
so that he can be properly advised and guided in the performance of his duties
relative to the execution and enforcement of the laws of the land. And if history is
to be revisited, this was also the objective of the investigative bodies created in the
past like the PCAC, PCAPE, PARGO, the Feliciano Commission, the Melo
Commission and the Zenarosa Commission. There being no changes in the
government structure, the Court is not inclined to declare such executive power as
non-existent just because the direction of the political winds have changed.
On the charge that Executive Order No. 1 transgresses the power of

Congress to appropriate funds for the operation of a public office, suffice it to say
that there will be no appropriation but only an allotment or allocations of existing
funds already appropriated. Accordingly, there is no usurpation on the part of the
Executive of the power of Congress to appropriate funds. Further, there is no need
to specify the amount to be earmarked for the operation of the commission
because, in the words of the Solicitor General, whatever funds the Congress has
provided for the Office of the President will be the very source of the funds for the
commission.[55] Moreover, since the amount that would be allocated to the PTC
shall be subject to existing auditing rules and regulations, there is no impropriety in
the funding.
Power of the Truth Commission to Investigate

The Presidents power to conduct investigations to ensure that laws are faithfully
executed is well recognized. It flows from the faithful-execution clause of the
Constitution under Article VII, Section 17 thereof.[56] As the Chief Executive, the
president represents the government as a whole and sees to it that all laws are
enforced by the officials and employees of his department. He has the authority to
directly assume the functions of the executive department.[57]
Invoking this authority, the President constituted the PTC to primarily investigate
reports of graft and corruption and to recommend the appropriate action. As
previously stated, no quasi-judicial powers have been vested in the said body as it
cannot adjudicate rights of persons who come before it. It has been said that Quasi-
judicial powers involve the power to hear and determine questions of fact to which
the legislative policy is to apply and to decide in accordance with the standards laid
down by law itself in enforcing and administering the same law. [58] In simpler
terms, judicial discretion is involved in the exercise of these quasi-judicial power,
such that it is exclusively vested in the judiciary and must be clearly authorized by
the legislature in the case of administrative agencies.
The distinction between the power to investigate and the power to adjudicate
was delineated by the Court in Cario v. Commission on Human Rights.[59] Thus:
"Investigate," commonly understood, means to examine,

explore, inquire or delve or probe into, research on, study. The
dictionary definition of "investigate" is "to observe or study
closely: inquire into systematically: "to search or inquire into: x x
to subject to an official probe x x: to conduct an official inquiry."
The purpose of investigation, of course, is to discover, to find out,
to learn, obtain information. Nowhere included or intimated is the
notion of settling, deciding or resolving a controversy involved in
the facts inquired into by application of the law to the facts
established by the inquiry.
The legal meaning of "investigate" is essentially the same:
"(t)o follow up step by step by patient inquiry or observation. To
trace or track; to search into; to examine and inquire into with
care and accuracy; to find out by careful inquisition; examination;
the taking of evidence; a legal inquiry;" "to inquire; to make an
investigation," "investigation" being in turn described as "(a)n
administrative function, the exercise of which ordinarily does not
require a hearing. 2 Am J2d Adm L Sec. 257; x x an inquiry,
judicial or otherwise, for the discovery and collection of facts
concerning a certain matter or matters."
"Adjudicate," commonly or popularly understood, means to
adjudge, arbitrate, judge, decide, determine, resolve, rule on,
settle. The dictionary defines the term as "to settle finally (the
rights and duties of the parties to a court case) on the merits of
issues raised: x x to pass judgment on: settle judicially: x x act as
judge." And "adjudge" means "to decide or rule upon as a judge or
with judicial or quasi-judicial powers: x x to award or grant
judicially in a case of controversy x x."
In the legal sense, "adjudicate" means: "To settle in the
exercise of judicial authority. To determine finally. Synonymous
with adjudge in its strictest sense;" and "adjudge" means: "To pass
on judicially, to decide, settle or decree, or to sentence or
condemn. x x. Implies a judicial determination of a fact, and the
entry of a judgment." [Italics included. Citations Omitted]
Fact-finding is not adjudication and it cannot be likened to the judicial

function of a court of justice, or even a quasi-judicial agency or office. The
function of receiving evidence and ascertaining therefrom the facts of a
controversy is not a judicial function. To be considered as such, the act of
receiving evidence and arriving at factual conclusions in a controversy must be
accompanied by the authority of applying the law to the factual conclusions to the
end that the controversy may be decided or resolved authoritatively, finally and
definitively, subject to appeals or modes of review as may be provided by
law.[60] Even respondents themselves admit that the commission is bereft of any
quasi-judicial power.[61]
Contrary to petitioners apprehension, the PTC will not supplant the Ombudsman or
the DOJ or erode their respective powers. If at all, the investigative function of the
commission will complement those of the two offices. As pointed out by the
Solicitor General, the recommendation to prosecute is but a consequence of the
overall task of the commission to conduct a fact-finding investigation.[62] The
actual prosecution of suspected offenders, much less adjudication on the merits of
the charges against them,[63] is certainly not a function given to the
commission. The phrase, when in the course of its investigation, under Section
2(g), highlights this fact and gives credence to a contrary interpretation from that
of the petitioners. The function of determining probable cause for the filing of the
appropriate complaints before the courts remains to be with the DOJ and the
Ombudsman.[64]
At any rate, the Ombudsmans power to investigate under R.A. No. 6770 is not
exclusive but is shared with other similarly authorized government agencies. Thus,
in the case of Ombudsman v. Galicia,[65] it was written:
This power of investigation granted to the Ombudsman by the

1987 Constitution and The Ombudsman Act is not exclusive but is
shared with other similarly authorized government agencies such as
the PCGG and judges of municipal trial courts and municipal
circuit trial courts. The power to conduct preliminary
investigation on charges against public employees and officials is
likewise concurrently shared with the Department of Justice.
Despite the passage of the Local Government Code in 1991, the
Ombudsman retains concurrent jurisdiction with the Office of the
President and the local Sanggunians to investigate complaints
against local elective officials. [Emphasis supplied].
Also, Executive Order No. 1 cannot contravene the power of the Ombudsman to
investigate criminal cases under Section 15 (1) of R.A. No. 6770, which states:
(1) Investigate and prosecute on its own or on complaint by

any person, any act or omission of any public officer or employee,
office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary jurisdiction over
cases cognizable by the Sandiganbayan and, in the exercise of its
primary jurisdiction, it may take over, at any stage, from any
investigatory agency of government, the investigation of such
cases. [Emphases supplied]
The act of investigation by the Ombudsman as enunciated above

contemplates the conduct of a preliminary investigation or the determination of the
existence of probable cause. This is categorically out of the PTCs sphere of
functions. Its power to investigate is limited to obtaining facts so that it can advise
and guide the President in the performance of his duties relative to the execution
and enforcement of the laws of the land. In this regard, the PTC commits no act of
usurpation of the Ombudsmans primordial duties.
The same holds true with respect to the DOJ. Its authority under Section 3 (2),
Chapter 1, Title III, Book IV in the Revised Administrative Code is by no means
exclusive and, thus, can be shared with a body likewise tasked to investigate the
commission of crimes.
Finally, nowhere in Executive Order No. 1 can it be inferred that the findings of
the PTC are to be accorded conclusiveness. Much like its predecessors, the Davide
Commission, the Feliciano Commission and the Zenarosa Commission, its findings
would, at best, be recommendatory in nature. And being so, the Ombudsman and
the DOJ have a wider degree of latitude to decide whether or not to reject the
recommendation. These offices, therefore, are not deprived of their mandated
duties but will instead be aided by the reports of the PTC for possible indictments
for violations of graft laws.
Violation of the Equal Protection Clause
Although the purpose of the Truth Commission falls within the investigative
power of the President, the Court finds difficulty in upholding the constitutionality
of Executive Order No. 1 in view of its apparent transgression of the equal
protection clause enshrined in Section 1, Article III (Bill of Rights) of the 1987
Constitution. Section 1 reads:
Section 1. No person shall be deprived of life, liberty, or

property without due process of law, nor shall any person be denied
the equal protection of the laws.
The petitioners assail Executive Order No. 1 because it is violative of this

constitutional safeguard. They contend that it does not apply equally to all
members of the same class such that the intent of singling out the previous
administration as its sole object makes the PTC an adventure in partisan
hostility.[66] Thus, in order to be accorded with validity, the commission must also
cover reports of graft and corruption in virtually all administrations previous to that
of former President Arroyo.[67]
The petitioners argue that the search for truth behind the reported cases of
graft and corruption must encompass acts committed not only during the
administration of former President Arroyo but also during prior administrations
where the same magnitude of controversies and anomalies[68] were reported to have
been committed against the Filipino people. They assail the classification
formulated by the respondents as it does not fall under the recognized exceptions
because first, there is no substantial distinction between the group of officials
targeted for investigation by Executive Order No. 1 and other groups or persons
who abused their public office for personal gain; and second, the selective
classification is not germane to the purpose of Executive Order No. 1 to end
corruption.[69] In order to attain constitutional permission, the petitioners advocate
that the commission should deal with graft and grafters prior and subsequent to the
Arroyo administration with the strong arm of the law with equal force.[70]
Position of respondents
According to respondents, while Executive Order No. 1 identifies the

previous administration as the initial subject of the investigation, following Section
17 thereof, the PTC will not confine itself to cases of large scale graft and
corruption solely during the said administration.[71] Assuming arguendo that the
commission would confine its proceedings to officials of the previous
administration, the petitioners argue that no offense is committed against the equal
protection clause for the segregation of the transactions of public officers during
the previous administration as possible subjects of investigation is a valid
classification based on substantial distinctions and is germane to the evils which
the Executive Order seeks to correct.[72] To distinguish the Arroyo administration
from past administrations, it recited the following:
First. E.O. No. 1 was issued in view of widespread reports of

large scale graft and corruption in the previous administration which
have eroded public confidence in public institutions. There is,
therefore, an urgent call for the determination of the truth regarding
certain reports of large scale graft and corruption in the government
and to put a closure to them by the filing of the appropriate cases
against those involved, if warranted, and to deter others from
committing the evil, restore the peoples faith and confidence in the
Government and in their public servants.
Second. The segregation of the preceding administration as the

object of fact-finding is warranted by the reality that unlike with
administrations long gone, the current administration will most likely
bear the immediate consequence of the policies of the previous
administration.
Third. The classification of the previous administration as a

separate class for investigation lies in the reality that the evidence of
possible criminal activity, the evidence that could lead to recovery of
public monies illegally dissipated, the policy lessons to be learned to
ensure that anti-corruption laws are faithfully executed, are more
easily established in the regime that immediately precede the current
administration.
Fourth. Many administrations subject the transactions of their

predecessors to investigations to provide closure to issues that are
pivotal to national life or even as a routine measure of due diligence
and good housekeeping by a nascent administration like the
Presidential Commission on Good Government (PCGG), created by
the late President Corazon C. Aquino under Executive Order No. 1 to
pursue the recovery of ill-gotten wealth of her predecessor former
President Ferdinand Marcos and his cronies, and
the Saguisag Commission created by former President Joseph Estrada
under Administrative Order No, 53, to form an ad-hoc and
independent citizens committee to investigate all the facts and
circumstances surrounding Philippine Centennial projects of his
predecessor, former President Fidel V. Ramos.[73] [Emphases
supplied]
Concept of the Equal Protection Clause
One of the basic principles on which this government was founded is that of the
equality of right which is embodied in Section 1, Article III of the 1987
Constitution. The equal protection of the laws is embraced in the concept of due
process, as every unfair discrimination offends the requirements of justice and fair
play. It has been embodied in a separate clause, however, to provide for a more
specific guaranty against any form of undue favoritism or hostility from the
government. Arbitrariness in general may be challenged on the basis of the due
process clause. But if the particular act assailed partakes of an unwarranted
partiality or prejudice, the sharper weapon to cut it down is the equal
protection clause.[74]
According to a long line of decisions, equal protection simply requires that

all persons or things similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed.[75] It requires public bodies and institutions
to treat similarly situated individuals in a similar manner.[76] The purpose of the
equal protection clause is to secure every person within a states jurisdiction against
intentional and arbitrary discrimination, whether occasioned by the express terms
of a statue or by its improper execution through the states duly constituted
authorities.[77] In other words, the concept of equal justice under the law requires
the state to govern impartially, and it may not draw distinctions between
individuals solely on differences that are irrelevant to a legitimate governmental
objective.[78]
The equal protection clause is aimed at all official state actions, not just
those of the legislature.[79] Its inhibitions cover all the departments of the
government including the political and executive departments, and extend to all
actions of a state denying equal protection of the laws, through whatever agency or
whatever guise is taken. [80]
It, however, does not require the universal application of the laws to all
persons or things without distinction. What it simply requires is equality among
equals as determined according to a valid classification. Indeed, the equal
protection clause permits classification. Such classification, however, to be valid
must pass the test of reasonableness. The test has four requisites: (1) The
classification rests on substantial distinctions; (2) It is germane to the purpose of
the law; (3) It is not limited to existing conditions only; and
(4) It applies equally to all members of the same class.[81] Superficial differences
do not make for a valid classification.[82]
For a classification to meet the requirements of constitutionality, it must
include or embrace all persons who naturally belong to the class. [83] The
classification will be regarded as invalid if all the members of the class are not
similarly treated, both as to rights conferred and obligations imposed. It is not
necessary that the classification be made with absolute symmetry, in the sense that
the members of the class should possess the same characteristics in equal
degree. Substantial similarity will suffice; and as long as this is achieved, all those
covered by the classification are to be treated equally. The mere fact that an
individual belonging to a class differs from the other members, as long as that class
is substantially distinguishable from all others, does not justify the non-application
of the law to him.[84]
The classification must not be based on existing circumstances only, or so

constituted as to preclude addition to the number included in the class. It must be
of such a nature as to embrace all those who may thereafter be in similar
circumstances and conditions. It must not leave out or underinclude those that
should otherwise fall into a certain classification. As elucidated in Victoriano v.
Elizalde Rope Workers' Union[85] and reiterated in a long line of cases,[86]
The guaranty of equal protection of the laws is not a
guaranty of equality in the application of the laws upon all citizens
of the state. It is not, therefore, a requirement, in order to avoid
the constitutional prohibition against inequality, that every man,
woman and child should be affected alike by a statute. Equality of
operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the
circumstances surrounding them. It guarantees equality, not
identity of rights. The Constitution does not require that things
which are different in fact be treated in law as though they were
the same. The equal protection clause does not forbid
discrimination as to things that are different. It does not prohibit
legislation which is limited either in the object to which it is
directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows

classification. Classification in law, as in the other departments of
knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain
particulars. A law is not invalid because of simple inequality. The
very idea of classification is that of inequality, so that it goes
without saying that the mere fact of inequality in no manner
determines the matter of constitutionality. All that is required of a
valid classification is that it be reasonable, which means that the
classification should be based on substantial distinctions which
make for real differences, that it must be germane to the purpose
of the law; that it must not be limited to existing conditions only;
and that it must apply equally to each member of the class. This
Court has held that the standard is satisfied if the classification or
distinction is based on a reasonable foundation or rational basis
and is not palpably arbitrary. [Citations omitted]
Applying these precepts to this case, Executive Order No. 1 should be struck
down as violative of the equal protection clause.The clear mandate of the
envisioned truth commission is to investigate and find out the truth concerning the
reported cases of graft and corruption during the previous administration[87] only.
The intent to single out the previous administration is plain, patent and
manifest. Mention of it has been made in at least three portions of the questioned
executive order. Specifically, these are:
WHEREAS, there is a need for a separate body dedicated solely to

investigating and finding out the truth concerning the reported
cases of graft and corruption during the previous administration,
and which will recommend the prosecution of the offenders and
secure justice for all;
SECTION 1. Creation of a Commission. There is hereby created

the PHILIPPINE TRUTH COMMISSION, hereinafter referred to
as the COMMISSION, which shall primarily seek and find the
truth on, and toward this end, investigate reports of graft and
corruption of such scale and magnitude that shock and offend the
moral and ethical sensibilities of the people, committed by public
officers and employees, their co-principals, accomplices and
accessories from the private sector, if any, during the previous
administration; and thereafter recommend the appropriate action
or measure to be taken thereon to ensure that the full measure of
justice shall be served without fear or favor.
SECTION 2. Powers and Functions. The Commission, which shall

have all the powers of an investigative body under Section 37,
Chapter 9, Book I of the Administrative Code of 1987, is primarily
tasked to conduct a thorough fact-finding investigation of reported
cases of graft and corruption referred to in Section 1, involving
third level public officers and higher, their co-principals,
accomplices and accessories from the private sector, if any, during
the previous administration and thereafter submit its finding and
recommendations to the President, Congress and the
Ombudsman. [Emphases supplied]
In this regard, it must be borne in mind that the Arroyo administration is but
just a member of a class, that is, a class of past administrations. It is not a class of
its own. Not to include past administrations similarly situated constitutes
arbitrariness which the equal protection clause cannot sanction. Such
discriminating differentiation clearly reverberates to label the commission as a
vehicle for vindictiveness and selective retribution.
Though the OSG enumerates several differences between the Arroyo

administration and other past administrations, these distinctions are not substantial
enough to merit the restriction of the investigation to the previous administration
only. The reports of widespread corruption in the Arroyo administration cannot be
taken as basis for distinguishing said administration from earlier administrations
which were also blemished by similar widespread reports of impropriety. They are
not inherent in, and do not inure solely to, the Arroyo administration. As Justice
Isagani Cruz put it, Superficial differences do not make for a valid classification.[88]
The public needs to be enlightened why Executive Order No. 1 chooses to

limit the scope of the intended investigation to the previous administration
only. The OSG ventures to opine that to include other past administrations, at this
point, may unnecessarily overburden the commission and lead it to lose its
effectiveness.[89] The reason given is specious. It is without doubt irrelevant to the
legitimate and noble objective of the PTC to stamp out or end corruption and the
evil it breeds.[90]
The probability that there would be difficulty in unearthing evidence or that

the earlier reports involving the earlier administrations were already inquired into
is beside the point. Obviously, deceased presidents and cases which have already
prescribed can no longer be the subjects of inquiry by the PTC. Neither is the PTC
expected to conduct simultaneous investigations of previous administrations, given
the bodys limited time and resources. The law does not require the impossible (Lex
non cogit ad impossibilia).[91]
Given the foregoing physical and legal impossibility, the Court logically
recognizes the unfeasibility of investigating almost a centurys worth of graft
cases. However, the fact remains that Executive Order No. 1 suffers from arbitrary
classification. The PTC, to be true to its mandate of searching for the truth, must
not exclude the other past administrations. The PTC must, at least, have the
authority to investigate all past administrations. While reasonable
prioritization is permitted, it should not be arbitrary lest it be struck down for
being unconstitutional. In the often quoted language of Yick Wo v. Hopkins,[92]
Though the law itself be fair on its face and impartial in

appearance, yet, if applied and administered by public authority with
an evil eye and an unequal hand, so as practically to make unjust and
illegal discriminations between persons in similar circumstances,
material to their rights, the denial of equal justice is still within the
prohibition of the constitution. [Emphasis supplied]
It could be argued that considering that the PTC is an ad hoc body, its scope
is limited. The Court, however, is of the considered view that although its focus is
restricted, the constitutional guarantee of equal protection under the laws should
not in any way be circumvented. The Constitution is the fundamental and
paramount law of the nation to which all other laws must conform and in
accordance with which all private rights determined and all public authority
administered.[93] Laws that do not conform to the Constitution should be stricken
down for being unconstitutional.[94] While the thrust of the PTC is specific, that is,
for investigation of acts of graft and corruption, Executive Order No. 1, to survive,
must be read together with the provisions of the Constitution. To exclude the
earlier administrations in the guise of substantial distinctions would only confirm
the petitioners lament that the subject executive order is only an adventure in
partisan hostility. In the case of US v. Cyprian,[95] it was written: A rather limited
number of such classifications have routinely been held or assumed to be arbitrary;
those include: race, national origin, gender, political activity or membership in a
political party, union activity or membership in a labor union, or more generally
the exercise of first amendment rights.
To reiterate, in order for a classification to meet the requirements of

constitutionality, it must include or embrace all persons who naturally belong to
the class.[96] Such a classification must not be based on existing circumstances
only, or so constituted as to preclude additions to the number included within a
class, but must be of such a nature as to embrace all those who may thereafter be in
similar circumstances and conditions. Furthermore, all who are in situations and
circumstances which are relative to the discriminatory legislation and which are
indistinguishable from those of the members of the class must be brought under the
influence of the law and treated by it in the same way as are the members of the
class.[97]
The Court is not unaware that mere underinclusiveness is not fatal to the
validity of a law under the equal protection clause.[98]Legislation is not
unconstitutional merely because it is not all-embracing and does not include all the
evils within its reach.[99] It has been written that a regulation challenged under the
equal protection clause is not devoid of a rational predicate simply because it
happens to be incomplete.[100] In several instances, the underinclusiveness was not
considered a valid reason to strike down a law or regulation where the purpose can
be attained in future legislations or regulations. These cases refer to the step by
step process.[101] With regard to equal protection claims, a legislature does not run
the risk of losing the entire remedial scheme simply because it fails, through
inadvertence or otherwise, to cover every evil that might conceivably have been
attacked.[102]
In Executive Order No. 1, however, there is no inadvertence. That the

previous administration was picked out was deliberate and intentional as can be
gleaned from the fact that it was underscored at least three times in the assailed
executive order. It must be noted that Executive Order No. 1 does not even
mention any particular act, event or report to be focused on unlike the investigative
commissions created in the past. The equal protection clause is violated by
purposeful and intentional discrimination.[103]
To disprove petitioners contention that there is deliberate discrimination, the
OSG clarifies that the commission does not only confine itself to cases of large
scale graft and corruption committed during the previous administration.[104] The
OSG points to Section 17 of Executive Order No. 1, which provides:
SECTION 17. Special Provision Concerning Mandate. If and when in

the judgment of the President there is a need to expand the mandate of
the Commission as defined in Section 1 hereof to include the
investigation of cases and instances of graft and corruption during the
prior administrations, such mandate may be so extended accordingly by
way of a supplemental Executive Order.
The Court is not convinced. Although Section 17 allows the President the
discretion to expand the scope of investigations of the PTC so as to include the acts
of graft and corruption committed in other past administrations, it does not
guarantee that they would be covered in the future. Such expanded mandate of the
commission will still depend on the whim and caprice of the President. If he would
decide not to include them, the section would then be meaningless. This will only
fortify the fears of the petitioners that the Executive Order No. 1 was crafted to
tailor-fit the prosecution of officials and personalities of the Arroyo
administration.[105]
The Court tried to seek guidance from the pronouncement in the case
of Virata v. Sandiganbayan,[106] that the PCGG Charter (composed of Executive
Orders Nos. 1, 2 and 14) does not violate the equal protection clause. The decision,
however, was devoid of any discussion on how such conclusory statement was
arrived at, the principal issue in said case being only the sufficiency of a cause of
action.
A final word
The issue that seems to take center stage at present is - whether or not the
Supreme Court, in the exercise of its constitutionally mandated power of Judicial
Review with respect to recent initiatives of the legislature and the executive
department, is exercising undue interference. Is the Highest Tribunal, which is
expected to be the protector of the Constitution, itself guilty of violating
fundamental tenets like the doctrine of separation of powers? Time and again, this
issue has been addressed by the Court, but it seems that the present political
situation calls for it to once again explain the legal basis of its action lest it
continually be accused of being a hindrance to the nations thrust to progress.
The Philippine Supreme Court, according to Article VIII, Section 1 of the

1987 Constitution, is vested with Judicial Power that includes the duty of the
courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a
grave of abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the government.
Furthermore, in Section 4(2) thereof, it is vested with the power of judicial

review which is the power to declare a treaty, international or executive agreement,
law, presidential decree, proclamation, order, instruction, ordinance, or regulation
unconstitutional. This power also includes the duty to rule on the constitutionality
of the application, or operation of presidential decrees, proclamations, orders,
instructions, ordinances, and other regulations. These provisions, however, have
been fertile grounds of conflict between the Supreme Court, on one hand, and the
two co-equal bodies of government, on the other. Many times the Court has been
accused of asserting superiority over the other departments.
To answer this accusation, the words of Justice Laurel would be a good

source of enlightenment, to wit: And when the judiciary mediates to allocate
constitutional boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act of the legislature, but
only asserts the solemn and sacred obligation assigned to it by the Constitution to
determine conflicting claims of authority under the Constitution and to establish
for the parties in an actual controversy the rights which that instrument secures and
guarantees to them.[107]
Thus, the Court, in exercising its power of judicial review, is not imposing
its own will upon a co-equal body but rather simply making sure that any act of
government is done in consonance with the authorities and rights allocated to it by
the Constitution. And, if after said review, the Court finds no constitutional
violations of any sort, then, it has no more authority of proscribing the actions
under review. Otherwise, the Court will not be deterred to pronounce said act as
void and unconstitutional.
It cannot be denied that most government actions are inspired with noble
intentions, all geared towards the betterment of the nation and its people. But then
again, it is important to remember this ethical principle: The end does not justify
the means. No matter how noble and worthy of admiration the purpose of an act,
but if the means to be employed in accomplishing it is simply irreconcilable with
constitutional parameters, then it cannot still be allowed.[108] The Court cannot just
turn a blind eye and simply let it pass. It will continue to uphold the Constitution
and its enshrined principles.
The Constitution must ever remain supreme. All must bow to

the mandate of this law. Expediency must not be allowed to sap its
strength nor greed for power debase its rectitude.[109]
Lest it be misunderstood, this is not the death knell for a truth commission as
nobly envisioned by the present administration.Perhaps a revision of the executive
issuance so as to include the earlier past administrations would allow it to pass
the test of reasonableness and not be an affront to the Constitution. Of all the
branches of the government, it is the judiciary which is the most interested in
knowing the truth and so it will not allow itself to be a hindrance or obstacle to its
attainment. It must, however, be emphasized that the search for the truth must be
within constitutional bounds for ours is still a government of laws and not of
men.[110]
WHEREFORE, the petitions are GRANTED. Executive Order No. 1 is

hereby declared UNCONSTITUTIONAL insofar as it is violative of the equal
protection clause of the Constitution.
As also prayed for, the respondents are hereby ordered to cease and desist
from carrying out the provisions of Executive Order No. 1.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. 122156 February 3, 1997
MANILA PRINCE HOTEL petitioner,

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION,
COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL, respondents.
BELLOSILLO, J.:
The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and
concessions covering the national economy and patrimony, the State shall give preference to
qualified Filipinos,1 is in oked by petitioner in its bid to acquire 51% of the shares of the Manila Hotel
Corporation (MHC) which owns the historic Manila Hotel. Opposing, respondents maintain that the
provision is not self-executing but requires an implementing legislation for its enforcement.
Corollarily, they ask whether the 51% shares form part of the national economy and patrimony
covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to
the privatization program of the Philippine Government under Proclamation No. 50 dated 8
December 1986, decided to sell through public bidding 30% to 51% of the issued and outstanding
shares of respondent MHC. The winning bidder, or the eventual "strategic partner," is to provide
management expertise and/or an international marketing/reservation system, and financial support
to strengthen the profitability and performance of the Manila Hotel.2 In a close bidding held on 18
September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a
Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per
share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for
the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state
I. EXECUTION OF THE NECESSARY CONTRACTS WITH

GSIS/MHC
1. The Highest Bidder must comply with the conditions set forth below by October 23,
1995 (reset to November 3, 1995) or the Highest Bidder will lose the right to
purchase the Block of Shares and GSIS will instead offer the Block of Shares to the
other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the

GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other type of contract
specified by the Highest Bidder in its strategic plan for the Manila
Hotel. . . .
b. The Highest Bidder must execute the Stock Purchase and Sale
Agreement with GSIS . . . .
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC

PARTNER
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the
following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than

October 23, 1995 (reset to November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on

Privatization)/OGCC (Office of the Government Corporate Counsel)
are obtained.3
Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the execution
of the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September 1995
matched the bid price of P44.00 per share tendered by Renong Berhad.4 In a subsequent letter
dated 10 October 1995 petitioner sent a manager's check issued by Philtrust Bank for Thirty-three
Million Pesos (P33.000.000.00) as Bid Security to match the bid of the Malaysian Group,
Messrs. Renong Berhad . . .5 which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the
matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and
consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On
18 October 1995 the Court issued a temporary restraining order enjoining respondents from
perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to
it by the First Division. The case was then set for oral arguments with former Chief Justice Enrique
M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits
that the Manila Hotel has been identified with the Filipino nation and has practically become a
historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud
legacy of an earlier generation of Filipinos who believed in the nobility and sacredness of
independence and its power and capacity to release the full potential of the Filipino people. To all
intents and purposes, it has become a part of the national patrimony.6 Petitioner also argues that
since 51% of the shares of the MHC carries with it the ownership of the business of the hotel which
is owned by respondent GSIS, a government-owned and controlled corporation, the hotel business
of respondent GSIS being a part of the tourism industry is unquestionably a part of the national
economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered
by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.7
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its
business also unquestionably part of the national economy petitioner should be preferred after it has
matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for any reason, the
Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match
the highest bid in terms of price per share.8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing provision and
requires implementing legislation(s) . . . Thus, for the said provision to Operate, there must be
existing laws "to lay down conditions under which business may be done."9
Second, granting that this provision is self-executing, Manila Hotel does not fall under the term
national patrimony which only refers to lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna and all marine wealth in its territorial sea, and exclusive marine zone as cited in the first and
second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while petitioner
speaks of the guests who have slept in the hotel and the events that have transpired therein which
make the hotel historic, these alone do not make the hotel fall under the patrimony of the nation.
What is more, the mandate of the Constitution is addressed to the State, not to respondent GSIS
which possesses a personality of its own separate and distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision
invoked is still inapplicable since what is being sold is only 51% of the outstanding shares of the
corporation, not the hotel building nor the land upon which the building stands. Certainly, 51% of the
equity of the MHC cannot be considered part of the national patrimony. Moreover, if the disposition
of the shares of the MHC is really contrary to the Constitution, petitioner should have questioned it
right from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if
for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to
the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are
willing to match the highest bid in terms of price per share, is misplaced. Respondents postulate that
the privilege of submitting a matching bid has not yet arisen since it only takes place if for any
reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by
petitioner of a matching bid is premature since Renong Berhad could still very well be awarded the
block of shares and the condition giving rise to the exercise of the privilege to submit a matching bid
had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent
GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did abuse its
discretion it was not so patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law. Similarly, the petition for mandamus should fail as
petitioner has no clear legal right to what it demands and respondents do not have an imperative
duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by the authority
from which it emanates. It has been defined as the fundamental and paramount law of the nation. 10 It
prescribes the permanent framework of a system of government, assigns to the different
departments their respective powers and duties, and establishes certain fixed principles on which
government is founded. The fundamental conception in other words is that it is a supreme law to
which all other laws must conform and in accordance with which all private rights must be
determined and all public authority administered. 11 Under the doctrine of constitutional supremacy, if
a law or contract violates any norm of the constitution that law or contract whether promulgated by
the legislative or by the executive branch or entered into by private persons for private purposes is
null and void and without any force and effect. Thus, since the Constitution is the fundamental,
paramount and supreme law of the nation, it is deemed written in every statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions
command the legislature to enact laws and carry out the purposes of the framers who merely
establish an outline of government providing for the different departments of the governmental
machinery and securing certain fundamental and inalienable rights of citizens. 12 A provision which
lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not
self-executing. But a provision which is complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies sufficient rule by means of which the
right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is self-
executing if the nature and extent of the right conferred and the liability imposed are fixed by the
constitution itself, so that they can be determined by an examination and construction of its terms,
and there is no language indicating that the subject is referred to the legislature for action. 13
As against constitutions of the past, modern constitutions have been generally drafted upon a
different principle and have often become in effect extensive codes of laws intended to operate
directly upon the people in a manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a legislative body. Hence, unless it
is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing If the constitutional
provisions are treated as requiring legislation instead of self-executing, the legislature would have
the power to ignore and practically nullify the mandate of the fundamental law.14 This can be
cataclysmic. That is why the prevailing view is, as it has always been, that
. . . in case of doubt, the Constitution should be considered self-executing rather than

non-self-executing . . . . Unless the contrary is clearly intended, the provisions of the
Constitution should be considered self-executing, as a contrary rule would give the
legislature discretion to determine when, or whether, they shall be effective. These
provisions would be subordinated to the will of the lawmaking body, which could
make them entirely meaningless by simply refusing to pass the needed implementing
statute. 15
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-
executing, as they quote from discussions on the floor of the 1986 Constitutional Commission
MR. RODRIGO. Madam President, I am asking this question as the

Chairman of the Committee on Style. If the wording of
"PREFERENCE" is given to QUALIFIED FILIPINOS," can it be
understood as a preference to qualified Filipinos vis-a-vis Filipinos
who are not qualified. So, why do we not make it clear? To qualified
Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is

it to remove the word "QUALIFIED?".
MR. RODRIGO. No, no, but say definitely "TO QUALIFIED

FILIPINOS" as against whom? As against aliens or over aliens?
MR. NOLLEDO. Madam President, I think that is understood. We use

the word "QUALIFIED" because the existing laws or prospective laws
will always lay down conditions under which business may be
done. For example, qualifications on the setting up of other financial
structures, et cetera (emphasis supplied by respondents)
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO Yes, 16
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear
that it is non-self-executing but simply for purposes of style. But, certainly, the legislature is not
precluded from enacting other further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature
without impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise
of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in
the absence of such legislation. The omission from a constitution of any express provision for a
remedy for enforcing a right or liability is not necessarily an indication that it was not intended to be
self-executing. The rule is that a self-executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available. 17 Subsequent
legislation however does not necessarily mean that the subject constitutional provision is not, by
itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is
implied from the tenor of the first and third paragraphs of the same section which undoubtedly are
not self-executing. 18 The argument is flawed. If the first and third paragraphs are not self-executing
because Congress is still to enact measures to encourage the formation and operation of enterprises
fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
exercise authority over foreign investments within its national jurisdiction, as in the third paragraph,
then a fortiori, by the same logic, the second paragraph can only be self-executing as it does not by
its language require any legislation in order to give preference to qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony. A constitutional
provision may be self-executing in one part and non-self-executing in another. 19
Even the cases cited by respondents holding that certain constitutional provisions are merely
statements of principles and policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially enforceable rights are simply not in
point. Basco v. Philippine Amusements and Gaming Corporation 20 speaks of constitutional
provisions on personal dignity, 21 the sanctity of family life, 22 the vital role of the youth in nation-
building 23 the promotion of social justice, 24 and the values of education. 25 Tolentino v. Secretary of
Finance 26 refers to the constitutional provisions on social justice and human rights 27 and on
education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites provisions on the promotion of general
welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-building 32 and the promotion
of total human liberation and development. 33 A reading of these provisions indeed clearly shows that
they are not judicially enforceable constitutional rights but merely guidelines for legislation. The very
terms of the provisions manifest that they are only principles upon which the legislations must be
based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a mandatory,
positive command which is complete in itself and which needs no further guidelines or implementing
laws or rules for its enforcement. From its very words the provision does not require any legislation
to put it in operation. It is per se judicially enforceable When our Constitution mandates that [i]n the
grant of rights, privileges, and concessions covering national economy and patrimony, the State
shall give preference to qualified Filipinos, it means just that qualified Filipinos shall be preferred.
And when our Constitution declares that a right exists in certain specified circumstances an action
may be maintained to enforce such right notwithstanding the absence of any legislation on the
subject; consequently, if there is no statute especially enacted to enforce such constitutional right,
such right enforces itself by its own inherent potency and puissance, and from which all legislations
must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission 34 explains
The patrimony of the Nation that should be conserved and developed refers not only
to out rich natural resources but also to the cultural heritage of out race. It also refers
to our intelligence in arts, sciences and letters. Therefore, we should develop not
only our lands, forests, mines and other natural resources but also the mental ability
or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage. 35 When the
Constitution speaks of national patrimony, it refers not only to the natural resources of the
Philippines, as the Constitution could have very well used the term natural resources, but also to
the cultural heritage of the Filipinos.
Manila Hotel has become a landmark a living testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly
Filipino, Formerly a concourse for the elite, it has since then become the venue of various significant
events which have shaped Philippine history. It was called the Cultural Center of the 1930's. It was
the site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as
the Official Guest House of the Philippine Government. it plays host to dignitaries and official visitors
who are accorded the traditional Philippine hospitality. 36
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of
a City. 37During World War II the hotel was converted by the Japanese Military Administration into a
military headquarters. When the American forces returned to recapture Manila the hotel was
selected by the Japanese together with Intramuros as the two (2) places fro their final stand.
Thereafter, in the 1950's and 1960's, the hotel became the center of political activities, playing host
to almost every political convention. In 1970 the hotel reopened after a renovation and reaped
numerous international recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986
the hotel was the site of a failed coup d' etat where an aspirant for vice-president was "proclaimed"
President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures,
loves and frustrations of the Filipinos; its existence is impressed with public interest; its own
historicity associated with our struggle for sovereignty, independence and nationhood. Verily, Manila
Hotel has become part of our national economy and patrimony. For sure, 51% of the equity of the
MHC comes within the purview of the constitutional shelter for it comprises the majority and
controlling stock, so that anyone who acquires or owns the 51% will have actual control and
management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the hotel
and the land on which the hotel edifice stands. Consequently, we cannot sustain respondents' claim
that the Filipino First Policy provision is not applicable since what is being sold is only 51% of
the outstanding shares of the corporation, not the Hotel building nor the land upon which the building
stands. 38
The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution also
includes corporations at least 60% of which is owned by Filipinos. This is very clear from the
proceedings of the 1986 Constitutional Commission
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo

amendment. And the amendment would consist in substituting the
words "QUALIFIED FILIPINOS" with the following: "CITIZENS OF
THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS
WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY
OWNED BY SUCH CITIZENS.
xxx xxx xxx
MR. MONSOD. Madam President, apparently the proponent is

agreeable, but we have to raise a question. Suppose it is a
corporation that is 80-percent Filipino, do we not give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual

Filipino. What about a corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we

say that the preference should only be 100-percent Filipino.
MR: DAVIDE. I want to get that meaning clear because "QUALIFIED

FILIPINOS" may refer only to individuals and not to juridical
personalities or entities.
MR. MONSOD. We agree, Madam President. 39
xxx xxx xxx
MR. RODRIGO. Before we vote, may I request that the amendment

be read again.
MR. NOLLEDO. The amendment will read: "IN THE GRANT OF

RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE
NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS." And the word
"Filipinos" here, as intended by the proponents, will include not only
individual Filipinos but also Filipino-controlled entities or entities fully-
controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained thus
MR. FOZ. Madam President, I would like to request Commissioner

Nolledo to please restate his amendment so that I can ask a
question.
MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND

CONCESSIONS COVERING THE NATIONAL ECONOMY AND
PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS."
MR FOZ. In connection with that amendment, if a foreign enterprise is

qualified and a Filipino enterprise is also qualified, will the Filipino
enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the
Filipino enterprise, will the Filipino still be preferred?
MR. NOLLEDO. The answer is "yes."
MR. FOZ. Thank you, 41
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL

THE STATE SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This
embodies the so-called "Filipino First" policy. That means that Filipinos should be
given preference in the grant of concessions, privileges and rights covering the
national patrimony. 42
The exchange of views in the sessions of the Constitutional Commission regarding the subject
provision was still further clarified by Commissioner Nolledo 43
Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic

concerns. It is better known as the FILIPINO FIRST Policy . . . This provision was
never found in previous Constitutions . . . .
The term "qualified Filipinos" simply means that preference shall be given to those
citizens who can make a viable contribution to the common good, because of
credible competence and efficiency. It certainly does NOT mandate the pampering
and preferential treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be counter productive and
inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to
be made between a "qualified foreigner" end a "qualified Filipino," the latter shall be
chosen over the former."
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS
and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance
with its own guidelines so that the sole inference here is that petitioner has been found to be
possessed of proven management expertise in the hotel industry, or it has significant equity
ownership in another hotel company, or it has an overall management and marketing proficiency to
successfully operate the Manila Hotel. 44
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject
provision is not self-executory and requires implementing legislation is quite disturbing. The attempt
to violate a clear constitutional provision by the government itself is only too distressing. To
adopt such a line of reasoning is to renounce the duty to ensure faithfulness to the Constitution. For,
even some of the provisions of the Constitution which evidently need implementing legislation have
juridical life of their own and can be the source of a judicial remedy. We cannot simply afford the
government a defense that arises out of the failure to enact further enabling, implementing or guiding
legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional government is apt
The executive department has a constitutional duty to implement laws, including the
Constitution, even before Congress acts provided that there are discoverable legal
standards for executive action. When the executive acts, it must be guided by its own
understanding of the constitutional command and of applicable laws. The
responsibility for reading and understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive would have to ask Congress,
or perhaps the Court, for an interpretation every time the executive is confronted by a
constitutional command. That is not how constitutional government operates. 45
Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality. This argument again
is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried out with
the prior approval of the State acting through respondent Committee on Privatization. As correctly
pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of
respondents GSIS and MHC a "state action." In constitutional jurisprudence, the acts of persons
distinct from the government are considered "state action" covered by the Constitution (1) when the
activity it engages in is a "public function;" (2) when the government is so significantly involved with
the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent GSIS in
selling 51% of its share in respondent MHC comes under the second and third categories of "state
action." Without doubt therefore the transaction. although entered into by respondent GSIS, is in fact
a transaction of the State and therefore subject to the constitutional command. 46
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3) divisions of
power legislative, executive and judicial. Accordingly, a constitutional mandate directed to the
State is correspondingly directed to the three(3) branches of government. It is undeniable that in this
case the subject constitutional injunction is addressed among others to the Executive Department
and respondent GSIS, a government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning
bidder. The bidding rules expressly provide that the highest bidder shall only be declared the winning
bidder after it has negotiated and executed the necessary contracts, and secured the requisite
approvals. Since the "Filipino First Policy provision of the Constitution bestows preference on
qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder will
be declared the winning bidder. Resultantly, respondents are not bound to make the award yet, nor
are they under obligation to enter into one with the highest bidder. For in choosing the awardee
respondents are mandated to abide by the dictates of the 1987 Constitution the provisions of which
are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it
should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be
nullified for being violative of the Constitution. It is a basic principle in constitutional law that all laws
and contracts must conform with the fundamental law of the land. Those which violate the
Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder cannot be
awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly
submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of
price per
share. 47 Certainly, the constitutional mandate itself is reason enough not to award the block of
shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the
highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the
grant of rights, privileges and concessions covering the national economy and patrimony, thereby
exceeding the bid of a Filipino, there is no question that the Filipino will have to be allowed to match
the bid of the foreign entity. And if the Filipino matches the bid of a foreign firm the award should go
to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision of
the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the
bidding rules, the constitutional fiat is, omnipresent to be simply disregarded. To ignore it would be to
sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign investors. But
the Constitution and laws of the Philippines are understood to be always open to public scrutiny.
These are given factors which investors must consider when venturing into business in a foreign
jurisdiction. Any person therefore desiring to do business in the Philippines or with any of its
agencies or instrumentalities is presumed to know his rights and obligations under the Constitution
and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to Renong
Berhad since petitioner was well aware from the beginning that a foreigner could participate in the
bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But
foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to
match the highest bid tendered by the foreign entity. In the case before us, while petitioner was
already preferred at the inception of the bidding because of the constitutional mandate, petitioner
had not yet matched the bid offered by Renong Berhad. Thus it did not have the right or personality
then to compel respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of
the foreign firm and the apparent disregard by respondent GSIS of petitioner's matching bid did the
latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award
has been finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino
group willing to match the bid of the foreign group is to insist that government be treated as any
other ordinary market player, and bound by its mistakes or gross errors of judgment, regardless of
the consequences to the Filipino people. The miscomprehension of the Constitution is regrettable.
Thus we would rather remedy the indiscretion while there is still an opportunity to do so than let the
government develop the habit of forgetting that the Constitution lays down the basic conditions and
parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the
bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block of
shares of MHC and to execute the necessary agreements and documents to effect the sale in
accordance not only with the bidding guidelines and procedures but with the Constitution as well.
The refusal of respondent GSIS to execute the corresponding documents with petitioner as provided
in the bidding rules after the latter has matched the bid of the Malaysian firm clearly constitutes
grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution
not merely to be used as a guideline for future legislation but primarily to be enforced; so must it be
enforced. This Court as the ultimate guardian of the Constitution will never shun, under any
reasonable circumstance, the duty of upholding the majesty of the Constitution which it is tasked to
defend. It is worth emphasizing that it is not the intention of this Court to impede and diminish, much
less undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes
more business opportunities but avowedly sanctions the preference for Filipinos whenever such
preference is ordained by the Constitution. The position of the Court on this matter could have not
been more appropriately articulated by Chief Justice Narvasa
As scrupulously as it has tried to observe that it is not its function to substitute its
judgment for that of the legislature or the executive about the wisdom and feasibility
of legislation economic in nature, the Supreme Court has not been spared criticism
for decisions perceived as obstacles to economic progress and development . . . in
connection with a temporary injunction issued by the Court's First Division against
the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that injunction "again demonstrates that
the Philippine legal system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to
intervene in contracts of the kind referred to or set itself up as the judge of whether
they are viable or attainable, it is its bounden duty to make sure that they do not
violate the Constitution or the laws, or are not adopted or implemented with grave
abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk that
duty, no matter how buffeted by winds of unfair and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing its business viability and preventing
further losses, regardless of the character of the asset, should not take precedence over non-
material values. A commercial, nay even a budgetary, objective should not be pursued at the
expense of national pride and dignity. For the Constitution enshrines higher and nobler non-material
values. Indeed, the Court will always defer to the Constitution in the proper governance of a free
society; after all, there is nothing so sacrosanct in any economic policy as to draw itself beyond
judicial review when the Constitution is involved. 49
Nationalism is inherent, in the very concept of the Philippines being a democratic and republican
state, with sovereignty residing in the Filipino people and from whom all government authority
emanates. In nationalism, the happiness and welfare of the people must be the goal. The nation-
state can have no higher purpose. Any interpretation of any constitutional provision must adhere to
such basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot
override the demands of nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the
highest bidder solely for the sake of privatization. We are not talking about an ordinary piece of
property in a commercial district. We are talking about a historic relic that has hosted many of the
most important events in the short history of the Philippines as a nation. We are talking about a hotel
where heads of states would prefer to be housed as a strong manifestation of their desire to cloak
the dignity of the highest state function to their official visits to the Philippines. Thus the Manila Hotel
has played and continues to play a significant role as an authentic repository of twentieth century
Philippine history and culture. In this sense, it has become truly a reflection of the Filipino soul a
place with a history of grandeur; a most historical setting that has played a part in the shaping of a
country. 51
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the
historical landmark this Grand Old Dame of hotels in Asia to a total stranger. For, indeed, the
conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less than
mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nation's soul for
some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from
a qualified Filipino, can be gained by the Filipinos Manila Hotel and all that it stands for is sold
to a non-Filipino? How much of national pride will vanish if the nation's cultural heritage is entrusted
to a foreign entity? On the other hand, how much dignity will be preserved and realized if the
national patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This is
the plain and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And
this Court, heeding the clarion call of the Constitution and accepting the duty of being the elderly
watchman of the nation, will continue to respect and protect the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL

CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the
Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner
MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila
Hotel Corporation at P44.00 per share and thereafter to execute the necessary clearances and to do
such other acts and deeds as may be necessary for purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.
Separate Opinions
PADILLA, J., concurring:
I concur with the ponencia of Mr. Justice Bellosillo. At the same time, I would like to expound a bit
more on the concept of national patrimony as including within its scope and meaning institutions
such as the Manila Hotel.
It is argued by petitioner that the Manila Hotel comes under "national patrimony" over which qualified
Filipinos have the preference, in ownership and operation. The Constitutional provision on point
states:
xxx xxx xxx
In the grant of rights, privileges, and concessions covering the national economy and
patrimony, the State shall Give preference to qualified Filipinos.1
Petitioner's argument, I believe, is well taken. Under the 1987 Constitution, "national patrimony"
consists of the natural resources provided by Almighty God (Preamble) in our territory (Article I)
consisting of land, sea, and air.2study of the 1935 Constitution, where the concept of "national
patrimony" originated, would show that its framers decided to adopt the even more comprehensive
expression "Patrimony of the Nation" in the belief that the phrase encircles a concept embracing not
only their natural resources of the country but practically everything that belongs to the Filipino
people, the tangible and the material as well as the intangible and the spiritual assets and
possessions of the people. It is to be noted that the framers did not stop with conservation. They
knew that conservation alone does not spell progress; and that this may be achieved only through
development as a correlative factor to assure to the people not only the exclusive ownership, but
also the exclusive benefits of their national patrimony).3
Moreover, the concept of national patrimony has been viewed as referring not only to our rich natural
resources but also to the cultural heritage of our
race.4
There is no doubt in my mind that the Manila Hotel is very much a part of our national patrimony
and, as such, deserves constitutional protection as to who shall own it and benefit from its operation.
This institution has played an important role in our nation's history, having been the venue of many a
historical event, and serving as it did, and as it does, as the Philippine Guest House for visiting
foreign heads of state, dignitaries, celebrities, and others.5
It is therefore our duty to protect and preserve it for future generations of Filipinos. As President
Manuel L. Quezon once said, we must exploit the natural resources of our country, but we should do
so with. an eye to the welfare of the future generations. In other words, the leaders of today are the
trustees of the patrimony of our race. To preserve our national patrimony and reserve it for Filipinos
was the intent of the distinguished gentlemen who first framed our Constitution. Thus, in debating
the need for nationalization of our lands and natural resources, one expounded that we should "put
more teeth into our laws, and; not make the nationalization of our lands and natural resources a
subject of ordinary legislation but of constitutional enactment"6 To quote further: "Let not our children
be mere tenants and trespassers in their own country. Let us preserve and bequeath to them what is
rightfully theirs, free from all foreign liens and encumbrances".7
Now, a word on preference. In my view "preference to qualified Filipinos", to be meaningful, must

refer not only to things that are peripheral, collateral, or tangential. It must touch and affect the very
"heart of the existing order." In the field of public bidding in the acquisition of things that pertain to the
national patrimony, preference to qualified Filipinos must allow a qualified Filipino to match or equal
the higher bid of a non-Filipino; the preference shall not operate only when the bids of the qualified
Filipino and the non-Filipino are equal in which case, the award should undisputedly be made to the
qualified Filipino. The Constitutional preference should give the qualified Filipino an opportunity to
match or equal the higher bid of the non-Filipino bidder if the preference of the qualified Filipino
bidder is to be significant at all.
It is true that in this present age of globalization of attitude towards foreign investments in our
country, stress is on the elimination of barriers to foreign trade and investment in the country. While
government agencies, including the courts should re-condition their thinking to such a trend, and
make it easy and even attractive for foreign investors to come to our shores, yet we should not
preclude ourselves from reserving to us Filipinos certain areas where our national identity, culture
and heritage are involved. In the hotel industry, for instance, foreign investors have established
themselves creditably, such as in the Shangri-La, the Nikko, the Peninsula, and Mandarin Hotels.
This should not stop us from retaining 51% of the capital stock of the Manila Hotel Corporation in the
hands of Filipinos. This would be in keeping with the intent of the Filipino people to preserve our
national patrimony, including our historical and cultural heritage in the hands of Filipinos.
VITUG, J., concurring:
I agree with Mr. Justice Josue N. Bellosillo on his clear-cut statements, shared by Mr. Justice
Reynato S. Puno in a well written separate (dissenting) opinion, that:
First, the provision in our fundamental law which provides that "(I)n the grant of rights, privileges, and
qualified Filipinos"1 is self-executory. The provision verily does not need, although it can obviously be
amplified or regulated by, an enabling law or a set of rules.
Second, the term "patrimony" does not merely refer to the country's natural resources but also to its
cultural heritage. A "historical landmark," to use the words of Mr. Justice Justo P. Torres, Jr., Manila
Hotel has now indeed become part of Philippine heritage.
Third, the act of the Government Service Insurance System ("GSIS"), a government entity which
derives its authority from the State, in selling 51% of its share in MHC should be considered an act
of the State subject to the Constitutional mandate.
On the pivotal issue of the degree of "preference to qualified Filipinos," I find it somewhat difficult to
take the same path traversed by the forceful reasoning of Justice Puno. In the particular case before
us, the only meaningful preference, it seems, would really be to allow the qualified Filipino to match
the foreign bid for, as a particular matter, I cannot see any bid that literally calls for millions of dollars
to be at par (to the last cent) with another. The magnitude of the magnitude of the bids is such that it
becomes hardly possible for the competing bids to stand exactly "equal" which alone, under the
dissenting view, could trigger the right of preference.
It is most unfortunate that Renong Berhad has not been spared this great disappointment, a letdown
that it did not deserve, by a simple and timely advise of the proper rules of bidding along with the
peculiar constitutional implications of the proposed transaction. It is also regrettable that the Court at
time is seen, to instead, be the refuge for bureaucratic inadequate which create the perception that it
even takes on non-justiciable controversies.
All told, I am constrained to vote for granting the petition.
MENDOZA, J., concurring in the judgment:
I take the view that in the context of the present controversy the only way to enforce the
constitutional mandate that "[i]n the grant of rights, privileges and concessions covering the national
patrimony the State shall give preference to qualified Filipinos"1 is to allow petitioner Philippine
corporation to equal the bid of the Malaysian firm Renong Berhad for the purchase of the controlling
shares of stocks in the Manila Hotel Corporation. Indeed, it is the only way a qualified Filipino of
Philippine corporation can be given preference in the enjoyment of a right, privilege or concession
given by the State, by favoring it over a foreign national corporation.
Under the rules on public bidding of the Government Service and Insurance System, if petitioner and
the Malaysian firm had offered the same price per share, "priority [would be given] to the bidder
seeking the larger ownership interest in MHC,"2 so that petitioner bid for more shares, it would be
preferred to the Malaysian corporation for that reason and not because it is a Philippine corporation.
Consequently, it is only in cases like the present one, where an alien corporation is the highest
bidder, that preferential treatment of the Philippine corporation is mandated not by declaring it winner
but by allowing it "to match the highest bid in terms of price per share" before it is awarded the
shares of stocks.3 That, to me, is what "preference to qualified Filipinos" means in the context of this
case by favoring Filipinos whenever they are at a disadvantage vis-a-vis foreigners.
This was the meaning given in Co Chiong v. Cuaderno4 to a 1947 statute giving "preference to
Filipino citizens in the lease of public market stalls."5 This Court upheld the cancellation of existing
leases covering market stalls occupied by persons who were not Filipinos and the award thereafter
of the stalls to qualified Filipino vendors as ordered by the Department of Finance. Similarly,
in Vda. de Salgado v. De la Fuente,6 this Court sustained the validity of a municipal ordinance
passed pursuant to the statute (R.A. No. 37), terminating existing leases of public market stalls and
granting preference to Filipino citizens in the issuance of new licenses for the occupancy of the
stalls. In Chua Lao v. Raymundo,7 the preference granted under the statute was held to apply to
cases in which Filipino vendors sought the same stalls occupied by alien vendors in the public
markets even if there were available other stalls as good as those occupied by aliens. "The law,
apparently, is applicable whenever there is a conflict of interest between Filipino applicants and
aliens for lease of stalls in public markets, in which situation the right to preference immediately
arises."8
Our legislation on the matter thus antedated by a quarter of a century efforts began only in the 1970s
in America to realize the promise of equality, through affirmative action and reverse discrimination
programs designed to remedy past discrimination against colored people in such areas as
employment, contracting and licensing.9Indeed, in vital areas of our national economy, there are
situations in which the only way to place Filipinos in control of the national economy as contemplated
in the Constitution 10 is to give them preferential treatment where they can at least stand on equal
footing with aliens.
There need be no fear that thus preferring Filipinos would either invite foreign retaliation or deprive
the country of the benefit of foreign capital or know-how. We are dealing here not with common
trades of common means of livelihood which are open to aliens in our midst, 11 but with the sale of
government property, which is like the grant of government largess of benefits and concessions
covering the national economy" and therefore no one should begrudge us if we give preferential
treatment to our citizens. That at any rate is the command of the Constitution. For the Manila Hotel is
a business owned by the Government. It is being privatized. Privatization should result in the
relinquishment of the business in favor of private individuals and groups who are Filipino citizens, not
in favor of aliens.
Nor should there be any doubt that by awarding the shares of stocks to petitioner we would be
trading competence and capability for nationalism. Both petitioner and the Malaysian firm are
qualified, having hurdled the prequalification process. 12 It is only the result of the public bidding that
is sought to be modified by enabling petitioner to up its bid to equal the highest bid.
Nor, finally, is there any basis for the suggestion that to allow a Filipino bidder to match the highest
bid of an alien could encourage speculation, since all that a Filipino entity would then do would be
not to make a bid or make only a token one and, after it is known that a foreign bidder has submitted
the highest bid, make an offer matching that of the foreign firm. This is not possible under the rules
on public bidding of the GSIS. Under these rules there is a minimum bid required (P36.87 per share
for a range of 9 to 15 million shares). 13 Bids below the minimum will not be considered. On the other
hand, if the Filipino entity, after passing the prequalification process, does not submit a bid, he will
not be allowed to match the highest bid of the foreign firm because this is a privilege allowed only to
those who have "validly submitted bids." 14 The suggestion is, to say the least, fanciful and has no
basis in fact.
For the foregoing reasons, I vote to grant the petition.
TORRES, JR., J., separate opinion:
Constancy in law is not an attribute of a judicious mind. I say this as we are not confronted in the
case at bar with legal and constitutional issues and yet I am driven so to speak on the side of
history. The reason perhaps is due to the belief that in the words of Justice Oliver Wendell Holmes,
Jr., a "page of history is worth a volume of logic."
I will, however, attempt to share my thoughts on whether the Manila Hotel has a historical and
cultural aspect within the meaning of the constitution and thus, forming part of the "patrimony of the
nation".
Section 10, Article XII of the 1987 Constitution provides:
xxx xxx xxx
patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its
national goals and priorities.
The foregoing provisions should be read in conjunction with Article II of the same Constitution
pertaining to "Declaration of Principles and State Policies" which ordain
The State shall develop a self-reliant and independent national economy effectively
by Filipinos. (Sec. 19).
Interestingly, the matter of giving preference to "qualified Filipinos" was one of the highlights in the
1987 Constitution Commission proceedings thus:
xxx xxx xxx
MR. NOLLEDO. The Amendment will read: "IN THE

GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL
ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS".
And the word "Filipinos" here, as intended by the
proponents, will include not only individual Filipinos
but also Filipino-Controlled entities fully controlled by
Filipinos (Vol. III, Records of the Constitutional
Commission, p. 608).
MR. MONSOD. We also wanted to add, as
Commissioner Villegas said, this committee and this
body already approved what is known as the Filipino
First policy which was suggested by Commissioner de
Castro. So that it is now in our Constitution (Vol. IV,
Records of the Constitutional Commission, p. 225).
Commissioner Jose Nolledo explaining the provision adverted to above, said:
MR. NOLLEDO. In the grant of rights, privileges and

concessions covering the national economy and
patrimony, the State shall give preference to qualified
Filipinos.
MR. FOZ. In connection with that amendment, if a

foreign enterprise is qualified and the Filipinos
enterprise is also qualified, will the Filipino enterprise
still be given a preference?
MR. FOZ. If the foreigner is more qualified in some

aspects than the Filipino enterprise, will the Filipino
still be preferred:?
MR. NOLLEDO. The answer is "yes". (Vol. III, p. 616,

Records of the Constitutional Commission).
The nationalistic provisions of the 1987 Constitution reflect the history and spirit of the Malolos
Constitution of 1898, the 1935 Constitution and the 1973 Constitutions. That we have no reneged on
this nationalist policy is articulated in one of the earliest case, this Court said
The nationalistic tendency is manifested in various provisions of the Constitution. . . .

It cannot therefore be said that a law imbued with the same purpose and spirit
underlying many of the provisions of the Constitution is unreasonable, invalid or
unconstitutional (Ichong, et al. vs. Hernandez, et al., 101 Phil. 1155).
I subscribe to the view that history, culture, heritage, and traditions are not legislated and is the
product of events, customs, usages and practices. It is actually a product of growth and acceptance
by the collective mores of a race. It is the spirit and soul of a people.
The Manila Hotel is part of our history, culture and heritage. Every inch of the Manila Hotel is witness
to historic events (too numerous to mention) which shaped our history for almost 84 years.
As I intimated earlier, it is not my position in this opinion, to examine the single instances of the legal
largese which have given rise to this controversy. As I believe that has been exhaustively discussed
in the ponencia. Suffice it to say at this point that the history of the Manila Hotel should not be placed
in the auction block of a purely business transaction, where profits subverts the cherished historical
values of our people.
As a historical landmark in this "Pearl of the Orient Seas", it has its enviable tradition which, in the
words of the philosopher Salvador de Madarriaga tradition is "more of a river than a stone, it keeps
flowing, and one must view the flowing , and one must view the flow of both directions. If you look
towards the hill from which the river flows, you see tradition in the form of forceful currents that push
the river or people towards the future, and if you look the other way, you progress."
Indeed, tradition and progress are the same, for progress depends on the kind of tradition. Let us not
jettison the tradition of the Manila Hotel and thereby repeat our colonial history.
I grant, of course the men of the law can see the same subject in different lights.
I remember, however, a Spanish proverb which says "He is always right who suspects that he
makes mistakes". On this note, I say that if I have to make a mistake, I would rather err upholding
the belief that the Filipino be first under his Constitution and in his own land.
I vote GRANT the petition.
PUNO, J., dissenting:
This is a. petition for prohibition and mandamus filed by the Manila Prince Hotel Corporation, a
domestic corporation, to stop the Government Service Insurance System (GSIS) from selling the
controlling shares of the Manila Hotel Corporation to a foreign corporation. Allegedly, the sale
violates the second paragraph of section 10, Article XII of the Constitution.
Respondent GSIS is a government-owned and controlled corporation. It is the sole owner of the
Manila Hotel which it operates through its subsidiary, the Manila Hotel Corporation. Manila Hotel was
included in the privatization program of the government. In 1995, GSIS proposed to sell to interested
buyers 30% to 51% of its shares, ranging from 9,000,000 to 15,300,000 shares, in the Manila Hotel
Corporation. After the absence of bids at the first public bidding, the block of shares offered for sale
was increased from a maximum of 30% to 51%. Also, the winning bidder, or the eventual "strategic
partner" of the GSIS was required to "provide management expertise and/or an international
marketing/reservation system, and financial support to strengthen the profitability and performance
of the Manila Hotel"1 The proposal was approved by respondent Committee on Privatization.
In July 1995, a conference was held where prequalification documents and the bidding rules were
furnished interested parties. Petitioner Manila Prince Hotel, a domestic corporation, and Renong
Berhad, Malaysian firm with ITT Sheraton as operator, prequalified.2
The bidding rules and procedures entitled "Guidelines and Procedures: Second Prequalification and
Public Bidding of the MHC Privatization" provide:
I INTRODUCTION AND HIGHLIGHTS
DETERMINING THE WINNING BIDDER/STRATEGIC PARTNER
The party that accomplishes the steps set forth below will be declared the Winning
Bidder/Strategic Partner and will be awarded the Block of Shares:
First Pass the prequalification process;

Second Submit the highest bid on a price per share basis for the Block of Shares;
Third Negotiate and execute the necessary contracts with GSIS/MHC not later
than October 23, 1995;
xxx xxx xxx
IV GUIDELINES FOR PREQUALIFICATION
A. PARTIES WHO MAP APPLY FOR PREQUALIFICATION
The Winning Bidder/Strategic Partner will be expected to provide

management expertise and/or an international marketing reservation
system, and financial support to strengthen the profitability and
performance of The Manila Hotel. In this context, the GSIS is inviting
to the prequalification process any local and/or foreign corporation,
consortium/joint venture or juridical entity with at least one of the
following qualifications:
a. Proven management .expertise in the hotel

industry; or
b. Significant equity ownership (i.e. board

representation) in another hotel company; or
c. Overall management and marketing expertise to

successfully operate the Manila Hotel.
Parties interested in bidding for MHC should be able to provide

access to the requisite management expertise and/or international
marketing/reservation system for The Manila Hotel.
xxx xxx xxx
D. PREQUALIFICATION DOCUMENTS
xxx xxx xxx
E. APPLICATION PROCEDURE
1. DOCUMENTS AVAILABLE AT THE REGISTRATION OFFICE
The prequalification documents can be secured at the Registration

Office between 9:00 AM to 4:00 PM during working days within the
period specified in Section III. Each set of documents consists of the
following:
a. Guidelines and Procedures: Second

Prequalification and Public Bidding of the MHC
Privatization
b. Confidential Information Memorandum: The Manila
Hotel Corporation
c. Letter of Invitation. to the Prequalification and

Bidding Conference
xxx xxx xxx
4. PREQUALIFICATION AND BIDDING CONFERENCE
A prequalification and bidding conference will be held at The Manila

Hotel on the date specified in Section III to allow the Applicant to seek
clarifications and further information regarding the guidelines and
procedures. Only those who purchased the prequalification
documents will be allowed in this conference. Attendance to this
conference is strongly advised, although the Applicant will not be
penalized if it does not attend.
5. SUBMISSION OF PREQUALIFICATION DOCUMENTS
The applicant should submit 5 sets of the prequalification documents

(1 original set plus 4 copies) at the Registration Office between 9:00
AM to 4:00 PM during working days within the period specified in
Section III.
F. PREQUALIFICATION PROCESS
1. The Applicant will be evaluated by the PBAC with

the assistance of the TEC based on the Information
Package and other information available to the PBAC.
2. If the Applicant is a Consortium/Joint Venture, the

evaluation will consider the overall qualifications of
the group, taking into account the contribution of each
member to the venture.
3. The decision of the PBAC with respect to the

results of the PBAC evaluation will be final.
4. The Applicant shall be evaluated according to the

criteria set forth below:
a. Business management expertise,

track record, and experience
b. Financial capability.
c. Feasibility and acceptability of the

proposed strategic plan for the Manila
Hotel
5. The PBAC will shortlist such number of Applicants as it may deem
appropriate.
6. The parties that prequalified in the first MHC public bidding ITT
Sheraton, Marriot International Inc., Renaissance Hotels International
Inc., consortium of RCBC Capital/Ritz Carlton may participate in
the Public Bidding without having to undergo the prequalification
process again.
G. SHORTLIST OF QUALIFIED BIDDERS
1. A notice of prequalification results containing the shortlist of

Qualified Bidders will be posted at the Registration Office at the date
specified in Section III.
2. In the case of a Consortium/Joint Venture, the withdrawal by

member whose qualification was a material consideration for being
included in the shortlist is ground for disqualification of the Applicant.
V. GUIDELINES FOR THE PUBLIC BIDDING
A. PARTIES WHO MAY PARTICIPATE IN THE PUBLIC BIDDING
All parties in the shortlist of Qualified Bidders will be eligible to

participate in the Public Bidding.
B. BLOCK OF SHARES
A range of Nine Million (9,000,000) to Fifteen Million Three Hundred

Thousand (15,300,000) shares of stock representing Thirty Percent to
Fifty-One Percent (30%-51%) of the issued and outstanding shares of
MHC, will be offered in the Public Bidding by the GSIS. The Qualified
Bidders will have the Option of determining the number of shares
within the range to bid for. The range is intended to attract bidders
with different preferences and objectives for the operation and
management of The Manila Hotel.
C. MINIMUM BID REQUIRED ON A PRICE PER SHARE BASIS
1. Bids will be evaluated on a price per share basis. The minimum bid
required on a price per share basis for the Block of Shares is Thirty-
Six Pesos and Sixty-Seven Centavos (P36.67).
2. Bids should be in the Philippine currency payable to the GSIS.
3. Bids submitted with an equivalent price per share below the

minimum required will not considered.
D. TRANSFER COSTS
xxx xxx xxx

E. OFFICIAL BID FORM
1. Bids must be contained in the prescribed Official Bid Form, a copy

of which is attached as Annex IV. The Official Bid Form must be
properly accomplished in all details; improper accomplishment may
be a sufficient basis for disqualification.
2. During the Public Bidding, the Qualified Bidder will submit the
Official Bid Form, which will indicate the offered purchase price, in a
sealed envelope marked "OFFICIAL BID."
F. SUPPORTING DOCUMENTS
During the Public Bidding, the following documents should be

submitted along with the bid in a separate envelop marked
"SUPPORTING DOCUMENTS":
1. WRITTEN AUTHORITY TO BID (UNDER OATH).
If the Qualified Bidder is a corporation, the representative of the

Qualified Bidder should submit a Board resolution which adequately
authorizes such representative to bid for and in behalf of the
corporation with full authority to perform such acts necessary or
requisite to bind the Qualified Bidder.
If the Qualified Bidder is a Consortium/Joint Venture, each member of

the Consortium/Joint venture should submit a Board resolution
authorizing one of its members and such member's representative to
make the bid on behalf of the group with full authority to perform such
acts necessary or requisite to bind the Qualified Bidder.
2. BID SECURITY
a. The Qualified Bidder should deposit Thirty-Three Million Pesos

(P33,000,00), in Philippine currency as Bid Security in the form of:
i. Manager's check or unconditional demand draft

payable to the "Government Service Insurance
System" and issued by a reputable banking institution
duly licensed to do business in the Philippines and
acceptable to GSIS; or
ii. Standby-by letter of credit issued by a reputable

banking institution acceptable to the GSIS.
b. The GSIS will reject a bid if:
i. The bid does not have Bid Security; or
ii. The Bid Security accompanying the bid is for less

than the required amount.
c. If the Bid Security is in the form of a manager's check or
unconditional demand draft, the interest earned on the Bid Security
will be for the account of GSIS.
d. If the Qualified Bidder becomes the winning Bidder/Strategic

Partner, the Bid Security will be applied as the downpayment on the
Qualified Bidder's offered purchase price.
e. The Bid Security of the Qualified Bidder will be returned

immediately after the Public Bidding if the Qualified Bidder is not
declared the Highest Bidder.
f. The Bid Security will be returned by October 23, 1995 if the Highest
Bidder is unable to negotiate and execute with GSIS/MHC the
Management Contract, International Marketing/Reservation System
Contract or other types of contract specified by the Highest Bidder in
its strategic plan for The Manila Hotel.
g. The Bid Security of the Highest Bidder will be forfeited in favor of

GSIS if the Highest Bidder, after negotiating and executing the
Contract specified by the Highest Bidder or other types of contract in
its strategic plan for The Manila Hotel, fails or refuses to:
i. Execute the Stock Purchase and Sale Agreement

with GSIS not later than October 23, 1995; or
ii. Pay the full amount of the offered purchase price

not later than October 23, 1995; or
iii. Consummate the sale of the Block of Shares for

any other reason.
G. SUBMISSION OF BIDS
1. The Public Bidding will be held on September 7, 1995 at the

following location:
New GSIS Headquarters Building

Financial Center, Reclamation Area
Roxas Boulevard, Pasay City, Metro Manila.
2. The Secretariat of the PBAC will be stationed at the Public Bidding

to accept any and all bids and supporting requirements.
Representatives from the Commission on Audit and COP will be
invited to witness the proceedings.
3. The Qualified Bidder should submit its bid using the Official Bid
Form. The accomplished Official Bid Form should be submitted in a
4. The Qualified Bidder should submit the following documents
in another sealed envelope marked "SUPPORTING BID
DOCUMENTS"
a. Written Authority Bid
b. Bid Security
5. The two sealed envelopes marked "OFFICIAL BID" and

"SUPPORTING BID DOCUMENTS" must be submitted
simultaneously to the Secretariat between 9:00 AM and 2:00 PM,
Philippine Standard Time, on the date of the Public Bidding. No bid
shall be accepted after the closing time. Opened or tampered bids
shall not be accepted.
6. The Secretariat will log and record the actual time of submission of
the two sealed envelopes. The actual time of submission will also be
indicated by the Secretariat on the face of the two envelopes.
7. After Step No. 6, the two sealed envelopes will be dropped in the
corresponding bid boxes provided for the purpose. These boxes will
be in full view of the invited public.
H. OPENING AND READING OF BIDS
1. After the closing time of 2:00 PM on the date of the Public Bidding,
the PBAC will open all sealed envelopes marked "SUPPORTING BID
DOCUMENTS" for screening, evaluation and acceptance. Those who
submitted incomplete/insufficient documents or document/s which
is/are not substantially in the form required by PBAC will be
disqualified. The envelope containing their Official Bid Form will be
immediately returned to the disqualified bidders.
2. The sealed envelopes marked "OFFICIAL BID" will be opened at

3:00 PM. The name of the bidder and the amount of its bid price will
be read publicly as the envelopes are opened.
3. Immediately following the reading of the bids, the PBAC will

formally announce the highest bid and the Highest Bidder.
4. The highest bid will be, determined on a price per share basis. In
the event of a tie wherein two or more bids have the same equivalent
price per share, priority will be given to the bidder seeking the larger
ownership interest in MHC.
5. The Public Bidding will be declared a failed bidding in case:
a. No single bid is submitted within the prescribed

period; or
b. There is only one (1) bid that is submitted and
acceptable to the PBAC.

GSIS/MHC
1. The Highest Bidder must comply with the conditions set forth below
by October 23, 1995 or the Highest Bidder will lose the right to
purchase the Block of Shares and GSIS will instead offer the Block of
Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute

with GSIS/MHC the Management Contract,
International Marketing Reservation System Contract
or other type of contract specified by the Highest
Bidder in its strategic plan for The Manila Hotel. If the
Highest Bidder is intending to provide only financial
support to The Manila Hotel, a separate institution
may enter into the aforementioned contract/s with
GSIS/MHC.
b. The Highest Bidder must execute the Stock

Purchase and Sale Agreement with GSIS, a copy of
which will be distributed to each of the Qualified
Bidder after the prequalification process is completed.
2. In the event that the Highest Bidder chooses a Management

Contract for The Manila Hotel, the maximum levels for the
management fee structure that GSIS/MHC are prepared to accept in
the Management Contract are as follows:
a. Basic management fee: Maximum of 2.5% of gross

revenues.(1)
b. Incentive fee: Maximum of 8.0% of gross operating

profit(1) after deducting undistributed overhead
expenses and the basic management fee.
c. Fixed component of the international

marketing/reservation system fee: Maximum of 2.0%
of gross room revenues.(1) The Applicant should
indicate in its Information Package if it is wishes to
charge this fee.
Note (1): As defined in the uniform system of account for hotels.
The GSIS/MHC have indicated above the acceptable parameters for

the hotel management fees to facilitate the negotiations with the
Highest Bidder for the Management Contract after the Public Bidding.
A Qualified Bidder envisioning a Management Contract for The
Manila Hotel should determine whether or not the management fee
structure above is acceptable before submitting their prequalification
documents to GSIS.
J. BLOCK SALE TO THE OTHER QUALIFIED BIDDERS
1. If for any reason, the Highest Bidder cannot be awarded the Block
of Shares, GSIS may offer this to the other Qualified Bidders that
have validly submitted bids provided that these Qualified are willing to
match the highest bid in terms of price per share.
2. The order of priority among the interested Qualified Bidders will be

in accordance wit the equivalent price per share of their respective
bids in their public Bidding, i.e., first and second priority will be given
to the Qualified Bidders that submitted the second and third highest
bids on the price per share basis, respectively, and so on.

PARTNER
The Highest Bidder will be declared the Winning Bidder/Strategic

Partner after the following conditions are met:
a. Execution of the necessary contract with

GSIS/MHC not later than October 23, 1995; and
b. Requisite approvals from the GSIS/MHC and

COP/OGCC are obtained.
I. FULL PAYMENT FOR THE BLOCK OF SHARES
1. Upon execution of the necessary contracts with GSIS/MHC, the

Winning Bidder/Strategic Partner must fully pay, not later than
October 23, 1995, the offered purchase price for the Block of Shares
after deducting the Bid Security applied as downpayment.
2. All payments should be made in the form of a Manager's Check or

unconditional Demand Draft, payable to the "Government Service
Insurance System," issued by a reputable banking institution licensed
to do business in the Philippines and acceptable to GSIS.
M. GENERAL CONDITIONS
1. The GSIS unconditionally reserves the right to reject any or all

applications, waive any formality therein, or accept such application
as maybe considered most advantageous to the GSIS. The GSIS
similarly reserves the right to require the submission of any additional
information from the Applicant as the PBAC may deem necessary.
2. The GSIS further reserves the right to call off the Public Bidding
prior to acceptance of the bids and call for a new public bidding under
amended rules, and without any liability whatsoever to any or all the
Qualified Bidders, except the obligation to return the Bid Security.
3. The GSIS reserves the right to reset the date of the

prequalification/bidding conference, the deadline for the submission
of the prequalification documents, the date of the Public Bidding or
other pertinent activities at least three (3) calendar days prior to the
respective deadlines/target dates.
4. The GSIS sells only whatever rights, interest and participation it

has on the Block of Shares.
5. All documents and materials submitted by the Qualified Bidders,

except the Bid Security, may be returned upon request.
6. The decision of the PBAC/GSIS on the results of the Public

Bidding is final. The Qualified Bidders, by participating in the Public
Bidding, are deemed to have agreed to accept and abide by these
results.
7. The GSIS will be held free and harmless form any liability, suit or
allegation arising out of the Public Bidding by the Qualified Bidders
who have participated in the Public Bidding.3
The second public bidding was held on September 18, 1995. Petitioner bidded P41.00 per share for
15,300,000 shares and Renong Berhad bidded P44.00 per share also for 15,300,000 shares. The
GSIS declared Renong Berhad the highest bidder and immediately returned petitioner's bid security.
On September 28, 1995, ten days after the bidding, petitioner wrote to GSIS offering to match the
bid price of Renong Berhad. It requested that the award be made to itself citing the second
paragraph of Section 10, Article XII of the Constitution. It sent a manager's check for thirty-three
million pesos (P33,000,000.00) as bid security.
Respondent GSIS, then in the process of negotiating with Renong Berhad the terms and conditions
of the contract and technical agreements in the operation of the hotel, refused to entertain
petitioner's request.
Hence, petitioner filed the present petition. We issued a temporary restraining order on October 18,
1995.
Petitioner anchors its plea on the second paragraph of Article XII, Section 10 of the Constitution4 on
the "National Economy and Patrimony" which provides:
xxx xxx xxx
xxx xxx xxx

The vital issues can be summed up as follows:
(1) Whether section 10, paragraph 2 of Article XII of the Constitution is a self-
executing provision and does not need implementing legislation to carry it into effect;
(2) Assuming section 10 paragraph 2 of Article XII is self-executing whether the

controlling shares of the Manila Hotel Corporation form part of our patrimony as a
nation;
(3) Whether GSIS is included in the term "State," hence, mandated to implement
section 10, paragraph 2 of Article XII of the Constitution;
(4) Assuming GSIS is part of the State, whether it failed to give preference to
petitioner, a qualified Filipino corporation, over and above Renong Berhad, a foreign
corporation, in the sale of the controlling shares of the Manila Hotel Corporation;
(5) Whether petitioner is estopped from questioning the sale of the shares to Renong
Berhad, a foreign corporation.
Anent the first issue, it is now familiar learning that a Constitution provides the guiding policies and
principles upon which is built the substantial foundation and general framework of the law and
government.5 As a rule, its provisions are deemed self-executing and can be enforced without further
legislative action.6 Some of its provisions, however, can be implemented only through appropriate
laws enacted by the Legislature, hence not self-executing.
To determine whether a particular provision of a Constitution is self-executing is a hard row to hoe.

The key lies on the intent of the framers of the fundamental law oftentimes submerged in its
language. A searching inquiry should be made to find out if the provision is intended as a present
enactment, complete in itself as a definitive law, or if it needs future legislation for completion and
enforcement.7 The inquiry demands a micro-analysis of the text and the context of the provision in
question.8
Courts as a rule consider the provisions of the Constitution as self-executing,9 rather than as
requiring future legislation for their enforcement. 10 The reason is not difficult to discern. For if they
are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign
people can be easily ignored and nullified by Congress. 11 Suffused with wisdom of the ages is the
unyielding rule that legislative actions may give breath to constitutional rights but congressional in
action should not suffocate them. 12
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and
seizures, 13the rights of a person under custodial investigation, 14 the rights of an accused, 15 and the
privilege against self-incrimination, 16 It is recognize a that legislation is unnecessary to enable courts
to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the
protection of property. 17 The same treatment is accorded to constitutional provisions forbidding the
taking or damaging of property for public use without just compensation.18
Contrariwise, case law lays down the rule that a constitutional provision is not self-executing where it
merely announces a policy and its language empowers the Legislature to prescribe the means by
which the policy shall be carried into effect. 19 Accordingly, we have held that the provisions in Article
II of our Constitution entitled "Declaration of Principles and State Policies" should generally be
construed as mere statements of principles of the State. 20 We have also ruled that some provisions
of Article XIII on "Social Justice and Human Rights," 21 and Article XIV on "Education Science and
Technology, Arts, Culture end Sports" 22 cannot be the basis of judicially enforceable rights. Their
enforcement is addressed to the discretion of Congress though they provide the framework for
legislation 23 to effectuate their policy content. 24
Guided by this map of settled jurisprudence, we now consider whether Section 10, Article XII of the
1987 Constitution is self-executing or not. It reads:
Sec. 10. The Congress shall, upon recommendation of the economic and planning
agency, when the national interest dictates, reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital is owned by
such citizens, or such higher percentage as Congress may prescribe, certain areas
of investments. The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.
national jurisdiction and in accordance with its national goals and priorities.
The first paragraph directs Congress to reserve certain areas of investments in the
country 25 to Filipino citizens or to corporations sixty per
cent 26 of whose capital stock is owned by Filipinos. It further commands Congress to enact
laws that will encourage the formation and operation of one hundred percent Filipino-owned
enterprises. In checkered contrast, the second paragraph orders the entire State to give
preference to qualified Filipinos in the grant of rights and privileges covering the national
economy and patrimony. The third paragraph also directs the State to regulate foreign
investments in line with our national goals and well-set priorities.
The first paragraph of Section 10 is not self-executing. By its express text, there is a
categorical command for Congress to enact laws restricting foreign ownership in certain
areas of investments in the country and to encourage the formation and operation of wholly-
owned Filipino enterprises. The right granted by the provision is clearly still in esse.
Congress has to breathe life to the right by means of legislation. Parenthetically, this
paragraph was plucked from section 3, Article XIV of the 1973 Constitution. 27 The provision
in the 1973 Constitution affirmed our ruling in the landmark case of Lao Ichong
v. Hernandez, 28where we upheld the discretionary authority of Congress to Filipinize certain
areas of investments. 29 By reenacting the 1973 provision, the first paragraph of section 10
affirmed the power of Congress to nationalize certain areas of investments in favor of
Filipinos.
The second and third paragraphs of Section 10 are different. They are directed to the State and not
to Congress alone which is but one of the three great branches of our government. Their coverage is
also broader for they cover "the national economy and patrimony" and "foreign investments within
[the] national jurisdiction" and not merely "certain areas of investments." Beyond debate, they cannot
be read as granting Congress the exclusive power to implement by law the policy of giving
preference to qualified Filipinos in the conferral of rights and privileges covering our national
economy and patrimony. Their language does not suggest that any of the State agency or
instrumentality has the privilege to hedge or to refuse its implementation for any reason whatsoever.
Their duty to implement is unconditional and it is now. The second and the third paragraphs of
Section 10, Article XII are thus self-executing.
This submission is strengthened by Article II of the Constitution entitled "Declaration of Principles
and State Policies." Its Section 19 provides that "[T]he State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos." It engrafts the all-important Filipino
First policy in our fundamental law and by the use of the mandatory word "shall," directs its
enforcement by the whole State without any pause or a half- pause in time.
The second issue is whether the sale of a majority of the stocks of the Manila Hotel Corporation
involves the disposition of part of our national patrimony. The records of the Constitutional
Commission show that the Commissioners entertained the same view as to its meaning. According
to Commissioner Nolledo, "patrimony" refers not only to our rich natural resources but also to the
cultural heritage of our race. 30 By this yardstick, the sale of Manila Hotel falls within the coverage of
the constitutional provision giving preferential treatment to qualified Filipinos in the grant of rights
involving our national patrimony. The unique value of the Manila Hotel to our history and culture
cannot be viewed with a myopic eye. The value of the hotel goes beyond pesos and centavos. As
chronicled by Beth Day Romulo, 31 the hotel first opened on July 4, 1912 as a first-class hotel built by
the American Insular Government for Americans living in, or passing through, Manila while traveling
to the Orient. Indigenous materials and Filipino craftsmanship were utilized in its construction, For
sometime, it was exclusively used by American and Caucasian travelers and served as the "official
guesthouse" of the American Insular Government for visiting foreign dignitaries. Filipinos began
coming to the Hotel as guests during the Commonwealth period. When the Japanese occupied
Manila, it served as military headquarters and lodging for the highest-ranking officers from Tokyo. It
was at the Hotel and the Intramuros that the Japanese made their last stand during the Liberation of
Manila. After the war, the Hotel again served foreign guests and Filipinos alike. Presidents and
kings, premiers and potentates, as well as glamorous international film and sports celebrities were
housed in the Hotel. It was also the situs of international conventions and conferences. In the local
scene, it was the venue of historic meetings, parties and conventions of political parties. The Hotel
has reaped and continues reaping numerous recognitions and awards from international hotel and
travel award-giving bodies, a fitting acknowledgment of Filipino talent and ingenuity. These are
judicially cognizable facts which cannot be bent by a biased mind.
The Hotel may not, as yet, have been declared a national cultural treasure pursuant to Republic Act
No. 4846 but that does not exclude it from our national patrimony. Republic Act No. 4846, "The
Cultural Properties Preservation and Protection Act," merely provides a procedure whereby a
particular cultural property may be classified a "national cultural treasure" or an "important cultural
property. 32 Approved on June 18, 1966 and amended by P.D. 374 in 1974, the law is limited in its
reach and cannot be read as the exclusive law implementing section 10, Article XII of the 1987
Constitution. To be sure, the law does not equate cultural treasure and cultural property as
synonymous to the phrase "patrimony of the nation."
The third issue is whether the constitutional command to the State includes the respondent GSIS. A
look at its charter will reveal that GSIS is a government-owned and controlled corporation that
administers funds that come from the monthly contributions of government employees and the
government. 33 The funds are held in trust for a distinct purpose which cannot be disposed of
indifferently. 34 They are to be used to finance the retirement, disability and life insurance benefits of
the employees and the administrative and operational expenses of the GSIS, 35 Excess funds,
however, are allowed to be invested in business and other ventures for the benefit of the
employees.36 It is thus contended that the GSIS investment in the Manila Hotel Corporation is a
simple business venture, hence, an act beyond the contemplation of section 10, paragraph 2 of
Article XII of the Constitution.
The submission is unimpressive. The GSIS is not a pure private corporation. It is essentially a public
corporation created by Congress and granted an original charter to serve a public purpose. It is
subject to the jurisdictions of the Civil Service Commission 37 and the Commission on Audit. 38 As
state-owned and controlled corporation, it is skin-bound to adhere to the policies spelled out in the
general welfare of the people. One of these policies is the Filipino First policy which the people
elevated as a constitutional command.
The fourth issue demands that we look at the content of phrase "qualified Filipinos" and their
"preferential right." The Constitution desisted from defining their contents. This is as it ought to be for
a Constitution only lays down flexible policies and principles which can bent to meet today's manifest
needs and tomorrow's unmanifested demands. Only a constitution strung with elasticity can grow as
a living constitution.
Thus, during the deliberations in the Constitutional Commission, Commissioner Nolledo to define the
phrase brushed aside a suggestion to define the phrase "qualified Filipinos." He explained that
present and prospective "laws" will take care of the problem of its interpretation, viz:
xxx xxx xxx
THE PRESIDENT. What is the suggestion of

Commissioner Rodrigo? Is it to remove the word
"QUALIFIED?"
MR. RODRIGO. No, no, but say definitely "TO

QUALIFIED FILIPINOS" as against whom? As
against aliens over aliens?
MR. NOLLEDO. Madam President, I think that is

understood. We use the word "QUALIFIED" because
the existing laws or the prospective laws will always
lay down conditions under which business map be
done, for example, qualifications on capital,
qualifications on the setting up of other financial
structures, et cetera.
MR. NOLLEDO Yes.
MR. RODRIGO. If we say, "PREFERENCE TO

QUALIFIED FILIPINOS," it can be understood as
giving preference to qualified Filipinos as against
Filipinos who are not qualified.
MR. NOLLEDO. Madam President, that was the

intention of the proponents. The committee has
accepted the amendment.
xxx xxx xxx
As previously discussed, the constitutional command to enforce the Filipino First policy is
addressed to the State and not to Congress alone. Hence, the word "laws" should not be
understood as limited to legislations but all state actions which include applicable rules and
regulations adopted by agencies and instrumentalities of the State in the exercise of their
rule-making power. In the case at bar, the bidding rules and regulations set forth the
standards to measure the qualifications of bidders Filipinos and foreigners alike. It is not
seriously disputed that petitioner qualified to bid as did Renong Berhad. 39
Thus, we come to the critical issue of the degree of preference which GSIS should have accorded
petitioner, a qualified Filipino, over Renong Berhad, a foreigner, in the purchase of the controlling
shares of the Manila Hotel. Petitioner claims that after losing the bid, this right of preference gives it
a second chance to match the highest bid of Renong Berhad.
With due respect, I cannot sustain petitioner's submission. I prescind from the premise that the
second paragraph of section 10, Article XII of the Constitution is pro-Pilipino but not anti-alien. It is
pro-Filipino for it gives preference to Filipinos. It is not, however, anti-alien per se for it does not
absolutely bar aliens in the grant of rights, privileges and concessions covering the national
economy and patrimony. Indeed, in the absence of qualified Filipinos, the State is not prohibited
from granting these rights, privileges and concessions to foreigners if the act will promote the weal of
the nation.
In implementing the policy articulated in section 10, Article XII of the Constitution, the stellar task of
our State policy-makers is to maintain a creative tension between two desiderata first, the need to
develop our economy and patrimony with the help of foreigners if necessary, and, second, the need
to keep our economy controlled by Filipinos. Rightfully, the framers of the Constitution did not define
the degree of the right of preference to be given to qualified Filipinos. They knew that for the right to
serve the general welfare, it must have a malleable content that can be adjusted by our policy-
makers to meet the changing needs of our people. In fine, the right of preference of qualified
Filipinos is to be determined by degree as time dictates and circumstances warrant. The lesser the
need for alien assistance, the greater the degree of the right of preference can be given to Filipinos
and vice verse.
Again, it should be stressed that the right and the duty to determine the degree of this privilege at
any given time is addressed to the entire State. While under our constitutional scheme, the right
primarily belongs to Congress as the lawmaking department of our government, other branches of
government, and all their agencies and instrumentalities, share the power to enforce this state
policy. Within the limits of their authority, they can act or promulgate rules and regulations defining
the degree of this right of preference in cases where they have to make grants involving the national
economy and judicial duty. On the other hand, our duty is to strike down acts of the state that violate
the policy.
To date, Congress has not enacted a law defining the degree of the preferential right. Consequently,
we must turn to the rules and regulations of on respondents Committee Privatization and GSIS to
determine the degree of preference that petitioner is entitled to as a qualified Filipino in the subject
sale. A tearless look at the rules and regulations will show that they are silent on the degree of
preferential right to be accorded qualified Filipino bidder. Despite their silence, however, they cannot
be read to mean that they do not grant any degree of preference to petitioner for paragraph 2,
section 10, Article XII of the Constitution is deemed part of said rules and regulations. Pursuant to
legal hermeneutics which demand that we interpret rules to save them from unconstitutionality, I
submit that the right of preference of petitioner arises only if it tied the bid of Benong Berhad. In that
instance, all things stand equal, and bidder, as a qualified Pilipino bidder, should be preferred.
It is with deep regret that I cannot subscribe to the view that petitioner has a right to match the bid of
Renong Berhad. Petitioner's submission must be supported by the rules but even if we examine the
rules inside-out .thousand times, they can not justify the claimed right. Under the rules, the right to
match the highest bid arises only "if for any reason, the highest bidder cannot be awarded block of
shares . . ." No reason has arisen that will prevent the award to Renong Berhad. It qualified as
bidder. It complied with the procedure of bidding. It tendered the highest bid. It was declared as the
highest bidder by the GSIS and the rules say this decision is final. It deserves the award as a matter
of right for the rules clearly did not give to the petitioner as a qualified Filipino privilege to match the
higher bid of a foreigner. What the rules did not grant, petitioner cannot demand. Our symphaties
may be with petitioner but the court has no power to extend the latitude and longtitude of the right of
preference as defined by the rules. The parameters of the right of preference depend on galaxy of
facts and factors whose determination belongs to the province of the policy-making branches and
agencies of the State. We are duty-bound to respect that determination even if we differ with the
wisdom of their judgment. The right they grant may be little but we must uphold the grant for as long
as the right of preference is not denied. It is only when a State action amounts to a denial of the right
that the Court can come in and strike down the denial as unconstitutional.
Finally, I submit that petitioner is estopped from assailing the winning bid of Renong Berhad.
Petitioner was aware of the rules and regulations of the bidding. It knew that the rules and
regulations do not provide that a qualified Filipino bidder can match the winning bid submitting an
inferior bid. It knew that the bid was open to foreigners and that foreigners qualified even during the
first bidding. Petitioner cannot be allowed to repudiate the rules which it agreed to respect. It cannot
be allowed to obey the rules when it wins and disregard them when it loses. If sustained, petitioners'
stance will wreak havoc on he essence of bidding. Our laws, rules and regulations require highest
bidding to raise as much funds as possible for the government to maximize its capacity to deliver
essential services to our people. This is a duty that must be discharged by Filipinos and foreigners
participating in a bidding contest and the rules are carefully written to attain this objective. Among
others, bidders are prequalified to insure their financial capability. The bidding is secret and the bids
are sealed to prevent collusion among the parties. This objective will be undermined if we grant
petitioner that privilege to know the winning bid and a chance to match it. For plainly, a second
chance to bid will encourage a bidder not to strive to give the highest bid in the first bidding.
We support the Filipino First policy without any reservation. The visionary nationalist Don Claro M.
Recto has warned us that the greatest tragedy that can befall a Filipino is to be an alien in his own
land. The Constitution has embodied Recto's counsel as a state policy. But while the Filipino First
policy requires that we incline to a Filipino, it does not demand that we wrong an alien. Our policy
makers can write laws and rules giving favored treatment to the Filipino but we are not free to be
unfair to a foreigner after writing the laws and the rules. After the laws are written, they must be
obeyed as written, by Filipinos and foreigners alike. The equal protection clause of the Constitution
protects all against unfairness. We can be pro-Filipino without unfairness to foreigner.
I vote to dismiss the petition.
Narvasa, C.J., and Melo, J., concur.
PANGANIBAN, J., dissenting:
I regret I cannot join the majority. To the incisive Dissenting Opinion of Mr. Justice Reynato S. Puno,
may I just add
1. The majority contends the Constitution should be interpreted to mean that, after a bidding process
is concluded, the losing Filipino bidder should be given the right to equal the highest foreign bid, and
thus to win. However, the Constitution [Sec. 10 (2), Art. XII] simply states that "in the grant of rights .
. . covering the national economy and patrimony, the State shall give preference to qualified
Filipinos." The majority concedes that there is no law defining the extent or degree of such
preference. Specifically, no statute empowers a losing Filipino bidder to increase his bid and equal
that of the winning foreigner. In the absence of such empowering law, the majority's strained
interpretation, I respectfully submit constitutes unadulterated judicial legislation, which makes
bidding a ridiculous sham where no Filipino can lose and where no foreigner can win. Only in the
Philippines!.
2. Aside from being prohibited by the Constitution, such judicial is short-sighted and, viewed
properly, gravely prejudicial to long-term Filipino interest. It encourages other countries in the
guise of reverse comity or worse, unabashed retaliation to discriminate against us in their own
jurisdictions by authorizing their own nationals to similarly equal and defeat the higher bids of Filipino
enterprises solely, while on the other hand, allowing similar bids of other foreigners to remain
unchallenged by their nationals. The majority's thesis will thus marginalize Filipinos as pariahs in the
global marketplace with absolute no chance of winning any bidding outside our country. Even
authoritarian regimes and hermit kingdoms have long ago found out unfairness, greed and isolation
are self-defeating and in the long-term, self-destructing.
The moral lesson here is simple: Do not do unto other what you dont want other to do unto you.
3. In the absence of a law specifying the degree or extent of the "Filipino First" policy of the
Constitution, the constitutional preference for the "qualified Filipinos" may be allowed only where all
the bids are equal. In this manner, we put the Filipino ahead without self-destructing him and without
being unfair to the foreigner.
In short, the Constitution mandates a victory for the qualified Filipino only when the scores are tied.
But not when the ballgame is over and the foreigner clearly posted the highest score.
Separate Opinions
PADILLA, J., concurring:
I concur with the ponencia of Mr. Justice Bellosillo. At the same time, I would like to expound a bit
more on the concept of national patrimony as including within its scope and meaning institutions
such as the Manila Hotel.
It is argued by petitioner that the Manila Hotel comes under "national patrimony" over which qualified
Filipinos have the preference, in ownership and operation. The Constitutional provision on point
states:
xxx xxx xxx
patrimony, the State shall Give preference to qualified Filipinos.1
Petitioner's argument, I believe, is well taken. Under the 1987 Constitution, "national patrimony"
consists of the natural resources provided by Almighty God (Preamble) in our territory (Article I)
consisting of land, sea, and air.2study of the 1935 Constitution, where the concept of "national
patrimony" originated, would show that its framers decided to adopt the even more comprehensive
expression "Patrimony of the Nation" in the belief that the phrase encircles a concept embracing not
only their natural resources of the country but practically everything that belongs to the Filipino
people, the tangible and the material as well as the intangible and the spiritual assets and
possessions of the people. It is to be noted that the framers did not stop with conservation. They
knew that conservation alone does not spell progress; and that this may be achieved only through
development as a correlative factor to assure to the people not only the exclusive ownership, but
also the exclusive benefits of their national patrimony).3
Moreover, the concept of national patrimony has been viewed as referring not only to our rich natural
resources but also to the cultural heritage of our
race.4
There is no doubt in my mind that the Manila Hotel is very much a part of our national patrimony
and, as such, deserves constitutional protection as to who shall own it and benefit from its operation.
This institution has played an important role in our nation's history, having been the venue of many a
historical event, and serving as it did, and as it does, as the Philippine Guest House for visiting
foreign heads of state, dignitaries, celebrities, and others.5
It is therefore our duty to protect and preserve it for future generations of Filipinos. As President
Manuel L. Quezon once said, we must exploit the natural resources of our country, but we should do
so with. an eye to the welfare of the future generations. In other words, the leaders of today are the
trustees of the patrimony of our race. To preserve our national patrimony and reserve it for Filipinos
was the intent of the distinguished gentlemen who first framed our Constitution. Thus, in debating
the need for nationalization of our lands and natural resources, one expounded that we should "put
more teeth into our laws, and; not make the nationalization of our lands and natural resources a
subject of ordinary legislation but of constitutional enactment"6 To quote further: "Let not our children
be mere tenants and trespassers in their own country. Let us preserve and bequeath to them what is
rightfully theirs, free from all foreign liens and encumbrances".7
Now, a word on preference. In my view "preference to qualified Filipinos", to be meaningful, must

refer not only to things that are peripheral, collateral, or tangential. It must touch and affect the very
"heart of the existing order." In the field of public bidding in the acquisition of things that pertain to the
national patrimony, preference to qualified Filipinos must allow a qualified Filipino to match or equal
the higher bid of a non-Filipino; the preference shall not operate only when the bids of the qualified
Filipino and the non-Filipino are equal in which case, the award should undisputedly be made to the
qualified Filipino. The Constitutional preference should give the qualified Filipino an opportunity to
match or equal the higher bid of the non-Filipino bidder if the preference of the qualified Filipino
bidder is to be significant at all.
It is true that in this present age of globalization of attitude towards foreign investments in our
country, stress is on the elimination of barriers to foreign trade and investment in the country. While
government agencies, including the courts should re-condition their thinking to such a trend, and
make it easy and even attractive for foreign investors to come to our shores, yet we should not
preclude ourselves from reserving to us Filipinos certain areas where our national identity, culture
and heritage are involved. In the hotel industry, for instance, foreign investors have established
themselves creditably, such as in the Shangri-La, the Nikko, the Peninsula, and Mandarin Hotels.
This should not stop us from retaining 51% of the capital stock of the Manila Hotel Corporation in the
hands of Filipinos. This would be in keeping with the intent of the Filipino people to preserve our
national patrimony, including our historical and cultural heritage in the hands of Filipinos.
VITUG, J., concurring:

I agree with Mr. Justice Josue N. Bellosillo on his clear-cut statements, shared by Mr. Justice
Reynato S. Puno in a well written separate (dissenting) opinion, that:
First, the provision in our fundamental law which provides that "(I)n the grant of rights, privileges, and
qualified Filipinos"1 is self-executory. The provision verily does not need, although it can obviously be
amplified or regulated by, an enabling law or a set of rules.
Second, the term "patrimony" does not merely refer to the country's natural resources but also to its
cultural heritage. A "historical landmark," to use the words of Mr. Justice Justo P. Torres, Jr., Manila
Hotel has now indeed become part of Philippine heritage.
Third, the act of the Government Service Insurance System ("GSIS"), a government entity which
derives its authority from the State, in selling 51% of its share in MHC should be considered an act
of the State subject to the Constitutional mandate.
On the pivotal issue of the degree of "preference to qualified Filipinos," I find it somewhat difficult to
take the same path traversed by the forceful reasoning of Justice Puno. In the particular case before
us, the only meaningful preference, it seems, would really be to allow the qualified Filipino to match
the foreign bid for, as a particular matter, I cannot see any bid that literally calls for millions of dollars
to be at par (to the last cent) with another. The magnitude of the magnitude of the bids is such that it
becomes hardly possible for the competing bids to stand exactly "equal" which alone, under the
dissenting view, could trigger the right of preference.
It is most unfortunate that Renong Berhad has not been spared this great disappointment, a letdown
that it did not deserve, by a simple and timely advise of the proper rules of bidding along with the
peculiar constitutional implications of the proposed transaction. It is also regrettable that the Court at
time is seen, to instead, be the refuge for bureaucratic inadequate which create the perception that it
even takes on non-justiciable controversies.
All told, I am constrained to vote for granting the petition.
MENDOZA, J., concurring in the judgment:
I take the view that in the context of the present controversy the only way to enforce the
constitutional mandate that "[i]n the grant of rights, privileges and concessions covering the national
patrimony the State shall give preference to qualified Filipinos"1 is to allow petitioner Philippine
corporation to equal the bid of the Malaysian firm Renong Berhad for the purchase of the controlling
shares of stocks in the Manila Hotel Corporation. Indeed, it is the only way a qualified Filipino of
Philippine corporation can be given preference in the enjoyment of a right, privilege or concession
given by the State, by favoring it over a foreign national corporation.
Under the rules on public bidding of the Government Service and Insurance System, if petitioner and
the Malaysian firm had offered the same price per share, "priority [would be given] to the bidder
seeking the larger ownership interest in MHC,"2 so that petitioner bid for more shares, it would be
preferred to the Malaysian corporation for that reason and not because it is a Philippine corporation.
Consequently, it is only in cases like the present one, where an alien corporation is the highest
bidder, that preferential treatment of the Philippine corporation is mandated not by declaring it winner
but by allowing it "to match the highest bid in terms of price per share" before it is awarded the
shares of stocks.3 That, to me, is what "preference to qualified Filipinos" means in the context of this
case by favoring Filipinos whenever they are at a disadvantage vis-a-vis foreigners.
This was the meaning given in Co Chiong v. Cuaderno4 to a 1947 statute giving "preference to
Filipino citizens in the lease of public market stalls."5 This Court upheld the cancellation of existing
leases covering market stalls occupied by persons who were not Filipinos and the award thereafter
of the stalls to qualified Filipino vendors as ordered by the Department of Finance. Similarly,
in Vda. de Salgado v. De la Fuente,6 this Court sustained the validity of a municipal ordinance
passed pursuant to the statute (R.A. No. 37), terminating existing leases of public market stalls and
granting preference to Filipino citizens in the issuance of new licenses for the occupancy of the
stalls. In Chua Lao v. Raymundo,7 the preference granted under the statute was held to apply to
cases in which Filipino vendors sought the same stalls occupied by alien vendors in the public
markets even if there were available other stalls as good as those occupied by aliens. "The law,
apparently, is applicable whenever there is a conflict of interest between Filipino applicants and
aliens for lease of stalls in public markets, in which situation the right to preference immediately
arises."8
Our legislation on the matter thus antedated by a quarter of a century efforts began only in the 1970s
in America to realize the promise of equality, through affirmative action and reverse discrimination
programs designed to remedy past discrimination against colored people in such areas as
employment, contracting and licensing.9Indeed, in vital areas of our national economy, there are
situations in which the only way to place Filipinos in control of the national economy as contemplated
in the Constitution 10 is to give them preferential treatment where they can at least stand on equal
footing with aliens.
There need be no fear that thus preferring Filipinos would either invite foreign retaliation or deprive
the country of the benefit of foreign capital or know-how. We are dealing here not with common
trades of common means of livelihood which are open to aliens in our midst, 11 but with the sale of
government property, which is like the grant of government largess of benefits and concessions
covering the national economy" and therefore no one should begrudge us if we give preferential
treatment to our citizens. That at any rate is the command of the Constitution. For the Manila Hotel is
a business owned by the Government. It is being privatized. Privatization should result in the
relinquishment of the business in favor of private individuals and groups who are Filipino citizens, not
in favor of aliens.
Nor should there be any doubt that by awarding the shares of stocks to petitioner we would be
trading competence and capability for nationalism. Both petitioner and the Malaysian firm are
qualified, having hurdled the prequalification process. 12 It is only the result of the public bidding that
is sought to be modified by enabling petitioner to up its bid to equal the highest bid.
Nor, finally, is there any basis for the suggestion that to allow a Filipino bidder to match the highest
bid of an alien could encourage speculation, since all that a Filipino entity would then do would be
not to make a bid or make only a token one and, after it is known that a foreign bidder has submitted
the highest bid, make an offer matching that of the foreign firm. This is not possible under the rules
on public bidding of the GSIS. Under these rules there is a minimum bid required (P36.87 per share
for a range of 9 to 15 million shares). 13 Bids below the minimum will not be considered. On the other
hand, if the Filipino entity, after passing the prequalification process, does not submit a bid, he will
not be allowed to match the highest bid of the foreign firm because this is a privilege allowed only to
those who have "validly submitted bids." 14 The suggestion is, to say the least, fanciful and has no
basis in fact.
For the foregoing reasons, I vote to grant the petition.
TORRES, JR., J., separate opinion:

Constancy in law is not an attribute of a judicious mind. I say this as we are not confronted in the
case at bar with legal and constitutional issues and yet I am driven so to speak on the side of
history. The reason perhaps is due to the belief that in the words of Justice Oliver Wendell Holmes,
Jr., a "page of history is worth a volume of logic."
I will, however, attempt to share my thoughts on whether the Manila Hotel has a historical and
cultural aspect within the meaning of the constitution and thus, forming part of the "patrimony of the
nation".
Section 10, Article XII of the 1987 Constitution provides:
xxx xxx xxx
national goals and priorities.
The foregoing provisions should be read in conjunction with Article II of the same Constitution
pertaining to "Declaration of Principles and State Policies" which ordain
The State shall develop a self-reliant and independent national economy effectively
by Filipinos. (Sec. 19).
Interestingly, the matter of giving preference to "qualified Filipinos" was one of the highlights in the
1987 Constitution Commission proceedings thus:
xxx xxx xxx
MR. NOLLEDO. The Amendment will read: "IN THE

GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL
ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS".
And the word "Filipinos" here, as intended by the
proponents, will include not only individual Filipinos
but also Filipino-Controlled entities fully controlled by
Filipinos (Vol. III, Records of the Constitutional
Commission, p. 608).
MR. MONSOD. We also wanted to add, as

Commissioner Villegas said, this committee and this
body already approved what is known as the Filipino
First policy which was suggested by Commissioner de
Castro. So that it is now in our Constitution (Vol. IV,
Records of the Constitutional Commission, p. 225).
Commissioner Jose Nolledo explaining the provision adverted to above, said:

MR. NOLLEDO. In the grant of rights, privileges and
concessions covering the national economy and
patrimony, the State shall give preference to qualified
Filipinos.
MR. FOZ. In connection with that amendment, if a

foreign enterprise is qualified and the Filipinos
enterprise is also qualified, will the Filipino enterprise
still be given a preference?
MR. FOZ. If the foreigner is more qualified in some

aspects than the Filipino enterprise, will the Filipino
still be preferred:?
MR. NOLLEDO. The answer is "yes". (Vol. III, p. 616,

Records of the Constitutional Commission).
The nationalistic provisions of the 1987 Constitution reflect the history and spirit of the Malolos
Constitution of 1898, the 1935 Constitution and the 1973 Constitutions. That we have no reneged on
this nationalist policy is articulated in one of the earliest case, this Court said
The nationalistic tendency is manifested in various provisions of the Constitution. . . .

It cannot therefore be said that a law imbued with the same purpose and spirit
underlying many of the provisions of the Constitution is unreasonable, invalid or
unconstitutional (Ichong, et al. vs. Hernandez, et al., 101 Phil. 1155).
I subscribe to the view that history, culture, heritage, and traditions are not legislated and is the
product of events, customs, usages and practices. It is actually a product of growth and acceptance
by the collective mores of a race. It is the spirit and soul of a people.
The Manila Hotel is part of our history, culture and heritage. Every inch of the Manila Hotel is witness
to historic events (too numerous to mention) which shaped our history for almost 84 years.
As I intimated earlier, it is not my position in this opinion, to examine the single instances of the legal
largese which have given rise to this controversy. As I believe that has been exhaustively discussed
in the ponencia. Suffice it to say at this point that the history of the Manila Hotel should not be placed
in the auction block of a purely business transaction, where profits subverts the cherished historical
values of our people.
As a historical landmark in this "Pearl of the Orient Seas", it has its enviable tradition which, in the
words of the philosopher Salvador de Madarriaga tradition is "more of a river than a stone, it keeps
flowing, and one must view the flowing , and one must view the flow of both directions. If you look
towards the hill from which the river flows, you see tradition in the form of forceful currents that push
the river or people towards the future, and if you look the other way, you progress."
Indeed, tradition and progress are the same, for progress depends on the kind of tradition. Let us not
jettison the tradition of the Manila Hotel and thereby repeat our colonial history.
I grant, of course the men of the law can see the same subject in different lights.
I remember, however, a Spanish proverb which says "He is always right who suspects that he
makes mistakes". On this note, I say that if I have to make a mistake, I would rather err upholding
the belief that the Filipino be first under his Constitution and in his own land.
I vote GRANT the petition.
PUNO, J., dissenting:
This is a. petition for prohibition and mandamus filed by the Manila Prince Hotel Corporation, a
domestic corporation, to stop the Government Service Insurance System (GSIS) from selling the
controlling shares of the Manila Hotel Corporation to a foreign corporation. Allegedly, the sale
violates the second paragraph of section 10, Article XII of the Constitution.
Respondent GSIS is a government-owned and controlled corporation. It is the sole owner of the
Manila Hotel which it operates through its subsidiary, the Manila Hotel Corporation. Manila Hotel was
included in the privatization program of the government. In 1995, GSIS proposed to sell to interested
buyers 30% to 51% of its shares, ranging from 9,000,000 to 15,300,000 shares, in the Manila Hotel
Corporation. After the absence of bids at the first public bidding, the block of shares offered for sale
was increased from a maximum of 30% to 51%. Also, the winning bidder, or the eventual "strategic
partner" of the GSIS was required to "provide management expertise and/or an international
marketing/reservation system, and financial support to strengthen the profitability and performance
of the Manila Hotel"1 The proposal was approved by respondent Committee on Privatization.
In July 1995, a conference was held where prequalification documents and the bidding rules were
furnished interested parties. Petitioner Manila Prince Hotel, a domestic corporation, and Renong
Berhad, Malaysian firm with ITT Sheraton as operator, prequalified.2
The bidding rules and procedures entitled "Guidelines and Procedures: Second Prequalification and
Public Bidding of the MHC Privatization" provide:
I INTRODUCTION AND HIGHLIGHTS
DETERMINING THE WINNING BIDDER/STRATEGIC PARTNER
The party that accomplishes the steps set forth below will be declared the Winning
Bidder/Strategic Partner and will be awarded the Block of Shares:
First Pass the prequalification process;
Second Submit the highest bid on a price per share basis for the Block of Shares;
Third Negotiate and execute the necessary contracts with GSIS/MHC not later
than October 23, 1995;
xxx xxx xxx
IV GUIDELINES FOR PREQUALIFICATION
A. PARTIES WHO MAP APPLY FOR PREQUALIFICATION

The Winning Bidder/Strategic Partner will be expected to provide
management expertise and/or an international marketing reservation
system, and financial support to strengthen the profitability and
performance of The Manila Hotel. In this context, the GSIS is inviting
to the prequalification process any local and/or foreign corporation,
consortium/joint venture or juridical entity with at least one of the
following qualifications:
a. Proven management .expertise in the hotel

industry; or
b. Significant equity ownership (i.e. board

representation) in another hotel company; or
c. Overall management and marketing expertise to

successfully operate the Manila Hotel.
Parties interested in bidding for MHC should be able to provide

access to the requisite management expertise and/or international
marketing/reservation system for The Manila Hotel.
xxx xxx xxx
D. PREQUALIFICATION DOCUMENTS
xxx xxx xxx
E. APPLICATION PROCEDURE
1. DOCUMENTS AVAILABLE AT THE REGISTRATION OFFICE
The prequalification documents can be secured at the Registration

Office between 9:00 AM to 4:00 PM during working days within the
period specified in Section III. Each set of documents consists of the
following:
a. Guidelines and Procedures: Second

Prequalification and Public Bidding of the MHC
Privatization
b. Confidential Information Memorandum: The Manila

Hotel Corporation
c. Letter of Invitation. to the Prequalification and

Bidding Conference
xxx xxx xxx
4. PREQUALIFICATION AND BIDDING CONFERENCE

A prequalification and bidding conference will be held at The Manila
Hotel on the date specified in Section III to allow the Applicant to seek
clarifications and further information regarding the guidelines and
procedures. Only those who purchased the prequalification
documents will be allowed in this conference. Attendance to this
conference is strongly advised, although the Applicant will not be
penalized if it does not attend.
5. SUBMISSION OF PREQUALIFICATION DOCUMENTS
The applicant should submit 5 sets of the prequalification documents

(1 original set plus 4 copies) at the Registration Office between 9:00
AM to 4:00 PM during working days within the period specified in
Section III.
F. PREQUALIFICATION PROCESS
1. The Applicant will be evaluated by the PBAC with

the assistance of the TEC based on the Information
Package and other information available to the PBAC.
2. If the Applicant is a Consortium/Joint Venture, the

evaluation will consider the overall qualifications of
the group, taking into account the contribution of each
member to the venture.
3. The decision of the PBAC with respect to the

results of the PBAC evaluation will be final.
4. The Applicant shall be evaluated according to the

criteria set forth below:
a. Business management expertise,

track record, and experience
b. Financial capability.
c. Feasibility and acceptability of the

proposed strategic plan for the Manila
Hotel
5. The PBAC will shortlist such number of Applicants as it may deem

appropriate.
6. The parties that prequalified in the first MHC public bidding ITT
Sheraton, Marriot International Inc., Renaissance Hotels International
Inc., consortium of RCBC Capital/Ritz Carlton may participate in
the Public Bidding without having to undergo the prequalification
process again.
G. SHORTLIST OF QUALIFIED BIDDERS

1. A notice of prequalification results containing the shortlist of
Qualified Bidders will be posted at the Registration Office at the date
specified in Section III.
2. In the case of a Consortium/Joint Venture, the withdrawal by

member whose qualification was a material consideration for being
included in the shortlist is ground for disqualification of the Applicant.
V. GUIDELINES FOR THE PUBLIC BIDDING
A. PARTIES WHO MAY PARTICIPATE IN THE PUBLIC BIDDING
All parties in the shortlist of Qualified Bidders will be eligible to

participate in the Public Bidding.
B. BLOCK OF SHARES
A range of Nine Million (9,000,000) to Fifteen Million Three Hundred

Thousand (15,300,000) shares of stock representing Thirty Percent to
Fifty-One Percent (30%-51%) of the issued and outstanding shares of
MHC, will be offered in the Public Bidding by the GSIS. The Qualified
Bidders will have the Option of determining the number of shares
within the range to bid for. The range is intended to attract bidders
with different preferences and objectives for the operation and
management of The Manila Hotel.
C. MINIMUM BID REQUIRED ON A PRICE PER SHARE BASIS
1. Bids will be evaluated on a price per share basis. The minimum bid
required on a price per share basis for the Block of Shares is Thirty-
Six Pesos and Sixty-Seven Centavos (P36.67).
2. Bids should be in the Philippine currency payable to the GSIS.
3. Bids submitted with an equivalent price per share below the

minimum required will not considered.
D. TRANSFER COSTS
xxx xxx xxx
E. OFFICIAL BID FORM
1. Bids must be contained in the prescribed Official Bid Form, a copy

of which is attached as Annex IV. The Official Bid Form must be
properly accomplished in all details; improper accomplishment may
be a sufficient basis for disqualification.
2. During the Public Bidding, the Qualified Bidder will submit the
Official Bid Form, which will indicate the offered purchase price, in a
F. SUPPORTING DOCUMENTS
During the Public Bidding, the following documents should be

submitted along with the bid in a separate envelop marked
"SUPPORTING DOCUMENTS":
1. WRITTEN AUTHORITY TO BID (UNDER OATH).
If the Qualified Bidder is a corporation, the representative of the

Qualified Bidder should submit a Board resolution which adequately
authorizes such representative to bid for and in behalf of the
corporation with full authority to perform such acts necessary or
requisite to bind the Qualified Bidder.
If the Qualified Bidder is a Consortium/Joint Venture, each member of

the Consortium/Joint venture should submit a Board resolution
authorizing one of its members and such member's representative to
make the bid on behalf of the group with full authority to perform such
acts necessary or requisite to bind the Qualified Bidder.
2. BID SECURITY
a. The Qualified Bidder should deposit Thirty-Three Million Pesos

(P33,000,00), in Philippine currency as Bid Security in the form of:
i. Manager's check or unconditional demand draft

payable to the "Government Service Insurance
System" and issued by a reputable banking institution
duly licensed to do business in the Philippines and
acceptable to GSIS; or
ii. Standby-by letter of credit issued by a reputable

banking institution acceptable to the GSIS.
b. The GSIS will reject a bid if:
i. The bid does not have Bid Security; or
ii. The Bid Security accompanying the bid is for less

than the required amount.
c. If the Bid Security is in the form of a manager's check or

unconditional demand draft, the interest earned on the Bid Security
will be for the account of GSIS.
d. If the Qualified Bidder becomes the winning Bidder/Strategic

Partner, the Bid Security will be applied as the downpayment on the
Qualified Bidder's offered purchase price.
e. The Bid Security of the Qualified Bidder will be returned
immediately after the Public Bidding if the Qualified Bidder is not
declared the Highest Bidder.
f. The Bid Security will be returned by October 23, 1995 if the Highest
Bidder is unable to negotiate and execute with GSIS/MHC the
Contract or other types of contract specified by the Highest Bidder in
its strategic plan for The Manila Hotel.
g. The Bid Security of the Highest Bidder will be forfeited in favor of

GSIS if the Highest Bidder, after negotiating and executing the
Contract specified by the Highest Bidder or other types of contract in
its strategic plan for The Manila Hotel, fails or refuses to:
i. Execute the Stock Purchase and Sale Agreement

with GSIS not later than October 23, 1995; or
ii. Pay the full amount of the offered purchase price

not later than October 23, 1995; or
iii. Consummate the sale of the Block of Shares for

any other reason.
G. SUBMISSION OF BIDS
1. The Public Bidding will be held on September 7, 1995 at the

following location:
New GSIS Headquarters Building

Financial Center, Reclamation Area
Roxas Boulevard, Pasay City, Metro Manila.
2. The Secretariat of the PBAC will be stationed at the Public Bidding

to accept any and all bids and supporting requirements.
Representatives from the Commission on Audit and COP will be
invited to witness the proceedings.
3. The Qualified Bidder should submit its bid using the Official Bid
Form. The accomplished Official Bid Form should be submitted in a
4. The Qualified Bidder should submit the following documents

in another sealed envelope marked "SUPPORTING BID
DOCUMENTS"
a. Written Authority Bid
b. Bid Security
5. The two sealed envelopes marked "OFFICIAL BID" and
"SUPPORTING BID DOCUMENTS" must be submitted
simultaneously to the Secretariat between 9:00 AM and 2:00 PM,
Philippine Standard Time, on the date of the Public Bidding. No bid
shall be accepted after the closing time. Opened or tampered bids
shall not be accepted.
6. The Secretariat will log and record the actual time of submission of
the two sealed envelopes. The actual time of submission will also be
indicated by the Secretariat on the face of the two envelopes.
7. After Step No. 6, the two sealed envelopes will be dropped in the
corresponding bid boxes provided for the purpose. These boxes will
be in full view of the invited public.
H. OPENING AND READING OF BIDS
1. After the closing time of 2:00 PM on the date of the Public Bidding,
the PBAC will open all sealed envelopes marked "SUPPORTING BID
DOCUMENTS" for screening, evaluation and acceptance. Those who
submitted incomplete/insufficient documents or document/s which
is/are not substantially in the form required by PBAC will be
disqualified. The envelope containing their Official Bid Form will be
immediately returned to the disqualified bidders.
2. The sealed envelopes marked "OFFICIAL BID" will be opened at

3:00 PM. The name of the bidder and the amount of its bid price will
be read publicly as the envelopes are opened.
3. Immediately following the reading of the bids, the PBAC will

formally announce the highest bid and the Highest Bidder.
4. The highest bid will be, determined on a price per share basis. In
the event of a tie wherein two or more bids have the same equivalent
price per share, priority will be given to the bidder seeking the larger
ownership interest in MHC.
5. The Public Bidding will be declared a failed bidding in case:
a. No single bid is submitted within the prescribed

period; or
b. There is only one (1) bid that is submitted and

acceptable to the PBAC.

GSIS/MHC
1. The Highest Bidder must comply with the conditions set forth below
by October 23, 1995 or the Highest Bidder will lose the right to
purchase the Block of Shares and GSIS will instead offer the Block of
Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute

with GSIS/MHC the Management Contract,
International Marketing Reservation System Contract
or other type of contract specified by the Highest
Bidder in its strategic plan for The Manila Hotel. If the
Highest Bidder is intending to provide only financial
support to The Manila Hotel, a separate institution
may enter into the aforementioned contract/s with
GSIS/MHC.
b. The Highest Bidder must execute the Stock

Purchase and Sale Agreement with GSIS, a copy of
which will be distributed to each of the Qualified
Bidder after the prequalification process is completed.
2. In the event that the Highest Bidder chooses a Management

Contract for The Manila Hotel, the maximum levels for the
management fee structure that GSIS/MHC are prepared to accept in
the Management Contract are as follows:
a. Basic management fee: Maximum of 2.5% of gross

revenues.(1)
b. Incentive fee: Maximum of 8.0% of gross operating

profit(1) after deducting undistributed overhead
expenses and the basic management fee.
c. Fixed component of the international

marketing/reservation system fee: Maximum of 2.0%
of gross room revenues.(1) The Applicant should
indicate in its Information Package if it is wishes to
charge this fee.
Note (1): As defined in the uniform system of account for hotels.
The GSIS/MHC have indicated above the acceptable parameters for

the hotel management fees to facilitate the negotiations with the
Highest Bidder for the Management Contract after the Public Bidding.
A Qualified Bidder envisioning a Management Contract for The

Manila Hotel should determine whether or not the management fee
structure above is acceptable before submitting their prequalification
documents to GSIS.
J. BLOCK SALE TO THE OTHER QUALIFIED BIDDERS
1. If for any reason, the Highest Bidder cannot be awarded the Block
of Shares, GSIS may offer this to the other Qualified Bidders that
have validly submitted bids provided that these Qualified are willing to
match the highest bid in terms of price per share.
2. The order of priority among the interested Qualified Bidders will be

in accordance wit the equivalent price per share of their respective
bids in their public Bidding, i.e., first and second priority will be given
to the Qualified Bidders that submitted the second and third highest
bids on the price per share basis, respectively, and so on.

PARTNER
The Highest Bidder will be declared the Winning Bidder/Strategic

Partner after the following conditions are met:
a. Execution of the necessary contract with

GSIS/MHC not later than October 23, 1995; and
b. Requisite approvals from the GSIS/MHC and

COP/OGCC are obtained.
I. FULL PAYMENT FOR THE BLOCK OF SHARES
1. Upon execution of the necessary contracts with GSIS/MHC, the

Winning Bidder/Strategic Partner must fully pay, not later than
October 23, 1995, the offered purchase price for the Block of Shares
after deducting the Bid Security applied as downpayment.
2. All payments should be made in the form of a Manager's Check or

unconditional Demand Draft, payable to the "Government Service
Insurance System," issued by a reputable banking institution licensed
to do business in the Philippines and acceptable to GSIS.
M. GENERAL CONDITIONS
1. The GSIS unconditionally reserves the right to reject any or all

applications, waive any formality therein, or accept such application
as maybe considered most advantageous to the GSIS. The GSIS
similarly reserves the right to require the submission of any additional
information from the Applicant as the PBAC may deem necessary.
2. The GSIS further reserves the right to call off the Public Bidding
prior to acceptance of the bids and call for a new public bidding under
amended rules, and without any liability whatsoever to any or all the
Qualified Bidders, except the obligation to return the Bid Security.
3. The GSIS reserves the right to reset the date of the

prequalification/bidding conference, the deadline for the submission
of the prequalification documents, the date of the Public Bidding or
other pertinent activities at least three (3) calendar days prior to the
respective deadlines/target dates.
4. The GSIS sells only whatever rights, interest and participation it
has on the Block of Shares.
5. All documents and materials submitted by the Qualified Bidders,

except the Bid Security, may be returned upon request.
6. The decision of the PBAC/GSIS on the results of the Public

Bidding is final. The Qualified Bidders, by participating in the Public
Bidding, are deemed to have agreed to accept and abide by these
results.
7. The GSIS will be held free and harmless form any liability, suit or
allegation arising out of the Public Bidding by the Qualified Bidders
who have participated in the Public Bidding.3
The second public bidding was held on September 18, 1995. Petitioner bidded P41.00 per share for
15,300,000 shares and Renong Berhad bidded P44.00 per share also for 15,300,000 shares. The
GSIS declared Renong Berhad the highest bidder and immediately returned petitioner's bid security.
On September 28, 1995, ten days after the bidding, petitioner wrote to GSIS offering to match the
bid price of Renong Berhad. It requested that the award be made to itself citing the second
paragraph of Section 10, Article XII of the Constitution. It sent a manager's check for thirty-three
million pesos (P33,000,000.00) as bid security.
Respondent GSIS, then in the process of negotiating with Renong Berhad the terms and conditions
of the contract and technical agreements in the operation of the hotel, refused to entertain
petitioner's request.
Hence, petitioner filed the present petition. We issued a temporary restraining order on October 18,
1995.
Petitioner anchors its plea on the second paragraph of Article XII, Section 10 of the Constitution4 on
the "National Economy and Patrimony" which provides:
xxx xxx xxx
xxx xxx xxx
The vital issues can be summed up as follows:
(1) Whether section 10, paragraph 2 of Article XII of the Constitution is a self-
executing provision and does not need implementing legislation to carry it into effect;
(2) Assuming section 10 paragraph 2 of Article XII is self-executing whether the

controlling shares of the Manila Hotel Corporation form part of our patrimony as a
nation;
(3) Whether GSIS is included in the term "State," hence, mandated to implement
section 10, paragraph 2 of Article XII of the Constitution;
(4) Assuming GSIS is part of the State, whether it failed to give preference to
petitioner, a qualified Filipino corporation, over and above Renong Berhad, a foreign
corporation, in the sale of the controlling shares of the Manila Hotel Corporation;
(5) Whether petitioner is estopped from questioning the sale of the shares to Renong
Berhad, a foreign corporation.
Anent the first issue, it is now familiar learning that a Constitution provides the guiding policies and
principles upon which is built the substantial foundation and general framework of the law and
government.5 As a rule, its provisions are deemed self-executing and can be enforced without further
legislative action.6 Some of its provisions, however, can be implemented only through appropriate
laws enacted by the Legislature, hence not self-executing.
To determine whether a particular provision of a Constitution is self-executing is a hard row to hoe.

The key lies on the intent of the framers of the fundamental law oftentimes submerged in its
language. A searching inquiry should be made to find out if the provision is intended as a present
enactment, complete in itself as a definitive law, or if it needs future legislation for completion and
enforcement.7 The inquiry demands a micro-analysis of the text and the context of the provision in
question.8
Courts as a rule consider the provisions of the Constitution as self-executing,9 rather than as
requiring future legislation for their enforcement. 10 The reason is not difficult to discern. For if they
are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign
people can be easily ignored and nullified by Congress. 11 Suffused with wisdom of the ages is the
unyielding rule that legislative actions may give breath to constitutional rights but congressional in
action should not suffocate them. 12
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and
seizures, 13the rights of a person under custodial investigation, 14 the rights of an accused, 15 and the
privilege against self-incrimination, 16 It is recognize a that legislation is unnecessary to enable courts
to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the
protection of property. 17 The same treatment is accorded to constitutional provisions forbidding the
taking or damaging of property for public use without just compensation.18
Contrariwise, case law lays down the rule that a constitutional provision is not self-executing where it
merely announces a policy and its language empowers the Legislature to prescribe the means by
which the policy shall be carried into effect. 19 Accordingly, we have held that the provisions in Article
II of our Constitution entitled "Declaration of Principles and State Policies" should generally be
construed as mere statements of principles of the State. 20 We have also ruled that some provisions
of Article XIII on "Social Justice and Human Rights," 21 and Article XIV on "Education Science and
Technology, Arts, Culture end Sports" 22 cannot be the basis of judicially enforceable rights. Their
enforcement is addressed to the discretion of Congress though they provide the framework for
legislation 23 to effectuate their policy content. 24
Guided by this map of settled jurisprudence, we now consider whether Section 10, Article XII of the
1987 Constitution is self-executing or not. It reads:
Sec. 10. The Congress shall, upon recommendation of the economic and planning
agency, when the national interest dictates, reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital is owned by
such citizens, or such higher percentage as Congress may prescribe, certain areas
of investments. The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.
national jurisdiction and in accordance with its national goals and priorities.
The first paragraph directs Congress to reserve certain areas of investments in the
country 25 to Filipino citizens or to corporations sixty per
cent 26 of whose capital stock is owned by Filipinos. It further commands Congress to enact
laws that will encourage the formation and operation of one hundred percent Filipino-owned
enterprises. In checkered contrast, the second paragraph orders the entire State to give
preference to qualified Filipinos in the grant of rights and privileges covering the national
economy and patrimony. The third paragraph also directs the State to regulate foreign
investments in line with our national goals and well-set priorities.
The first paragraph of Section 10 is not self-executing. By its express text, there is a
categorical command for Congress to enact laws restricting foreign ownership in certain
areas of investments in the country and to encourage the formation and operation of wholly-
owned Filipino enterprises. The right granted by the provision is clearly still in esse.
Congress has to breathe life to the right by means of legislation. Parenthetically, this
paragraph was plucked from section 3, Article XIV of the 1973 Constitution. 27 The provision
in the 1973 Constitution affirmed our ruling in the landmark case of Lao Ichong
v. Hernandez, 28where we upheld the discretionary authority of Congress to Filipinize certain
areas of investments. 29 By reenacting the 1973 provision, the first paragraph of section 10
affirmed the power of Congress to nationalize certain areas of investments in favor of
Filipinos.
The second and third paragraphs of Section 10 are different. They are directed to the State and not
to Congress alone which is but one of the three great branches of our government. Their coverage is
also broader for they cover "the national economy and patrimony" and "foreign investments within
[the] national jurisdiction" and not merely "certain areas of investments." Beyond debate, they cannot
be read as granting Congress the exclusive power to implement by law the policy of giving
preference to qualified Filipinos in the conferral of rights and privileges covering our national
economy and patrimony. Their language does not suggest that any of the State agency or
instrumentality has the privilege to hedge or to refuse its implementation for any reason whatsoever.
Their duty to implement is unconditional and it is now. The second and the third paragraphs of
Section 10, Article XII are thus self-executing.
This submission is strengthened by Article II of the Constitution entitled "Declaration of Principles

and State Policies." Its Section 19 provides that "[T]he State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos." It engrafts the all-important Filipino
First policy in our fundamental law and by the use of the mandatory word "shall," directs its
enforcement by the whole State without any pause or a half- pause in time.
The second issue is whether the sale of a majority of the stocks of the Manila Hotel Corporation
involves the disposition of part of our national patrimony. The records of the Constitutional
Commission show that the Commissioners entertained the same view as to its meaning. According
to Commissioner Nolledo, "patrimony" refers not only to our rich natural resources but also to the
cultural heritage of our race. 30 By this yardstick, the sale of Manila Hotel falls within the coverage of
the constitutional provision giving preferential treatment to qualified Filipinos in the grant of rights
involving our national patrimony. The unique value of the Manila Hotel to our history and culture
cannot be viewed with a myopic eye. The value of the hotel goes beyond pesos and centavos. As
chronicled by Beth Day Romulo, 31 the hotel first opened on July 4, 1912 as a first-class hotel built by
the American Insular Government for Americans living in, or passing through, Manila while traveling
to the Orient. Indigenous materials and Filipino craftsmanship were utilized in its construction, For
sometime, it was exclusively used by American and Caucasian travelers and served as the "official
guesthouse" of the American Insular Government for visiting foreign dignitaries. Filipinos began
coming to the Hotel as guests during the Commonwealth period. When the Japanese occupied
Manila, it served as military headquarters and lodging for the highest-ranking officers from Tokyo. It
was at the Hotel and the Intramuros that the Japanese made their last stand during the Liberation of
Manila. After the war, the Hotel again served foreign guests and Filipinos alike. Presidents and
kings, premiers and potentates, as well as glamorous international film and sports celebrities were
housed in the Hotel. It was also the situs of international conventions and conferences. In the local
scene, it was the venue of historic meetings, parties and conventions of political parties. The Hotel
has reaped and continues reaping numerous recognitions and awards from international hotel and
travel award-giving bodies, a fitting acknowledgment of Filipino talent and ingenuity. These are
judicially cognizable facts which cannot be bent by a biased mind.
The Hotel may not, as yet, have been declared a national cultural treasure pursuant to Republic Act
No. 4846 but that does not exclude it from our national patrimony. Republic Act No. 4846, "The
Cultural Properties Preservation and Protection Act," merely provides a procedure whereby a
particular cultural property may be classified a "national cultural treasure" or an "important cultural
property. 32 Approved on June 18, 1966 and amended by P.D. 374 in 1974, the law is limited in its
reach and cannot be read as the exclusive law implementing section 10, Article XII of the 1987
Constitution. To be sure, the law does not equate cultural treasure and cultural property as
synonymous to the phrase "patrimony of the nation."
The third issue is whether the constitutional command to the State includes the respondent GSIS. A
look at its charter will reveal that GSIS is a government-owned and controlled corporation that
administers funds that come from the monthly contributions of government employees and the
government. 33 The funds are held in trust for a distinct purpose which cannot be disposed of
indifferently. 34 They are to be used to finance the retirement, disability and life insurance benefits of
the employees and the administrative and operational expenses of the GSIS, 35 Excess funds,
however, are allowed to be invested in business and other ventures for the benefit of the
employees.36 It is thus contended that the GSIS investment in the Manila Hotel Corporation is a
simple business venture, hence, an act beyond the contemplation of section 10, paragraph 2 of
Article XII of the Constitution.
The submission is unimpressive. The GSIS is not a pure private corporation. It is essentially a public
corporation created by Congress and granted an original charter to serve a public purpose. It is
subject to the jurisdictions of the Civil Service Commission 37 and the Commission on Audit. 38 As
state-owned and controlled corporation, it is skin-bound to adhere to the policies spelled out in the
general welfare of the people. One of these policies is the Filipino First policy which the people
elevated as a constitutional command.
The fourth issue demands that we look at the content of phrase "qualified Filipinos" and their
"preferential right." The Constitution desisted from defining their contents. This is as it ought to be for
a Constitution only lays down flexible policies and principles which can bent to meet today's manifest
needs and tomorrow's unmanifested demands. Only a constitution strung with elasticity can grow as
a living constitution.
Thus, during the deliberations in the Constitutional Commission, Commissioner Nolledo to define the
phrase brushed aside a suggestion to define the phrase "qualified Filipinos." He explained that
present and prospective "laws" will take care of the problem of its interpretation, viz:
xxx xxx xxx
THE PRESIDENT. What is the suggestion of

Commissioner Rodrigo? Is it to remove the word
"QUALIFIED?"
MR. RODRIGO. No, no, but say definitely "TO

QUALIFIED FILIPINOS" as against whom? As
against aliens over aliens?
MR. NOLLEDO. Madam President, I think that is

understood. We use the word "QUALIFIED" because
the existing laws or the prospective laws will always
lay down conditions under which business map be
done, for example, qualifications on capital,
qualifications on the setting up of other financial
structures, et cetera.
MR. NOLLEDO Yes.
MR. RODRIGO. If we say, "PREFERENCE TO

QUALIFIED FILIPINOS," it can be understood as
giving preference to qualified Filipinos as against
Filipinos who are not qualified.
MR. NOLLEDO. Madam President, that was the

intention of the proponents. The committee has
accepted the amendment.
xxx xxx xxx
As previously discussed, the constitutional command to enforce the Filipino First policy is
addressed to the State and not to Congress alone. Hence, the word "laws" should not be
understood as limited to legislations but all state actions which include applicable rules and
regulations adopted by agencies and instrumentalities of the State in the exercise of their
rule-making power. In the case at bar, the bidding rules and regulations set forth the
standards to measure the qualifications of bidders Filipinos and foreigners alike. It is not
seriously disputed that petitioner qualified to bid as did Renong Berhad. 39
Thus, we come to the critical issue of the degree of preference which GSIS should have accorded
petitioner, a qualified Filipino, over Renong Berhad, a foreigner, in the purchase of the controlling
shares of the Manila Hotel. Petitioner claims that after losing the bid, this right of preference gives it
a second chance to match the highest bid of Renong Berhad.
With due respect, I cannot sustain petitioner's submission. I prescind from the premise that the
second paragraph of section 10, Article XII of the Constitution is pro-Pilipino but not anti-alien. It is
pro-Filipino for it gives preference to Filipinos. It is not, however, anti-alien per se for it does not
absolutely bar aliens in the grant of rights, privileges and concessions covering the national
economy and patrimony. Indeed, in the absence of qualified Filipinos, the State is not prohibited
from granting these rights, privileges and concessions to foreigners if the act will promote the weal of
the nation.
In implementing the policy articulated in section 10, Article XII of the Constitution, the stellar task of
our State policy-makers is to maintain a creative tension between two desiderata first, the need to
develop our economy and patrimony with the help of foreigners if necessary, and, second, the need
to keep our economy controlled by Filipinos. Rightfully, the framers of the Constitution did not define
the degree of the right of preference to be given to qualified Filipinos. They knew that for the right to
serve the general welfare, it must have a malleable content that can be adjusted by our policy-
makers to meet the changing needs of our people. In fine, the right of preference of qualified
Filipinos is to be determined by degree as time dictates and circumstances warrant. The lesser the
need for alien assistance, the greater the degree of the right of preference can be given to Filipinos
and vice verse.
Again, it should be stressed that the right and the duty to determine the degree of this privilege at
any given time is addressed to the entire State. While under our constitutional scheme, the right
primarily belongs to Congress as the lawmaking department of our government, other branches of
government, and all their agencies and instrumentalities, share the power to enforce this state
policy. Within the limits of their authority, they can act or promulgate rules and regulations defining
the degree of this right of preference in cases where they have to make grants involving the national
economy and judicial duty. On the other hand, our duty is to strike down acts of the state that violate
the policy.
To date, Congress has not enacted a law defining the degree of the preferential right. Consequently,
we must turn to the rules and regulations of on respondents Committee Privatization and GSIS to
determine the degree of preference that petitioner is entitled to as a qualified Filipino in the subject
sale. A tearless look at the rules and regulations will show that they are silent on the degree of
preferential right to be accorded qualified Filipino bidder. Despite their silence, however, they cannot
be read to mean that they do not grant any degree of preference to petitioner for paragraph 2,
section 10, Article XII of the Constitution is deemed part of said rules and regulations. Pursuant to
legal hermeneutics which demand that we interpret rules to save them from unconstitutionality, I
submit that the right of preference of petitioner arises only if it tied the bid of Benong Berhad. In that
instance, all things stand equal, and bidder, as a qualified Pilipino bidder, should be preferred.
It is with deep regret that I cannot subscribe to the view that petitioner has a right to match the bid of
Renong Berhad. Petitioner's submission must be supported by the rules but even if we examine the
rules inside-out .thousand times, they can not justify the claimed right. Under the rules, the right to
match the highest bid arises only "if for any reason, the highest bidder cannot be awarded block of
shares . . ." No reason has arisen that will prevent the award to Renong Berhad. It qualified as
bidder. It complied with the procedure of bidding. It tendered the highest bid. It was declared as the
highest bidder by the GSIS and the rules say this decision is final. It deserves the award as a matter
of right for the rules clearly did not give to the petitioner as a qualified Filipino privilege to match the
higher bid of a foreigner. What the rules did not grant, petitioner cannot demand. Our symphaties
may be with petitioner but the court has no power to extend the latitude and longtitude of the right of
preference as defined by the rules. The parameters of the right of preference depend on galaxy of
facts and factors whose determination belongs to the province of the policy-making branches and
agencies of the State. We are duty-bound to respect that determination even if we differ with the
wisdom of their judgment. The right they grant may be little but we must uphold the grant for as long
as the right of preference is not denied. It is only when a State action amounts to a denial of the right
that the Court can come in and strike down the denial as unconstitutional.
Finally, I submit that petitioner is estopped from assailing the winning bid of Renong Berhad.
Petitioner was aware of the rules and regulations of the bidding. It knew that the rules and
regulations do not provide that a qualified Filipino bidder can match the winning bid submitting an
inferior bid. It knew that the bid was open to foreigners and that foreigners qualified even during the
first bidding. Petitioner cannot be allowed to repudiate the rules which it agreed to respect. It cannot
be allowed to obey the rules when it wins and disregard them when it loses. If sustained, petitioners'
stance will wreak havoc on he essence of bidding. Our laws, rules and regulations require highest
bidding to raise as much funds as possible for the government to maximize its capacity to deliver
essential services to our people. This is a duty that must be discharged by Filipinos and foreigners
participating in a bidding contest and the rules are carefully written to attain this objective. Among
others, bidders are prequalified to insure their financial capability. The bidding is secret and the bids
are sealed to prevent collusion among the parties. This objective will be undermined if we grant
petitioner that privilege to know the winning bid and a chance to match it. For plainly, a second
chance to bid will encourage a bidder not to strive to give the highest bid in the first bidding.
We support the Filipino First policy without any reservation. The visionary nationalist Don Claro M.
Recto has warned us that the greatest tragedy that can befall a Filipino is to be an alien in his own
land. The Constitution has embodied Recto's counsel as a state policy. But while the Filipino First
policy requires that we incline to a Filipino, it does not demand that we wrong an alien. Our policy
makers can write laws and rules giving favored treatment to the Filipino but we are not free to be
unfair to a foreigner after writing the laws and the rules. After the laws are written, they must be
obeyed as written, by Filipinos and foreigners alike. The equal protection clause of the Constitution
protects all against unfairness. We can be pro-Filipino without unfairness to foreigner.
I vote to dismiss the petition.
Narvasa, C.J., and Melo, J., concur.
PANGANIBAN, J., dissenting:
I regret I cannot join the majority. To the incisive Dissenting Opinion of Mr. Justice Reynato S. Puno,
may I just add
1. The majority contends the Constitution should be interpreted to mean that, after a bidding process
is concluded, the losing Filipino bidder should be given the right to equal the highest foreign bid, and
thus to win. However, the Constitution [Sec. 10 (2), Art. XII] simply states that "in the grant of rights .
. . covering the national economy and patrimony, the State shall give preference to qualified
Filipinos." The majority concedes that there is no law defining the extent or degree of such
preference. Specifically, no statute empowers a losing Filipino bidder to increase his bid and equal
that of the winning foreigner. In the absence of such empowering law, the majority's strained
interpretation, I respectfully submit constitutes unadulterated judicial legislation, which makes
bidding a ridiculous sham where no Filipino can lose and where no foreigner can win. Only in the
Philippines!.
2. Aside from being prohibited by the Constitution, such judicial is short-sighted and, viewed
properly, gravely prejudicial to long-term Filipino interest. It encourages other countries in the
guise of reverse comity or worse, unabashed retaliation to discriminate against us in their own
jurisdictions by authorizing their own nationals to similarly equal and defeat the higher bids of Filipino
enterprises solely, while on the other hand, allowing similar bids of other foreigners to remain
unchallenged by their nationals. The majority's thesis will thus marginalize Filipinos as pariahs in the
global marketplace with absolute no chance of winning any bidding outside our country. Even
authoritarian regimes and hermit kingdoms have long ago found out unfairness, greed and isolation
are self-defeating and in the long-term, self-destructing.
The moral lesson here is simple: Do not do unto other what you dont want other to do unto you.
3. In the absence of a law specifying the degree or extent of the "Filipino First" policy of the
Constitution, the constitutional preference for the "qualified Filipinos" may be allowed only where all
the bids are equal. In this manner, we put the Filipino ahead without self-destructing him and without
being unfair to the foreigner.
In short, the Constitution mandates a victory for the qualified Filipino only when the scores are tied.
But not when the ballgame is over and the foreigner clearly posted the highest score.
SUPREME COURT
Manila
EN BANC
G.R. No. L-6355-56 August 31, 1953
PASTOR M. ENDENCIA and FERNANDO JUGO, plaintiffs-appellees,

vs.
SATURNINO DAVID, as Collector of Internal Revenue, defendant-appellant.
Office of the Solicitor General Juan R. Liwag and Solicitor Jose P. Alejandro for appellant.
Manuel O. Chan for appellees.
MONTEMAYOR, J.:
This is a joint appeal from the decision of the Court of First Instance of Manila declaring section 13 of
Republic Act No. 590 unconstitutional, and ordering the appellant Saturnino David as Collector of
Internal Revenue to re-fund to Justice Pastor M. Endencia the sum of P1,744.45, representing the
income tax collected on his salary as Associate Justice of the Court of Appeals in 1951, and to
Justice Fernando Jugo the amount of P2,345.46, representing the income tax collected on his salary
from January 1,1950 to October 19, 1950, as Presiding Justice of the Court of Appeals, and from
October 20, 1950 to December 31,1950, as Associate Justice of the Supreme Court, without special
pronouncement as to costs.
Because of the similarity of the two cases, involving as they do the same question of law, they were
jointly submitted for determination in the lower court. Judge Higinio B. Macadaeg presiding, in a
rather exhaustive and well considered decision found and held that under the doctrine laid down by
this Court in the case of Perfecto vs. Meer, 85 Phil., 552, the collection of income taxes from the
salaries of Justice Jugo and Justice Endencia was a diminution of their compensation and therefore
was in violation of the Constitution of the Philippines, and so ordered the refund of said taxes.
We see no profit and necessity in again discussing and considering the proposition and the
arguments pro and cons involved in the case of Perfecto vs. Meer, supra, which are raised, brought
up and presented here. In that case, we have held despite the ruling enunciated by the United
States Federal Supreme Court in the case of O 'Malley vs. Woodrought 307 U. S., 277, that taxing
the salary of a judicial officer in the Philippines is a diminution of such salary and so violates the
Constitution. We shall now confine our-selves to a discussion and determination of the remaining
question of whether or not Republic Act No. 590, particularly section 13, can justify and legalize the
collection of income tax on the salary of judicial officers.
According to the brief of the Solicitor General on behalf of appellant Collector of Internal Revenue,
our decision in the case of Perfecto vs. Meer, supra, was not received favorably by Congress,
because immediately after its promulgation, Congress enacted Republic Act No. 590. To bring home
his point, the Solicitor General reproduced what he considers the pertinent discussion in the Lower
House of House Bill No. 1127 which became Republic Act No. 590.
For purposes of reference, we are reproducing section 9, Article VIII of our Constitution:.
SEC. 9. The members of the Supreme Court and all judges of inferior courts shall hold office
during good behavior, until they reach the age of seventy years, or become incapacitated to
discharge the duties of their office. They shall receive such compensation as may be fixed by
law, which shall not be diminished during their continuance in office. Until the Congress shall
provide otherwise, the Chief Justice of the Supreme Court shall receive an annual
compensation of sixteen thousand pesos, and each Associate Justice, fifteen thousand
pesos.
As already stated construing and applying the above constitutional provision, we held in the Perfecto
case that judicial officers are exempt from the payment of income tax on their salaries, because the
collection thereof by the Government was a decrease or diminution of their salaries during their
continuance in office, a thing which is expressly prohibited by the Constitution. Thereafter, according
to the Solicitor General, because Congress did not favorably receive the decision in the Perfecto
case, Congress promulgated Republic Act No. 590, if not to counteract the ruling in that decision, at
least now to authorize and legalize the collection of income tax on the salaries of judicial officers. We
quote section 13 of Republic Act No. 590:
SEC 13. No salary wherever received by any public officer of the Republic of the Philippines
shall be considered as exempt from the income tax, payment of which is hereby declared not
to be dimunition of his compensation fixed by the Constitution or by law.
So we have this situation. The Supreme Court in a decision interpreting the Constitution, particularly
section 9, Article VIII, has held that judicial officers are exempt from payment of income tax on their
salaries, because the collection thereof was a diminution of such salaries, specifically prohibited by
the Constitution. Now comes the Legislature and in section 13, Republic Act No. 590, says that "no
salary wherever received by any public officer of the Republic (naturally including a judicial officer)
shall be considered as exempt from the income tax," and proceeds to declare that payment of said
income tax is not a diminution of his compensation. Can the Legislature validly do this? May the
Legislature lawfully declare the collection of income tax on the salary of a public official, specially a
judicial officer, not a decrease of his salary, after the Supreme Court has found and decided
otherwise? To determine this question, we shall have to go back to the fundamental principles
regarding separation of powers.
Under our system of constitutional government, the Legislative department is assigned the power to
make and enact laws. The Executive department is charged with the execution of carrying out of the
provisions of said laws. But the interpretation and application of said laws belong exclusively to the
Judicial department. And this authority to interpret and apply the laws extends to the Constitution.
Before the courts can determine whether a law is constitutional or not, it will have to interpret and
ascertain the meaning not only of said law, but also of the pertinent portion of the Constitution in
order to decide whether there is a conflict between the two, because if there is, then the law will
have to give way and has to be declared invalid and unconstitutional.
Defining and interpreting the law is a judicial function and the legislative branch may not limit
or restrict the power granted to the courts by the Constitution. (Bandy vs. Mickelson et al.,
44N. W., 2nd 341, 342.)
When it is clear that a statute transgresses the authority vested in the legislature by the
Constitution, it is the duty of the courts to declare the act unconstitutional because they
cannot shrink from it without violating their oaths of office. This duty of the courts to maintain
the Constitution as the fundamental law of the state is imperative and unceasing; and, as
Chief Justice Marshall said, whenever a statute is in violation of the fundamental law, the
courts must so adjudge and thereby give effect to the Constitution. Any other course would
lead to the destruction of the Constitution. Since the question as to the constitutionality of a
statute is a judicial matter, the courts will not decline the exercise of jurisdiction upon the
suggestion that action might be taken by political agencies in disregard of the judgment of
the judicial tribunals. (11 Am. Jur., 714-715.)
Under the American system of constitutional government, among the most important
functions in trusted to the judiciary are the interpreting of Constitutions and, as a closely
connected power, the determination of whether laws and acts of the legislature are or are not
contrary to the provisions of the Federal and State Constitutions. (11 Am. Jur., 905.).
By legislative fiat as enunciated in section 13, Republic Act NO. 590, Congress says that taxing the
salary of a judicial officer is not a decrease of compensation. This is a clear example of interpretation
or ascertainment of the meaning of the phrase "which shall not be diminished during their
continuance in office," found in section 9, Article VIII of the Constitution, referring to the salaries of
judicial officers. This act of interpreting the Constitution or any part thereof by the Legislature is an
invasion of the well-defined and established province and jurisdiction of the Judiciary.
The rule is recognized elsewhere that the legislature cannot pass any declaratory act, or act
declaratory of what the law was before its passage, so as to give it any binding weight with
the courts. A legislative definition of a word as used in a statute is not conclusive of its
meaning as used elsewhere; otherwise, the legislature would be usurping a judicial function
in defining a term. (11 Am. Jur., 914, emphasis supplied)
The legislature cannot, upon passing a law which violates a constitutional provision, validate
it so as to prevent an attack thereon in the courts, by a declaration that it shall be so
construed as not to violate the constitutional inhibition. (11 Am. Jur., 919, emphasis supplied)
We have already said that the Legislature under our form of government is assigned the task and
the power to make and enact laws, but not to interpret them. This is more true with regard to the
interpretation of the basic law, the Constitution, which is not within the sphere of the Legislative
department. If the Legislature may declare what a law means, or what a specific portion of the
Constitution means, especially after the courts have in actual case ascertain its meaning by
interpretation and applied it in a decision, this would surely cause confusion and instability in judicial
processes and court decisions. Under such a system, a final court determination of a case based on
a judicial interpretation of the law of the Constitution may be undermined or even annulled by a
subsequent and different interpretation of the law or of the Constitution by the Legislative
department. That would be neither wise nor desirable, besides being clearly violative of the
fundamental, principles of our constitutional system of government, particularly those governing the
separation of powers.
So much for the constitutional aspect of the case. Considering the practical side thereof, we believe
that the collection of income tax on a salary is an actual and evident diminution thereof. Under the
old system where the in-come tax was paid at the end of the year or sometime thereafter, the
decrease may not be so apparent and clear. All that the official who had previously received his full
salary was called upon to do, was to fulfill his obligation and to exercise his privilege of paying his
income tax on his salary. His salary fixed by law was received by him in the amount of said tax
comes from his other sources of income, he may not fully realize the fact that his salary had been
decreased in the amount of said income tax. But under the present system of withholding the income
tax at the source, where the full amount of the income tax corresponding to his salary is computed in
advance and divided into equal portions corresponding to the number of pay-days during the year
and actually deducted from his salary corresponding to each payday, said official actually does not
receive his salary in full, because the income tax is deducted therefrom every payday, that is to say,
twice a month. Let us take the case of Justice Endencia. As Associate Justice of the Court of
Appeals, his salary is fixed at p12,000 a year, that is to say, he should receive P1,000 a month or
P500 every payday, fifteenth and end of month. In the present case, the amount collected by the
Collector of Internal Revenue on said salary is P1,744.45 for one year. Divided by twelve (months)
we shall have P145.37 a month. And further dividing it by two paydays will bring it down to P72.685,
which is the income tax deducted form the collected on his salary each half month. So, if Justice
Endencia's salary as a judicial officer were not exempt from payment of the income tax, instead of
receiving P500 every payday, he would be actually receiving P427.31 only, and instead of receiving
P12,000 a year, he would be receiving but P10,255.55. Is it not therefor clear that every payday, his
salary is actually decreased by P72.685 and every year is decreased by P1,744.45?
Reading the discussion in the lower House in connection with House Bill No. 1127, which became
Republic Act No. 590, it would seem that one of the main reasons behind the enactment of the law
was the feeling among certain legislators that members of the Supreme Court should not enjoy any
exemption and that as citizens, out of patriotism and love for their country, they should pay income
tax on their salaries. It might be stated in this connection that the exemption is not enjoyed by the
members of the Supreme Court alone but also by all judicial officers including Justices of the Court
of Appeals and judges of inferior courts. The exemption also extends to other constitutional officers,
like the President of the Republic, the Auditor General, the members of the Commission on
Elections, and possibly members of the Board of Tax Appeals, commissioners of the Public Service
Commission, and judges of the Court of Industrial Relations. Compares to the number of all these
officials, that of the Supreme Court Justices is relatively insignificant. There are more than 990 other
judicial officers enjoying the exemption, including 15 Justices of the Court of Appeals, about 107
Judges of First Instance, 38 Municipal Judges and about 830 Justices of the Peace. The reason
behind the exemption in the Constitution, as interpreted by the United States Federal Supreme Court
and this Court, is to preserve the independence of the Judiciary, not only of this High Tribunal but of
the other courts, whose present membership number more than 990 judicial officials.
The exemption was not primarily intended to benefit judicial officers, but was grounded on public
policy. As said by Justice Van Devanter of the United States Supreme Court in the case of Evans vs.
Gore (253 U. S., 245):
The primary purpose of the prohibition against diminution was not to benefit the judges, but,
like the clause in respect of tenure, to attract good and competent men to the bench and to
promote that independence of action and judgment which is essential to the maintenance of
the guaranties, limitations and pervading principles of the Constitution and to the
administration of justice without respect to person and with equal concern for the poor and
the rich. Such being its purpose, it is to be construed, not as a private grant, but as a
limitation imposed in the public interest; in other words, not restrictively, but in accord with its
spirit and the principle on which it proceeds.
Having in mind the limited number of judicial officers in the Philippines enjoying this exemption,
especially when the great bulk thereof are justices of the peace, many of them receiving as low as
P200 a month, and considering further the other exemptions allowed by the income tax law, such as
P3,000 for a married person and P600 for each dependent, the amount of national revenue to be
derived from income tax on the salaries of judicial officers, were if not for the constitutional
exemption, could not be large or substantial. But even if it were otherwise, it should not affect, much
less outweigh the purpose and the considerations that prompted the establishment of the
constitutional exemption. In the same case of Evans vs. Gore, supra, the Federal Supreme Court
declared "that they (fathers of the Constitution) regarded the independence of the judges as far as
greater importance than any revenue that could come from taxing their salaries.
When a judicial officer assumed office, he does not exactly ask for exemption from payment of
income tax on his salary, as a privilege . It is already attached to his office, provided and secured by
the fundamental law, not primarily for his benefit, but based on public interest, to secure and
preserve his independence of judicial thought and action. When we come to the members of the
Supreme Court, this excemption to them is relatively of short duration. Because of the limited
membership in this High Tribunal, eleven, and due to the high standards of experience, practice and
training required, one generally enters its portals and comes to join its membership quite late in life,
on the aver-age, around his sixtieth year, and being required to retire at seventy, assuming that he
does not die or become incapacitated earlier, naturally he is not in a position to receive the benefit of
exemption for long. It is rather to the justices of the peace that the exemption can give more benefit.
They are relatively more numerous, and because of the meager salary they receive, they can less
afford to pay the income tax on it and its diminution by the amount of the income tax if paid would be
real, substantial and onerous.
Considering exemption in the abstract, there is nothing unusual or abhorrent in it, as long as it is
based on public policy or public interest. While all other citizens are subject to arrest when charged
with the commission of a crime, members of the Senate and House of Representatives except in
cases of treason, felony and breach of the peace are exempt from arrest, during their attendance in
the session of the Legislature; and while all other citizens are generally liable for any speech, remark
or statement, oral or written, tending to cause the dishonor, discredit or contempt of a natural or
juridical person or to blacken the memory of one who is dead, Senators and Congressmen in making
such statements during their sessions are extended immunity and exemption.
And as to tax exemption, there are not a few citizens who enjoy this exemption. Persons, natural and
juridical, are exempt from taxes on their lands, buildings and improvements thereon when used
exclusively for educational purposes, even if they derive income therefrom. (Art. VI, Sec. 22 [3].)
Holders of government bonds are exempted from the payment of taxes on the income or interest
they receive therefrom (sec. 29 (b) [4], National Internal Revenue Code as amended by Republic Act
No. 566). Payments or income received by any person residing in the Philippines under the laws of
the United States administered by the United States Veterans Administration are exempt from
taxation. (Republic Act No. 360). Funds received by officers and enlisted men of the Philippine Army
who served in the Armed Forces of the United States, allowances earned by virtue of such services
corresponding to the taxable years 1942 to 1945, inclusive, are exempted from income tax.
(Republic Act No. 210). The payment of wages and allowances of officers and enlisted men of the
Army Forces of the Philippines sent to Korea are also exempted from taxation. (Republic Act No.
35). In other words, for reasons of public policy and public interest, a citizen may justifiably by
constitutional provision or statute be exempted from his ordinary obligation of paying taxes on his
income. Under the same public policy and perhaps for the same it not higher considerations, the
framers of the Constitution deemed it wise and necessary to exempt judicial officers from paying
taxes on their salaries so as not to decrease their compensation, thereby insuring the independence
of the Judiciary.
In conclusion we reiterate the doctrine laid down in the case of Perfecto vs. Meer, supra, to the effect
that the collection of income tax on the salary of a judicial officer is a diminution thereof and so
violates the Constitution. We further hold that the interpretation and application of the Constitution
and of statutes is within the exclusive province and jurisdiction of the Judicial department, and that in
enacting a law, the Legislature may not legally provide therein that it be interpreted in such a way
that it may not violate a Constitutional prohibition, thereby tying the hands of the courts in their task
of later interpreting said statute, specially when the interpretation sought and provided in said statute
runs counter to a previous interpretation already given in a case by the highest court of the land.
In the views of the foregoing considerations, the decision appealed from is hereby affirmed, with no
pronouncement as to costs.
Pablo, Bengzon, Padilla, Tuason, Reyes, and Labrador, JJ., concur.
Separate Opinions
BAUTISTA ANGELO, J., concurring:
Without expressing any opinion on the doctrine laid down by this Court in the case of Perfecto vs.
Meer, G. R. No. L-2314, in view of the part I had in that case as former Solicitor General, I wish
however to state that I concur in the opinion of the majority to the effect that section 13, Republic Act
No. 590, in so far as it provides that taxing of the salary of a judicial officer shall be considered "not
to be a diminution of his compensation fixed by the Constitution or by law", constitutes an invasion of
the province and jurisdiction of the judiciary. In this sense, I am of the opinion that said section is null
and void, it being a transgression of the fundamental principle underlying the separation of powers.
PARAS, C.J., concurring and dissenting:
I dissent for the same reasons stated in the dissenting opinion of Mr. Justice Ozaeta in Perfecto vs.
Meer, 85 Phil., 552, in which I concurred. But I disagree with the majority in ruling that no legislation
may provide that it be held valid although against a provision of the Constitution.
EN BANC
[G.R. No. 127685. July 23, 1998]
BLAS F. OPLE, petitioner, vs. RUBEN D. TORRES, ALEXANDER

AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO, ROBERT
BARBERS, CARMENCITA REODICA, CESAR SARINO, RENATO
VALENCIA, TOMAS P. AFRICA, HEAD OF THE NATIONAL
COMPUTER CENTER and CHAIRMAN OF THE COMMISSION ON
AUDIT, respondents.
DECISION
PUNO, J.:
The petition at bar is a commendable effort on the part of Senator Blas F. Ople to
prevent the shrinking of the right to privacy, which the revered Mr. Justice Brandeis
considered as "the most comprehensive of rights and the right most valued by civilized
men."[1] Petitioner Ople prays that we invalidate Administrative Order No. 308 entitled
"Adoption of a National Computerized Identification Reference System" on two
important constitutional grounds, viz: one, it is a usurpation of the power of Congress to
legislate, and two, it impermissibly intrudes on our citizenry's protected zone of
privacy. We grant the petition for the rights sought to be vindicated by the petitioner
need stronger barriers against further erosion.
A.O. No. 308 was issued by President Fidel V. Ramos on December 12, 1996 and
reads as follows:
"ADOPTION OF A NATIONAL COMPUTERIZED IDENTIFICATION

REFERENCE SYSTEM
WHEREAS, there is a need to provide Filipino citizens and foreign residents

with the facility to conveniently transact business with basic service and social
security providers and other government instrumentalities;
WHEREAS, this will require a computerized system to properly and efficiently

identify persons seeking basic services on social security and reduce, if not
totally eradicate, fraudulent transactions and misrepresentations;
WHEREAS, a concerted and collaborative effort among the various basic

services and social security providing agencies and other government
instrumentalities is required to achieve such a system;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by law, do hereby direct the
following:
SECTION 1. Establishment of a National Computerized Identification

Reference System. A decentralized Identification Reference System among
the key basic services and social security providers is hereby established.
SEC. 2 Inter-Agency Coordinating Committee. An Inter-Agency Coordinating

Committee (IACC) to draw-up the implementing guidelines and oversee the
implementation of the System is hereby created, chaired by the Executive
Secretary, with the following as members:
Head, Presidential Management Staff
Secretary, National Economic Development Authority

Secretary, Department of the Interior and
Local Government
Secretary, Department of Health
Administrator, Government Service Insurance
System,
Administrator, Social Security System, Administrator,
National Statistics Office Managing Director, National
Computer Center.
SEC. 3. Secretariat. The National Computer Center (NCC) is hereby

designated as secretariat to the IACC and as such shall provide administrative
and technical support to the IACC.
SEC. 4. Linkage Among Agencies. The Population Reference Number (PRN)

generated by the NSO shall serve as the common reference number to
establish a linkage among concerned agencies. The IACC Secretariat shall
coordinate with the different Social Security and Services Agencies to
establish the standards in the use of Biometrics Technology and in computer
application designs of their respective systems.
SEC. 5. Conduct of Information Dissemination Campaign. The Office of the

Press Secretary, in coordination with the National Statistics Office,the GSIS
and SSS as lead agencies and other concerned agencies shall undertake a
massive tri-media information dissemination campaign to educate and raise
public awareness on the importance and use of the PRN and the Social
Security Identification Reference.
SEC. 6. Funding. The funds necessary for the implementation of the system
shall be sourced from the respective budgets of the concerned agencies.
SEC. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall
submit regular reports to the Office of the President, through the IACC, on the
status of implementation of this undertaking.
SEC. 8. Effectivity. This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 12th day of December in the year of Our
Lord, Nineteen Hundred and Ninety-Six.
(SGD.) FIDEL V. RAMOS"
A.O. No. 308 was published in four newspapers of general circulation on January
22, 1997 and January 23, 1997. On January 24, 1997, petitioner filed the instant petition
against respondents, then Executive Secretary Ruben Torres and the heads of the
government agencies, who as members of the Inter-Agency Coordinating Committee,
are charged with the implementation of A.O. No. 308. On April 8, 1997, we issued a
temporary restraining order enjoining its implementation.
Petitioner contends:
"A. THE ESTABLISHMENT OF A NATIONAL COMPUTERIZED

IDENTIFICATION REFERENCE SYSTEM REQUIRES A LEGISLATIVE ACT.
THE ISSUANCE OF A.O. NO. 308 BY THE PRESIDENT OF THE REPUBLIC
OF THE PHILIPPINES IS, THEREFORE, AN UNCONSTITUTIONAL
USURPATION OF THE LEGISLATIVE POWERS OF THE CONGRESS OF
THE REPUBLIC OF THE PHILIPPINES.
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR

THE IMPLEMENTATION OF A.O. NO. 308 IS AN UNCONSTITUTIONAL
USURPATION OF THE EXCLUSIVE RIGHT OF CONGRESS TO
APPROPRIATE PUBLIC FUNDS FOR EXPENDITURE.
C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE

GROUNDWORK FOR A SYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS
ENSHRINED IN THE CONSTITUTION."[2]
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD

WARRANT A JUDICIAL REVIEW;
B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND
ADMINISTRATIVE POWERS OF THE PRESIDENT WITHOUT
ENCROACHING ON THE LEGISLATIVE POWERS OF CONGRESS;
C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE

IDENTIFICATION REFERENCE SYSTEM MAY BE SOURCED FROM THE
BUDGETS OF THE CONCERNED AGENCIES;
D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY.[3]
We now resolve.
I
As is usual in constitutional litigation, respondents raise the threshold issues relating

to the standing to sue of the petitioner and the justiciability of the case at bar. More
specifically, respondents aver that petitioner has no legal interest to uphold and that the
implementing rules of A.O. No. 308 have yet to be promulgated.
These submissions do not deserve our sympathetic ear. Petitioner Ople is a
distinguished member of our Senate. As a Senator, petitioner is possessed of the
requisite standing to bring suit raising the issue that the issuance of A.O. No. 308 is a
usurpation of legislative power.[4] As taxpayer and member of the Government Service
Insurance System (GSIS), petitioner can also impugn the legality of the misalignment of
public funds and the misuse of GSIS funds to implement A.O. No. 308.[5]
The ripeness for adjudication of the petition at bar is not affected by the fact that the
implementing rules of A.O. No. 308 have yet to be promulgated. Petitioner Ople assails
A.O. No. 308 as invalid per se and as infirmed on its face. His action is not premature
for the rules yet to be promulgated cannot cure its fatal defects. Moreover, the
respondents themselves have started the implementation of A.O. No. 308 without
waiting for the rules. As early as January 19, 1997, respondent Social Security System
(SSS) caused the publication of a notice to bid for the manufacture of the National
Identification (ID) card.[6] Respondent Executive Secretary Torres has publicly
announced that representatives from the GSIS and the SSS have completed the
guidelines for the national identification system.[7] All signals from the respondents show
their unswerving will to implement A.O. No. 308 and we need not wait for the formality
of the rules to pass judgment on its constitutionality. In this light, the dissenters
insistence that we tighten the rule on standing is not a commendable stance as its result
would be to throttle an important constitutional principle and a fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No. 308 is not a
mere administrative order but a law and hence, beyond the power of the
President to issue. He alleges that A.O. No. 308 establishes a system of identification
that is all-encompassing in scope, affects the life and liberty of every Filipino citizen and
foreign resident, and more particularly, violates their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on the lawmaking
domain of Congress is understandable. The blurring of the demarcation line between
the power of the Legislature to make laws and the power of the Executive to execute
laws will disturb their delicate balance of power and cannot be allowed. Hence, the
exercise by one branch of government of power belonging to another will be given
a stricter scrutiny by this Court.
The line that delineates Legislative and Executive power is not
indistinct. Legislative power is "the authority, under the Constitution, to make laws, and
to alter and repeal them."[8] The Constitution, as the will of the people in their original,
sovereign and unlimited capacity, has vested this power in the Congress of the
Philippines.[9] The grant of legislative power to Congress is broad, general and
comprehensive.[10] The legislative body possesses plenary power for all purposes of civil
government.[11] Any power, deemed to be legislative by usage and tradition, is
necessarily possessed by Congress, unless the Constitution has lodged it
elsewhere.[12] In fine, except as limited by the Constitution, either expressly or impliedly,
legislative power embraces all subjects and extends to matters of general concern or
common interest.[13]
While Congress is vested with the power to enact laws, the President executes
the laws.[14] The executive power is vested in the President. [15] It is generally defined as
the power to enforce and administer the laws.[16] It is the power of carrying the laws into
practical operation and enforcing their due observance.[17]
As head of the Executive Department, the President is the Chief Executive. He
represents the government as a whole and sees to it that all laws are enforced by the
officials and employees of his department.[18] He has control over the executive
department, bureaus and offices. This means that he has the authority to assume
directly the functions of the executive department, bureau and office, or interfere with
the discretion of its officials.[19] Corollary to the power of control, the President also has
the duty of supervising the enforcement of laws for the maintenance of general peace
and public order. Thus, he is granted administrative power over bureaus and offices
under his control to enable him to discharge his duties effectively.[20]
Administrative power is concerned with the work of applying policies and
enforcing orders as determined by proper governmental organs.[21] It enables the
President to fix a uniform standard of administrative efficiency and check the
official conduct of his agents.[22] To this end, he can issue administrative orders,
rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308 involves a subject
that is not appropriate to be covered by an administrative order. An administrative
order is:
"Sec. 3. Administrative Orders.-- Acts of the President which relate to particular aspects
of governmental operation in pursuance of his duties as administrative head shall be
promulgated in administrative orders."[23]
An administrative order is an ordinance issued by the President which relates to specific
aspects in the administrative operation of government.It must be in harmony with the
law and should be for the sole purpose of implementing the law and carrying out
the legislative policy.[24] We reject the argument that A.O. No. 308 implements the
legislative policy of the Administrative Code of 1987. The Code is a general law and
"incorporates in a unified document the major structural, functional and procedural
principles of governance"[25] and "embodies changes in administrative structures and
procedures designed to serve the people."[26] The Code is divided into seven (7)
Books: Book I deals with Sovereignty and General Administration, Book II with the
Distribution of Powers of the three branches of Government, Book III on the Office of
the President, Book IV on the Executive Branch, Book V on the Constitutional
Commissions, Book VI on National Government Budgeting, and Book VII on
Administrative Procedure. These Books contain provisions on the organization, powers
and general administration of the executive, legislative and judicial branches of
government, the organization and administration of departments, bureaus and offices
under the executive branch, the organization and functions of the Constitutional
Commissions and other constitutional bodies, the rules on the national government
budget, as well as guidelines for the exercise by administrative agencies of quasi-
legislative and quasi-judicial powers. The Code covers both the internal administration
of government, i.e, internal organization, personnel and recruitment, supervision and
discipline, and the effects of the functions performed by administrative officials on
private individuals or parties outside government.[27]
It cannot be simplistically argued that A.O. No. 308 merely implements the
Administrative Code of 1987. It establishes for the first time a National Computerized
Identification Reference System. Such a System requires a delicate adjustment of
various contending state policies-- the primacy of national security, the extent of privacy
interest against dossier-gathering by government, the choice of policies, etc. Indeed, the
dissent of Mr. Justice Mendoza states that the A.O. No. 308 involves the all-important
freedom of thought. As said administrative order redefines the parameters of some
basic rights of our citizenry vis-a-vis the State as well as the line that separates the
administrative power of the President to make rules and the legislative power of
Congress, it ought to be evident that it deals with a subject that should be covered by
law.
Nor is it correct to argue as the dissenters do that A.O. No. 308 is not a law
because it confers no right, imposes no duty, affords no protection, and creates no
office. Under A.O. No. 308, a citizen cannot transact business with government
agencies delivering basic services to the people without the contemplated identification
card. No citizen will refuse to get this identification card for no one can avoid dealing
with government. It is thus clear as daylight that without the ID, a citizen will have
difficulty exercising his rights and enjoying his privileges. Given this reality, the
contention that A.O. No. 308 gives no right and imposes no duty cannot stand.
Again, with due respect, the dissenting opinions unduly expand the limits of
administrative legislation and consequently erodes the plenary power of Congress to
make laws. This is contrary to the established approach defining the traditional limits of
administrative legislation. As well stated by Fisher: "x x x Many regulations however,
bear directly on the public. It is here that administrative legislation must be
restricted in its scope and application. Regulations are not supposed to be a
substitute for the general policy-making that Congress enacts in the form of a
public law. Although administrative regulations are entitled to respect, the
authority to prescribe rules and regulations is not an independent source of
power to make laws."[28]
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it
cannot pass constitutional muster as anadministrative legislation because
facially it violates the right to privacy. The essence of privacy is the "right to be let
alone."[29] In the 1965 case of Griswold v. Connecticut,[30] the United States Supreme
Court gave more substance to the right of privacy when it ruled that the right has a
constitutional foundation. It held that there is a right of privacy which can be found within
the penumbras of the First, Third, Fourth, Fifth and Ninth Amendments, [31] viz:
"Specific guarantees in the Bill of Rights have penumbras formed by

emanations from these guarantees that help give them life and substance x x
x. Various guarantees create zones of privacy. The right of association
contained in the penumbra of the First Amendment is one, as we have seen.
The Third Amendment in its prohibition against the quartering of soldiers `in
any house' in time of peace without the consent of the owner is another facet
of that privacy. The Fourth Amendment explicitly affirms the `right of the
people to be secure in their persons, houses, papers, and effects, against
unreasonable searches and seizures.' The Fifth Amendment in its Self-
Incrimination Clause enables the citizen to create a zone of privacy which
government may not force him to surrender to his detriment. The Ninth
Amendment provides: `The enumeration in the Constitution, of certain rights,
shall not be construed to deny or disparage others retained by the people.'"
In the 1968 case of Morfe v. Mutuc,[32] we adopted the Griswold ruling that there is a
constitutional right to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique
Fernando, we held:
"xxx
The Griswold case invalidated a Connecticut statute which made the use of
contraceptives a criminal offense on the ground of its amounting to an
unconstitutional invasion of the right of privacy of married persons; rightfully it
stressed "a relationship lying within the zone of privacy created by several
fundamental constitutional guarantees." It has wider implications though. The
constitutional right to privacy has come into its own.
So it is likewise in our jurisdiction. The right to privacy as such is accorded
recognition independently of its identification with liberty; in itself, it is fully
deserving of constitutional protection. The language of Prof. Emerson is
particularly apt: 'The concept of limited government has always included the
idea that governmental powers stop short of certain intrusions into the
personal life of the citizen. This is indeed one of the basic distinctions between
absolute and limited government. Ultimate and pervasive control of the
individual, in all aspects of his life, is the hallmark of the absolute state. In
contrast, a system of limited government safeguards a private sector, which
belongs to the individual, firmly distinguishing it from the public sector, which
the state can control. Protection of this private sector-- protection, in other
words, of the dignity and integrity of the individual--has become increasingly
important as modern society has developed. All the forces of a technological
age --industrialization, urbanization, and organization-- operate to narrow the
area of privacy and facilitate intrusion into it. In modern terms, the capacity to
maintain and support this enclave of private life marks the difference between
a democratic and a totalitarian society.'"
Indeed, if we extend our judicial gaze we will find that the right of privacy is
recognized and enshrined in several provisions of our Constitution.[33] It is
expressly recognized in Section 3(1) of the Bill of Rights:
"Sec. 3. (1) The privacy of communication and correspondence shall be

inviolable except upon lawful order of the court, or when public safety or order
requires otherwise as prescribed by law."
Other facets of the right to privacy are protected in various provisions of the Bill of
Rights, viz:[34]
"Sec. 1. No person shall be deprived of life, liberty, or property without due

process of law, nor shall any person be denied the equal protection of the
laws.
Sec. 2. The right of the people to be secure in their persons, houses, papers,
and effects against unreasonable searches and seizures of whatever nature
and for any purpose shall be inviolable, and no search warrant or warrant of
arrest shall issue except upon probable cause to be determined personally by
the judge after examination under oath or affirmation of the complainant and
the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.
x x x.
Sec. 6. The liberty of abode and of changing the same within the limits
prescribed by law shall not be impaired except upon lawful order of the court.
Neither shall the right to travel be impaired except in the interest of national
security, public safety, or public health, as may be provided by law.
x x x.
Sec. 8. The right of the people, including those employed in the public and
private sectors, to form unions, associations, or societies for purposes not
contrary to law shall not be abridged.
Sec. 17. No person shall be compelled to be a witness against himself."
Zones of privacy are likewise recognized and protected in our laws. The Civil
Code provides that "[e]very person shall respect the dignity, personality, privacy and
peace of mind of his neighbors and other persons" and punishes as actionable torts
several acts by a person of meddling and prying into the privacy of another. [35] It also
holds a public officer or employee or any private individual liable for damages for any
violation of the rights and liberties of another person, [36] and recognizes the privacy of
letters and other private communications.[37] The Revised Penal Code makes a crime
the violation of secrets by an officer,[38] the revelation of trade and industrial
secrets,[39] and trespass to dwelling.[40]Invasion of privacy is an offense in special
laws like the Anti-Wiretapping Law,[41] the Secrecy of Bank Deposit Act[42] and the
Intellectual Property Code.[43] The Rules of Court on privileged communication likewise
recognize the privacy of certain information.[44]
Unlike the dissenters, we prescind from the premise that the right to privacy
is a fundamental right guaranteed by the Constitution, hence, it is the burden of
government to show that A.O. No. 308 is justified by some compelling state
interest and that it is narrowly drawn. A.O. No. 308 is predicated on two
considerations: (1) the need to provide our citizens and foreigners with the facility to
conveniently transact business with basic service and social security providers and
other government instrumentalities and (2) the need to reduce, if not totally eradicate,
fraudulent transactions and misrepresentations by persons seeking basic services. It is
debatable whether these interests are compelling enough to warrant the issuance of
A.O. No. 308. But what is not arguable is the broadness, the vagueness, the
overbreadth of A.O. No. 308 which if implemented will put our people's right to
privacy in clear and present danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a Population
Reference Number (PRN) as a "common reference number to establish a linkage
among concerned agencies" through the use of "Biometrics Technology" and "computer
application designs."
Biometry or biometrics is "the science of the application of statistical methods to
biological facts; a mathematical analysis of biological data." [45] The term "biometrics"
has now evolved into a broad category of technologies which provide precise
confirmation of an individual's identity through the use of the individual's own
physiological and behavioral characteristics.[46] A physiological characteristic is a
relatively stable physical characteristic such as a fingerprint, retinal scan, hand
geometry or facial features. A behavioral characteristic is influenced by the
individual's personality and includes voice print, signature and keystroke. [47] Most
biometric identification systems use a card or personal identification number (PIN) for
initial identification. The biometric measurement is used to verify that the individual
holding the card or entering the PIN is the legitimate owner of the card or PIN.[48]
A most common form of biological encoding is finger-scanning where technology
scans a fingertip and turns the unique pattern therein into an individual number which is
called a biocrypt. The biocrypt is stored in computer data banks[49] and becomes a
means of identifying an individual using a service. This technology requires one's
fingertip to be scanned every time service or access is provided. [50] Another method is
the retinal scan. Retinal scan technology employs optical technology to map the
capillary pattern of the retina of the eye. This technology produces a unique print similar
to a finger print.[51] Another biometric method is known as the "artificial nose." This
device chemically analyzes the unique combination of substances excreted from the
skin of people.[52] The latest on the list of biometric achievements is
the thermogram.Scientists have found that by taking pictures of a face using infra-red
cameras, a unique heat distribution pattern is seen. The different densities of bone,
skin, fat and blood vessels all contribute to the individual's personal "heat signature." [53]
In the last few decades, technology has progressed at a galloping rate. Some
science fictions are now science facts. Today, biometrics is no longer limited to the
use of fingerprint to identify an individual. It is a new science that uses various
technologies in encoding any and all biological characteristics of an individual
for identification. It is noteworthy that A.O. No. 308 does not state what specific
biological characteristics and what particular biometrics technology shall be
used to identify people who will seek its coverage. Considering the banquet of
options available to the implementors of A.O. No. 308, the fear that it threatens
the right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will show that it
does not state whether encoding of data is limited to biological information alone
for identification purposes. In fact, the Solicitor General claims that the adoption of
the Identification Reference System will contribute to the "generation of population data
for development planning."[54] This is an admission that the PRN will not be used solely
for identification but for the generation of other data with remote relation to the avowed
purposes of A.O. No. 308. Clearly, the indefiniteness of A.O. No. 308 can give the
government the roving authority to store and retrieve information for a purpose
other than the identification of the individual through his PRN.
The potential for misuse of the data to be gathered under A.O. No. 308 cannot
be underplayed as the dissenters do. Pursuant to said administrative order, an
individual must present his PRN everytime he deals with a government agency to avail
of basic services and security. His transactions with the government agency will
necessarily be recorded-- whether it be in the computer or in the documentary file of the
agency. The individual's file may include his transactions for loan availments, income
tax returns, statement of assets and liabilities, reimbursements for medication,
hospitalization, etc. The more frequent the use of the PRN, the better the chance of
building a huge and formidable information base through the electronic linkage of
the files.[55] The data may be gathered for gainful and useful government purposes;
but the existence of this vast reservoir of personal information constitutes a
covert invitation to misuse, a temptation that may be too great for some of our
authorities to resist.[56]
We can even grant, arguendo, that the computer data file will be limited to the
name, address and other basic personal information about the individual. [57] Even that
hospitable assumption will not save A.O. No. 308 from constitutional infirmity for again
said order does not tell us in clear and categorical terms how these information
gathered shall be handled. It does not provide who shall control and access the
data, under what circumstances and for what purpose. These factors are essential
to safeguard the privacy and guaranty the integrity of the information. [58] Well to note, the
computer linkage gives other government agencies access to the information. Yet,
there are no controls to guard against leakage of information. When the access
code of the control programs of the particular computer system is broken, an intruder,
without fear of sanction or penalty, can make use of the data for whatever purpose, or
worse, manipulate the data stored within the system.[59]
It is plain and we hold that A.O. No. 308 falls short of assuring that personal
information which will be gathered about our people will only be processed
for unequivocally specified purposes.[60] The lack of proper safeguards in this regard
of A.O. No. 308 may interfere with the individual's liberty of abode and travel by
enabling authorities to track down his movement; it may also enable unscrupulous
persons to access confidential information and circumvent the right against self-
incrimination; it may pave the way for "fishing expeditions" by government authorities
and evade the right against unreasonable searches and seizures. [61] The possibilities of
abuse and misuse of the PRN, biometrics and computer technology are
accentuated when we consider that the individual lacks control over what can be
read or placed on his ID, much less verify the correctness of the data
encoded.[62] They threaten the very abuses that the Bill of Rights seeks to
prevent.[63]
The ability of a sophisticated data center to generate a comprehensive cradle-to-
grave dossier on an individual and transmit it over a national network is one of the
most graphic threats of the computer revolution.[64] The computer is capable of producing
a comprehensive dossier on individuals out of information given at different times and
for varied purposes.[65] It can continue adding to the stored data and keeping the
information up to date. Retrieval of stored data is simple. When information of a
privileged character finds its way into the computer, it can be extracted together with
other data on the subject.[66] Once extracted, the information is putty in the hands of any
person. The end of privacy begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions
would dismiss its danger to the right to privacy asspeculative and hypothetical. Again,
we cannot countenance such a laidback posture. The Court will not be true to its role as
the ultimate guardian of the people's liberty if it would not immediately smother the
sparks that endanger their rights but would rather wait for the fire that could consume
them.
We reject the argument of the Solicitor General that an individual has a
reasonable expectation of privacy with regard to the National ID and the use of
biometrics technology as it stands on quicksand. The reasonableness of a person's
expectation of privacy depends on a two-part test: (1) whether by his conduct, the
individual has exhibited an expectation of privacy; and (2) whether this expectation is
one that society recognizes as reasonable.[67] The factual circumstances of the case
determines the reasonableness of the expectation. [68]However, other factors, such as
customs, physical surroundings and practices of a particular activity, may serve to
create or diminish this expectation.[69] The use of biometrics and computer technology in
A.O. No. 308 does not assure the individual of a reasonable expectation of privacy. [70] As
technology advances, the level of reasonably expected privacy decreases.[71] The
measure of protection granted by the reasonable expectation diminishes as relevant
technology becomes more widely accepted.[72] The security of the computer data file
depends not only on the physical inaccessibility of the file but also on the advances in
hardware and software computer technology. A.O. No. 308 is so widely drawn that a
minimum standard for a reasonable expectation of privacy, regardless of
technology used, cannot be inferred from its provisions.
The rules and regulations to be drawn by the IACC cannot remedy this fatal
defect. Rules and regulations merely implement the policy of the law or order. On its
face, A.O. No. 308 gives the IACC virtually unfettered discretion to determine the metes
and bounds of the ID System.
Nor do our present laws provide adequate safeguards for
a reasonable expectation of privacy. Commonwealth Act No. 591 penalizes the
disclosure by any person of data furnished by the individual to the NSO with
imprisonment and fine.[73] Republic Act No. 1161 prohibits public disclosure of SSS
employment records and reports.[74] These laws, however, apply to records and data with
the NSO and the SSS. It is not clear whether they may be applied to data with the other
government agencies forming part of the National ID System. The need to clarify the
penal aspect of A.O. No. 308 is another reason why its enactment should be given to
Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the
right of privacy by using the rational relationship test.[75]He stressed that the purposes
of A.O. No. 308 are: (1) to streamline and speed
up the implementation of basic government services, (2)eradicate fraud by avoiding
duplication of services, and (3) generate population data for development planning. He
concludes that these purposes justify the incursions into the right to privacy for the
means are rationally related to the end.[76]
We are not impressed by the argument. In Morfe v. Mutuc,[77] we upheld the
constitutionality of R.A. 3019, the Anti-Graft and Corrupt Practices Act, as a valid police
power measure. We declared that the law, in compelling a public officer to make an
annual report disclosing his assets and liabilities, his sources of income and expenses,
did not infringe on the individual's right to privacy. The law was enacted to promote
morality in public administration by curtailing and minimizing the opportunities for official
corruption and maintaining a standard of honesty in the public service. [78]
The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a
statute, not an administrative order. Secondly, R.A. 3019 itself is sufficiently
detailed. The law is clear on what practices were prohibited and penalized, and it was
narrowly drawn to avoid abuses. In the case at bar, A.O. No. 308 may have been
impelled by a worthy purpose, but, it cannot pass constitutional scrutiny for it is not
narrowly drawn.And we now hold that when the integrity of a fundamental right is
at stake, this court will give the challenged law, administrative order, rule or
regulation a stricter scrutiny. It will not do for the authorities to invoke the
presumption of regularity in theperformance of official duties. Nor is it enough for
the authorities to prove that their act is not irrational for a basic right can be
diminished, if not defeated, even when the government does not act
irrationally. They must satisfactorily show the presence of compelling state
interests and that the law, rule, or regulation is narrowly drawn to preclude
abuses. This approach is demanded by the 1987 Constitution whose entire matrix is
designed to protect human rights and to prevent authoritarianism. In case of doubt, the
least we can do is to lean towards the stance that will not put in danger the rights
protected by the Constitution.
The case of Whalen v. Roe[79] cited by the Solicitor General is also off-line.
In Whalen, the United States Supreme Court was presented with the question of
whether the State of New York could keep a centralized computer record of the names
and addresses of all persons who obtained certain drugs pursuant to a doctor's
prescription. The New York State Controlled Substances Act of 1972 required
physicians to identify patients obtaining prescription drugs enumerated in the statute,
i.e., drugs with a recognized medical use but with a potential for abuse, so that the
names and addresses of the patients can be recorded in a centralized computer file of
the State Department of Health. The plaintiffs, who were patients and doctors, claimed
that some people might decline necessary medication because of their fear that the
computerized data may be readily available and open to public disclosure; and that
once disclosed, it may stigmatize them as drug addicts. [80] The plaintiffs alleged that the
statute invaded a constitutionally protected zone of privacy, i.e, the individual interest in
avoiding disclosure of personal matters, and the interest in independence in making
certain kinds of important decisions. The U.S. Supreme Court held that while an
individual's interest in avoiding disclosure of personal matters is an aspect of the right to
privacy, the statute did not pose a grievous threat to establish a constitutional
violation. The Court found that the statute was necessary to aid in the enforcement of
laws designed to minimize the misuse of dangerous drugs. The patient-identification
requirement was a product of an orderly and rational legislative decision made
upon recommendation by a specially appointed commission which held
extensive hearings on the matter. Moreover, the statute was narrowly drawn and
contained numerous safeguards against indiscriminate disclosure. The statute laid
down the procedure and requirements for the gathering, storage and retrieval of the
information. It enumerated who were authorized to access the data. It also prohibited
public disclosure of the data by imposing penalties for its violation. In view of these
safeguards, the infringement of the patients' right to privacy was justified by a valid
exercise of police power. As we discussed above, A.O. No. 308 lacks these vital
safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that the Court is
not per se against the use of computers to accumulate, store, process, retrieve
and transmit data to improve our bureaucracy. Computers work wonders to achieve
the efficiency which both government and private industry seek. Many information
systems in different countries make use of the computer to facilitate important social
objectives, such as better law enforcement, faster delivery of public services, more
efficient management of credit and insurance programs, improvement of
telecommunications and streamlining of financial activities.[81] Used wisely, data stored in
the computer could help good administration by making accurate and comprehensive
information for those who have to frame policy and make key decisions. [82] The benefits
of the computer has revolutionized information technology. It developed the
internet,[83] introduced the concept of cyberspace[84] and the information superhighway
where the individual, armed only with his personal computer, may surf and search all
kinds and classes of information from libraries and databases connected to the net.
In no uncertain terms, we also underscore that the right to privacy does not
bar all incursions into individual privacy. The right is not intended to stifle
scientific and technological advancements that enhance public service and the
common good. It merely requires that the law be narrowly focused[85] and a compelling
interest justify such intrusions.[86] Intrusions into the right must be accompanied by proper
safeguards and well-defined standards to prevent unconstitutional invasions. We
reiterate that any law or order that invades individual privacy will be subjected by this
Court to strict scrutiny. The reason for this stance was laid down in Morfe v. Mutuc, to
wit:
"The concept of limited government has always included the idea that governmental
powers stop short of certain intrusions into the personal life of the citizen. This is indeed
one of the basic distinctions between absolute and limited government. Ultimate and
pervasive control of the individual, in all aspects of his life, is the hallmark of the
absolute state. In contrast, a system of limited government safeguards a private sector,
which belongs to the individual, firmly distinguishing it from the public sector, which the
state can control. Protection of this private sector-- protection, in other words, of the
dignity and integrity of the individual-- has become increasingly important as modern
society has developed. All the forces of a technological age-- industrialization,
urbanization, and organization-- operate to narrow the area of privacy and facilitate
intrusion into it. In modern terms, the capacity to maintain and support this enclave of
private life marks the difference between a democratic and a totalitarian society." [87]
IV
The right to privacy is one of the most threatened rights of man living in a
mass society. The threats emanate from various sources-- governments, journalists,
employers, social scientists, etc.[88] In the case at bar, the threat comes from the
executive branch of government which by issuing A.O. No. 308 pressures the people to
surrender their privacy by giving information about themselves on the pretext that it will
facilitate delivery of basic services. Given the record-keeping power of the
computer, only the indifferent will fail to perceive the danger that A.O. No. 308
gives the government the power to compile a devastating dossier against
unsuspecting citizens. It is timely to take note of the well-worded warning of Kalvin,
Jr., "the disturbing result could be that everyone will live burdened by an unerasable
record of his past and his limitations. In a way, the threat is that because of its record-
keeping, the society will have lost its benign capacity to forget." [89] Oblivious to this
counsel, the dissents still say we should not be too quick in labelling the right to privacy
as a fundamental right. We close with the statement that the right to privacy was not
engraved in our Constitution for flattery.
IN VIEW WHEREOF, the petition is granted and Administrative Order No. 308
entitled "Adoption of a National Computerized Identification Reference System"
declared null and void for being unconstitutional.
SO ORDERED.
THIRD DIVISION
CEMCO HOLDINGS, INC., G.R. No. 171815

Petitioner,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
NATIONAL LIFE INSURANCE Promulgated:

COMPANY OF THE
PHILIPPINES, INC., August 7, 2007
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
This Petition for Review under Rule 45 of the Rules of Court seeks to
reverse and set aside the 24 October 2005 Decision[1]and the 6 March 2006
Resolution[2] of the Court of Appeals in CA-G.R. SP No. 88758 which affirmed the
judgment[3] dated 14 February 2005 of the Securities and Exchange Commission
(SEC) finding that the acquisition of petitioner Cemco Holdings, Inc. (Cemco) of
the shares of stock of Bacnotan Consolidated Industries, Inc. (BCI) and Atlas
Cement Corporation (ACC) in Union Cement Holdings Corporation (UCHC) was
covered by the Mandatory Offer Rule under Section 19 of Republic Act No. 8799,
otherwise known as the Securities Regulation Code.
The Facts
Union Cement Corporation (UCC), a publicly-listed company, has two
principal stockholders UCHC, a non-listed company, with shares amounting to
60.51%, and petitioner Cemco with 17.03%. Majority of UCHCs stocks were
owned by BCI with 21.31% and ACC with 29.69%. Cemco, on the other hand,
owned 9% of UCHC stocks.
In a disclosure letter dated 5 July 2004, BCI informed the Philippine Stock
Exchange (PSE) that it and its subsidiary ACC had passed resolutions to sell
to Cemco BCIs stocks in UCHC equivalent to 21.31% and ACCs stocks in UCHC
equivalent to 29.69%.
In the PSE Circular for Brokers No. 3146-2004 dated 8 July 2004, it was
stated that as a result of petitioner Cemcosacquisition of BCI and ACCs shares in
UCHC, petitioners total beneficial ownership, direct and indirect, in UCC has
increased by 36% and amounted to at least 53% of the shares of UCC, to wit[4]:
Particulars Percentage
Existing shares of Cemco in UCHC 9%
Acquisition by Cemco of BCIs and ACCs shares in 51%
UCHC
Total stocks of Cemco in UCHC 60%
Percentage of UCHC ownership in UCC 60%
Indirect ownership of Cemco in UCC 36%
Direct ownership of Cemco in UCC 17%
Total ownership of Cemco in UCC 53%
As a consequence of this disclosure, the PSE, in a letter to the SEC dated 15

July 2004, inquired as to whether the Tender Offer Rule under Rule 19 of the
Implementing Rules of the Securities Regulation Code is not applicable to the
purchase by petitioner of the majority of shares of UCC.
In a letter dated 16 July 2004, Director Justina Callangan of the SECs

Corporate Finance Department responded to the query of the PSE that while it was
the stance of the department that the tender offer rule was not applicable, the
matter must still have to be confirmed by the SEC en banc.
Thereafter, in a subsequent letter dated 27 July 2004,
Director Callangan confirmed that the SEC en banc had resolved that
the Cemco transaction was not covered by the tender offer rule.
On 28 July 2004, feeling aggrieved by the transaction, respondent National
Life Insurance Company of the Philippines, Inc., a minority stockholder of UCC,
sent a letter to Cemco demanding the latter to comply with the rule on mandatory
tender offer. Cemco, however, refused.
On 5 August 2004, a Share Purchase Agreement was executed by ACC and

BCI, as sellers, and Cemco, as buyer.
On 12 August 2004, the transaction was consummated and closed.
On 19 August 2004, respondent National Life Insurance Company of the

Philippines, Inc. filed a complaint with the SEC asking it to reverse its 27 July
2004 Resolution and to declare the purchase agreement of Cemco void and praying
that the mandatory tender offer rule be applied to its UCC shares. Impleaded in the
complaint were Cemco, UCC, UCHC, BCI and ACC, which were then required by
the SEC to file their respective comment on the complaint. In their comments, they
were uniform in arguing that the tender offer rule applied only to a direct
acquisition of the shares of the listed company and did not extend to an indirect
acquisition arising from the purchase of the shares of a holding company of the
listed firm.
In a Decision dated 14 February 2005, the SEC ruled in favor of the

respondent by reversing and setting aside its 27 July 2004 Resolution and directed
petitioner Cemco to make a tender offer for UCC shares to respondent and other
holders of UCC shares similar to the class held by UCHC in accordance with
Section 9(E), Rule 19 of the Securities Regulation Code.
Petitioner filed a petition with the Court of Appeals challenging the SECs
jurisdiction to take cognizance of respondents complaint and its authority to
require Cemco to make a tender offer for UCC shares, and arguing that the tender
offer rule does not apply, or that the SECs re-interpretation of the rule could not be
made to retroactively apply to Cemcos purchase of UCHC shares.
The Court of Appeals rendered a decision affirming the ruling of the SEC. It
ruled that the SEC has jurisdiction to render the questioned decision and, in any
event, Cemco was barred by estoppel from questioning the SECs jurisdiction. It,
likewise, held that the tender offer requirement under the Securities Regulation
Code and its Implementing Rules applies to Cemcos purchase of UCHC
stocks. The decretal portion of the said Decision reads:
IN VIEW OF THE FOREGOING, the assailed decision of the SEC is
AFFIRMED, and the preliminary injunction issued by the Court LIFTED.[5]
Cemco filed a motion for reconsideration which was denied by the Court of
Appeals.
Hence, the instant petition.
In its memorandum, petitioner Cemco raises the following issues:
I.
ASSUMING ARGUENDO THAT THE SEC HAS JURISDICTION OVER
NATIONAL LIFES COMPLAINT AND THAT THE SECS RE-
INTERPRETATION OF THE TENDER OFFER RULE IS CORRECT,
WHETHER OR NOT THAT REINTERPRETATION CAN BE APPLIED
RETROACTIVELY TO CEMCOS PREJUDICE.
II.
WHETHER OR NOT THE SEC HAS JURISDICTION TO ADJUDICATE THE
DISPUTE BETWEEN THE PARTIES A QUO OR TO RENDER JUDGMENT
REQUIRING CEMCO TO MAKE A TENDER OFFER FOR UCC SHARES.
III.
WHETHER OR NOT CEMCOS PURCHASE OF UCHC SHARES IS SUBJECT

TO THE TENDER OFFER REQUIREMENT.
IV.
WHETHER OR NOT THE SEC DECISION, AS AFFIRMED BY THE CA
DECISION, IS AN INCOMPLETE JUDGMENT WHICH PRODUCED NO
EFFECT.[6]
Simply stated, the following are the issues:
1. Whether or not the SEC has jurisdiction over respondents complaint and
to require Cemco to make a tender offer for respondents UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect
acquisition of shares in a listed company, in this case, the indirect
acquisition by Cemco of 36% of UCC, a publicly-listed company, through
its purchase of the shares in UCHC, a non-listed company.
3. Whether or not the questioned ruling of the SEC can be applied
retroactively to Cemcos transaction which was consummated under the
authority of the SECs prior resolution.
On the first issue, petitioner Cemco contends that while the SEC can take
cognizance of respondents complaint on the alleged violation by
petitioner Cemco of the mandatory tender offer requirement under Section 19 of
Republic Act No. 8799, the same statute does not vest the SEC with jurisdiction to
adjudicate and determine the rights and obligations of the parties since, under the
same statute, the SECs authority is purely administrative. Having been vested with
purely administrative authority, the SEC can only impose administrative sanctions
such as the imposition of administrative fines, the suspension or revocation of
registrations with the SEC, and the like. Petitioner stresses that there is nothing in
the statute which authorizes the SEC to issue orders granting
affirmative reliefs. Since the SECs order commanding it to make a tender offer is
an affirmative relief fixing the respective rights and obligations of parties, such
order is void.
Petitioner further contends that in the absence of any specific grant of

jurisdiction by Congress, the SEC cannot, by mere administrative regulation,
confer on itself that jurisdiction.
Petitioners stance fails to persuade.
In taking cognizance of respondents complaint against petitioner and

eventually rendering a judgment which ordered the latter to make a tender offer,
the SEC was acting pursuant to Rule 19(13) of the Amended Implementing Rules
and Regulations of the Securities Regulation Code, to wit:
13. Violation
If there shall be violation of this Rule by pursuing a purchase of equity

shares of a public company at threshold amounts without the required tender
offer, the Commission, upon complaint, may nullify the said acquisition and
direct the holding of a tender offer. This shall be without prejudice to the
imposition of other sanctions under the Code.
The foregoing rule emanates from the SECs power and authority to regulate,
investigate or supervise the activities of persons to ensure compliance with the
Securities Regulation Code, more specifically the provision on mandatory tender
offer under Section 19 thereof.[7]
Another provision of the statute, which provides the basis of Rule 19(13) of
the Amended Implementing Rules and Regulations of the Securities Regulation
Code, is Section 5.1(n), viz:
[T]he Commission shall have, among others, the following powers and functions:
xxxx
(n) Exercise such other powers as may be provided by law as well as those
which may be implied from, or which are necessary or incidental to the carrying
out of, the express powers granted the Commission to achieve the objectives and
purposes of these laws.
The foregoing provision bestows upon the SEC the general adjudicative
power which is implied from the express powers of the Commission or which is
incidental to, or reasonably necessary to carry out, the performance of the
administrative duties entrusted to it. As a regulatory agency, it has the incidental
power to conduct hearings and render decisions fixing the rights and obligations of
the parties. In fact, to deprive the SEC of this power would render the agency
inutile, because it would become powerless to regulate and implement the law. As
correctly held by the Court of Appeals:
We are nonetheless convinced that the SEC has the competence to render
the particular decision it made in this case. A definite inference may be drawn
from the provisions of the SRC that the SEC has the authority not only to
investigate complaints of violations of the tender offer rule, but to adjudicate
certain rights and obligations of the contending parties and grant
appropriate reliefs in the exercise of its regulatory functions under the
SRC. Section 5.1 of the SRC allows a general grant of adjudicative powers to the
SEC which may be implied from or are necessary or incidental to the carrying out
of its express powers to achieve the objectives and purposes of the SRC. We must
bear in mind in interpreting the powers and functions of the SEC that the law has
made the SEC primarily a regulatory body with the incidental power to conduct
administrative hearings and make decisions. A regulatory body like the SEC may
conduct hearings in the exercise of its regulatory powers, and if the case involves
violations or conflicts in connection with the performance of its regulatory
functions, it will have the duty and authority to resolve the dispute for the best
interests of the public.[8]
For sure, the SEC has the authority to promulgate rules and regulations,
subject to the limitation that the same are consistent with the declared policy of the
Code. Among them is the protection of the investors and the minimization, if not
total elimination, of fraudulent and manipulative devises. Thus, Subsection 5.1(g)
of the law provides:
Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulations and orders.
Also, Section 72 of the Securities Regulation Code reads:
72.1. x x x To effect the provisions and purposes of this Code, the

Commission may issue, amend, and rescind such rules and regulations and orders
necessary or appropriate, x x x.
72.2. The Commission shall promulgate rules and regulations providing

for reporting, disclosure and the prevention of fraudulent, deceptive or
manipulative practices in connection with the purchase by an issuer, by tender
offer or otherwise, of and equity security of a class issued by it that satisfies the
requirements of Subsection 17.2. Such rules and regulations may require such
issuer to provide holders of equity securities of such dates with such information
relating to the reasons for such purchase, the source of funds, the number of
shares to be purchased, the price to be paid for such securities, the method of
purchase and such additional information as the Commission deems necessary or
appropriate in the public interest or for the protection of investors, or which the
Commission deems to be material to a determination by holders whether such
security should be sold.
The power conferred upon the SEC to promulgate rules and regulations is a
legislative recognition of the complexity and the constantly-fluctuating nature of
the market and the impossibility of foreseeing all the possible contingencies that
cannot be addressed in advance. As enunciated in Victorias Milling Co., Inc. v.
Social Security Commission[9]:
Rules and regulations when promulgated in pursuance of the procedure or

authority conferred upon the administrative agency by law, partake of the nature
of a statute, and compliance therewith may be enforced by a penal sanction
provided in the law. This is so because statutes are usually couched in general
terms, after expressing the policy, purposes, objectives, remedies and sanctions
intended by the legislature. The details and the manner of carrying out the law are
often times left to the administrative agency entrusted with its enforcement. In
this sense, it has been said that rules and regulations are the product of a delegated
power to create new or additional legal provisions that have the effect of law.
Moreover, petitioner is barred from questioning the jurisdiction of the
SEC. It must be pointed out that petitioner had participated in all the proceedings
before the SEC and had prayed for affirmative relief. In fact, petitioner defended
the jurisdiction of the SEC in its Comment dated 15 September 2004, filed with the
SEC wherein it asserted:
This Honorable Commission is a highly specialized body created for the

purpose of administering, overseeing, and managing the corporate industry, share
investment and securities market in the Philippines. By the very nature of its
functions, it dedicated to the study and administration of the corporate and
securities laws and has necessarily developed an expertise on the subject. Based
on said functions, the Honorable Commission is necessarily tasked to issue
rulings with respect to matters involving corporate matters and share
acquisitions. Verily when this Honorable Commission rendered the Ruling that
the acquisition of Cemco Holdings of the majority shares of Union Cement
Holdings, Inc., a substantial stockholder of a listed company, Union Cement
Corporation, is not covered by the mandatory tender offer requirement of the SRC
Rule 19, it was well within its powers and expertise to do so. Such ruling shall be
respected, unless there has been an abuse or improvident exercise of authority.[10]
Petitioner did not question the jurisdiction of the SEC when it rendered an
opinion favorable to it, such as the 27 July 2004Resolution, where the SEC opined
that the Cemco transaction was not covered by the mandatory tender offer rule. It
was only when the case was before the Court of Appeals and after the SEC
rendered an unfavorable judgment against it that petitioner challenged the SECs
competence. As articulated in Ceroferr Realty Corporation v. Court of Appeals[11]:
While the lack of jurisdiction of a court may be raised at any stage of an

action, nevertheless, the party raising such question may be estoppedif he has
actively taken part in the very proceedings which he questions and he only objects
to the courts jurisdiction because the judgment or the order subsequently rendered
is adverse to him.
On the second issue, petitioner asserts that the mandatory tender offer rule
applies only to direct acquisition of shares in the public company.
This contention is not meritorious.

Tender offer is a publicly announced intention by a person acting alone or in
concert with other persons to acquire equity securities of a public company.[12] A
public company is defined as a corporation which is listed on an exchange, or a
corporation with assets exceeding P50,000,000.00 and with 200 or more
stockholders, at least 200 of them holding not less than 100 shares of such
company.[13] Stated differently, a tender offer is an offer by the acquiring person to
stockholders of a public company for them to tender their shares therein on the
terms specified in the offer.[14] Tender offer is in place to protect minority
shareholders against any scheme that dilutes the share value of their investments. It
gives the minority shareholders the chance to exit the company under reasonable
terms, giving them the opportunity to sell their shares at the same price as those of
the majority shareholders.[15]
Under Section 19 of Republic Act No. 8799, it is stated:
Tender Offers. 19.1. (a) Any person or group of persons acting in concert
who intends to acquire at least fifteen percent (15%) of any class of any equity
security of a listed corporation or of any class of any equity security of a
corporation with assets of at least Fifty million pesos (P50,000,000.00) and
having two hundred (200) or more stockholders with at least one hundred (100)
shares each or who intends to acquire at least thirty percent (30%) of such equity
over a period of twelve (12) months shall make a tender offer to stockholders by
filing with the Commission a declaration to that effect; and furnish the issuer, a
statement containing such of the information required in Section 17 of this Code
as the Commission may prescribe. Such person or group of persons shall publish
all requests or invitations for tender, or materials making a tender offer or
requesting or inviting letters of such a security. Copies of any additional material
soliciting or requesting such tender offers subsequent to the initial solicitation or
request shall contain such information as the Commission may prescribe, and
shall be filed with the Commission and sent to the issuer not later than the time
copies of such materials are first published or sent or given to security holders.
Under existing SEC Rules,[16] the 15% and 30% threshold acquisition of
shares under the foregoing provision was increased to thirty-five percent (35%). It
is further provided therein that mandatory tender offer is still applicable even if the
acquisition is less than 35% when the purchase would result in ownership of over
51% of the total outstanding equity securities of the public company.[17]
The SEC and the Court of Appeals ruled that the indirect acquisition by
petitioner of 36% of UCC shares through the acquisition of the non-listed UCHC
shares is covered by the mandatory tender offer rule.
This interpretation given by the SEC and the Court of Appeals must be
sustained.
The rule in this jurisdiction is that the construction given to a statute by an

administrative agency charged with the interpretation and application of that
statute is entitled to great weight by the courts, unless such construction is clearly
shown to be in sharp contrast with the governing law or statute.[18] The rationale for
this rule relates not only to the emergence of the multifarious needs of a modern or
modernizing society and the establishment of diverse administrative agencies for
addressing and satisfying those needs; it also relates to accumulation of experience
and growth of specialized capabilities by the administrative agency charged
withimplementing a particular statute.[19]
The SEC and the Court of Appeals accurately pointed out that the coverage
of the mandatory tender offer rule covers not only direct acquisition but also
indirect acquisition or any type of acquisition. This is clear from the discussions of
the Bicameral Conference Committee on the Securities Act of 2000, on 17 July
2000.
SEN. S. OSMEA. Eto ang mangyayari diyan, eh. Somebody controls 67%
of the Company. Of course, he will pay a premium for the first 67%. Control yan,
eh. Eh, kawawa yung mga maiiwan, ang 33% because the value of the stock
market could go down, could go down after that, because there will (p. 41) be no
more market. Wala nang gustong bumenta. Wala nang I
mean maraming gustong bumenta, walang gustong bumilikung hindi yung majorit
y owner. And they will not buy. They already have 67%. They already have
control. And this protects the minority. And we have had a case in Cebu wherein
Ayala A who already owned 40% of Ayala B made an offer for another 40%
of Ayala B without offering the
20%.Kawawa naman yung nakahawak ngayon ng 20%. Ang baba ng share sa mar
ket. But we did not have a law protecting them at that time.
CHAIRMAN ROCO. So what is it that you want to achieve?

SEN. S. OSMEA. That if a certain group achieves a certain amount of
ownership in a corporation, yeah, he is obligated to buy anybody who wants to
sell.
CHAIRMAN ROCO. Pro-rata lang. (p. 42).
xxxx
REP. TEODORO. As long as it reaches 30, ayan na. Any type of

acquisition just as long as it will result in 30 (p.50) reaches 30, ayanna. Any
type of acquisition just as long as it will result in 30, general tender, pro-
rata.[20] (Emphasis supplied.)
Petitioner counters that the legislators reference to any type of acquisition

during the deliberations on the Securities Regulation Code does not indicate that
congress meant to include the indirect acquisition of shares of a public corporation
to be covered by the tender offer rule. Petitioner also avers that it did not directly
acquire the shares in UCC and the incidental benefit of having acquired the control
of the said public company must not be taken against it.
These arguments are not convincing. The legislative intent of Section 19 of

the Code is to regulate activities relating to acquisition of control of the listed
company and for the purpose of protecting the minority stockholders of a listed
corporation.Whatever may be the method by which control of a public company is
obtained, either through the direct purchase of its stocks or through an indirect
means, mandatory tender offer applies. As appropriately held by the Court of
Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not UCC. By
happenstance, as a result of the transaction, it became an indirect owner of
UCC. We are constrained, however, to construe ownership acquisition to mean
both direct and indirect. What is decisive is the determination of the power of
control. The legislative intent behind the tender offer rule makes clear that the
type of activity intended to be regulated is the acquisition of control of the listed
company through the purchase of shares. Control may [be] effected through a
direct and indirect acquisition of stock, and when this takes place, irrespective of
the means, a tender offer must occur. The bottomline of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to sell
in connection with a transfer of control. x x x.[21]
As to the third issue, petitioner stresses that the ruling on mandatory tender
offer rule by the SEC and the Court of Appeals should not have retroactive effect
or be made to apply to its purchase of the UCHC shares as it relied in good faith on
the letter dated 27 July 2004 of the SEC which opined that the proposed
acquisition of the UCHC shares was not covered by the mandatory offer rule.
The argument is not persuasive.
The action of the SEC on the PSE request for opinion on

the Cemco transaction cannot be construed as passing merits or giving approval to
the questioned transaction. As aptly pointed out by the respondent, the letter
dated 27 July 2004 of the SEC was nothing but an approval of the draft letter
prepared by Director Callanga. There was no public hearing where interested
parties could have been heard. Hence, it was not issued upon a definite and
concrete controversy affecting the legal relations of parties thereby making it a
judgment conclusive on all the parties. Said letter was merely
advisory. Jurisprudence has it that an advisory opinion of an agency may be
stricken down if it deviates from the provision of the statute.[22] Since the letter
dated 27 July 2004 runs counter to the Securities Regulation Code, the same may
be disregarded as what the SEC has done in its decision dated 14 February 2005.
Assuming arguendo that the letter dated 27 July 2004 constitutes a ruling,
the same cannot be utilized to determine the rights of the parties. What is to be
applied in the present case is the subsequent ruling of the SEC dated 14 February
2005 abandoning the opinion embodied in the letter dated 27 July 2004. In Serrano
v. National Labor Relations Commission,[23] an argument was raised similar to the
case under consideration. Private respondent therein argued that the new doctrine
pronounced by the Court should only be applied prospectively. Said postulation
was ignored by the Court when it ruled:
While a judicial interpretation becomes a part of the law as of the date that
law was originally passed, this is subject to the qualification that when a doctrine
of this Court is overruled and a different view is adopted, and more so when there
is a reversal thereof, the new doctrine should be applied prospectively and should
not apply to parties who relied on the old doctrine and acted in good faith. To
hold otherwise would be to deprive the law of its quality of fairness and justice
then, if there is no recognition of what had transpired prior to such adjudication.
It is apparent that private respondent misconceived the import of the

ruling. The decision in Columbia Pictures does not mean that if a new rule is laid
down in a case, it should not be applied in that case but that said rule should apply
prospectively to cases arising afterwards. Private respondents view of the
principle of prospective application of new judicial doctrines would turn the
judicial function into a mere academic exercise with the result that the doctrine
laid down would be no more than a dictum and would deprive the holding in the
case of any force.
Indeed, when the Court formulated the Wenphil doctrine, which we

reversed in this case, the Court did not defer application of the rule laid down
imposing a fine on the employer for failure to give notice in a case of dismissal
for cause. To the contrary, the new rule was applied right then and there. x x x.
Lastly, petitioner alleges that the decision of the SEC dated 14 February
2005 is incomplete and produces no effect.
This contention is baseless.
The decretal portion of the SEC decision states:
In view of the foregoing, the letter of the Commission, signed by

Director Justina F. Callangan, dated July 27, 2004, addressed to the Philippine
Stock Exchange is hereby REVERSED and SET ASIDE. Respondent Cemco is
hereby directed to make a tender offer for UCC shares to complainant and other
holders of UCC shares similar to the class held by respondent UCHC, at the
highest price it paid for the beneficial ownership in respondent UCC, strictly in
accordance with SRC Rule 19, Section 9(E).[24]
A reading of the above ruling of the SEC reveals that the same is
complete. It orders the conduct of a mandatory tender offer pursuant to the
procedure provided for under Rule 19(E) of the Amended Implementing Rules and
Regulations of the Securities Regulation Code for the highest price paid for the
beneficial ownership of UCC shares. The price, on the basis of the SEC decision, is
determinable. Moreover, the implementing rules and regulations of the Code are
sufficient to inform and guide the parties on how to proceed with the mandatory
tender offer.
WHEREFORE, the Decision and Resolution of the Court of Appeals

dated 24 October 2005 and 6 March 2006, respectively, affirming the Decision
dated 14 February 2005 of the Securities and Exchange Commission En Banc, are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-47771 March 11, 1978
PEDRO G. PERALTA, petitioner,
vs.
HON. COMMISSION ON ELECTIONS, HON. NATIONAL TREASURER, and KILUSANG
BAGONG LIPUNAN,respondents.
G.R. No. L-47803 March 11, 1978
JUAN T. DAVID, petitioner,
vs.
COMMISSION ON ELECTIONS (COMELEC); LEONARDO B. PEREZ, Chairman-
COMELEC; VENANCIO S. DUQUE, FLORES A. BAYOT, CASIMIRO R. MADARANG,
VENANCIO L. YANEZA, Commissioners-COMELEC; JAIME LAYA, Budget
Commissioner; and GREGORIO G. MENDOZA, National Treasurer, respondents.
G.R. No. L-47816 March 11, 1978
YOUTH DEMOCRATIC MOVEMENT, RAMON PAGUIRIGAN, and ALFREDO
SALAPANTAN, JR., petitioners,
vs.
THE COMMISSION ON ELECTIONS, respondent.
G.R. No. L-47767 March 11, 1978
IN THE MATTER OF PETITION FOR THE DECLARATION OF CERTAIN PROVISIONS
OF THE ELECTION CODE OF 1978 AS UNCONSTITUTIONAL. GUALBERTO J. DE LA
LLANA, petitioner.
G.R. No. L-47791 March 11, 1978
B. ASUNCION BUENAFE, petitioner,
vs.
COMMISSION ON ELECTIONS, respondent.
G.R. No. L-47827 March 11, 1978
REYNALDO T. FAJARDO, petitioner,
vs.
COMMISSION ON ELECTIONS, JAIME LAYA, as the BUDGET COMMISSIONER,
GREGORIO G. MENDOZA, as the NATIONAL TREASURER, KILUSANG BAGONG
LIPUNAN, and LAKAS NG BAYAN, respondents.
Pedro G. Peralta in his own behalf.
Nemesio C. Garcia, Jr., Rodrigo H. Melchor, Dante, S. David, Julie David-Feliciano & Juan
T. David for petitioner Juan T. David.
Raul M. Gonzalez & Associates for petitioners Youth Democractic Movement, et al.
Gualberto J. de la Llana in his own behalf.
B. Asuncion Buenafe in his own behalf
Binay Cueva, Fernandez & Associates for petitioner Reynaldo T. Fajardo.
Tolentino Law Office for respondent Kilusang Bagong Lipunan.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Vicente V. Mendoza and
Assistant Solicitor General Reynato S. Puno for Commission of Elections (COMELEC).
DECISION
ANTONIO, J.:
These six (6) consolidated petitions pose for the determination of this Court the
constitutionality of specific provisions of the 1978 Election Code (Presidential Decree No.
1269).
I
The first issue posed for resolution is: Whether or not the voting system provided for in
Sections 140 and 155, subparagraphs 26 to 28, of the 1978 Election Code, granting to the
voter the option to vote either for individual candidates by filling in the proper spaces in the
ballot the names of candidates he desires to elect, or to vote for all the candidates of a
political party, group or aggrupation by simply waiting in the space provided for in the ballot
the name of the political party, group or aggrupation, violates Section 1 of Article IV and
Section 9(1) of article XII-C of the Constitution.
The specific provisions of the 1978 Election Code which are assailed as being in violation of
the equal protection clause are the following:
SEC. 140. Manner of preparing the ballot. The voter upon receiving his folded ballot shall
forthwith proceed to one of the empty voting booths and shall there fill his ballot by writing in
the proper space for each office the name of the candidate for whom he desires to
vote: Provided, That in the election of regional representatives to the interim Batasang
Pambansa, the voter may choose to vote for individual candidates by filling in the proper
spaces of the ballot the names of candidates he desires to elect, but if for any reason he
chooses to vote for all the candidates of a political party, group or aggrupation, by writing in
the space provided for in the ballot the name of the political party, group or
aggrupation: Provided further, That the ballots for the election of regional representatives to
theinterim Batasang Pambansa shall be prepared by the Commission in such manner that
the voter may vote for the straight ticket of a political party, group or aggrupation or for
individual candidates, and for this purpose, the ticket of a regularly organized political party,
group or aggrupation as certified under oath by their respective directorates or duly
authorized representatives as wen as candidates not belonging to any particular political
party, group or aggrupation, shall be printed in the upper portion of said ballots in a manner
which does not give undue advantage to any political party, group or aggrupation or
candidate, and there shall also be a column containing blank spaces for the names of such
candidates which spaces are to be filled by the voter who does not desire to vote for a
straight ticket: Provided, finally, That a candidate may be in the ticket of only one political
party, group or aggrupation; if he is included in the ticket of more than one political party,
group or aggrupation presenting different sets of candidates, he shall immediately inform
the Commission as to which ticket he chooses to be included, and if he fails to do so, he
shall cease to be considered to belong to any ticket. The following notice shall be printed on
the ballot: If you want to vote for all the official candidates of a political party, group or
aggrupation to the exclusion of all other candidates, write the name of such political party,
group or aggrupation in the space indicated. It shag then be unnecessary for you to write
the names of Candidates you vote for. On the other hand, if you want to vote for candidates
belonging to different parties, groups or aggrupations and/or for individual candidates, write
in the respective blank spaces the names of the candidates you vote for and the names
written by you in the respective blank spaces in the ballot shall then be considered as
validly voted for.
xxx xxx xxx
SEC. 155. Rules for the appreciation of ballots. In the reading and appreciation of ballots,
the committee shall observe the following rules:
xxx xxx xxx
26. If a voter has written in the proper space of the ballot the name of a political party, group
or aggrupation which has nominated official candidates, a vote shall be counted for each of
the official candidates of such party, group or aggrupation.
27. If a voter has written in the proper space of the ballot the name of a political party, group
or aggrupation which has nominated official candidates and the names of individual
candidates belonging to the ticket of the same political party, group or aggrupation in the
spaces provided therefor, a vote shall be counted for each of the official candidates of such
party, group or aggrupation and the votes for the individual candidates written on the ballot
shall be considered as stray votes.
28. If a voter has written in the proper space of his ballot the name of a political party, group
or aggrupation which has nominated official candidates and the names of individual
candidates not belonging to the ticket of the same political party, group or aggrupation in the
spaces provided therefor, an of the votes indicated in the ballot shall be considered as stray
votes and shall not be counted. Provided, however, That if the number of candidates
nominated by the political party, group or aggrupation written by the voter in the ballot is
less than the number of seats to be filled in the election and the voter also writes the names
of individual candidates in the spaces provided therefor not belonging to the ticket of the
political party, group or aggrupation he has written in the ballot, the ballot shall be counted
as votes in favor of the candidates of the political party, group or aggrupation concerned
and the individual candidates whose names were firstly written by the voter in the spaces
provided therefor, until the authorized number of seats is fined.
The system which allows straight party voting is not unique in the Philippine experience. As
early as 1941, the Second National Assembly of the Philippines enacted Commonwealth
Act No. 666, entitled An Act to Provide for the First Election for President and Vice-
President of the Philippines, Senators, and Members of the House of Representatives,
Under the Constitution and the Amendments Thereof. Said Commonwealth Act enabled
the voter to vote for individual candidates or for a straight party ticket by writing either the
names of the candidates of his choice or of the political party he favored on designated
blank spaces on the ballot. 1
While the original Election Code, Commonwealth Act No. 357, dated August 22, 1938, did
not carry provisions for optional straight party voting, 2 the system was, however,
substantially reinstituted in Republic Act No. 180, or the Revised Election Code, enacted on
June 21, 1947. 3 The only im portent difference introduced was that in appreciating ballots
on which the voter had written both the name of a political party and the names of
candidates not members of said party, Republic Act No. 180 provided that the individual
candidates whose names were written shall be considered voted for, 4 whereas
Commonwealth Act No. 666 provided that the vote shall be counted in favor of the political
party. 5
Likewise, it should be noted that in other jurisdictions, ballots providing for optional straight
party voting have been accepted as a standard form, in addition to the office-block ballots
in which all candidates for each office grouped together. Among the different states of the
United States, for example, the following has been observed:
The party-column ballot, used in about 30 states, is sometimes called the Indiana-type
ballot because the Indiana law of 1889 has served as a model for other states. In most
states using the party column ballot, it is possible to vote for the candidates of a single party
for all offices by making a single cross in the circle at the head of the column containing the
partys candidates. In some states, the party emblem is carried at the top of its column, a
feature which, in less literate days, was of some utility in guiding the voter to the right
column on the ballot. To vote a split ticket on a party-column ballot usually requires the
recording of a choice for each office, path the voter will presumably hesitate to follow when
he has the alternative of making a single crossmark. Professional party workers generally
favor the use of the party-column ballot because it encourages straight ticket voting.
In contrast with the party-column ballot is the office-block ballot, or, as it is sometimes called
by virtue of its origin, the Massachussetts ballot. Names of all candidates, by whatever party
nominated, for each office are grouped together on the office-block ballot, usually with an
indication alongside each name of the party affiliation. The supposition is that the voter will
be compelled to consider separately the candidates for each ballot, in contrast with the
encouragement given to straight-ticket voting by the party column ballot. Pennsylvania uses
a variation of the office-block ballot: the candidates are grouped according to office but
provision is made for straight-ticket voting by a single mark. 6
Election laws providing for the Indiana-type ballot, as aforementioned, have been held
constitutional as against the contention that they interfere with the freedom and equality of
elections. Thus, in Oughton, et al. v. Black, et al., 7assailed as unconstitutional was a
statutory proviso which required that ballots should be printed with the following instructions:
To vote a straight party ticket, mark a cross (x) in the square opposite the name of the
party of your choice, in the first column. a crossmark in the square opposite the name of any
candidate indicates a vote for that candidate.
It was contended that such provision interferes with the freedom and equality of elections,
and authorizes a method of voting for political parties and not or men. It was alleged that
the special privilege given to straight ticket voters and denied to others injured appellants,
who, as candidates, were opposed by other candidates who can much more easily be voted
for. In resolving such question and declaring the law valid, the Supreme Court of
Pennsylvania held that the free and equal exercises of the elective franchise by every
elector is not impaired by the statute, but simply regulated. The regulation is for the
convenience of the electors. The constitutionality of the law is not to be tested by the fact
that one voter can cast his ballot by making one mark while another may be required to
make two or more to express his will. When each has been afforded the opportunity and
been provided with reasonable facilities to vote, the Constitution, and lies in the sound
discretion of the Legislature. 8
The Pennsylvania Court further emphasized that elections are equal when the vote of every
candidate is equal in its influence on the result, to the vote of every candidate; when each
ballot is as effective as every other ballot. 9
To the same effect is the holding in Ritchie v. Richards, which sustained the validity of a
statute containing a similar provisional. 10
At any rate, voting by party has been accepted in various states as a form of democratic
electoral process. In Israel, for example, where the election system is one of proportional
representation in which each political party presents a list of candidates to the citizenry, the
voter selects a party, not a candidate, and each party is then represented in the Knesset in
proportion to its strength on the polls. The head of the largest party is asked to form a
government. 11 In France, on the other hand, under the electoral law of October 5, 1946,
providing for the selection of National Assembly members, a list system of proportional
representation was set up, whereby each electoral area elected several candidates in
proportion to its voting strength. The voter was required to vote only for one party list; he
could not split his vote among several candidates on different party lists, but could depart
from the order of preference set up by the party. Commissioners then count the ballots for
each party list and distribute the total number of seats among the different successful
parties. 12 In Italy and West Germany, party voting is likewise in practice, and proportional
representation seats are distributed on the basis of the number of votes received by the
successful parties.
Petitioners in the cases at bar invoke the constitutional mandate that no person shag be
denied the equal protection of the laws (Article IV, Section 1) and the provision that bona
fide candidates for any public office shall be free from any form of harassment or
discrimination (Article XII-C, Section 9[l]). The word discrmination in the latter provision
should be construed in relation to the equal protection clause and in the manner and degree
in which it is taken therein, since said provision is in line with the provision of the Bill of
Rights that no person shall be denied the equal protection of the laws . 13
The main objection of petitioners against the optional straight party voting provided for in
the Code is that an independent candidate would be discriminated against because by
merely writing on his ballot the name of a political party, a voter would have voted for all the
candidates of that party, an advantage which the independent candidate does not enjoy. In
effect, it discontended that the candidate who is not a party member is deprived of the equal
protection of the laws, as provided in Section 1 of Article IV, in relation to Section 9 of Article
XII, of the Constitution.
The equal protection clause does not forbid all legal classifications. What is proscribes is a
classification which is arbitrary and unreasonable. It is not violated by a reasonable
classification based upon substantial distinctions, where the classification is germane to the
purpose of the law and applies equally to all those belonging to the same class. 14 The equal
protection clause is not infringed by legislation which applies only to those persons falling
within a specified class, if it applies alike to all persons within such class, and reasonable
grounds exist for making a distinction between those who fall within the class and those
who do not. 15 There is, of course, no concise or easy answer as to what an arbitrary
classification is. No definite rule has been or can be laid down on the basis of which such
question may be resolved. The determination must be made in accordance with the facts
presented by the particular case. The general rule, which is well-settled by the authorities, is
that a classification, to be valid, must rest upon material differences between the persons,
activities or things included and those excluded. There must, in other words, be a basis for
distinction. Furthermore, such classification must be germane and pertinent to the purpose
of the law. And, finally, the basis of classification must, in general, be so drawn that those
who stand in substantially the same position with respect to the law are treated alike. It is,
however, conceded that it is almost impossible in some matters to foresee and provide for
every imaginable and exceptional case. Exactness in division is impossible and never
looked for in applying the legal test. All that is required is that there must be, in general,
some reasonable basis on general lines for the division. 16
Classification which has some reasonable basis does not offend the equal protection clause
merely because it is not made with mathematical nicety. 17
In the cases at bar, the assailed classification springs from the alleged differential treatment
afforded to candidates who are party members as against those who run as independents.
It must be emphasized in the election law must carry the burden of showing that it does not
rest upon a reasonable basis, but is essentially arbitrary. 18 The factual foundation to
demonstrate invalidity must be established by the litigant challenging its
constitutionality. 19 These principles are predicated upon the presumption in favor of
constitutionality.
This has to be so because of the fundamental criteria in cases of this nature that all
reasonable doubts should be resolved in favor of the constitutionality of a statute. An act of
the legislature, approved by the executive, is presumed to be within constitutional
limitations. The responsibility of upholding the Constitution rests not on the courts alone but
on the legislature as well. The question of the validity of every statute is first determined by
the legislative department of the government itself. 20
Thus, to justify the nullification of a law, there must be a clear and unequivocal breach of
the Constitution, not a doubtful and argumentative implication. 21 There is practical
unanimity among the courts in the pronouncement that laws shag not be declared invalid
unless the conflict with the Constitution is clear beyond a reasonable doubt. 22
We shall now test the validity of petitioners arguments on the basis of these principles.
In the challenged provision of the electoral law, unlike the previous block- voting statutes, all
the names of the candidates, whether of parties, groups or independent candidates, are
printed on the ballot. Before he prepares his ballot, the voter will be able to read all the
names of the candidates. No candidate will receive more than one vote, whether he is voted
individually or as a candidate of a party group or aggrupation. The voter is free to vote for
the individual candidates or to vote by party, group or aggrupation. The choice is His. No
one can compel him to do otherwise. In the case of candidates, the decision on whether to
run as an independent candidate or to join a political party, group or aggrupation is left
entirely to their discretion. Certainly, before filing his certificate of candidacy, a candidate is
aware of the advantages under the law accruing to candidates of a political party or group. If
he wishes to avail hihiself of such alleged advantages as an official candidate of a party, he
is free to do so by joining a political party group or aggrupation. In other words, the choice is
his. In making his decision, it must be assumed that the candidate had carefully weighed
and considered the relative advantages and disavantages of either alternative. So long as
the application of the rule depends on his voluntary action or decision, he cannot, after
exercising his discretion, claim that he was the victim of discrimination.
In the ordinary course of things, those who join or become members of associations, such
as political parties or any other lawful groups or organizations, necessarily enjoy certain
benefits and privileges which are incident to, or are consequences of such membership.
Freedom of association has been enshrined in the Constitution to enable individuals to join
others of like persuasion to pursue common objectives and to engage in lawful activities.
Membership in associations is considered as an extension of individual freedom. Effective
advocacy of both public and private views or opinions is undeniably enhanced by group
association. Freedom to engage in associations for the advancement of beliefs and Ideas
is, therefore, an inseparable aspect of the liberty guaranteed by the fundamental law.
Therefore, if, as an incident of joining a political party, group or aggrupation, the candidate
is given certain privileges, this is constitutionally Permissible. Thus, under the provisions of
the previous election laws, only the parties who polled the largest and the next largest
number of votes in the last preceding presidential elections were entitled to representation
in the Board of Election Inspectors. 23 Independent candidates had no representation in the
Board; and yet it was never contended that the independent candidates were denied the
equal protection of the laws.
The official candidates of an organized political party may be distinguished from an
independent candidate. The former are bound by the partys rules. They owe loyalty to the
party, its tenets, its policies, its platform and programmes of government. To the electorate,
they represent the party, its principles, ideals and objectives. This is not true of an
independent candidate. If the electoral law has bias in favor of political parties, it is because
political parties constitute a basic element of the democractic institutional apparatus.
Government derives its strength from the support, activity or passive, of a coalition of
elements of society. In modern nines the political party has become the instrument for the
organization of societies. This is predicated on the doctrine that government exists with the
consent of the governed. Political parties per. form an essential function in the
management of succession to power, as well as in the process of obtaining popular consent
to the course of public policy. They amass sufficient support to buttress the authority of
governments; or, on the contrary, they attract or organize discontent and dissatisfaction
sufficient to oust the government. In either case they perform the function of the articulation
of the interests and aspirations of a substantial segment of the citizenry, usually in ways
contended to be promotive of the national weal. 24
The Constitution establishes a parliamentary system of government. Such a system implies
the existence of responsible political parties with distinct programmes of government.
The parliamentary system works best when party distinctions are well defined by
differences in principle. As observed by a noted authority on political law, under a
parliamentary system; the maintenance and development party system becomes not only
necessary but indispensable for the enforcement of the idea and the rule of government
responsibility and accountability to the people in the political management of the
country. 25 Indeed, the extent to which political parties can become effective instruments of
self-government depends, in the final analysis, on the degree of the citizens competence in
politics and their willingness to contribute political resources to the parties.
It is also contended that the system of optional straight party voting is anathema to free,
orderly and honest elections or that it encourages laziness or political irresponsibility. These
are objections that go to the wisdom of the statute. It is well to remember that this Court
does not pass upon questions of wisdom or expediency of legislation. We have reiterated in
a previous case that: It is settled that only congressional power or competence, not
the wisdom of the action taken, may be the basis for declaring a statute invalid. 26 This
notwithstanding, We deem it necessary, for the information of everyone concerned, to
explain why such fears, in a growing climate of political maturity and social responsibility
appear conjectural.
There are no data to show that the system herein assailed was the proximate cause of all
the frauds in the 1941, 1947 and 1949 elections. Besides, all procedures or manners of
voting are susceptible to fraud. The important thing to consider is that the 1978 Election
Code is replete with new provisions designed to guarantee the sanctity and secrecy of the
peoples vote.
As demonstrated in the experience of other democratic states, such a system has its
advantages. It may enable deserving young candidates but without adequate financial
resources of their own to win, with party support, in countrywide or regional elections.
Since candidates of a party or group may pool their resources, it will tend to make elections
less expensive. As this system of voting favors the strongly organized parties or groups, it
tends to prevent the proliferation of political parties or groups. It thus results in the formation
of stable and responsible political parties. On the part of the electorate, such a system of
voting facilitates the exercise of their right of suffrage. It enables the laborer, the farmer and
the voter of ordinary education to vote with greater facility for all the official candidates of
the party of his choice. It thus broadens the ways and means by which the sovereign will
can be expressed.
Nor could it be true, as petitioners contend, that a system which allows straight ticket voting
encourages laziness and political irresponsibility. While there may be those who may be
moved to vote straight party by reason of lack of interest, nevertheless, there are still those
sufficiently interested to cast an intelligent vote. It has been observed that in a straight ticket
the motivated voter is more likely to organize his ballot in a highly structure pattern. His
motivation may derive from an interest in parties, candidates, or issues or any combination
of those. As observed by a survey research group: Motivated straight ticket voting appears
to reflect an intention on the part of the voter to accomplish his political purpose as fully as
possible. Such a voter does not scatter his choices casually, he has a political direction in
mind and he implements it through the choice of one party or the other on the ballot. The
more highly motivated he is toward this political objective, the less willing he is to dilute his
vote by crossing party lines. 27
II
The second issue before Us is: Whether or not the provisions of Sections 11, 12 and 14 of
the 1978 Election Code, which authorize the elections of the members of the interim
Batasang Pambansa by regions, violate Section 2 of Article VIII of the Constitution which
provides that the members of the National Assembly shall be apportioned among the
provinces, representative districts and cities.
Assailed as unconstitutional are the following provisions of the 1978 Election Code:
SEC. 11. Composition. The interim Batasang Pambansa shall be composed of the
incumbent President of the Philippines, representatives elected from the different regions of
the nation, those who shag not be less than eighteen years of age elected by their
respective sectors, and those chosen by the incumbent President from the members of the
Cabinet.
SEC. 12. Apportionment of regional representatives. There shall be 160 regional
representatives to the interim Batasang Pambansa apportioned among the thirteen regions
of the nation in accordance with the number of their respective inhabitants and on the basis
of a uniform and progressive ratio :
xxx xxx xxx
The foregoing apportionment shall be not considered a precedent in connection with the re-
apportionment of representative districts for the regular National Assembly under Section 2,
Article VIII and Section 6, Article XVI I of the Constitution.
Notwithstanding the foregoing provisions, the number of regional representative for any
region shall not be less than the number of representative districts therein existing at the
time of the ratification of the Constitution. There are also allotted two additional seats for
regional representatives to Region IV in view of inhabitants, such as students, in the region
not taken into account in the 1975 census.
SEC. 14. Voting by region. Each region shall be entitled to such number of regional
representatives as are allotted to it in Section 12 of Article II hereof. All candidates for
region representatives shall be voted upon at large by the registered voters of their
respective regions. The candidates receiving the highest number of votes from the entire
region shall be declared elected.
The constitutional provision relied upon is Section 2 of Article VIII, which provides:
SEC. 2. The National Assembly shall be composed of as many Members as may be
provided by law to be apportioned among the provinces, representative districts and cities in
accordance with the number of their respective inhabitants and on the basis of a uniform
and progressive ratio. Each district shall Comprise, as far as practicable, contiguous,
compact, and adjacent territory. Representative districts or provinces already created or
existing at the time of the ratification of this Constitution shag have at least one Member
each.
In resolving the issue, the provisions of Amendment No. 1 to the Constitution, which took
effect on October 27, 1976, should be considered and not, as pointed out by petitioner Juan
T. David, those of Section 2 of Article VIII of the Constitution, which deal with the
composition of the regular National Assembly.
It should be recalled that under the term of the Transitory Provisions of the
Constitution, 28 the membership of theinterim National Assembly would consists of the
Incumbent President and Vice-President, the Senators and the Representatives of the old
Congress and the Delegates to the Constitutional Convention who have opted to serve
therein. The Filipino people rejected the convening of the interim National Assembly, and for
a perfectly justifiable reason.
By September of 1976, the consensus had emerged for a referendum partaking of the
character of a plebiscite which would be held to establish the solid foundation for the next
step towards normalizing the political process. By the will of the people, as expressed
overwhelmingly in the plebiscite of October 15 and 16, 1976, Amendments Nos. 1 to 9 were
approved, abolishing the interim National Assembly and creating in its stead
an interim Batasang Pambansa. T was intended as a preparatory and experimental step
toward the establishment of full parliamentary government as provided for in the
Constitution.
Amendment No. 1 provides:
1. There shall be, in lieu of the interim National Assembly, an interim Batasang Pambansa,
Members of the interim Batasang Pambansa, which shall not be more than 120, unless
otherwise provided by law, shall include the incumbent President of the
Philippines, representatives elected from the different regions of the nation, those who shall
not be less than eighteen years of age elected by their respective sectors, and those
chosen by the incumbent President from the Members of the Cabinet.Regional
representatives shall be apportioned among the regions in accordance with the number of
their respective inhabitants and on the basis of a uniform and progressive ratio, while the
sectors shall be determined by law. The number of representatives from each region or
sector and the manner of their election shall be prescribed and regulated by law. (Emphasis
supplied.)
The provisions of the Above Amendment are clear. Instead of providing that representation
in the interimBatasang Pambansa shall be by representative districts, it specifically provides
that; (1) the representatives shall be elected from the different regions of the nation; and (2)
the Regional representatives shall be apportioned among the regions in accordance with
the number of their respective inhabitants and on the basis of a uniform and progressive
ratio while the sector shall be determined by law. No mention whatsoever is made of 4
provinces, representative districts and cities. Where the intent is to relate to the regular
National Assembly, the Constitution made it clear and manifest, as indicated in Amendment
No. 2 of the Constitution. 29 It is significant to note that nowhere in the said amendment is it
provided that the members of the interim Batasang Pambansa shall be apportioned among
the representative districts, in the same manner as the regular National Assembly. The
clear import and intent of the Constitutional Amendment is, therefore, the election of the
representatives from the different regions of the nation, and such regional representatives
shall be alloted or distributed among the regions in accordance with the number of their
respective inhabitants and on the basis of a uniform and progressive ratio. Neither does the
Amendment provide that the members of the interim Batasang Pambansa shall be elected
by the qualified electors in their respective district for term of six years as provided in
Section 3[l] of Article VIII of the Constitution. To hold that Section 3[l] of Article VIII is
applicable to the interim Batasang Pambansa would lead to the conclusion that the
members of the Batasan shall have a term of six years, which is of course inconsistent with
its transitory character. That the interim Batasang Pambansa is a distinct and special body,
which, by reason of its transitory nature should be governed by specifically formulated rules,
is apparent from the constitutional amendment which created it. Thus, its membership shall
not be more than 120, unless otherwise provided by law. Furthermore, it shall include the
incumbent President of the Philippines, representatives elected from the different regions of
the nation, those who shall not be less than eighteen years of age elected by their
respective sectors, and those chosen by the incumbent President from the Members of the
Cabinet. The regular National Assembly, on the other hand, is limited in its membership to
representatives to be apportioned among the provinces, representative districts and cities.
By reason of its provisional character, the interim Batasang Pambansa has to be more
flexible, both in its representation and the manner of election of its members. There is no
denying the fact that as wide a range of representation as possible is required in order to
hasten the nations return to normalcy. It is for t reason that sectors are given adequate
representation 30 and are considered as national aggrupations. Elections of sectoral
representatives are specially provided for in the 1978 Election Code. 31 It should be
emphasized that the regular National Assembly is distinct and different in composition,
powers and manner of elections of its members from the interim Batasang Pambansa is to
function during the period of transition while the regular National Assembly is to operate
upon the restoration of normalcy.
The composition of the interim Batasang Pambansa is indeed experimental. It is an
experiment in size, form and distribution of constituencies in the hope of securing a
legislature most truly representative of the views of the electorate. It would, therefore, be
ludicrous to confine the members of such body within the strictures of the representative
districts of the regular National Assembly. The fear of petitioner Juan T. David that several
representative districts will be deprived of representation misconstrues the concept of
regional elections. The representatives are to be elected by the voters of the entire region.
They will represent the whole region and not merely its integral provinces, districts or cities.
Moreover, Section 12 of the Code ensures that there shall be sufficient representatives for
each region by providing that the number of regional representatives for any region shall
not be less than the number of representative districts therein existing at the time of the
ratification of the Constitution.
III
The following two issues raised by petitioners are interrelated and must be jointly discussed
herein. They are:
(a) Whether or not the Kilusang Bagong Lipunan (KBL) and the Lakas ng Bayan (LABAN)
may be registered and accredited as political parties under Section 8 of Article XII-C of the
Constitution, so that their respective candidates for membership in the interim Batasang
Pambansa may be voted for as a group under the 1978 Election Code; and
(b) Whether or not members of a political party in the l971 elections may run under the
ticket sponsored by any other party, group or aggrupation, considering the provisions of
Section 10 of Article XII-C of the Constitution which prohibition candidates for any elective
public office from changing party affiliation within six months s immediately preceding or
following an election
The resolution of the foregoing issues calls for the determination of the constitutionality of
Section 199 of the 1978 Election Code, questioned by petitioners. Said section provides:
SEC. 199. Registration of political parties. Pending the promulgation of rules and
regulations to govern the registration and accreditation of political parties by the
Commission in accordance with Article XII[C] of the Constitution, the registration with the
Commission previous to 1972 of the Nacionalista Party, Liberal Party, Citizens Party, and
other national parties shall be deemed to continue and they may, upon notice to the
Commission through their respective presidents or duly authorized representatives, amend
or change their names, constitutions, by-laws, or other organizational papers, platfor,
officers and members, and shag be entitled to nominate and support their respective
candidates for representatives in the interim Batasang Pambansa. Similarly, any other
group of persons pursuing the same political Ideals in government may register with the
Commission and be entitled to the same rights and privileges.
Invoked by petitioner are Sections 8 and 10 of Article XII-C of the Constitution, which
provide:
SEC. 8. A political party shall be entitled to accreditation by the Commission if, in the
immediately preceding election, such party has obtained at least the third highest number of
votes cast in the constituency to which it seeks accreditation. No religious sect shall be
registered as political party, and no political party which seeks to achieve its goals through
violence or subversion shall be entitled to accreditation.
SEC. 10. No elective public officer may change political party affiliation during term of office,
and no candidate for any elective public office may change political party affiliation within six
months immediately preceding g or following an election.
It should be recalled that the object of the afore-quoted provisions of the Constitution was to
develop a third party and break the heretofore dominant hold on the political system by the
two major political parties which have been in existence since the birth of the republic.
These two major parties were considered as in fact a one party system with two factions
openly disagreeing on fringe issues but tacitly united by one common aim: alternate
monopoly of power through a pattern of patronage politics. 32 The framers of the
Constitution examined the weaknesses of the party system and saw the need for
discarding the old party system as a political farce that has been largely responsible for
many of the countrys ills . 33 They envisioned, therefore, a new era in Philippine politics,
where elections were to be decided on issues rather than on personalities, and where the
electoral process was to be free, less expensive government depends on an organized and
vigorous citizenry. Such can only exist if citizens can increase their effectiveness in politics
by modernizing and using political parties to set the general directions of public policy and
to influence the specific decisions of public institutions that affect their daily lives.
It was intended, however, that some of these provisions would not operate during
the interim period. Thus, from the wording of Section 8, it is obvious that said section is
incapable of application during the first election because it states that no political party shall
be entitled to accreditation unless in the immediately preceding election, it obtained at least
the third highest number of votes cast in the constituency to which it seeks accreditation.
That there cannot be any accreditation during the first election under the 1973 Constitution
is evident from the sponsorship speech of the proponent of t constitutional provision. 34
Although their members are united by common policies and principles of government and
apparently impelled by the same political Ideals, neither the Kilusang Bagong Lipunan
(KBL) nor the Lakas ng Bayan (LABAN) professes to be a political party in the sense of a
stable organization with a degree of permanence, imposing strict discipline among the
members, and with a party platform drafted and ratified in a party convention. It does not
follow, however, that the KBL and LABAN are not political parties, in a generic sense, since
a political party has been generally defined as an association of voters believing in certain
principles of government, formed to urge the adoption and execution of such principles in
governmental affairs through officers of like belief. 35. Political parties result from the
voluntary association of electors, and do not exist by operation of law. The element of time
is not essential to the formation of a legal party; it may spring into existence from the
exigencies of a particular election, and with no intention of continuing after the exigency has
passed. 36 As a matter of fact, it is only the Kilusang Bagong Lipunan (KBL) and the Lakas
ng Bayan (LABAN) that have polarized the major differences on vital public issues affecting
the nation. And, during t first election in t period of transition when, obviously, no political
party can be accredited, does the Constitution, in Article XII-C, Sections 2[5] and 8
limit registration to political parties as strictly understood by withholding it from aggrupations
of persons pursuing the same political Ideals of government as provided in Section 199 of
the 1978 Election Code? It clearly does not. The listing of political parties appears to have a
dual aspect registration and accreditation Registration is a means by which the
government is enabled to supervise and regulate the activities of various elements
participating in an election.
It would appear from Section 8 of Article XII-C that the only groups which cannot be
registered are: (a) religious groups or sects; and (b) those political parties or groups who
seek to achieve its goals through violence and subversion. Accreditation is the means by
which the registration requirement is made effective by conferring benefits to registered
political parties. The condition for accreditation, aside from those mentioned, is that the
political party must have obtained, in the immediately preceding election, at least the third
highest number of votes cast in the constituency to which it seeks accreditation. The
Constitution, however, does not state what are the effects of accreditation. There is,
therefore, necessity for legislation. Moreover, to construe the term political party
restrictively would delimit the supervisory authority of the Commission on Elections. More
specifically, it would exempt aggrupations or other political groups from certain
requirements. Under Section 199, the 1978 Election Code allows the registration of
aggrupations or groups of persons pursuing the same political Ideals in government;
consequently, they are subjected to the regulation of propaganda materials (Sec. 41) and
the limitation of expenses for candidates (Sec. 52).
From another point of view, a narrow construction may discourage the robust exercise of
the right of association guaranteed by the Bill of Rights, which at t stage of our political tory
appears, necessary.
The facts that the coming polls will be the first that we shall hold since the proclamation of
martial law on September 21, 1972 makes it an event of no ordinary significance. The
Filipino society has outgrown its age of innocence. Today the acts of Filipino politicians
must be judged by more mature standards and the test of national allegiance has become
more strict and more demanding, even more binding. 37 By the election, we shall inaugurate
a new stage in our political life, and commence our fateful transition from crisis government
to a parliamentary system.
But as President Ferdinand E. Marcos has significantly observed:
this step, I repeat, is no mere restoration of electoral processes and representative
government. The coming elections would be a perilous exercise indeed if they would merely
return us to elections and representative institutions as we had known them in the past, and
compromise what had taken us so much time and effort to construct over the last five years.
What we envision in t initiative is the permanence and continuity of the refor that we have
launched under the aegis of crisis government. We envision in it the full emergence of a
new political order that will give life and sustenance to our national vision of a new society.
And it will have permanence and continuity because by the grace of suffrage and
representative government, we shag thereby attain a formal mechanism for the exercise of
participation and involvement by our people in nation-building and national development. 38
It is, therefore, necessary at t stage to encourage the emergence or growth of political
parties that will truly reflect the opinions and aspirations of our people. The right of
individuals to form associations as guaranteed by the fundamental law, includes the
freedom to associate or refrain from association. 39 In accord with t constitutional precept, it
is recognized that no man is compelled by law to become a member of a political party, or,
after having become such, to remain a member. 40
The existence of responsible political parties with distinct programs of government is
essential to the effectiveness of a parliamentary system of government. It is in recognition of
t fact that Section 199 of the 1978 Election Code allows or sanctions the registration of
groups of persons pursuing the same political ideals in government with the Commission
on Elections. Moreover, to what extent the rights of organized political parties should be
regulated by law is a matter of public policy to be determined by the lawmaker a matter
which does not concern the courts. 41
T brings us to the next point raised by petitioners, namely, that under Section 10 of Article
XII-C of the Constitution, no candidate for elective office may change party affiliation within
six months immediately preceding or following an election. In the cases at bar, We
understand that no candidate voluntarily changed party affiliation. On the contrary, the claim
that the KBL and the LABAN are not political parties is based partly on the fact that the
candidates running under their banners have retained their party affiliation. Section 10 is a
statement of a basic principle against political opportunism. To begin with, no legislation has
been enacted to implement t constitutional prohibition. Indeed, it is difficult to conceive how
the courts may apply the prohibition, in all the varied facts and circutances under which it
may be invoked, without the aid of supplementary legislation. For instance, the provision in
question states that no elective public officer may change political party affiliation during
term of office. Suppose an elected representative in the legislature, belonging to one party,
shall always vote and side with another political party. Will he be considered a turncoat
even if he does not formally change party affiliation? Suppose it be decided that he is a
turncoat. What sanctions should be adopted? Should he be suspended or ousted from the
legislature?
When one turns to political candidates, the same questions as to what should be
considered political opportunism or turncoatism will be encountered. But the problem of
procedure for hearing and deciding infringements of the prohibition or the determination of
the appropriate sanction becomes more acute. Is the sanction to be found in the refusal by
the Commission on Elections to register the party or group, or in the denial of certificate of
candidacy, or are there other ways? Should political parties be prevented from adopting
candidates? Or from forming coalitions?
All of these are questions of policy, in resolving winch many immensurable factors have to
be considered. The afore-cited constitutional provisions are commands to the legislature to
enact laws to carry out the constitutional purpose. They are, therefore, addressed initially to
the lawmaking department of the government. It is not part of the judicial department to deal
with such questions without their authoritative solutions by the legislative department. It may
be relevant to emphasize here that the jurisdiction of t Court is limited to cases and
controversies, presented in such form, with adverse litigants, that the judicial power is
capable of acting upon them, and pronouncing and carrying into effect a judgment between
the parties, and does not extend to the determination of abstract questions or issues framed
for the purpose of invoking the advice of the court without real parties or a real case. 42
In any event, We cannot perceive how such constitutional prohibition could be applied in t
first election. Precisely, the overriding constitutional purpose is to remove the dominant hold
of the two major political parties and encourage the formation of new political parties. The
intention is not to rebuild old party coalitions but to define new political means and
instruments, within the parties or beyond them, that will allow the Filipino people to express
their deeper concerns and aspirations through popular government.
IV
The fourth issue is: whether or not the forty-five-day period of campaign prescribed in the
1978 Election Code violates the Constitution because. (a) it was decreed by the President
and not by the Commission on Elections as provided by Section 6 of Article XII-C; and (b)
the period should cover at least ninety (90) days.
Petitioners question the constitutionality of Section 4 of the 1978 Election Code, which
provides:
SEC. 4. Election and campaign periods. The election period shall be fixed by the
Commission on Elections in accordance with Section 6, Article XII-C of the Constitution.
The period of campaign shall not be more than forty- five days immediately preceding the
election, excluding the day before and the day of the election: Provided, That for the
election of representatives to the interim Batasang Pambansa, the period of campaign shall
commence on February 17, 1978 except that no election campaign or partisan political
activity may be conducted on March 23 and 24, 1978.
In support of the allegation of unconstitutionality, petitioners rely on Section 6 of Article XII-
C of the Constitution, thus:
SEC. 6. Unless otherwise fixed by the Commission in special cases, the election period
shall commence ninety days before the day of election and shall end thirty days thereafter.
At the outset, it should be considered that Amendment No. 1 provides that the number of
representatives from each region and the manner of their election shall be prescribed and
regulated by law (emphasis supplied). Under Amendment No. 5, the incumbent President
shall continue to exercise legislative powers until martial law shall have been lifted. The
power conferred by these Amendment upon the lawmaker necessarily included the
authority to prescribe the date and procedure for the holding of such elections. It should be
borne in mind that the forthcoming election for members in the interim Batasang Pambansa
will be a special election during a regime of martial law. It is, therefore, an election in a state
of emergency. The exigencies of the situation require that it be governed by special rules.
At t point, the objective is to hasten the normalization of government and, at the same time,
to ensure that the nation is not exposed to the same critical proble that necessitated the
declaration of martial law. In conferring upon the incumbent President the authority to
determine the date of the election, those who drafted the Amendments must have realized
that it is only the incumbent President who has the authority and the means of obtaining,
through the various facilities in the civil and military agencies of the government, information
on the peace and order condition of the country, and to determine the period within which
an electoral campaign may be adequately conducted in all the regions of the nation. Thus,
the 1978 Election Code was formulated to meet a special need, and t is emphasized by the
fact that the Code itself limits its application. 43
Even assuming that it should be the Commission on Elections that should fix the period for
campaign, the constitutional mandate is complied with by the fact that the Commission on
Elections has adopted and is enforcing the period fixed in Section 4, Article I of the 1978
Election Code.
At any rate, insofar as objections to the fixing of the campaign period for elections in general
are concerned, it is apparent that there is a distinction between the ter election period and
campaign period. Thus, Section 4, Article I of the 1978 Election Code provides that the
election period shag be fixed by the Commission on Elections in accordance with Section
6, Article XII (C) of the Constitution. The campaign period, however, has been fixed so
that it shall not be more than forty-five days immediately preceding the election: Provided,
That for the election of representatives to the interim Batasang Pambansa, the period of
campaign shag commence on February 17, 1978 except that no election campaign or
partisan political activity may be conducted on March 23 and 24, 1978. The distinction is
further made apparent by the fact that the election period under Section 5 of Article XII-C
of the Constitution extends even beyond the day of the election itself, while the campaign
period, by reason of its nature and purpose, must necessarily be before the elections are
held. There is, therefore, no conflict with the constitutional provision.
At t juncture, it may be relevant to note the efforts of the Commission on Elections to give
more substance and meaning to the intent and spirit of the Constitution and the 1978
Election Code by giving the same practicable opportunities to candidates, groups or parties
involved in the April 7, 1978 interim Batasang Pambansa elections. Thus, in Resolution No.
1289, the COMELEC removed the so-called undue advantage which the Nacionalista Party
and the Kilusang Bagong Lipunan (KBL) had over the Lakas ng Bayan (LABAN) in ter of
authorized election expenses, appointment of election watchers and use of print and
broadcast media. T circutance, contrary to the clai of petitioners, shows that the
Commission on Elections, as a constitutional body charged with the enforcement and
administration of all laws relative to the conduct of elections, and with broad powers,
functions and duties under the 1973 Constitution, can give candidates, irrespective of
parties, equal opportunities under equal circutances.
WHEREFORE, in view of the foregoing, the instant petitions are hereby DISMISSED,
without costs.
SUPREME COURT
Manila
EN BANC
G.R. No. 112497 August 4, 1994
HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF JUSTICE, petitioner,

vs.
MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURER ANTHONY
ACEVEDO, SANGGUNIANG PANGLUNSOD AND THE CITY OF MANILA, respondents.
The City Legal Officer for petitioner.
Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.).
Joseph Lopez for Sangguniang Panglunsod of Manila.
L.A. Maglaya for Petron Corporation.
CRUZ, J.:
The principal issue in this case is the constitutionality of Section 187 of the Local Government Code
reading as follows:
Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures;
Mandatory Public Hearings. The procedure for approval of local tax ordinances
and revenue measures shall be in accordance with the provisions of this Code:
Provided, That public hearings shall be conducted for the purpose prior to the
enactment thereof; Provided, further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal within thirty
(30) days from the effectivity thereof to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of receipt of the appeal: Provided,
however, That such appeal shall not have the effect of suspending the effectivity of
the ordinance and the accrual and payment of the tax, fee, or charge levied therein:
Provided, finally, That within thirty (30) days after receipt of the decision or the lapse
of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent
jurisdiction.
Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies and a
taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and
void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for
containing certain provisions contrary to law and public policy.1
In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the
Secretary's resolution and sustained the ordinance, holding inter alia that the procedural
requirements had been observed. More importantly, it declared Section 187 of the Local
Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power
of control over local governments in violation of the policy of local autonomy mandated in the
Constitution and of the specific provision therein conferring on the President of the Philippines only
the power of supervision over local governments.2
The present petition would have us reverse that decision. The Secretary argues that the annulled
Section 187 is constitutional and that the procedural requirements for the enactment of tax
ordinances as specified in the Local Government Code had indeed not been observed.
Parenthetically, this petition was originally dismissed by the Court for non-compliance with Circular
1-88, the Solicitor General having failed to submit a certified true copy of the challenged
decision.3 However, on motion for reconsideration with the required certified true copy of the decision
attached, the petition was reinstated in view of the importance of the issues raised therein.
We stress at the outset that the lower court had jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the general definition of the judicial power to determine
what are the valid and binding laws by the criterion of their conformity to the fundamental law.
Specifically, BP 129 vests in the regional trial courts jurisdiction over all civil cases in which the
subject of the litigation is incapable of pecuniary estimation,4 even as the accused in a criminal action
has the right to question in his defense the constitutionality of a law he is charged with violating and
of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final
judgments and orders of lower courts in all cases in which the constitutionality or validity of any
treaty, international or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.
In the exercise of this jurisdiction, lower courts are advised to act with the utmost circumspection,
bearing in mind the consequences of a declaration of unconstitutionality upon the stability of laws, no
less than on the doctrine of separation of powers. As the questioned act is usually the handiwork of
the legislative or the executive departments, or both, it will be prudent for such courts, if only out of a
becoming modesty, to defer to the higher judgment of this Court in the consideration of its validity,
which is better determined after a thorough deliberation by a collegiate body and with the
concurrence of the majority of those who participated in its discussion.5
It is also emphasized that every court, including this Court, is charged with the duty of a purposeful
hesitation before declaring a law unconstitutional, on the theory that the measure was first carefully
studied by the executive and the legislative departments and determined by them to be in
accordance with the fundamental law before it was finally approved. To doubt is to sustain. The
presumption of constitutionality can be overcome only by the clearest showing that there was indeed
an infraction of the Constitution, and only when such a conclusion is reached by the required
majority may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged
act must be struck down.
In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local Government
Code unconstitutional insofar as it empowered the Secretary of Justice to review tax ordinances and,
inferentially, to annul them. He cited the familiar distinction between control and supervision, the first
being "the power of an officer to alter or modify or set aside what a subordinate officer had done in
the performance of his duties and to substitute the judgment of the former for the latter," while the
second is "the power of a superior officer to see to it that lower officers perform their functions in
accordance with law."6 His conclusion was that the challenged section gave to the Secretary the
power of control and not of supervision only as vested by the Constitution in the President of the
Philippines. This was, in his view, a violation not only of Article X, specifically Section 4 thereof, 7and
of Section 5 on the taxing powers of local governments,8 and the policy of local autonomy in general.
We do not share that view. The lower court was rather hasty in invalidating the provision.
Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the
tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or
modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the
judgment of the local government that enacted the measure. Secretary Drilon did set aside the
Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He
did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not
say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in
reviewing the said measure was determine if the petitioners were performing their functions in
accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and
the grant of powers to the city government under the Local Government Code. As we see it, that was
an act not of control but of mere supervision.
An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his
discretion, order the act undone or re-done by his subordinate or he may even decide to do it
himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to
it that the rules are followed, but he himself does not lay down such rules, nor does he have the
discretion to modify or replace them. If the rules are not observed, he may order the work done or re-
done but only to conform to the prescribed rules. He may not prescribe his own manner for the doing
of the act. He has no judgment on this matter except to see to it that the rules are followed. In the
opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so
performed an act not of control but of mere supervision.
The case of Taule v. Santos 9 cited in the decision has no application here because the jurisdiction
claimed by the Secretary of Local Governments over election contests in the Katipunan ng Mga
Barangay was held to belong to the Commission on Elections by constitutional provision. The
conflict was over jurisdiction, not supervision or control.
Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which provided in its
Section 2 as follows:
A tax ordinance shall go into effect on the fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided, however, That the Secretary of Finance
shall have authority to suspend the effectivity of any ordinance within one hundred
and twenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee
therein levied or imposed is unjust, excessive, oppressive, or confiscatory, or when it
is contrary to declared national economy policy, and when the said Secretary
exercises this authority the effectivity of such ordinance shall be suspended, either in
part or as a whole, for a period of thirty days within which period the local legislative
body may either modify the tax ordinance to meet the objections thereto, or file an
appeal with a court of competent jurisdiction; otherwise, the tax ordinance or the part
or parts thereof declared suspended, shall be considered as revoked. Thereafter, the
local legislative body may not reimpose the same tax or fee until such time as the
grounds for the suspension thereof shall have ceased to exist.
That section allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in his
opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory. Determination of
these flaws would involve the exercise of judgment or discretion and not merely an examination of
whether or not the requirements or limitations of the law had been observed; hence, it would smack
of control rather than mere supervision. That power was never questioned before this Court but, at
any rate, the Secretary of Justice is not given the same latitude under Section 187. All he is
permitted to do is ascertain the constitutionality or legality of the tax measure, without the right to
declare that, in his opinion, it is unjust, excessive, oppressive or confiscatory. He has no discretion
on this matter. In fact, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to
with, the inclusion therein of certain ultra vires provisions and non-compliance with the prescribed
procedure in its enactment. These grounds affected the legality, not the wisdom or reasonableness,
of the tax measure.
The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue
Code is another matter.
In his resolution, Secretary Drilon declared that there were no written notices of public hearings on
the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of
the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance
published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a).
No minutes were submitted to show that the obligatory public hearings had been held. Neither were
copies of the measure as approved posted in prominent places in the city in accordance with Sec.
511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into
Pilipino or Tagalog and disseminated among the people for their information and guidance,
conformably to Sec. 59(b) of the Code.
Judge Palattao found otherwise. He declared that all the procedural requirements had been
observed in the enactment of the Manila Revenue Code and that the City of Manila had not been
able to prove such compliance before the Secretary only because he had given it only five days
within which to gather and present to him all the evidence (consisting of 25 exhibits) later submitted
to the trial court.
To get to the bottom of this question, the Court acceded to the motion of the respondents and called
for the elevation to it of the said exhibits. We have carefully examined every one of these exhibits
and agree with the trial court that the procedural requirements have indeed been observed. Notices
of the public hearings were sent to interested parties as evidenced by Exhibits G-1 to 17. The
minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the
proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993,
respectively, and the approved ordinance was published in the July 3, 4, 5, 1993 issues of the
Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3.
The only exceptions are the posting of the ordinance as approved but this omission does not affect
its validity, considering that its publication in three successive issues of a newspaper of general
circulation will satisfy due process. It has also not been shown that the text of the ordinance has
been translated and disseminated, but this requirement applies to the approval of local development
plans and public investment programs of the local government unit and not to tax ordinances.
We make no ruling on the substantive provisions of the Manila Revenue Code as their validity has
not been raised in issue in the present petition.
WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of the
Regional Trial Court insofar as it declared Section 187 of the Local Government Code
unconstitutional but AFFIRMING its finding that the procedural requirements in the enactment of the
Manila Revenue Code have been observed. No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-9396 August 16, 1956
MANILA MOTOR COMPANY, INC., plaintiff-appellee,

vs.
MANUEL T. FLORES, defendant-appellant.
Delgado, Flores and Macapagal for appellant.

Zafra, Lara, De Leon and Veneracion for appellee.
BENGZON, J.:
In May 1954, Manila Motor Company filed in the Municipal Court of Manila a complaint to recover
from Manuel T. Flores the amount of P1,047.98 as chattel mortgage installments which fell due in
September 1941. Defendant pleaded prescription: 1941 to 1954. The complaint was dismissed. On
appeal, the Court of First Instance saw differently, sustaining plaintiff's contention that the
moratorium laws had interrupted the running of the prescriptive period, and that deducting the time
during which said laws were in operation three years and eight months1 the ten year term had
not yet elapsed when complainant sued for collection in May 1954. Wherefore said court ordered the
return of the case to the municipal judge for trial on the merits.
Defendant appealed, arguing principally that the moratorium laws did not have the effect of
suspending the period of limitations, because they were unconstitutional, as declared by this court in
Rutter vs. Esteban, 49 Off. Gaz. (5) 1807. He cites jurisprudence holding that when a statute is
adjudged unconstitutional it is as inoperative as if it had never been passed, and no rights can be
built upon it.2
Some members expressed doubts as to whether the order of the lower court was appealable in
nature; but we agreed not to discuss the point, inasmuch as the question submitted by appellant
could speedily be disposed of. In Montilla vs. Pacific Commercial3 we held that the moratorium laws
suspended the period of prescription. That was rendered after the Rutter-Esteban decision. It should
be stated however, in fairness to appellant, that the Montilla decision came down after he had
submitted his brief. And in answer to his main contention, the following portion is quoted from a
resolution of this Court4
2. Rutter vs. Esteban (93 Phil., 68) may be construed to mean that at the of the decision the
Moratorium law could no longer be validly applied because of the prevailing circumstances.
At any rate, although the general rule is that an unconstitutional statute
"confers no right, create no office, affords no protection and justifies no acts performed under
it." (11 Am. Jur., pp. 828, 829.)
there are several instances wherein courts, out of equity, have relaxed its operation (cf.
notes in Cooley's Constitutional Limitations 8th ed., p. 383 and Notes 53 A. L. R., 273) or
qualified its effects "since the actual existence of a statute prior to such declaration is an
operative fact, and may have consequences which cannot justly be ignored (Chicot
County vs. Baster, 308 U. S., 371) and a realistic approach is eroding the general doctrine
(Warring vs. Colpoys, 136 Am. Law Rep., 1025, 1030).
Judgment affirmed, without costs.

EN BANC
[G.R. No. 135869. September 22, 1999]
RUSTICO H. ANTONIO, petitioner, vs. COMMISSION ON ELECTIONS

and VICENTE T. MIRANDA, JR., respondents.
DECISION
GONZAGA_REYES, J.:
Is the period to appeal a decision of a municipal trial court to the Commission on

Elections (COMELEC) in an election protest involving a barangay position five (5)
days per COMELEC Rules of Procedure or ten (10) days as provided for in Republic
Act 6679[1] and the Omnibus Election Code? This is the sole issue posed in the instant
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure seeking to
annul the order dated August 3, 1998 of the Second Division of the
COMELEC,[2] dismissing the appeal of petitioner Rustico Antonio for having been
filed out of time pursuant to COMELEC Rules of Procedure, and the order
promulgated on October 14, 1998 of the COMELEC en banc, denying petitioners
motion for reconsideration.
The antecedents as found by the COMELEC in the order dated October 14, 1998
are:
The parties in this case were rival candidates for the Punong Barangay of Barangay
Ilaya, Las Pias City, Metro Manila. After the board of canvassers proclaimed
protestee-appellant Rustico Antonio, protestant-appellee Vicente T. Miranda, Jr. filed
an election protest docketed as Election Protest Case No. 97-0017 against Antonio
before the Metropolitan Trial Court of Las Pias City (Branch LXXIX). The trial court
rendered a Decision dated 9 March 1998, the dispositive portion of which states:
WHEREFORE, the Court declares the protestant Vicente Miranda as the duly
elected Barangay Chairman of Barangay Ilaya, Las Pias City, Metro Manila.
Antonio admitted receipt of the above-quoted decision on 18 March

1998. Subsequently, Antonio filed a Notice of Appeal with the trial court on 27
March 1998 or nine (9) days after receipt thereof. Meanwhile, Miranda moved to
execute the trial courts decision. Rustico, in his Opposition to the Motion for
Execution or Execution Pending Appeal, argued against Mirandas motion for
execution. After the trial court denied the motion for execution, the records of this
case was forwarded to the Commission (Second Division).
On 10 August 1998, protestee-appellant Rustico Antonio received from this

Commission (Second Division) an Order dated 3 August 1998 stating as follows:
In the light of the aforequoted rules, protestee RUSTICO ANTONIO, failed to perfect
his appeal within the five (5) days period prescribed for perfecting his appeal, as he
filed his Notice of Appeal only on March 27, 1998 or nine (9) days after receipt of the
decision sought to be appealed.
The Period aforestated is jurisdictional and failure of the protestee to perfect his
appeal within the said period deprives the Commission of its appellate jurisdiction.
ACCORDINGLY, the instant appeal is hereby DISMISSED for lack of jurisdiction.
Hence, this motion for reconsideration.
The instant Motion for Reconsideration is DENIED and We AFFIRM the Order dated
3 August 1998 of this Commission (Second Division).[3]
In the instant petition for certiorari, petitioner argues that the COMELEC
committed grave abuse of discretion amounting to lack of jurisdiction when it
dismissed the appeal for the following reasons:
(a) In barangay electoral protest cases, the period of appeal is ten (10) days from receipt of the
decision of the Metropolitan or Municipal Trial Court. This is provided for by Sec. 9 of R.A.
6679 and Sec. 252 of the Omnibus Election Code
(b) The provisions of Sec. 21, Rule 37 of the COMELEC Rules of Procedure providing for a
five-day period within which to appeal from the decision of the Metropolitan or Municipal
Trial Court could not prevail upon the express provisions of Rep. Act No. 6679 and Sec. 252
of the Omnibus Election Code;
(c) Moreover, the COMELEC committed an error of jurisdiction when it disregarded the
provisions of Sections 5,6 & 7, Rule 22 of the COMELEC Rules of Procedure requiring the
filing of briefs by the appellant and the appellee. The questioned resolution of August 3,
1998 was issued motu propio and without prior notice and hearing. The petitioner was fast
tracked;
(d) The alleged winning margin of the private respondent over the petitioner as found by the
Metropolitan Trial Court of Las Pias is only four (4) votes the results being MIRANDA
1,171; ANTONIO 1,167. The peoples will must not go on procedural points. An election
protest involves public interest, and technicalities should not be sanctioned when it will be
an obstacle in the determination of the true will of the electorate in the choice of its public
officials. [Macasundig vs. Macalanagan, 13 SCRA 577; Vda. De Mesa vs. Mensias, 18
SCRA 533; Juliano vs. Court of Appeals, 20 SCRA 808; Genete vs. Archangel, 21 SCRA
1178; Maliwanag vs. Herrera, 25 SCRA 175; De Castro vs. Genete, 27 SCRA 623]
(e) The questioned resolutions violated the above principle because the COMELEC did not
appreciate the contested ballots.[4]
In dismissing the appeal, the COMELEC relied on Section 21, Rule 35 of the
COMELEC Rules of Procedure which reads:
SEC. 21. Appeal From any decision rendered by the court, the aggrieved party may
appeal to the Commission on Elections within five (5) days after the promulgation of
the decision.
On the other hand, petitioner contends that the period of appeal from decisions of
the Municipal Trial Courts or Metropolitan Trial Courts involving barangay officials
is governed by Section 9 of Republic Act 6679 and Section 252 of the Omnibus
Election Code.
Section 9 of Republic Act 6679 reads:
SEC. 9. A sworn petition contesting the election of a barangay official may be filed
with the proper municipal or metropolitan trial court by any candidate who has duly
filed a certificate of candidacy and has been voted for a barangay office within ten
(10) days after the proclamation of the results of the election. The trial court shall
decide the election protest within thirty (30) days after the filing thereof. The decision
of the municipal or metropolitan trial court may be appealed within ten (10) days from
receipt of a copy thereof by the aggrieved party to the regional trial court which shall
decide the issue within thirty (30) days from receipt of the appeal and whose decision
on questions of fact shall be final and non-appealable. For purposes of the barangay
elections, no pre-proclamation cases shall be allowed.
Similarly, Section 252 of the Omnibus Election Code provides:
SEC. 252. Election contest for barangay offices. A sworn petition contesting the
election of a barangay officer shall be filed with the proper municipal or metropolitan
trial court by any candidate who has duly filed a certificate of candidacy and has been
voted for the same office within ten days after the proclamation of the results of the
election. The trial court shall decide the election protest within fifteen days after the
filing thereof. The decision of the municipal or metropolitan trial court may be
appealed within ten days from receipt of a copy thereof by the aggrieved party to the
regional trial court which shall decide the case within thirty days from its submission,
and whose decisions shall be final.
In applying Section 21 of the COMELEC Rules of Procedure rather than Section

9 of Republic Act 6779 and Section 252 of the Omnibus Election Code, the
COMELEC rationalized thus:
Antonio asserts that Section 9 of Republic Act 6679 and Section 252 of the Omnibus
Election Code providing for a ten-day period to appeal prevails over the provisions of
the COMELEC Rules of Procedure. According to Antonio, quasi-judicial bodies,
including this Commission, cannot amend an act of Congress and in case of
discrepancy between the basic law and an interpretative or administrative ruling, the
former prevails. Generally, yes. But the situation herein does not fall within the
generic situation contemplated therein.
No less than the 1987 Constitution (Article IX-A, Section 6 and Article IX-C, Section
3) grants and authorizes this Commission to promulgate its own rules of procedure as
long as such rules concerning pleadings and practice do not diminish, increase or
modify substantive rights. Hence, the COMELEC Rules of Procedure promulgated in
1993 as amended in 1994 is no ordinary interpretative or administrative ruling. It is
promulgated by this Commission pursuant to a constitutionally mandated authority
which no legislative enactment can amend, revise or repeal.
The COMELEC Rules of Procedure (Rule 37 Section 21) provides that from the
decision rendered by the court, the aggrieved party may appeal to the Commission on
Elections within five (5) days after the promulgation of the decision. Rule 22 Section
9 (d) of Our Rules of Procedure further provides that an appeal from decisions of
courts in election protest cases may be dismissed at the instance of the Commission
for failure to file the required notice of appeal within the prescribed period.
In case at bar, Antonio filed his notice of appeal before the trial court on the ninth (9)
day from receipt of the decision appealed from or four (4) days after the five-day
prescribed period to appeal lapsed. Therefore, the present appeal must be
dismissed. For it is axiomatic that the perfection of an appeal in the manner and within
the period laid down by the COMELEC Rules of Procedure is not only mandatory but
also jurisdictional. As a consequence, the failure to perfect an appeal within the
prescribed period as required by the Rules has the effect of defeating the right of
appeal of a party and precluding the appellate court from acquiring jurisdiction over
the case. So the High Court rules in Villanueva vs. Court of Appeals, et.al. (205 SCRA
537). And so, it should also be in the case at bar.
Worth noting is that Our Rules of Procedure may be amended, revised or repealed
pursuant to the 1987 Constitution (Article VIII Section 5[5]) providing that rules of
procedure of quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court. But far from being disapproved the COMELEC Rules of Procedure
received approbation and has constantly been cited by the Supreme Court in a number
of decisions such as in the case of Pahilan vs. Tabalba (230 SCRA 205, at 211)
and Rodillas vs. Commission on Elections (245 SCRA 702, at 704). In the more recent
case of Calucag vs. Commission on Electionspromulgated on 19 June 1997 (G.R. N.o
123673), the Supreme Court stated that:
Therefore, the COMELEC is the proper appellate court clothed with jurisdiction to
hear the appeal WHICH APPEAL MUST BE FILED WITHIN FIVE
DAYS AFTER THE PROMULGATION OF THE MTC DECISION(page 4-5).
The repeated recognition given by the Supreme Court of this five-day rule within
which to file the required notice of appeal will make questionable the legislative
enactment providing for a ten-day period.[5]
Without adopting the foregoing ratiocination of the COMELEC, we nonetheless

find the instant petition devoid of merit.
It is beyond cavil that legislative enactments prevail over rules of procedure
promulgated by administrative or quasi-judicial bodies and that rules of procedure
should be consistent with standing legislative enactments. In relation to the above-
quoted Section 9 of Republic Act 6679 and Section 252 of the Omnibus Election
Code, petitioner points out that in Flores vs. Commission on Elections[6], this Court
had declared that decisions of the Metropolitan or Municipal Court in election protest
cases involving barangay officials are no longer appealable to the Regional Trial
Court but to the COMELEC pursuant to Section 2(2) of Article IX-C of the 1987
Constitution.[7] Petitioner submits that the dispositive portion in the Flores case only
declared unconstitutional that portion of Section 9 of Republic Act 6679 providing for
appeal to the Regional Trial Court but not the ten (10) day period of appeal. The
dispositive portion of the Flores case reads:
1. Declaring Section 9 of Rep. Act No. 6679 UNCONSTITUTIONAL insofar as it

provides that barangay election contests decided by the municipal or metropolitan trial
court shall be appealable to the regional trial court:
Petitioner admits that the provisions in Republic Act No. 6679 and for that matter the
Omnibus Election Code providing for appellate jurisdiction to the Regional Trial
Court had been declared unconstitutional in the aforecited Flores case. A verbatim
comparison of both provisions reveals that they provide the same remedy, that is,
appeal from a decision of the municipal or metropolitan trial court in barangay
election cases to the regional trial court. Both provisions provide that (1) results of a
barangay election may be contested by filing a sworn petition with the municipal trial
court within ten days from proclamation; (2) the MTC shall decide within thirty days
per Republic Act No. 6679 or fifteen days per Omnibus Election Code; and (3) the
decision of the municipal trial court may be appealed to the regional trial court within
ten days from receipt by the aggrieved party, which decision is final and non-
appealable. There is no appreciable basis to make a distinction between the two
provisions, except for their different numbers, to advance that they provide for two
different remedies. It would be superfluous to insist on a categorical declaration of the
unconstitutionality of the appeal provided for in Sec. 252 of the Omnibus Election
Code, as the same appeal in Sec. 9, Republic Act No. 6679 had already been
categorically declared unconstitutional. Further, Sec. 252 of the Omnibus Election
Code[8] as amended by the new law, Republic Act No. 6679[9], has in effect, been
superseded by the latter. While the appellate procedure has been retained by the
amendatory act, Republic Act No. 6679 nonetheless supersedes the verbatim
provision in the Omnibus Election Code. Hence, it was not necessary for Flores to
mention Sec. 252 of the Omnibus Election Code, considering that as aforestated,
Section 9 of Republic Act No. 6679 was a mere reenactment of the former law.
Petitioner is of the opinion, though, that the unconstitutionality extended only as
to which court has appellate jurisdiction without affecting the period within which to
appeal. According to petitioner, only the portion providing for the appellate
jurisdiction of the Regional Trial Court in said cases should be deemed
unconstitutional.The rest of the provisions, particularly on the period to appeal, free
from the taint of unconstitutionality, should remain in force and effect in view of the
separability clauses contained in Republic Act 6779[10] and the Omnibus Election
Code.[11]
We do not agree.
First, petitioners argument raises the presumption that the period to appeal can be
severed from the remedy or the appeal itself which is provided in Section 9, Republic
Act 6679 and survive on its own. The presumption cannot be sustained because the
period to appeal is an essential characteristic and wholly dependent on the remedy.
Aptly, the rules on statutory construction prescribe:
The general rule is that where part of a statute is void as repugnant to the Constitution,
while another part is valid, the valid portion, if separable from the invalid, may stand
and be enforced. The presence of a separability clause in a statute creates the
presumption that the legislature intended separability, rather than complete nullity, of
the statute. To justify this result, the valid portion must be so far independent of the
invalid portion that it is fair to presume that the legislature would have enacted it by
itself if it had supposed that it could not constitutionally enact the other. Enough must
remain to make a complete, intelligible, and valid statute, which carries out the
legislative intent. The void provisions must be eliminated without causing results
affecting the main purpose of the act in a manner contrary to the intention of the
legislature. The language used in the invalid part of the statute can have no legal effect
or efficacy for any purpose whatsoever, and what remains must express the legislative
will independently of the void part, since the court has no power to legislate.
The exception to the general rule is that when the parts of a statute are so mutually
dependent and connected, as conditions, considerations, inducements, or
compensations for each other, as to warrant a belief that the legislature intended them
as a whole the nullity of one part will vitiate the rest. In making the parts of the statute
dependent, conditional, or connected with one another, the legislature intended the
statute to be carried out as a whole and would not have enacted it if one part is void, in
which case if some parts are unconstitutional, all the other provisions thus dependent,
conditional, or connected must fall with them.[12]
In the instant petition, the exception applies. Section 9 of Republic Act No. 6679
and Section 252 of the Omnibus Election Code, without the constitutionally infirm
portion on the appellate jurisdiction of Regional Trial Courts in barangay election
protest cases, does not remain complete in itself, sensible, capable of being executed
and wholly independent of the portion which was rejected. In other words, with the
elimination of the forum, the period cannot stand on its own. Moreover, when this
Court stated that Section 9 of Rep. Act No. 6679 is declared
unconstitutional insofar as it provides that barangay election contests decided by the
municipal or metropolitan trial court shall be appealable to the regional trial court, it
meant to preserve the first two sentences on the original jurisdiction of municipal and
metropolitan trial courts to try barangay election protests cases but not, as advanced
by the petitioner, the ten-day period to appeal to the Regional Trial Court.This is the
logical and sound interpretation of subject portion of the Flores case.
Second, what was invalidated by the Flores case was the whole appeal itself and
not just the question of which court to file the petition. If the remedy itself is declared
unconstitutional how could the period to appeal possibly survive? How could the time
limit exist if there is nothing to be done within such time?
Third, we cannot indulge in the assumption that Congress still intended, by the
said laws, to maintain the ten (10) day period to appeal despite the declaration of
unconstitutionality of the appellate jurisdiction of the regional trial court, Republic
Act No. 7166[13] amending the Omnibus Election Code, evinces the intent of our
lawmakers to expedite the remedial aspect of election controversies. The law was
approved on November 26, 1991, after the Flores case which was promulgated on
April 20,1990, and presumably, the legislature in enacting the same was cognizant of
the ruling in Flores. Said law provides the same five (5) day period to appeal
decisions of the trial court in election contests for municipal officers to the
COMELEC. Section 22 thereof reads:
Sec. 22. Election Contests for Municipal Officers. All election contests involving
municipal offices filed with the Regional Trial Court shall be decided
expeditiously.The decision may be appealed to the Commission within five (5) days
from promulgation or receipt of a copy thereof by the aggrieved party. The
Commission shall decide the appeal within sixty (60) days after it is submitted for
decision, but not later than six (6) months after the filing of the appeal, which decision
shall be final, unappealable and executory.
There would be no logic nor reason in ruling that a longer period to appeal to the
COMELEC should apply to election contests for barangay officials.
Fourth, since the whole remedy was invalidated, a void was created. Thus, the
COMELEC had to come in and provide for a new appeal in accordance with the
mandate of the Constitution. As correctly pointed out by the COMELEC, Section 6,
Article IX-A[14] of the 1987 Constitution grants and authorizes the COMELEC to
promulgate its own rules of procedure. The 1993 COMELEC Rules of Procedure have
provided a uniform five (5) day period for taking an appeal [15] consistent with the
expeditious resolution of election-related cases. It would be absurd and therefore not
clearly intended, to maintain the 10-day period for barangay election contests. Hence,
Section 3, Rule 22 of the COMELEC Rules of Procedure is not in conflict with any
existing law. To adopt a contrary view would defeat the laudable objective of
providing a uniform period of appeal and defy the COMELECs constitutional
mandate to enact rules of procedure to expedite disposition of election cases.
In view of the Flores case, jurisprudence has consistently recognized that the
COMELEC Rules of Procedure are controlling in election protests heard by a regional
trial court.[16] The Court en banc has held in Rodillas vs. COMELEC[17] that the
procedure for perfecting an appeal from the decision of the Municipal Trial Court in a
barangay election protest case is set forth in the COMELEC Rules of Procedure. More
recently, in Calucag vs. Commission on Elections[18], the Court en banc had occasion
to state that:
It follows that after the promulgation of Flores, the same arguments propounded
therein by the petitioner may no longer be employed. Article 8 of the Civil Code states
that (j)udicial decisions applying or interpreting the laws or the constitution shall form
part of the legal system of the Philippines. Said pronouncement of the Court, having
formed part of the law of the land, ignorance thereof can no longer be
countenanced. Therefore, the COMELEC is the proper appellate court clothed
with jurisdiction to hear the appeal, which appeal must be filed within five days
after the promulgation of the MTCs decision. The erroneous filing of the appeal
with the RTC did not toll the running of the prescriptive period. xxx. The five-day
period having expired without the aggrieved party filing the appropriate appeal before
the COMELEC, the statutory privilege of petitioner to appeal is deemed waived and
the appealed decisions has become final and executory.
Significantly, Section 5(5), Article VIII of the Constitution provides in part that
[r]ules of procedure of special courts and quasi-judicial bodies shall remain effective
unless disapproved by the Supreme Court.
Equally devoid of merit is the contention that petitioner was fast tracked because
the COMELEC did not require the parties to file their appeal briefs; that the dismissal
was issued motu proprio without prior notice and hearing; and that dismissal of the
appeal defeats the peoples will on procedural points. Suffice it to state that the period
for filing an appeal is by no means a mere technicality of law or procedure. It is an
essential requirement without which the decision appealed from would become final
and executory as if no appeal was filed at all. The right of appeal is merely a statutory
privilege and may be exercised only in the manner prescribed by, and in accordance
with, the provisions of the law.[19] Further, by virtue of Section 9 (d), Rule 22 of the
COMELEC Rules of Procedure which provides that an appeal may be dismissed upon
motion of either party or at the instance of the Commission for failure to file a notice
of appeal within the prescribed period, the COMELEC is precisely given the
discretion, in a case where the appeal is not filed on time to dismiss the action or
proceeding.
The COMELEC, therefore, did not commit an abuse of discretion in dismissing
the appeal.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED for lack
of merit. The assailed orders of the Commission on Elections dated August 3, 1998
and October 14, 1998 are hereby AFFIRMED.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. 89604 April 20, 1990
ROQUE FLORES, petitioner,

vs.
COMMISSION ON ELECTIONS , NOBELITO RAPISORA, respondents.
Felix B. Claustro for petitioner.

Romeo B. Astudillo for private respondent.
CRUZ, J.:
Petitioner Roque Flores was proclaimed by the board of canvassers as having received the highest
number of votes for kagawad in the elections held on 28 March 1989, in Barangay Poblacion,
Tayum, Abra, and thus becamepunong barangay in accordance with Section 5 of Rep. Act No.
6679, providing in part as follows
Sec. 5. There shall be a sangguniang barangay in every duly constituted barangay which
shall be the legislative body and shall be composed of seven (7) kagawads to be elected by
the registered voters of the barangay. The candidate who obtains the highest number of
votes shall be the punong barangay . . . .
However, his election was protested by Nobelito Rapisora, herein private respondent, who placed
second in the election with 463 votes, or one vote less than the petitioner. The Municipal Circuit Trial
Court of Tayum, Abra, sustained Rapisora and installed him as punong barangay in place of the
petitioner after deducting two votes as stray from the latter's total. 1
Flores appealed to the Regional Trial Court of Abra, which affirmed the challenged decision in toto.
Judge Francisco O. Villarta, Jr. agreed that the four votes cast for "Flores" only, without any
distinguishing first name or initial, should all have been considered invalid instead of being divided
equally between the petitioner and Anastacio Flores, another candidate for kagawad. The judge held
that the original total credited to the petitioner was correctly reduced by 2, to 462, demoting him to
second place. 2
The petitioner then went to the Commission on Elections, but his appeal was dismissed on the
ground that the public respondent had no power to review the decision of the regional trial court.
This ruling, embodied in its resolution dated 3 August 1989, 3 was presumably based on Section 9 of
Rep. Act No. 6679, which was quoted therein in full as follows:
Sec. 9. A sworn petition contesting the election of a barangay official may be filed with the
proper municipal or metropolitan trial court by any candidate who has duly filed a certificate
of candidacy and has been voted for a barangay office within ten (10) days after the
proclamation of the result of the election. The trial court shall decide the election protest
within (30) days after the filing thereof. The decision of the municipal or metropolitan trial
court may be appealed within ten (10) days from receipt of a copy thereof by the aggrieved
party to the regional trial court which shall decide the issue within thirty (30) days from
receipt of the appeal and whose decision on questions of fact shall be final and non-
appealable. For purposes of the barangay elections, no pre-proclamation cases shall be
allowed.
In this petition for certiorari, the Commission on Elections is faulted for not taking cognizance of the
petitioner's appeal and for not ruling that all the four questioned votes should have been credited to
him under the equity of the incumbent rule in Section 211(2) of the Omnibus Election Code.
The Commission on Elections was obviously of the opinion that it could not entertain the petitioner's
appeal because of the provision in Rep. Act No. 6679 that the decision of the regional trial court in a
protest appealed to it from the municipal trial court in barangay elections "on questions of fact shall
be final and non-appealable."
While supporting the dismissal of the appeal, the Solicitor General justifies this action on an entirely
different and more significant ground, to wit, Article IX-C, Section 2(2) of the Constitution, providing
that the Commission on Elections shall:
(2) Exercise exclusive original jurisdiction over all contests relating to the elections, returns
and qualifications of all elective regional, provincial, and city officials, and appellate
jurisdiction over all contests involving elective municipal officials decided by trial courts of
general jurisdiction, or involving elective barangay officials decided by trial courts of limited
jurisdiction. (Emphasis supplied.)
Decisions, final orders, or rulings of the Commission on election contests involving elective
municipal and barangay offices shall be final, executory, and not appealable.
His submission is that municipal or metropolitan courts being courts of limited jurisdiction, their
decisions in barangay election contests are subject to the exclusive appellate jurisdiction of the
Commission on Elections under the afore-quoted section. Hence, the decision rendered by the
Municipal Circuit Trial Court of Tayum, Abra, should have been appealed directly to the Commission
on Elections and not to the Regional Trial Court of Abra.
It is recalled that in the case of Luison v. Garcia, 4 respondent Garcia's certificate of candidacy was
declared invalid by the Commission on Elections for non-compliance with the statutory requirements.
What he did was appeal to the court of first instance, which held that the certificate was merely
defective but not altogether null and void. Garcia continued his candidacy on the strength of this
ruling and was subsequently proclaimed elected, thereafter assuming office as municipal mayor.
In sustaining the quo warranto petition filed against him by Luison, this Court declared that all the
votes cast for Garcia should have been rejected as stray because he did not have a valid certificate
of candidacy. The action of the Commission on Elections should have been appealed not to the
court of first instance but to the Supreme Court as required by the 1935 Constitution. Since this was
not done, the resolution of the Commission on Elections rejecting Garcia's certificate remained valid
on the date of the election and rendered all votes cast for him as stray.
The doctrine in that case, although laid down under the 1935 Constitution, is still controlling under
the present charter as the interpretation by this Court of Article IX-C, Section 2(2). Accordingly,
Section 9 of Rep. Act No. 6679, insofar as it provides that the decision of the municipal or
metropolitan court in a barangay election case should be appealed to the regional trial court, must
be declared unconstitutional.
We make this declaration even if the law has not been squarely and properly challenged by the
petitioner. Ordinarily, the Court requires compliance with the requisites of a judicial inquiry into a
1wphi1
constitutional question. 5 In the case at bar, however, we feel there is no point in waiting to resolve
the issue now already before us until it is raised anew, probably only in the next barangay elections.
The time to resolve it is now, before such elections. We shall therefore disregard the technical
obstacles in the case at bar so that the flaw in Rep. Act No. 6679 may be brought to the attention of
Congress and the constitutional defect in Section 9 may be corrected.
In taking this step, the Court does not disregard the fact that the petitioner was only acting in
accordance with the said law when he appealed the decision of the Municipal Circuit Trial Court of
Tayum to the Regional Trial Court of Abra. That is what the statute specifically directed in its Section
9 which, at the time the appeal was made, was considered constitutional. The petitioner had a light
to rely on its presumed validity as everyone apparently did. Even the Congress and the Executive
were satisfied that the measure was constitutional when they separately approved it after careful
study. Indeed, no challenge to its validity had been lodged or even hinted not even by the public
respondent as to suggest to the petitioner that he was following the wrong procedure. In fairness
to him therefore, we shall consider his appeal to the Commission on Elections as having been made
directly from the Municipal Circuit Trial Court of Tayum, Abra, disregarding the detour to the
Regional Trial Court.
Accordingly, we hold that the petitioner's appeal was validly made to the Commission on Elections
under its "exclusive appellate jurisdiction over all contests. . . involving elective barangay officials
decided by trial courts of limited jurisdiction." Its decision was in turn also properly elevated to us
pursuant to Article IX-A, Section 7, of the Constitution, stating that "unless otherwise provided by this
Constitution or by law, any decision, order or ruling of each Commission may be brought to the
Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof."
Obviously, the provision of Article IX-C, Section 2(2) of the Constitution that "decisions, final orders,
or rulings of the Commission on election contests involving elective municipal and barangay offices
shall be final, executory, and not appealable" applies only to questions of fact and not of law. That
provision was not intended to divest the Supreme Court of its authority to resolve questions of law as
inherent in the judicial power conferred upon it by the Constitution. 6 We eschew a literal reading of
that provision that would contradict such authority.
The issue the petitioner was raising was one of law, viz., whether he was entitled to the benefits of
the equity-of-the-incumbent rule, and so subject to our review. This issue was not resolved by the
public respondent because it apparently believed itself to be without appellate jurisdiction over the
decision of the Regional Trial Court of Abra. Considering that the public respondent has already
manifested its position on this issue, as will appear presently, the Court will now rule upon it directly
instead of adopting the round-about way of remanding the case to the Commission on Elections
before its decision is elevated to this Court.
Implementing Rep. Act No. 6679, the Commission on Elections promulgated Resolution No. 2022-A
providing in Section 16(3) thereof that:
Incumbent Barangay Captains, whether elected, appointed or designated shall be deemed

resigned as such upon the filing of their certificates of candidacy for the office of "Kagawad,"
which is another office, for the March 28, 1989 barangay election.
This was the reason why the Municipal Circuit Trial Court of Tayum, Abra, held that the four
questioned votes cast for Flores could not be credited to either Roque Flores or Anastacio Flores
and should have been regarded as stray under Section 211(1) 7 of the Omnibus Election Code.
Rejecting the petitioner's claim, the court held that Roque Flores was not entitled to any of the four
contested votes because he was not incumbent as punong barangay (or barangay captain, as the
office was formerly called) on the date of the election.
The petitioner insists on the application to him of Section 211(2) of the Code, stating pertinently that:
2. . . . If there are two or more candidates with the same full name, first name or surname
and one of them is the incumbent, and on the ballot is written only such full name, first name
or surname, the vote shall be counted in favor of the incumbent.
because he should not have been considered resigned but continued to be entitled to the office
of punong barangay under Section 8 of Rep. Act No. 6679, providing as follows:
Sec. 8. Incumbent elective officials running for the same office shall not be considered
resigned upon the filing of then, certificates of candidacy. They shall continue to hold office
until their successors shall have been elected and qualified.
The petitioner contends that the afore-quoted administrative regulation is inofficious because the
forfeiture prescribed is not authorized by the statute itself and beyond the intentions of the
legislature. Moreover, the enforcement of the rule would lead to discrimination against the punong
barangay and in favor of the other kagawads, who, unlike him, could remain in office while running
for re-election and, additionally, benefit from the equity-of-the-incumbent rule.
Alternatively, the petitioner argues that, assuming the regulation to be valid he was nonetheless
basically also a kagawad as he was a member of the sangguniang barangay like the other six
councilmen elected with him in 1982. In fact, Section 5 of the Rep. Act No. 6679 also speaks
of seven kagawads, the foremost of whom shall again be the punong barangay. He concludes that
he should thus be regarded as running for the same office and therefore not considered resigned
when he filed his certificate of candidacy for kagawad.
The Court does not agree.
It seems to us that the challenged resolution quite clearly expresses the mandate of the above-
quoted Section 8 that all incumbent elected officials should not be considered resigned upon the
filing of their certificates of candidacy as long as they were running for the same position. The
purpose of the resolution was merely to implement this intention, which was clearly applicable not
only to the ordinary members of the sangguniang barangay but also to the punong barangay.
As for the questioned authority, this is found in Section 52 of the Omnibus Election Code, which
empowers the public respondent to "promulgate rules and regulations implementing the provisions of
this Code or other laws which the Commission is required to enforce and administer. . . ."
The justification given by the resolution is that the position of punong barangay is different from that
of kagawad as in fact it is. There should be no question that the punong barangay is an essentially
executive officer, as the enumeration of his functions in Section 88 of the Local Government Code
will readily show, unlike the kagawad, who is vested with mainly legislative functions (although he
does assist the punong barangay in the administration of the barangay). Under Rep. Act No. 6679,
the person who wins the highest number of votes as a kagawad becomes by operation of law
the punong barangay, or the executive of the political unit. In the particular case of the petitioner, it
should be noted that he was in fact not even elected in 1982 as one of the six councilmen but
separately as the barangay captain. He was thus correctly deemed resigned upon his filing of a
certificate of candidacy for kagawad in 1989, as this was not the position he was holding, or was
incumbent in, at the time he filed such certificate.
It is worth stressing that under the original procedure followed in the 1982 barangay elections, the
petitioner was elected barangay captain directly by the voters, separately from the candidates
running for mere membership in the sangguniang barangay. The offices of the barangay captain and
councilmen were both open to the candidates, but they could run only for one or the other position
and not simultaneously for both. By contrast, the candidate under the present law may aspire
for both offices, but can run only for one, to wit, that of kagawad. While campaigning for this position,
he may hope and actually strive to win the highest number of votes as this would automatically make
him the punong barangay. In this sense, it may be said that he is a candidate for both offices. Strictly
speaking, however, the only office for which he may run and for which a certificate of candidacy
may be admitted is that of kagawad.
It follows that the petitioner cannot insist that he was running not for kagawad only but ultimately also
for punong barangay in the 28 March 1989 election. In fact, his certificate of candidacy was
for kagawad and not for punong barangay. As the basic position being disputed in the barangay
election was that of kagawad, that of punong barangay being conferred only by operation of law on
the candidate placing first, the petitioner had to forfeit his position of punong barangay, which he was
holding when he presented his candidacy for kagawad. Consequently, he cannot be credited with
the four contested votes for Flores on the erroneous ground that he was still incumbent as punong
barangay on the day of the election.
The petitioner argues that he could not have run for reelection as punong barangay because the
office was no longer subject to separate or even direct election by the voters. That may be so, but
this argument goes to the wisdom of the law, not its validity, and is better addressed to the
legislature. From the strictly legal viewpoint, the statute does not offend the equal protection clause,
as there are, to repeat, substantial distinctions between the offices of punong
barangay and kagawad. Precisely , the reason for divesting the punong barangay of his position was
to place him on the same footing as the other candidates by removing the advantages he would
enjoy if he were to continue as punong barangay while running for kagawad.
In sum, we hold that Section 9 of Rep. Act No. 6679 is constitutionally defective and must be struck
down, but the challenged resolution must be sustained as a reasonable and valid implementation of
the said statute. The petitioner was no longer the incumbent punong barangay on election day and
so was not entitled to the benefits of the equity-of-the-incumbent rule. The consequence is that the
four votes claimed by him were correctly considered stray, making the private respondent
the punong barangay of Poblacion, Tayum, Abra, for having received the highest number of votes
for kagawad.
It remains to stress that although the elections involved herein pertain to the lowest level of our
political organization, this fact has not deterred the highest tribunal from taking cognizance of this
case and discussing it at length in this opinion. This only goes to show that as long as a
constitutional issue is at stake, even the barangayand its officers, for all their humility in the political
hierarchy, deserve and will get the full attention of this Court.
WHEREFORE, the petition is DISMISSED. Judgment is hereby rendered:

1. Declaring Section 9 of Rep. Act No. 6679 UNCONSTITUTIONAL insofar as it provides
that barangay election contests decided by the municipal or metropolitan trial court shall be
appealable to the regional trial court;
2. Declaring valid Section 16(3) of Com. Res. No. 2022-A dated January 5, 1989; and
3. Declaring private respondent Nobelito Rapisora the duly elected punong barangay of
Poblacion, Tayum, Abra.
No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-63915 April 24, 1985
LORENZO M. TAADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR

BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. [MABINI], petitioners,
vs.
HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON.
JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President ,
MELQUIADES P. DE LA CRUZ, in his capacity as Director, Malacaang Records Office, and
FLORENDO S. PABLO, in his capacity as Director, Bureau of Printing, respondents.
ESCOLIN, J.:
Invoking the people's right to be informed on matters of public concern, a right recognized in Section
6, Article IV of the 1973 Philippine Constitution, 1 as well as the principle that laws to be valid and
enforceable must be published in the Official Gazette or otherwise effectively promulgated,
petitioners seek a writ of mandamus to compel respondent public officials to publish, and/or cause
the publication in the Official Gazette of various presidential decrees, letters of instructions, general
orders, proclamations, executive orders, letter of implementation and administrative orders.
Specifically, the publication of the following presidential issuances is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184, 197, 200,
234, 265, 286, 298, 303, 312, 324, 325, 326, 337, 355, 358, 359, 360, 361, 368, 404,
406, 415, 427, 429, 445, 447, 473, 486, 491, 503, 504, 521, 528, 551, 566, 573, 574,
594, 599, 644, 658, 661, 718, 731, 733, 793, 800, 802, 835, 836, 923, 935, 961,
1017-1030, 1050, 1060-1061, 1085, 1143, 1165, 1166, 1242, 1246, 1250, 1278,
1279, 1300, 1644, 1772, 1808, 1810, 1813-1817, 1819-1826, 1829-1840, 1842-
1847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141, 150, 153,
155, 161, 173, 180, 187, 188, 192, 193, 199, 202, 204, 205, 209, 211-213, 215-224,
226-228, 231-239, 241-245, 248, 251, 253-261, 263-269, 271-273, 275-283, 285-
289, 291, 293, 297-299, 301-303, 309, 312-315, 325, 327, 343, 346, 349, 357, 358,
362, 367, 370, 382, 385, 386, 396-397, 405, 438-440, 444- 445, 473, 486, 488, 498,
501, 399, 527, 561, 576, 587, 594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642,
665, 702, 712-713, 726, 837-839, 878-879, 881, 882, 939-940, 964,997,1149-
1178,1180-1278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-1526, 1529,
1532, 1535, 1538, 1540-1547, 1550-1558, 1561-1588, 1590-1595, 1594-1600, 1606-
1609, 1612-1628, 1630-1649, 1694-1695, 1697-1701, 1705-1723, 1731-1734, 1737-
1742, 1744, 1746-1751, 1752, 1754, 1762, 1764-1787, 1789-1795, 1797, 1800,
1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829, 1831-1832, 1835-1836,
1839-1840, 1843-1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870,
1876-1889, 1892, 1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984,
1986-2028, 2030-2044, 2046-2145, 2147-2161, 2163-2244.
e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457- 471, 474-492, 494-507,
509-510, 522, 524-528, 531-532, 536, 538, 543-544, 549, 551-553, 560, 563, 567-
568, 570, 574, 593, 594, 598-604, 609, 611- 647, 649-677, 679-703, 705-707, 712-
786, 788-852, 854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59, 76, 80-81,
92, 94, 95, 107, 120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378, 380-433, 436-439.
The respondents, through the Solicitor General, would have this case dismissed outright on the
ground that petitioners have no legal personality or standing to bring the instant petition. The view is
submitted that in the absence of any showing that petitioners are personally and directly affected or
prejudiced by the alleged non-publication of the presidential issuances in question 2 said petitioners
are without the requisite legal personality to institute this mandamus proceeding, they are not being
"aggrieved parties" within the meaning of Section 3, Rule 65 of the Rules of Court, which we quote:
SEC. 3. Petition for Mandamus.When any tribunal, corporation, board or person

unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully excludes another from the
use a rd enjoyment of a right or office to which such other is entitled, and there is no
other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court alleging the facts
with certainty and praying that judgment be rendered commanding the defendant,
immediately or at some other specified time, to do the act required to be done to
Protect the rights of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the defendant.
Upon the other hand, petitioners maintain that since the subject of the petition concerns a public
right and its object is to compel the performance of a public duty, they need not show any specific
interest for their petition to be given due course.
The issue posed is not one of first impression. As early as the 1910 case of Severino vs. Governor
General, 3 this Court held that while the general rule is that "a writ of mandamus would be granted to
a private individual only in those cases where he has some private or particular interest to be
subserved, or some particular right to be protected, independent of that which he holds with the
public at large," and "it is for the public officers exclusively to apply for the writ when public rights are
to be subserved [Mithchell vs. Boardmen, 79 M.e., 469]," nevertheless, "when the question is one of
public right and the object of the mandamus is to procure the enforcement of a public duty, the
people are regarded as the real party in interest and the relator at whose instigation the proceedings
are instituted need not show that he has any legal or special interest in the result, it being sufficient
to show that he is a citizen and as such interested in the execution of the laws [High, Extraordinary
Legal Remedies, 3rd ed., sec. 431].
Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as a proper
party to the mandamus proceedings brought to compel the Governor General to call a special
election for the position of municipal president in the town of Silay, Negros Occidental. Speaking for
this Court, Mr. Justice Grant T. Trent said:
We are therefore of the opinion that the weight of authority supports the proposition
that the relator is a proper party to proceedings of this character when a public right
is sought to be enforced. If the general rule in America were otherwise, we think that
it would not be applicable to the case at bar for the reason 'that it is always
dangerous to apply a general rule to a particular case without keeping in mind the
reason for the rule, because, if under the particular circumstances the reason for the
rule does not exist, the rule itself is not applicable and reliance upon the rule may
well lead to error'
No reason exists in the case at bar for applying the general rule insisted upon by
counsel for the respondent. The circumstances which surround this case are different
from those in the United States, inasmuch as if the relator is not a proper party to
these proceedings no other person could be, as we have seen that it is not the duty
of the law officer of the Government to appear and represent the people in cases of
this character.
The reasons given by the Court in recognizing a private citizen's legal personality in the
aforementioned case apply squarely to the present petition. Clearly, the right sought to be enforced
by petitioners herein is a public right recognized by no less than the fundamental law of the land. If
petitioners were not allowed to institute this proceeding, it would indeed be difficult to conceive of
any other person to initiate the same, considering that the Solicitor General, the government officer
generally empowered to represent the people, has entered his appearance for respondents in this
case.
Respondents further contend that publication in the Official Gazette is not a sine qua non
requirement for the effectivity of laws where the laws themselves provide for their own effectivity
dates. It is thus submitted that since the presidential issuances in question contain special provisions
as to the date they are to take effect, publication in the Official Gazette is not indispensable for their
effectivity. The point stressed is anchored on Article 2 of the Civil Code:
Art. 2. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided, ...
The interpretation given by respondent is in accord with this Court's construction of said article. In a
long line of decisions,4 this Court has ruled that publication in the Official Gazette is necessary in
those cases where the legislation itself does not provide for its effectivity date-for then the date of
publication is material for determining its date of effectivity, which is the fifteenth day following its
publication-but not when the law itself provides for the date when it goes into effect.
Respondents' argument, however, is logically correct only insofar as it equates the effectivity of laws
with the fact of publication. Considered in the light of other statutes applicable to the issue at hand,
the conclusion is easily reached that said Article 2 does not preclude the requirement of publication
in the Official Gazette, even if the law itself provides for the date of its effectivity. Thus, Section 1 of
Commonwealth Act 638 provides as follows:
Section 1. There shall be published in the Official Gazette [1] all important legisiative
acts and resolutions of a public nature of the, Congress of the Philippines; [2] all
executive and administrative orders and proclamations, except such as have no
general applicability; [3] decisions or abstracts of decisions of the Supreme Court
and the Court of Appeals as may be deemed by said courts of sufficient importance
to be so published; [4] such documents or classes of documents as may be required
so to be published by law; and [5] such documents or classes of documents as the
President of the Philippines shall determine from time to time to have general
applicability and legal effect, or which he may authorize so to be published. ...
The clear object of the above-quoted provision is to give the general public adequate notice of the
various laws which are to regulate their actions and conduct as citizens. Without such notice and
publication, there would be no basis for the application of the maxim "ignorantia legis non excusat." It
would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law
of which he had no notice whatsoever, not even a constructive one.
Perhaps at no time since the establishment of the Philippine Republic has the publication of laws
taken so vital significance that at this time when the people have bestowed upon the President a
power heretofore enjoyed solely by the legislature. While the people are kept abreast by the mass
media of the debates and deliberations in the Batasan Pambansaand for the diligent ones, ready
access to the legislative recordsno such publicity accompanies the law-making process of the
President. Thus, without publication, the people have no means of knowing what presidential
decrees have actually been promulgated, much less a definite way of informing themselves of the
specific contents and texts of such decrees. As the Supreme Court of Spain ruled: "Bajo la
denominacion generica de leyes, se comprenden tambien los reglamentos, Reales decretos,
Instrucciones, Circulares y Reales ordines dictadas de conformidad con las mismas por el Gobierno
en uso de su potestad.5
The very first clause of Section I of Commonwealth Act 638 reads: "There shall be published in the
Official Gazette ... ." The word "shall" used therein imposes upon respondent officials an imperative
duty. That duty must be enforced if the Constitutional right of the people to be informed on matters of
public concern is to be given substance and reality. The law itself makes a list of what should be
published in the Official Gazette. Such listing, to our mind, leaves respondents with no discretion
whatsoever as to what must be included or excluded from such publication.
The publication of all presidential issuances "of a public nature" or "of general applicability" is
mandated by law. Obviously, presidential decrees that provide for fines, forfeitures or penalties for
their violation or otherwise impose a burden or. the people, such as tax and revenue measures, fall
within this category. Other presidential issuances which apply only to particular persons or class of
persons such as administrative and executive orders need not be published on the assumption that
they have been circularized to all concerned. 6
It is needless to add that the publication of presidential issuances "of a public nature" or "of general
applicability" is a requirement of due process. It is a rule of law that before a person may be bound
by law, he must first be officially and specifically informed of its contents. As Justice Claudio
Teehankee said in Peralta vs. COMELEC 7:
In a time of proliferating decrees, orders and letters of instructions which all form part
of the law of the land, the requirement of due process and the Rule of Law demand
that the Official Gazette as the official government repository promulgate and publish
the texts of all such decrees, orders and instructions so that the people may know
where to obtain their official and specific contents.
The Court therefore declares that presidential issuances of general application, which have not been
published, shall have no force and effect. Some members of the Court, quite apprehensive about the
possible unsettling effect this decision might have on acts done in reliance of the validity of those
presidential decrees which were published only during the pendency of this petition, have put the
question as to whether the Court's declaration of invalidity apply to P.D.s which had been enforced
or implemented prior to their publication. The answer is all too familiar. In similar situations in the
past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage
District vs. Baxter Bank 8 to wit:
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. Norton v. Shelby County, 118 U.S. 425, 442; Chicago, 1. & L. Ry. Co. v.
Hackett, 228 U.S. 559, 566. It is quite clear, however, that such broad statements as
to the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to such a determination, is an
operative fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the subsequent
ruling as to invalidity may have to be considered in various aspects-with respect to
particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal and it
is manifest from numerous decisions that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.
Consistently with the above principle, this Court in Rutter vs. Esteban 9 sustained the right of a party
under the Moratorium Law, albeit said right had accrued in his favor before said law was declared
unconstitutional by this Court.
Similarly, the implementation/enforcement of presidential decrees prior to their publication in the

Official Gazette is "an operative fact which may have consequences which cannot be justly ignored.
The past cannot always be erased by a new judicial declaration ... that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."
From the report submitted to the Court by the Clerk of Court, it appears that of the presidential
decrees sought by petitioners to be published in the Official Gazette, only Presidential Decrees Nos.
1019 to 1030, inclusive, 1278, and 1937 to 1939, inclusive, have not been so published. 10 Neither
the subject matters nor the texts of these PDs can be ascertained since no copies thereof are
available. But whatever their subject matter may be, it is undisputed that none of these unpublished
PDs has ever been implemented or enforced by the government. In Pesigan vs. Angeles, 11 the
Court, through Justice Ramon Aquino, ruled that "publication is necessary to apprise the public of
the contents of [penal] regulations and make the said penalties binding on the persons affected
thereby. " The cogency of this holding is apparently recognized by respondent officials considering
the manifestation in their comment that "the government, as a matter of policy, refrains from
prosecuting violations of criminal laws until the same shall have been published in the Official
Gazette or in some other publication, even though some criminal laws provide that they shall take
effect immediately.
WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all
unpublished presidential issuances which are of general application, and unless so published, they
shall have no binding force and effect.
SO ORDERED.
Relova, J., concurs.
Aquino, J., took no part.
Concepcion, Jr., J., is on leave.
Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of the views expressed in the ably written opinion of
Justice Escolin. I am unable, however, to concur insofar as it would unqualifiedly impose the
requirement of publication in the Official Gazette for unpublished "presidential issuances" to have
binding force and effect.
I shall explain why.
1. It is of course true that without the requisite publication, a due process question would arise if
made to apply adversely to a party who is not even aware of the existence of any legislative or
executive act having the force and effect of law. My point is that such publication required need not
be confined to the Official Gazette. From the pragmatic standpoint, there is an advantage to be
gained. It conduces to certainty. That is too be admitted. It does not follow, however, that failure to
do so would in all cases and under all circumstances result in a statute, presidential decree or any
other executive act of the same category being bereft of any binding force and effect. To so hold
would, for me, raise a constitutional question. Such a pronouncement would lend itself to the
interpretation that such a legislative or presidential act is bereft of the attribute of effectivity unless
published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana
so aptly pointed out. It is true that what is decided now applies only to past "presidential issuances".
Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as to what
is required for any statute or presidential act to be impressed with binding force or effectivity.
2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its first
paragraph sets forth what to me is the constitutional doctrine applicable to this case. Thus: "The
Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity,
unlike some Constitutions elsewhere. It may be said though that the guarantee of due process
requires notice of laws to affected Parties before they can be bound thereby; but such notice is not
necessarily by publication in the Official Gazette. The due process clause is not that precise. 1 I am
likewise in agreement with its closing paragraph: "In fine, I concur in the majority decision to the
extent that it requires notice before laws become effective, for no person should be bound by a law
without notice. This is elementary fairness. However, I beg to disagree insofar as it holds that such
notice shall be by publication in the Official Gazette. 2
3. It suffices, as was stated by Judge Learned Hand, that law as the command of the government
"must be ascertainable in some form if it is to be enforced at all. 3 It would indeed be to reduce it to
the level of mere futility, as pointed out by Justice Cardozo, "if it is unknown and
unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared to subscribe to is the
doctrine that it must be in the Official Gazette. To be sure once published therein there is the
ascertainable mode of determining the exact date of its effectivity. Still for me that does not dispose
of the question of what is the jural effect of past presidential decrees or executive acts not so
published. For prior thereto, it could be that parties aware of their existence could have conducted
themselves in accordance with their provisions. If no legal consequences could attach due to lack of
publication in the Official Gazette, then serious problems could arise. Previous transactions based
on such "Presidential Issuances" could be open to question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such an effect is contemplated by our decision. Where
such presidential decree or executive act is made the basis of a criminal prosecution, then, of
course, its ex post facto character becomes evident. 5 In civil cases though, retroactivity as such is
not conclusive on the due process aspect. There must still be a showing of arbitrariness. Moreover,
where the challenged presidential decree or executive act was issued under the police power, the
non-impairment clause of the Constitution may not always be successfully invoked. There must still
be that process of balancing to determine whether or not it could in such a case be tainted by
infirmity. 6 In traditional terminology, there could arise then a question of unconstitutional application.
That is as far as it goes.
4. Let me make therefore that my qualified concurrence goes no further than to affirm that
publication is essential to the effectivity of a legislative or executive act of a general application. I am
not in agreement with the view that such publication must be in the Official Gazette. The Civil Code
itself in its Article 2 expressly recognizes that the rule as to laws taking effect after fifteen days
following the completion of their publication in the Official Gazette is subject to this exception,
"unless it is otherwise provided." Moreover, the Civil Code is itself only a legislative enactment,
Republic Act No. 386. It does not and cannot have the juridical force of a constitutional command. A
later legislative or executive act which has the force and effect of law can legally provide for a
different rule.
5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus previously published in the Official Gazette would
be devoid of any legal character. That would be, in my opinion, to go too far. It may be fraught, as
earlier noted, with undesirable consequences. I find myself therefore unable to yield assent to such a
pronouncement.
I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in this
separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.
TEEHANKEE, J., concurring:
I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme. Justice
Herrera. The Rule of Law connotes a body of norms and laws published and ascertainable and of
equal application to all similarly circumstances and not subject to arbitrary change but only under
certain set procedures. The Court has consistently stressed that "it is an elementary rule of fair play
and justice that a reasonable opportunity to be informed must be afforded to the people who are
commanded to obey before they can be punished for its violation,1 citing the settled principle based
on due process enunciated in earlier cases that "before the public is bound by its contents,
especially its penal provisions, a law, regulation or circular must first be published and the people
officially and specially informed of said contents and its penalties.
Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the
Revised Administrative Code, there would be no basis nor justification for the corollary rule of Article
3 of the Civil Code (based on constructive notice that the provisions of the law are ascertainable
from the public and official repository where they are duly published) that "Ignorance of the law
excuses no one from compliance therewith.
Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws which
are silent as to their effectivity [date] need be published in the Official Gazette for their effectivity" is
manifestly untenable. The plain text and meaning of the Civil Code is that "laws shall take effect after
fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise
provided, " i.e. a different effectivity date is provided by the law itself. This proviso perforce refers to
a law that has been duly published pursuant to the basic constitutional requirements of due process.
The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it "shall
take effect [only] one year [not 15 days] after such publication. 2 To sustain respondents' misreading
that "most laws or decrees specify the date of their effectivity and for this reason, publication in the
Official Gazette is not necessary for their effectivity 3 would be to nullify and render nugatory the Civil
Code's indispensable and essential requirement of prior publication in the Official Gazette by the
simple expedient of providing for immediate effectivity or an earlier effectivity date in the law
itself before the completion of 15 days following its publication which is the period generally fixed by
the Civil Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:
I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it
has to be published. What I would like to state in connection with that proposition is that when a date
of effectivity is mentioned in the decree but the decree becomes effective only fifteen (15) days after
its publication in the Official Gazette, it will not mean that the decree can have retroactive effect to
the date of effectivity mentioned in the decree itself. There should be no retroactivity if the
retroactivity will run counter to constitutional rights or shall destroy vested rights.
PLANA, J., concurring (with qualification):
The Philippine Constitution does not require the publication of laws as a prerequisite for their
effectivity, unlike some Constitutions elsewhere. * It may be said though that the guarantee of due process requires
notice of laws to affected parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette.
The due process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a prerequisite
for their effectivity, if said laws already provide for their effectivity date.
Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is otherwise provided " Two things
may be said of this provision: Firstly, it obviously does not apply to a law with a built-in provision as
to when it will take effect. Secondly, it clearly recognizes that each law may provide not only a
different period for reckoning its effectivity date but also a different mode of notice. Thus, a law may
prescribe that it shall be published elsewhere than in the Official Gazette.
Commonwealth Act No. 638, in my opinion, does not support the proposition that for their
effectivity, laws must be published in the Official Gazette. The said law is simply "An Act to Provide
for the Uniform Publication and Distribution of the Official Gazette." Conformably therewith, it
authorizes the publication of the Official Gazette, determines its frequency, provides for its sale and
distribution, and defines the authority of the Director of Printing in relation thereto. It also enumerates
what shall be published in the Official Gazette, among them, "important legislative acts and
resolutions of a public nature of the Congress of the Philippines" and "all executive and
administrative orders and proclamations, except such as have no general applicability." It is
noteworthy that not all legislative acts are required to be published in the Official Gazette but only
"important" ones "of a public nature." Moreover, the said law does not provide that publication in the
Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal
and stand on the same footing. A law, especially an earlier one of general application such as
Commonwealth Act No. 638, cannot nullify or restrict the operation of a subsequent statute that has
a provision of its own as to when and how it will take effect. Only a higher law, which is the
Constitution, can assume that role.
In fine, I concur in the majority decision to the extent that it requires notice before laws become
effective, for no person should be bound by a law without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that such notice shall be by publication in the Official
Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
I concur insofar as publication is necessary but reserve my vote as to the necessity of such
publication being in the Official Gazette.
DE LA FUENTE, J., concurring:
I concur insofar as the opinion declares the unpublished decrees and issuances of a public nature or
general applicability ineffective, until due publication thereof.
Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of the views expressed in the ably written opinion of
Justice Escolin. I am unable, however, to concur insofar as it would unqualifiedly impose the
requirement of publication in the Official Gazette for unpublished "presidential issuances" to have
binding force and effect.
I shall explain why.

1. It is of course true that without the requisite publication, a due process question would arise if
made to apply adversely to a party who is not even aware of the existence of any legislative or
executive act having the force and effect of law. My point is that such publication required need not
be confined to the Official Gazette. From the pragmatic standpoint, there is an advantage to be
gained. It conduces to certainty. That is too be admitted. It does not follow, however, that failure to
do so would in all cases and under all circumstances result in a statute, presidential decree or any
other executive act of the same category being bereft of any binding force and effect. To so hold
would, for me, raise a constitutional question. Such a pronouncement would lend itself to the
interpretation that such a legislative or presidential act is bereft of the attribute of effectivity unless
published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana
so aptly pointed out. It is true that what is decided now applies only to past "presidential issuances".
Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as to what
is required for any statute or presidential act to be impressed with binding force or effectivity.
2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its first
paragraph sets forth what to me is the constitutional doctrine applicable to this case. Thus: "The
Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity,
unlike some Constitutions elsewhere. It may be said though that the guarantee of due process
requires notice of laws to affected Parties before they can be bound thereby; but such notice is not
necessarily by publication in the Official Gazette. The due process clause is not that precise. 1 I am
likewise in agreement with its closing paragraph: "In fine, I concur in the majority decision to the
extent that it requires notice before laws become effective, for no person should be bound by a law
without notice. This is elementary fairness. However, I beg to disagree insofar as it holds that such
notice shall be by publication in the Official Gazette. 2
3. It suffices, as was stated by Judge Learned Hand, that law as the command of the government
"must be ascertainable in some form if it is to be enforced at all. 3 It would indeed be to reduce it to
the level of mere futility, as pointed out by Justice Cardozo, "if it is unknown and
unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared to subscribe to is the
doctrine that it must be in the Official Gazette. To be sure once published therein there is the
ascertainable mode of determining the exact date of its effectivity. Still for me that does not dispose
of the question of what is the jural effect of past presidential decrees or executive acts not so
published. For prior thereto, it could be that parties aware of their existence could have conducted
themselves in accordance with their provisions. If no legal consequences could attach due to lack of
publication in the Official Gazette, then serious problems could arise. Previous transactions based
on such "Presidential Issuances" could be open to question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such an effect is contemplated by our decision. Where
such presidential decree or executive act is made the basis of a criminal prosecution, then, of
course, its ex post facto character becomes evident. 5 In civil cases though, retroactivity as such is
not conclusive on the due process aspect. There must still be a showing of arbitrariness. Moreover,
where the challenged presidential decree or executive act was issued under the police power, the
non-impairment clause of the Constitution may not always be successfully invoked. There must still
be that process of balancing to determine whether or not it could in such a case be tainted by
infirmity. 6 In traditional terminology, there could arise then a question of unconstitutional application.
That is as far as it goes.
4. Let me make therefore that my qualified concurrence goes no further than to affirm that
publication is essential to the effectivity of a legislative or executive act of a general application. I am
not in agreement with the view that such publication must be in the Official Gazette. The Civil Code
itself in its Article 2 expressly recognizes that the rule as to laws taking effect after fifteen days
following the completion of their publication in the Official Gazette is subject to this exception,
"unless it is otherwise provided." Moreover, the Civil Code is itself only a legislative enactment,
Republic Act No. 386. It does not and cannot have the juridical force of a constitutional command. A
later legislative or executive act which has the force and effect of law can legally provide for a
different rule.
5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus previously published in the Official Gazette would
be devoid of any legal character. That would be, in my opinion, to go too far. It may be fraught, as
earlier noted, with undesirable consequences. I find myself therefore unable to yield assent to such a
pronouncement.
I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in this
separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.
TEEHANKEE, J., concurring:
I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme. Justice
Herrera. The Rule of Law connotes a body of norms and laws published and ascertainable and of
equal application to all similarly circumstances and not subject to arbitrary change but only under
certain set procedures. The Court has consistently stressed that "it is an elementary rule of fair play
and justice that a reasonable opportunity to be informed must be afforded to the people who are
commanded to obey before they can be punished for its violation,1 citing the settled principle based
on due process enunciated in earlier cases that "before the public is bound by its contents,
especially its penal provisions, a law, regulation or circular must first be published and the people
officially and specially informed of said contents and its penalties.
Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the
Revised Administrative Code, there would be no basis nor justification for the corollary rule of Article
3 of the Civil Code (based on constructive notice that the provisions of the law are ascertainable
from the public and official repository where they are duly published) that "Ignorance of the law
excuses no one from compliance therewith.
Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws which
are silent as to their effectivity [date] need be published in the Official Gazette for their effectivity" is
manifestly untenable. The plain text and meaning of the Civil Code is that "laws shall take effect after
fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise
provided, " i.e. a different effectivity date is provided by the law itself. This proviso perforce refers to
a law that has been duly published pursuant to the basic constitutional requirements of due process.
The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it "shall
take effect [only] one year [not 15 days] after such publication. 2 To sustain respondents' misreading
that "most laws or decrees specify the date of their effectivity and for this reason, publication in the
Official Gazette is not necessary for their effectivity 3 would be to nullify and render nugatory the Civil
Code's indispensable and essential requirement of prior publication in the Official Gazette by the
simple expedient of providing for immediate effectivity or an earlier effectivity date in the law
itself before the completion of 15 days following its publication which is the period generally fixed by
the Civil Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:

I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it
has to be published. What I would like to state in connection with that proposition is that when a date
of effectivity is mentioned in the decree but the decree becomes effective only fifteen (15) days after
its publication in the Official Gazette, it will not mean that the decree can have retroactive effect to
the date of effectivity mentioned in the decree itself. There should be no retroactivity if the
retroactivity will run counter to constitutional rights or shall destroy vested rights.
PLANA, J., concurring (with qualification):
The Philippine Constitution does not require the publication of laws as a prerequisite for their
effectivity, unlike some Constitutions elsewhere. * It may be said though that the guarantee of due process requires
notice of laws to affected parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette.
The due process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a prerequisite
for their effectivity, if said laws already provide for their effectivity date.
Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is otherwise provided " Two things
may be said of this provision: Firstly, it obviously does not apply to a law with a built-in provision as
to when it will take effect. Secondly, it clearly recognizes that each law may provide not only a
different period for reckoning its effectivity date but also a different mode of notice. Thus, a law may
prescribe that it shall be published elsewhere than in the Official Gazette.
Commonwealth Act No. 638, in my opinion, does not support the proposition that for their
effectivity, laws must be published in the Official Gazette. The said law is simply "An Act to Provide
for the Uniform Publication and Distribution of the Official Gazette." Conformably therewith, it
authorizes the publication of the Official Gazette, determines its frequency, provides for its sale and
distribution, and defines the authority of the Director of Printing in relation thereto. It also enumerates
what shall be published in the Official Gazette, among them, "important legislative acts and
resolutions of a public nature of the Congress of the Philippines" and "all executive and
administrative orders and proclamations, except such as have no general applicability." It is
noteworthy that not all legislative acts are required to be published in the Official Gazette but only
"important" ones "of a public nature." Moreover, the said law does not provide that publication in the
Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal
and stand on the same footing. A law, especially an earlier one of general application such as
Commonwealth Act No. 638, cannot nullify or restrict the operation of a subsequent statute that has
a provision of its own as to when and how it will take effect. Only a higher law, which is the
Constitution, can assume that role.
In fine, I concur in the majority decision to the extent that it requires notice before laws become
effective, for no person should be bound by a law without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that such notice shall be by publication in the Official
Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
I concur insofar as publication is necessary but reserve my vote as to the necessity of such
publication being in the Official Gazette.
DE LA FUENTE, J., concurring:
I concur insofar as the opinion declares the unpublished decrees and issuances of a public nature or
general applicability ineffective, until due publication thereof.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162155 August 28, 2007
COMMISSIONER OF INTERNAL REVENUE and ARTURO V. PARCERO in his official capacity

as Revenue District Officer of Revenue District No. 049 (Makati), Petitioners,
vs.
PRIMETOWN PROPERTY GROUP, INC., Respondent.
DECISION
CORONA, J.:
This petition for review on certiorari1 seeks to set aside the August 1, 2003 decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 64782 and its February 9, 2004 resolution denying
reconsideration.3
On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied
for the refund or credit of income tax respondent paid in 1997. In Yap's letter to petitioner revenue
district officer Arturo V. Parcero of Revenue District No. 049 (Makati) of the Bureau of Internal
Revenue (BIR),4 he explained that the increase in the cost of labor and materials and difficulty in
obtaining financing for projects and collecting receivables caused the real estate industry to
slowdown.5 As a consequence, while business was good during the first quarter of 1997, respondent
suffered losses amounting to 71,879,228 that year.6
According to Yap, because respondent suffered losses, it was not liable for income
taxes.7 Nevertheless, respondent paid its quarterly corporate income tax and remitted creditable
withholding tax from real estate sales to the BIR in the total amount of 26,318,398.32.8 Therefore,
respondent was entitled to tax refund or tax credit.9
On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional
documents to support its claim.10 Respondent complied but its claim was not acted upon. Thus, on
April 14, 2000, it filed a petition for review11 in the Court of Tax Appeals (CTA).
On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year
prescriptive period for filing a judicial claim for tax refund or tax credit.12 It invoked Section 229 of the
National Internal Revenue Code (NIRC):
Sec. 229. Recovery of Taxes Erroneously or Illegally Collected. -- No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but
such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from
the date of payment of the tax or penalty regardless of any supervening cause that may arise
after payment: Provided, however, That the Commissioner may, even without a claim therefor,
refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid. (emphasis supplied)
The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to
claim a refund or credit commenced on that date.13
The tax court applied Article 13 of the Civil Code which states:
Art. 13. When the law speaks of years, months, days or nights, it shall be understood that years are
of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours, and
nights from sunset to sunrise.
If the months are designated by their name, they shall be computed by the number of days which
they respectively have.
In computing a period, the first day shall be excluded, and the last included. (emphasis supplied)
Thus, according to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the
filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year,
respondent's petition, which was filed 731 days14 after respondent filed its final adjusted return, was
filed beyond the reglementary period.15
Respondent moved for reconsideration but it was denied.16 Hence, it filed an appeal in the CA.17
On August 1, 2003, the CA reversed and set aside the decision of the CTA.18 It ruled that Article 13
of the Civil Code did not distinguish between a regular year and a leap year. According to the CA:
The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap
year.19
In other words, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April
14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of
730 days. A statute which is clear and explicit shall be neither interpreted nor construed.20
Petitioners moved for reconsideration but it was denied.21 Thus, this appeal.
Petitioners contend that tax refunds, being in the nature of an exemption, should be strictly
construed against claimants.22 Section 229 of the NIRC should be strictly applied against respondent
inasmuch as it has been consistently held that the prescriptive period (for the filing of tax refunds
and tax credits) begins to run on the day claimants file their final adjusted returns.23 Hence, the claim
should have been filed on or before April 13, 2000 or within 730 days, reckoned from the time
respondent filed its final adjusted return.
The conclusion of the CA that respondent filed its petition for review in the CTA within the two-year
prescriptive period provided in Section 229 of the NIRC is correct. Its basis, however, is not.
The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted
return.24 But how should the two-year prescriptive period be computed?
As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is
understood to be equivalent to 365 days. In National Marketing Corporation v. Tecson,25 we ruled
that a year is equivalent to 365 days regardless of whether it is a regular year or a leap year.26
However, in 1987, EO27 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter
VIII, Book I thereof provides:
Sec. 31. Legal Periods. "Year" shall be understood to be twelve calendar months; "month" of
thirty days, unless it refers to a specific calendar month in which case it shall be computed according
to the number of days the specific month contains; "day", to a day of twenty-four hours and; "night"
from sunrise to sunset. (emphasis supplied)
A calendar month is "a month designated in the calendar without regard to the number of days it
may contain."28 It is the "period of time running from the beginning of a certain numbered day up to,
but not including, the corresponding numbered day of the next month, and if there is not a sufficient
number of days in the next month, then up to and including the last day of that month."29 To illustrate,
one calendar month from December 31, 2007 will be from January 1, 2008 to January 31, 2008; one
calendar month from January 31, 2008 will be from February 1, 2008 until February 29, 2008.30
A law may be repealed expressly (by a categorical declaration that the law is revoked and abrogated
by another) or impliedly (when the provisions of a more recent law cannot be reasonably reconciled
with the previous one).31Section 27, Book VII (Final Provisions) of the Administrative Code of 1987
states:
Sec. 27. Repealing clause. All laws, decrees, orders, rules and regulation, or portions thereof,
inconsistent with this Code are hereby repealed or modified accordingly.
A repealing clause like Sec. 27 above is not an express repealing clause because it fails to identify
or designate the laws to be abolished.32 Thus, the provision above only impliedly repealed all laws
inconsistent with the Administrative Code of 1987. 1avvphi 1
Implied repeals, however, are not favored. An implied repeal must have been clearly and
unmistakably intended by the legislature. The test is whether the subsequent law encompasses
entirely the subject matter of the former law and they cannot be logically or reasonably reconciled.33
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of
1987 deal with the same subject matter the computation of legal periods. Under the Civil Code, a
year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative
Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the
Administrative Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of computing legal periods under the
Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter
VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation
of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-
year prescriptive period (reckoned from the time respondent filed its final adjusted return34 on April
14, 1998) consisted of 24 calendar months, computed as follows:
Year 1st calendar April 15, 1998 to May 14, 1998

1 month
2nd calendar May 15, 1998 to June 14, 1998
month
3rd calendar June 15, 1998 to July 14, 1998

month
4th calendar July 15, 1998 to August 14, 1998
month
5th calendar August 15, 1998 to September 14,

month 1998
6th calendar September 15, to October 14, 1998
month 1998
7th calendar October 15, 1998 to November 14, 1998
month
8th calendar November 15, 1998 to December 14, 1998
month
9th calendar December 15, 1998 to January 14, 1999

month
10th calendar January 15, 1999 to February 14, 1999
month
11th calendar February 15, 1999 to March 14, 1999
month
12th calendar March 15, 1999 to April 14, 1999

month
Year 13th calendar April 15, 1999 to May 14, 1999
2 month
14th calendar May 15, 1999 to June 14, 1999
month
15th calendar June 15, 1999 to July 14, 1999
month
16th calendar July 15, 1999 to August 14, 1999

month
17th calendar August 15, 1999 to September 14,

month 1999
18th calendar September 15, to October 14, 1999

month 1999
19th calendar October 15, 1999 to November 14, 1999
month
20th calendar November 15, 1999 to December 14, 1999
month
21st calendar December 15, 1999 to January 14, 2000
month
22nd calendar January 15, 2000 to February 14, 2000
month
23rd calendar February 15, 2000 to March 14, 2000

month
24th calendar March 15, 2000 to April 14, 2000

month
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the
24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within
the reglementary period.
Accordingly, the petition is hereby DENIED. The case is REMANDED to the Court of Tax Appeals
which is ordered to expeditiously proceed to hear C.T.A. Case No. 6113 entitled Primetown Property
Group, Inc. v. Commissioner of Internal Revenue and Arturo V. Parcero.
No costs.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170735 December 17, 2007
IMMACULADA L. GARCIA, petitioner,

vs.
SOCIAL SECURITY COMMISSION LEGAL AND COLLECTION, SOCIAL SECURITY
SYSTEM, respondents.
DECISION
CHICO-NAZARIO, J.:
This is petition for review on Certiorari under Rule 45 of the Rules of Court is assailing the 2 June
2005 Decision1and 8 December 2005 Resolution2 both of the Court of Appeals in CA-G.R. SP No.
85923. the appellate court affirmed the --- Order and --- Resolution both of the Social Security
Commission (SSC) in SSC Case No. 10048, finding Immaculada L. Garcia (Garcia), the sole
surviving director of Impact Corporation, petitioner herein, liable for unremitted, albeit collected, SSS
contributions.
Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and
Consuelo Villanueva were directors3 of Impact Corporation. The corporation was engaged in the
business of manufacturing aluminum tube containers and operated two factories. One was a "slug"
foundry-factory located in Cuyapo, Nueva Ecija, while the other was an Extrusion Plant in Cainta,
Metro Manila, which processed the "slugs" into aluminum collapsible tubes and similar containers for
toothpaste and other related products.
Records show that around 1978, Impact Corporation started encountering financial problems. By
1980, labor unrest besieged the corporation.
In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) a
Petition for Suspension of Payments,4 docketed as SEC Case No. 02423, in which it stated that:
[Impact Corporation] has been and still is engaged in the business of manufacturing
aluminum tube containers x x x.
xxxx
In brief, it is an on-going, viable, and profitable enterprise.
On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Labor
which was followed by a declaration of strike on 28 July 1985. Subsequently, the Ministry of Labor
certified the labor dispute for compulsory arbitration to the National Labor Relations Commission
(NLRC) in an Order5 dated 25 August 1985. The Ministry of Labor, in the same Order, noted the
inability of Impact Corporation to pay wages, 13th month pay, and SSS remittances due to cash
liquidity problems. A portion of the order reads:
On the claims of unpaid wages, unpaid 13th month pay and non-remittance of loan
amortization and SSS premiums, we are for directing the company to pay the same to the
workers and to remit loan amortizations and SSS premiums previously deducted from their
wages to the Social Security System. Such claims were never contested by the company
both during the hearing below and in our office. In fact, such claims were admitted by the
company although it alleged cash liquidity as the main reason for such non-payment.
WHEREFORE, the dispute at Impact Corporation is hereby certified to the National Labor
Relations Commission for compulsory arbitration in accordance with Article 264 (g) of the
Labor Code, as amended.
xxxx
The company is directed to pay all the entitled workers unpaid wages, unpaid 13th month
pay and to remit to the Social Security System loan amortizations and SSS premiums
previously deducted from the wages of the workers.6
On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD),
filed a case before the SSC for the collection of unremitted SSS premium contributions withheld by
Impact Corporation from its employees. The case which impleaded Impact Corporation as
respondent was docketed as SSC Case No. 10048.7
Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and
was assigned Employer I.D. No. 03-2745100-21.
In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then
Vice President Ricardo de Leon, explained in a letter dated 18 July 1985 that it had been confronted
with strikes in 1984 and layoffs were effected thereafter. It further argued that the P402,988.93 is
erroneous. It explained among other things, that its operations had been suspended and that it was
waiting for the resolution on its Petition for Suspension of Payments by the SEC under SEC Case
No. 2423. Despite due notice, the corporation failed to appear at the hearings. The SSC ordered the
investigating team of the SSS to determine if it can still file its claim for unpaid premium contributions
against the corporation under the Petition for Suspension of Payments.
In the meantime, the Petition for Suspension of Payments was dismissed which was pending before
the SEC in an Order8 dated 12 December 1985. Impact Corporation resumed operations but only for
its winding up and dissolution.9 Due to Impact Corporations liability and cash flow problems, all of its
assets, namely, its machineries, equipment, office furniture and fixtures, were sold to scrap dealers
to answer for its arrears in rentals.
On 1 December 1995, the SSS-LCD filed an amended Petition10 in SSC Case No. 10048 wherein
the directors of Impact Corporation were directly impleaded as respondents, namely: Eduardo de
Leon, Ricardo de Leon,11 Pacita Fernandez, Consuelo Villanueva, and petitioner. The amounts
sought to be collected totaled P453,845.78 and P10,856.85 for the periods August 1980 to
December 1984 and August 1981 to July 1984, respectively, and the penalties for late remittance at
the rate of 3% per month from the date the contributions fell due until fully paid pursuant to Section
22(a) of the Social Security Law,12 as amended, in the amounts of P49,941.67 and P2,474,662.82.
Period Unremitted Penalties Total

Amount (3% Interest Per
Month)
August 1980 to December 1984 P 453,845.78 P49, 941.67 503,787.45
August 1981 to July 1984 P 10,856.85 P2, 474, 662.82 2,485,519.67
Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva,
their whereabouts unknown. They were all later determined to be deceased. On the other hand, due
to failure to file his responsive pleading, Ricardo de Leon was declared in default.
Petitioner filed with the SSC a Motion to Dismiss13 on grounds of prescription, lack of cause of action
and cessation of business, but the Motion was denied for lack of merit.14 In her Answer with
Counterclaim15 dated 20 May 1999, petitioner averred that Impact Corporation had ceased
operations in 1980. In her defense, she insisted that she was a mere director without managerial
functions, and she ceased to be such in 1982. Even as a stockholder and director of Impact
Corporation, petitioner contended that she cannot be made personally liable for the corporate
obligations of Impact Corporation since her liability extended only up to the extent of her unpaid
subscription, of which she had none since her subscription was already fully paid. The petitioner
raised the same arguments in her Position Paper. 16
On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7
February 2000. In an Order dated 11 April 2000, the SSC directed the System to check if Impact
Corporation had leviable properties to which the investigating team of respondent SSS manifested
that the Impact Corporation had already been dissolved and its assets disposed of.17
In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and
declared petitioner liable to pay the unremitted contributions and penalties, stating the following:
WHEREFORE, premises considered, this Commission finds, and so holds, that respondents
Impact Corporation and/or Immaculada L. Garcia, as director and responsible officer of the
said corporation, is liable to pay the SSS the amounts of P442,988.93, representing the
unpaid SS contributions of their employees for the period August 1980 to December 1984,
not inclusive, and P10,856.85, representing the balance of the unpaid SS contributions in
favor of Donato Campos, Jaime Mascarenas, Bonifacio Franco and Romeo Fullon for the
period August 1980 to December 1984, not inclusive, as well as the 3% per month penalty
imposed thereon for late payment in the amounts of P3,194,548.63 and P78,441.33,
respectively, computed as of April 30, 2003. This is without prejudice to the right of the SSS
to collect the penalties accruing after April 30, 2003 and to institute other appropriate actions
against the respondent corporation and/or its responsible officers.
Should the respondents pay their liability for unpaid SSS contributions within sixty (60) days
from receipt of a copy of this Resolution, the 3% per month penalty for late payment thereof
shall be deemed condoned pursuant to SSC Res. No. 397-S.97, as amended by SSC Res.
Nos. 112-S.98 and 982-S.99, implementing the provision on condonation of penalty under
Section 30 of R.A. No. 8282.
In the event the respondents fail to pay their liabilities within the aforestated period, let a writ
of execution be issued, pursuant to Section 22 (c) [2] of the SS Law, as amended, for the
satisfaction of their liabilities to the SSS.18
Petitioner filed a Motion for Reconsideration19 of the afore-quoted Decision but it was denied for lack
of merit in an Order20 dated 4 August 2004, thus:
Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directors
of the defunct Impact Corporation are absolved from their contribution and penalty liabilities
to the SSS. It is certainly farthest from the intention of the petitioner SSS or this Commission
to pin the entire liability of Impact Corporation on movant Immaculada L. Garcia, to the
exclusion of the directors of the corporation namely: Eduardo de Leon, Ricardo de Leon,
Pacita Fernandez and Conzuelo Villanueva, who were all impleaded as parties-respondents
in this case.
The case record shows that there was failure of service of summonses upon respondents
Eduardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who are all deceased, for the
reason that their whereabouts are unknown. Moreover, neither the legal heirs nor the estate
of the defaulted respondent Ricardo de Leon were substituted as parties-respondents in this
case when he died on January 23, 1998. Needless to state, the Commission did not acquire
jurisdiction over the persons or estates of the other directors of Impact Corporation, hence, it
could not validly render any pronouncement as to their liabilities in this case.
Furthermore, the movant cannot raise in a motion for reconsideration the defense that she
was no longer a director of Impact Corporation in 1982, when she was allegedly eased out
by the managing directors of Impact Corporation as purportedly shown in the Deed of Sale
and Assignment of Shares of Stock dated January 22, 1982. This defense was neither
pleaded in her Motion to Dismiss dated January 17, 1996 nor in her Answer with
Counterclaim dated May 18, 1999 and is, thus, deemed waived pursuant to Section 1, Rule 9
of the 1997 Rules of Civil Procedure, which has suppletory application to the Revised Rules
of Procedure of the Commission.
Finally, this Commission has already ruled in the Order dated April 27, 1999 that since the
original Petition was filed by the SSS on July 3, 1985, and was merely amended on
December 1, 1995 to implead the responsible officers of Impact Corporation, without
changing its causes of action, the same was instituted well within the 20-year prescriptive
period provided under Section 22 (b) of the SS Law, as amended, considering that the
contribution delinquency assessment covered the period August 1980 to December 1984.
In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.
Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed
its Comment dated 20 January 2005, and petitioner submitted her Reply thereto on 4 April 2005.
The Court of Appeals, applying Section 28(f) of the Social Security Law,21 again ruled against
petitioner. It dismissed the petitioners Petition in a Decision dated 2 June 2005, the dispositive
portion of which reads:
WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. The
assailed Resolution dated 28 May 2003 and the Order dated 4 August 2004 of the Social
Security Commission are AFFIRMED in toto.22
Aggrieved, petitioner filed a Motion for Reconsideration of the appellate courts Decision but her
Motion was denied in a Resolution dated 8 December 2005.
Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave error
in holding her solely liable for the collected but unremitted SSS premium contributions and the
consequent late penalty payments due thereon. Petitioner anchors her Petition on the following
arguments:
I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOR
OR PARTNER IS LIABLE ONLY FOR THE PENALTIES OF THE EMPLOYER
CORPORATION AND NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER
CORPORATION.
II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERS
WHO SHALL BE LIABLE TOGETHER WITH THE CORPORATION. IN THIS CASE,
PETITIONER HAS CEASED TO BE A STOCKHOLDER OF IMPACT CORPORATION IN
1982. EVEN WHILE SHE WAS A STOCKHOLDER, SHE NEVER PARTICIPATED IN THE
DAILY OPERATIONS OF IMPACT CORPORATION.
III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS,

TRUSTEES OR OFFICERS WHO PARTICIPATE IN UNLAWFUL ACTS OR ARE GUILTY
OF GROSS NEGLIGENCE AND BAD FAITH SHALL BE PERSONALLY LIABLE.
OTHERWISE, BEING A MERE STOCKHOLDER, SHE IS LIABLE ONLY TO THE EXTENT
OF HER SUBSCRIPTION.
IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTS

WHICH WERE NEITHER DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER.
THUS, BY REASON OF FORTUITOUS EVENTS, THE PETITIONER SHOULD BE
ABSOLVED FROM LIABILITY.
V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING

EFFORTS TO ACQUIRE JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACT
CORPORATION, PERSON/S AND/OR ESTATE/S OF THE OTHER DIRECTORS OR
OFFICERS OF IMPACT CORPORATION.
VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING A

JUDGMENT BY DEFAULT AGAINST THE DIRECTORS UPON WHOM IT ACQUIRED
JURISDICTION.
Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolution
dated 8 December 2005 of the Court of Appeals be reversed and set aside, and a new one be
rendered absolving her of any and all liabilities under the Social Security Law.
In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving
director of Impact Corporation, can be made solely liable for the corporate obligations of Impact
Corporation pertaining to unremitted SSS premium contributions and penalties therefore.
As a covered employer under the Social Security Law, it is the obligation of Impact Corporation
under the provisions of Sections 18, 19 and 22 thereof, as amended, to deduct from its duly covered
employees monthly salaries their shares as premium contributions and remit the same to the SSS,
together with the employers shares of the contributions to the petitioner, for and in their behalf.
From all indications, the corporation has already been dissolved. Respondents are now going after
petitioner who is the only surviving director of Impact Corporation.
A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals
there seems to be no dispute as to the assessed liability of Impact Corporation for the unremitted
SSS premiums of its employees for the period January 1980 to December 1984.
There is also no dispute as to the fact that the employees SSS premium contributions have been
deducted from their salaries by Impact Corporation.
Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremitted
or unpaid SSS premium contributions. She points out that although the appellate court is of the
opinion that the concerned officers of an employer corporation are liable for the penalties for non-
remittance of premiums, it still affirmed the SSC Resolution holding petitioner liable for the unpaid
SSS premium contributions in addition to the penalties.
Petitioner avers that under the aforesaid provision, the liability does not include liability for the
unremitted SSS premium contributions.
Petitioners argument is ridiculous. The interpretation petitioner would like us to adopt finds no
support in law or in jurisprudence. While the Court of Appeals Decision provided that Section 28(f)
refers to the liabilities pertaining to penalty for the non-remittance of SSS employee contributions,
holding that it is distinct from the amount of the supposed SSS remittances, petitioner mistakenly
concluded that Section 28(f) is applicable only to penalties and not to the liability of the employer for
the unremitted premium contributions. Clearly, a simplistic interpretation of the law is untenable. It is
a rule in statutory construction that every part of the statute must be interpreted with reference to the
context, i.e., that every part of the statute must be considered together with the other parts, and kept
subservient to the general intent of the whole enactment.23 The liability imposed as contemplated
under the foregoing Section 28(f) of the Social Security Law does not preclude the liability for the
unremitted amount. Relevant to Section 28(f) is Section 22 of the same law.
SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the preceding
Section shall be remitted to the SSS within the first ten (10) days of each calendar month
following the month for which they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such contributions shall be liable
for their payment and if any contribution is not paid to the SSS as herein prescribed, he shall
pay besides the contribution a penalty thereon of three percent (3%) per month from the date
the contribution falls due until paid. If deemed expedient and advisable by the Commission,
the collection and remittance of contributions shall be made quarterly or semi-annually in
advance, the contributions payable by the employees to be advanced by their respective
employers: Provided, That upon separation of an employee, any contribution so paid in
advance but not due shall be credited or refunded to his employer.
Under Section 22(a), every employer is required to deduct and remit such contributions penalty
refers to the 3% penalty that automatically attaches to the delayed SSS premium contributions. The
spirit, rather than the letter of a law determines construction of a provision of law. It is a cardinal rule
in statutory construction that in interpreting the meaning and scope of a term used in the law, a
careful review of the whole law involved, as well as the intendment of the law, must be
made.24 Nowhere in the provision or in the Decision can it be inferred that the persons liable are
absolved from paying the unremitted premium contributions.
Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them
regardless of personal belief or predilections - when the law is unambiguous and unequivocal,
application not interpretation thereof is imperative.25 However, where the language of a statute is
vague and ambiguous, an interpretation thereof is resorted to. An interpretation thereof is necessary
in instances where a literal interpretation would be either impossible or absurd or would lead to an
injustice. A law is deemed ambiguous when it is capable of being understood by reasonably well-
informed persons in either of two or more senses.26 The fact that a law admits of different
interpretations is the best evidence that it is vague and ambiguous.27 In the instant case, petitioner
interprets Section 28(f) of the Social Security Law as applicable only to penalties and not to the
liability of the employer for the unremitted premium contributions. Respondents present a more
logical interpretation that is consistent with the provisions as a whole and with the legislative intent
behind the Social Security Law.
This Court cannot be made to accept an interpretation that would defeat the intent of the law and its
legislators.28
Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social
Security Law, a mere director or officer of an employer corporation, and not necessarily a
"managing" director or officer, can be held liable for the unpaid SSS premium contributions.
Section 28(f) of the Social Security Law provides the following:
(f) If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing head, directors or partners shall be liable to
the penalties provided in this Act for the offense.
This Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that
petitioner was not the "managing head" of Impact Corporation. However, the Court of Appeals rightly
held that petitioner, as a director of Impact Corporation, is among those officers covered by Section
28(f) of the Social Security Law.
Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general
words follow an enumeration of persons or things, by words of a particular and specific meaning,
such general words are not to be construed in their widest extent, but are to be held as applying only
to persons or things of the same kind or class as those specifically mentioned. According to
petitioner, to be held liable under Section 28(f) of the Social Security Law, one must be the
"managing head," "managing director," or "managing partner." This Court though finds no need to
resort to statutory construction. Section 28(f) of the Social Security Law imposes penalty on:
(1) the managing head;
(2) directors; or
(3) partners, for offenses committed by a juridical person
The said provision does not qualify that the director or partner should likewise be a "managing
director" or "managing partner."29 The law is clear and unambiguous.
Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only
directors, trustees or officers who participate in unlawful acts or are guilty of gross negligence and
bad faith shall be personally liable, and that being a mere stockholder, she is liable only to the extent
of her subscription.
Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers,
provides:
SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
Basic is the rule that a corporation is invested by law with a personality separate and distinct from
that of the persons composing it as well as from that of any other legal entity to which it may be
related. A corporation is a juridical entity with legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. Following this, the general
rule applied is that obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities.30 A director, officer, and employee of a corporation are generally
not held personally liable for obligations incurred by the corporation.
Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to
warrant the disregard of its independent being and the lifting of the corporate veil. This situation
might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to
shield or perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a
subterfuge to commit injustice and so circumvent the law.31 Thus, Section 31 of the Corporation Law
provides:
Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held
solidarily liable with the corporation in the following instances:
1. When directors and trustees or, in appropriate cases, the officers of

a corporation--
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders
or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action. 32
The aforesaid provision states:
SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit
the SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the Social
Security Law imposes a civil liability for any act or omission pertaining to the violation of the Social
Security Law, to wit:
(f) If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing head, directors or partners shall be liable to
the penalties provided in this Act for the offense.
In fact, criminal actions for violations of the Social Security Law are also provided under the Revised
Penal Code. The Social Security Law provides, in Section 28 thereof, to wit:
(h) Any employer who, after deducting the monthly contributions or loan amortizations from
his employees compensation, fails to remit the said deductions to the SSS within thirty (30)
days from the date they became due shall be presumed to have misappropriated such
contributions or loan amortizations and shall suffer the penalties provided in Article Three
hundred fifteen of the Revised Penal Code.
(i) Criminal action arising from a violation of the provisions of this Act may be commenced by
the SSS or the employee concerned either under this Act or in appropriate cases under the
Revised Penal Code: x x x.
Respondents would like this Court to apply another exception to the rule that the persons comprising
a corporation are not personally liable for acts done in the performance of their duties.
The Court of Appeals in the appealed Decision stated:
Anent the unpaid SSS contributions of Impact Corporations employees, the officers of a
corporation are liable in behalf of a corporation, which no longer exists or has ceased
operations. Although as a rule, the officers and members of a corporation are not personally
liable for acts done in performance of their duties, this rule admits of exception, one of which
is when the employer corporation is no longer existing and is unable to satisfy the judgment
in favor of the employee, the officers should be held liable for acting on behalf of the
corporation. Following the foregoing pronouncement, petitioner, as one of the directors of
Impact Corporation, together with the other directors of the defunct corporation, are liable for
the unpaid SSS contributions of their employees.33
On the other hand, the SSC, in its Resolution, presented this discussion:
Although as a rule, the officers and members of a corporation are not personally liable for
acts done in the performance of their duties, this rule admits of exceptions, one of which is
when the employer corporation is no longer existing and is unable to satisfy the judgment in
favor of the employee, the officers should be held liable for acting on behalf of the
corporation. x x x.34
The rationale cited by respondents in the two preceding paragraphs need not have been applied
because the personal liability for the unremitted SSS premium contributions and the late penalty
thereof attaches to the petitioner as a director of Impact Corporation during the period the amounts
became due and demandable by virtue of a direct provision of law.
Petitioners defense that since Impact Corporation suffered irreversible economic losses, and by
reason of fortuitous events, she should be absolved from liability, is also untenable. The evidence
adduced totally belies this claim. A reference to the copy of the Petition for Suspension of Payments
filed by Impact Corporation on 18 March 1983 before the SEC contained an admission that:
"[I]t has been and still is engaged in business" and "has been and still is engaged in the
business of manufacturing aluminum tube containers" and "in brief, it is an on-going, viable,
and profitable enterprise" which has "sufficient assets" and "actual and potential income-
generation capabilities."
The foregoing document negates petitioners assertion and supports the contention that during the
period involved Impact Corporation was still engaged in business and was an ongoing, viable,
profitable enterprise. In fact, the latest SSS form RIA submitted by Impact Corporation is dated 7
May 1984. The assessed SSS premium contributions and penalty are obligations imposed upon
Impact Corporation by law, and should have been remitted to the SSS within the first 10 days of
each calendar month following the month for which they are applicable or within such time as the
SSC prescribes.35
This Court also notes the evident failure on the part of SSS to issue a judgment in default against
Ricardo de Leon, who was the vice-president and officer of the corporation, upon his non-filing of a
responsive pleading after summons was served on him. As can be gleaned from Section 11 of the
SSS Revised Rules of Procedure, the Commissioner is mandated to render a decision either
granting or denying the petition. Under the aforesaid provision, if respondent fails to answer within
the time prescribed, the Hearing Commissioner may, upon motion of petitioner, or motu proprio,
declare respondent in default and proceed to receive petitioners evidence ex parteand thereafter
recommend to the Commission either the granting or denial of the petition as the evidence may
warrant.36
On a final note, this Court sees it proper to quote verbatim respondents prefatory statement in
their Comment:
The Social Security System is a government agency imbued with a salutary purpose to carry
out the policy of the State to establish, develop, promote and perfect a sound and viable tax
exempt social security system suitable to the needs of the people throughout the Philippines
which shall promote social justice and provide meaningful protection to members and their
beneficiaries against the hazards of disability, sickness, maternity, old-age, death and other
contingencies resulting in loss of income or financial burden.
The soundness and viability of the funds of the SSS in turn depends on the contributions of
its covered employee and employer members, which it invests in order to deliver the basic
social benefits and privileges to its members. The entitlement to and amount of benefits and
privileges of the covered members are contribution-based. Both the soundness and viability
of the funds of the SSS as well as the entitlement and amount of benefits and privileges of its
members are adversely affected to a great extent by the non-remittance of the much-needed
contributions.37
The sympathy of the law on social security is toward its beneficiaries. This Court will not turn a blind
eye on the perpetration of injustice. This Court cannot and will not allow itself to be made an
instrument nor be privy to any attempt at the perpetration of injustice.
Following the doctrine laid down in Laguna Transportation Co., Inc. v. Social Security System,38 this
Court rules that although a corporation once formed is conferred a juridical personality separate and
distinct from the persons comprising it, it is but a legal fiction introduced for purposes of convenience
and to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons
and policy, and when invoked in support of an end subversive of this policy, will be disregarded by
the courts.
WHEREFORE, pursuant to the foregoing, the Decision of the Court of Appeals dated 2 June 2005
in CA-G.R. SP No. 85923 is hereby AFFIRMED WITH FINALITY. Petitioner Immaculada L. Garcia,
as sole surviving director of Impact Corporation is hereby ORDERED to pay for the collected and
unremitted SSS contributions of Impact Corporation. The case is REMANDED to the SSS for
computation of the exact amount and collection thereof.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND

HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND
CONSTRUCTION SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345
which affirmed with modification the Decision2 of the Regional Trial Court, Branch 41, San Fernando,
Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and
Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January
27, 1992. Respondent, doing business under the name and style Carwin Construction and
Construction Supply (Carwin Construction), was pre-qualified together with two other contractors.
Since respondent submitted the lowest bid, he was awarded the contract for the concreting
of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract Agreement was executed by respondent
and petitioner.4 On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to
Proceed with the concreting of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works,
made advances for the purchase of the materials and payment for labor costs.6
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga
conducted a final inspection of the project and found it 100% completed in accordance with the
approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates
of Final Inspection and Final Acceptance.7
Thereafter, respondent sought to collect payment for the completed project.8 The DPWH prepared
the Disbursement Voucher in favor of petitioner.9 However, the DPWH withheld payment from
respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release
of funds on the ground that the contractors license of respondent had expired at the time of the
execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department
on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects
were valid and effective although its contractors license had already expired when the projects were
contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal
Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the
Contractors License Law, does not provide that a contract entered into after the license has expired
is void and there is no law which expressly prohibits or declares void such contract, the contract is
enforceable and payment may be paid, without prejudice to any appropriate administrative liability
action that may be imposed on the contractor and the government officials or employees
concerned.11
In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal
Department on whether Carwin Construction should be paid for works accomplished despite an
expired contractors license at the time the contracts were executed.12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department,
recommended that payment should be made to Carwin Construction, reiterating his earlier legal
opinion.13 Despite such recommendation for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages
against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion
to Dismiss the complaint on the grounds that the complaint states no cause of action and that the
RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the
decision of the District Auditor to disapprove the claim.15
Following the submission of respondents Opposition to Motion to Dismiss,16 the RTC issued an
Order dated March 11, 1996 denying the Motion to Dismiss.17 The OSG filed a Motion for
Reconsideration18 but it was likewise denied by the RTC in its Order dated May 23, 1996.19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of
administrative remedies and the doctrine of non-suability of the State.20
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which
reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the
plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San
Fernando, Pampanga, to pay the following:
a) 457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare,
Candaba, Pampanga plus interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price since it has accepted the
completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long
standing and consistent pronouncement against enriching oneself at the expense of another.22
Dissatisfied, petitioner filed an appeal with the CA.23 On April 28, 2003, the CA rendered its Decision
sustaining the Decision of the RTC. It held that since the case involves the application of the
principle of estoppel against the government which is a purely legal question, then the principle of
exhaustion of administrative remedies does not apply; that by its actions the government is estopped
from questioning the validity and binding effect of the Contract Agreement with the respondent; that
denial of payment to respondent on purely technical grounds after successful completion of the
project is not countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which
reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the
interest shall be six percent (6%) per annum computed from June 21, 1995.
SO ORDERED.24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF
ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO

RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT.25
Petitioner contends that respondents recourse to judicial action was premature since the proper
remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section
48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing
Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim
against the government under Section 2(1),26 Article IX of the 1987 Constitution and Section 2627 of
P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the
principle of primary jurisdiction results in a lack of cause of action.
Respondent, on the other hand, in his Memorandum28 limited his discussion to Civil Code provisions
relating to human relations. He submits that equity demands that he be paid for the work performed;
otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered
nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its
inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the court, he should first avail of
all the means afforded him by administrative processes.29 The issues which administrative agencies
are authorized to decide should not be summarily taken from them and submitted to a court without
first giving such administrative agency the opportunity to dispose of the same after due
deliberation.30
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary

jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of
primary jurisdiction, which are based on sound public policy and practical considerations, are not
inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the
part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will
irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to
make the rule impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice;32 (f) where judicial intervention is urgent; (g)
when its application may cause great and irreparable damage; (h) where the controverted acts
violate due process; (i) when the issue of non-exhaustion of administrative remedies has been
rendered moot;33 (j) when there is no other plain, speedy and adequate remedy; (k) when strong
public interest is involved; and, (l) in quo warranto proceedings.34 Exceptions (c) and (e) are
applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that
payment to a contractor with an expired contractors license is proper, respondent remained unpaid
for the completed work despite repeated demands. Clearly, there was unreasonable delay and
official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of its contract
is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an
examination of the probative value of the evidence presented by the parties. There is a question of
law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to
the truth or the falsehood of alleged facts.35Said question at best could be resolved
only tentatively by the administrative authorities. The final decision on the matter rests not with them
but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing
of an administrative nature is to be or can be done.36 The issue does not require technical knowledge
and experience but one that would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim
against the Government, and, under Section 4837 of P.D. No. 1445, the administrative remedy
available to respondent is an appeal of the denial of his claim by the District Auditor to the COA
itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for
specific performance and damages was not prematurely filed and within the jurisdiction of the RTC
to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in
Rocamora v. RTC-Cebu (Branch VIII):38
The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the
Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by
the government. The road had been completed; the Pope had come and gone; but the plaintiffs had
yet to be paid for the properties taken from them. Given this official indifference, which apparently
would continue indefinitely, the private respondents had to act to assert and protect their interests.39
On the question of whether a contractor with an expired license is entitled to be paid for completed
projects, Section 35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to
submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a
supervisory capacity of a construction work within the purview of this Act, without first securing a
license to engage in the business of contracting in this country; or who shall present or file the
license certificate of another, give false evidence of any kind to the Board, or any member thereof in
obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or
license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a
fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain
and free from ambiguity, it must be given its literal meaning and applied without interpretation.40 This
rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by the legislature in a statute correctly express its
intention or will and preclude the court from construing it differently. The legislature is presumed to
know the meaning of the words, to have used words advisedly, and to have expressed its intent by
use of such words as are found in the statute.41 Verba legis non est recedendum, or from the words
of a statute there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void
contracts entered into by a contractor whose license had already expired. Nonetheless, such
contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for
the projects he completed. Such payment, however, is without prejudice to the payment of the fine
prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of anothers injury) states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as "basic principles to be observed for the rightful relationship between human beings
and for the stability of the social order, x x x designed to indicate certain norms that spring from the
fountain of good conscience, x x x guides human conduct [that] should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice."43 The rules thereon apply equally well to the Government.44Since respondent
had rendered services to the full satisfaction and acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the finished project at no cost would
undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such
unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court
of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
Supreme Court
Manila
SECOND DIVISION
SPOUSES ROMAN A. PASCUAL and G.R. No. 186269

MERCEDITA R. PASCUAL, FRANCISCO
A. PASCUAL, MARGARITA CORAZON D.
Present:
MARIANO, EDWIN D. MARIANO and
DANNY R. MARIANO
Petitioners, CARPIO, J.,
Chairperson,
VILLARAMA, JR.,*
- versus - PEREZ,
SERENO, and
REYES, JJ.
SPOUSES ANTONIO BALLESTEROS and

LORENZA MELCHOR-BALLESTEROS,
Respondents.
Promulgated:
February 15, 2012

x-------------------------------------------------------------------------------------------x
RESOLUTION
REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of

Court filed by the spouses Roman A. Pascual and Mercedita R. Pascual (Spouses
Pascual), Francisco A. Pascual (Francisco), Margarita Corazon D. Mariano
(Margarita), Edwin D. Mariano and Danny R. Mariano (petitioners) assailing
the Decision[1] dated July 29, 2008 and Resolution[2] dated January 30, 2009 issued
by the Court of Appeals (CA) in CA-G.R. CV No. 89111.
The instant case involves a 1,539 square meter parcel of land (subject
property) situated in Barangay Sta. Maria, Laoag City and covered by Transfer
Certificate of Title (TCT) No. T-30375[3] of the Laoag City registry. The subject
property is owned by the following persons, with the extent of their respective
shares over the same: (1) the spouses Albino and Margarita Corazon Mariano, 330
square meters; (2) Angela Melchor (Angela), 466.5 square meters; and (3) the
spouses Melecio and Victoria Melchor (Spouses Melchor), 796.5 square meters.
Upon the death of the Spouses Melchor, their share in the subject property
was inherited by their daughter Lorenza Melchor Ballesteros (Lorenza).
Subsequently, Lorenza and her husband Antonio Ballesteros (respondents)
acquired the share of Angela in the subject property by virtue of an Affidavit of
Extrajudicial Settlement with Absolute Sale[4] dated October 1, 1986.
On August 11, 2000, Margarita, then already widowed, together with her
children, sold their share in the subject property to Spouses Pascual and
Francisco.[5]Subsequently, Spouses Pascual and Francisco caused the cancellation
of TCT No. 30375 and, thus, TCT No. T-32522[6] was then issued in their names
together with Angela and Spouses Melchor.
Consequently, the respondents, claiming that they did not receive any
written notice of the said sale in favor of Spouses Pascual and Francisco, filed with
the Regional Trial Court (RTC) of Laoag City a Complaint[7] for legal redemption
against the petitioners. The respondents claimed that they are entitled to redeem the
portion of the subject property sold to Spouses Pascual and Francisco being co-
owners of the same.
For their part, the petitioners claimed that there was no co-ownership over
the subject property considering that the shares of the registered owners thereof
had been particularized, specified and subdivided and, hence, the respondents has
no right to redeem the portion of the subject property that was sold to them.[8]
On January 31, 2007, the RTC rendered a decision[9] dismissing the

complaint for legal redemption filed by the respondents. In disposing of the said
complaint, the RTC summed up the issues raised therein as follows: (1) whether
the respondents herein and the predecessors-in-interest of the petitioners are co-
owners of the subject property who have the right of redemption under Article
1620 of the Civil Code; and (2) if so, whether that right was seasonably exercised
by the respondents within the 30-day redemption period under Article 1623 of the
Civil Code.
On the first issue, the RTC held that the respondents and the predecessors-
in-interest of the petitioners are co-owners of the subject property considering that
the petitioners failed to adduce any evidence showing that the respective shares of
each of the registered owners thereof were indeed particularized, specified and
subdivided.
On the second issue, the RTC ruled that the respondents failed to seasonably
exercise their right of redemption within the 30-day period pursuant to Article
1623 of the Civil Code. Notwithstanding the lack of a written notice of the sale of a
portion of the subject property to Spouses Pascual and Francisco, the RTC asserted
that the respondents had actual notice of the said sale. Failing to exercise their right
of redemption within 30 days from actual notice of the said sale, the RTC opined
that the respondents can no longer seek for the redemption of the property as
against the petitioners.
Thereupon, the respondents appealed from the January 31, 2007 decision of
the RTC of Laoag City with the CA. On July 29, 2008, the CA rendered the herein
assailed Decision[10] the decretal portion of which reads:
WHEREFORE, the appeal is GRANTED and the appealed

January 31, 2007 Decision is, accordingly, REVERSED and SET
ASIDE. In lieu thereof, another is entered approving [respondents] legal
redemption of the portion in litigation. The rest of their monetary claims
are, however, DENIED for lack of factual and/or legal bases.
SO ORDERED.[11]
In allowing the respondents to exercise their right of redemption, the CA

held that the 30-day period within which to exercise the said right had not yet
lapsed considering the absence of a written notice of the said sale. Thus, the CA
stated that [t]he mandatory nature of the written notice requirement is such that,
notwithstanding the actual knowledge of the sale, written notice from the seller is
still necessary in order to remove all uncertainties about the sale, its terms and
conditions, as well as its efficacy and status.[12]
The petitioners sought for a reconsideration of the said July 29, 2008
Decision, but it was denied by the CA in its Resolution[13] dated January 30, 2009.
Undaunted, the petitioners instituted the instant petition for review

on certiorari before this Court essentially asserting the following arguments: (1)
their predecessors-in-interest and the respondents are not co-owners of the subject
property since their respective shares therein had already been particularized,
specified and subdivided; and (2) even if such co-ownership exists, the respondents
could no longer exercise their right of redemption having failed to exercise the
same within 30 days from actual knowledge of the said sale.
The petition is denied.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that
the petition filed shall raise only questions of law, which must be distinctly set
forth. A question of law arises when there is doubt as to what the law is on a
certain state of facts, while there is a question of fact when the doubt arises as to
the truth or falsity of the alleged facts. For a question to be one of law, the same
must not involve an examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one of fact.[14]
The first issue raised by the petitioners is a factual question as it entails a

determination of whether the subject property was indeed co-owned by the
respondents and the predecessors-in-interest of the petitioners. Such determination
would inevitably necessitate a review of the probative value of the evidence
adduced in the case below.
In any case, it ought to be stressed that both the RTC and the CA found that
the subject property was indeed co-owned by the respondents and the
predecessors-in-interest of the petitioners. Thus, in the absence of any exceptional
circumstances to warrant the contrary, this Court must abide by
the prevailing rule that findings of fact of the trial court, more so when affirmed by
the CA, are binding and conclusive upon it.[15]
Anent the second issue asserted by the petitioners, we find no reversible

error on the part of the CA in ruling that the 30-day period given to the respondents
within which to exercise their right of redemption has not commenced in view of
the absence of a written notice. Verily, despite the respondents actual knowledge
of the sale to the respondents, a written notice is still mandatory and indispensable
for purposes of the commencement of the 30-day period within which to exercise
the right of redemption.
Article 1623 of the Civil Code succinctly provides that:
Article 1623. The right of legal pre-emption or redemption shall

not be exercised except within thirty days from the notice in writing by
the prospective vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining

owners. (emphasis supplied)
The indispensability of the written notice requirement for purposes of the

exercise of the right of redemption was explained by this Court in Barcellano v.
Baas,[16] thus:
Nothing in the records and pleadings submitted by the parties

shows that there was a written notice sent to the respondents. Without
a written notice, the period of thirty days within which the right of legal
pre-emption may be exercised, does not start.
The indispensability of a written notice had long been discussed

in the early case of Conejero v. Court of Appeals, penned by Justice
J.B.L. Reyes:
With regard to the written notice, we agree with

petitioners that such notice is indispensable, and that, in
view of the terms in which Article of the Philippine Civil
Code is couched, mere knowledge of the sale, acquired in
some other manner by the redemptioner, does not satisfy
the statute. The written notice was obviously exacted by
the Code to remove all uncertainty as to the sale, its terms
and its validity, and to quiet any doubts that the alienation
is not definitive. The statute not having provided for any
alternative, the method of notification prescribed remains
exclusive.
This is the same ruling in Verdad v. Court of Appeals:
The written notice of sale is mandatory. This Court has long

established the rule that notwithstanding actual knowledge of a co-
owner, the latter is still entitled to a written notice from the selling co-
owner in order to remove all uncertainties about the sale, its terms and
conditions, as well as its efficacy and status.
Lately, in Gosiengfiao Guillen v. The Court of Appeals, this Court

again emphasized the mandatory character of a written notice in legal
redemption:
From these premises, we ruled that [P]etitioner-

heirs have not lost their right to redeem, for in the absence
of a written notification of the sale by the vendors, the 30-
day period has not even begun to run. These premises and
conclusion leave no doubt about the thrust
of Mariano: The right of the petitioner-heirs to exercise
their right of legal redemption exists, and the running of
the period for its exercise has not even been triggered
because they have not been notified in writing of the fact
of sale.
xxxx
Justice Edgardo Paras, referring to the origins of the

requirement, would explain in his commentaries on the New Civil Code
that despite actual knowledge, the person having the right to redeem
is STILL entitled to the written notice. Both the letter and the spirit of
the New Civil Code argue against any attempt to widen the scope of the
written notice by including therein any other kind of notice such as an
oral one, or by registration. If the intent of the law has been to include
verbal notice or any other means of information as sufficient to give the
effect of this notice, there would have been no necessity or reason to
specify in the article that said notice be in writing, for under the old law,
a verbal notice or mere information was already deemed sufficient.
Time and time again, it has been repeatedly declared by this

Court that where the law speaks in clear and categorical language,
there is no room for interpretation. There is only room for application.
Where the language of a statute is clear and unambiguous, the law is
applied according to its express terms, and interpretation should be
resorted to only where a literal interpretation would be either
impossible or absurd or would lead to an injustice. x x x (citations
omitted)
Here, it is undisputed that the respondents did not receive a written notice of
the sale in favor of the petitioners. Accordingly, the 30-day period stated under
Article 1623 of the Civil Code within which to exercise their right of redemption
has not begun to run. Consequently, the respondents may still redeem from the
petitioners the portion of the subject property that was sold to the latter.
WHEREFORE, in consideration of the foregoing disquisitions, the petition

is DENIED. The assailed Decision dated July 29, 2008 and Resolution dated
January 30, 2009 issued by the Court of Appeals in CA-G.R. CV No. 89111
are AFFIRMED.
SO ORDERED.
SECOND DIVISION
SOUTH PACIFIC SUGAR G.R. No. 180462
CORPORATION and SOUTH
EAST ASIA SUGAR MILL Present:
CORPORATION,
Petitioners, CARPIO, J., Chairperson,
NACHURA,
PERALTA,
- versus - ABAD, and
MENDOZA, JJ.
COURT OF APPEALS and
SUGAR REGULATORY Promulgated:
ADMINISTRATION,
Respondents. February 9, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the 6 November 2007 Decision2 of the
Court of Appeals in CA-G.R. SP No. 100571, which set aside the 26 June 2007, 6
August 2007, and 31 August 2007 Orders3 as well as the 6 September 2007 Writ of
Execution and the 12 September 2007 Amended Writ of Execution of the Regional
Trial Court (Branch 77) of Quezon City in Civil Case No. Q-02-46236.
The Facts
In 1999, the government projected a shortage of some 500,000 metric tons of sugar
due to the effects of El Nio and La Nia phenomena. To fill the expected shortage and
to ensure stable sugar prices, then President Joseph Ejercito Estrada issued Executive
Order No. 87, Series of 1999 (EO 87),4 facilitating sugar importation by the private
sector.
Section 2 of EO 87 created a Committee on Sugar Conversion/Auction to determine

procedures for sugar importation as well as for collection and remittance of
conversion fee.
Under Section 3 of EO 87, sugar conversion is by auction and is subject to conversion

fee to be remitted by respondent Sugar Regulatory Administration (SRA) to the
Bureau of Treasury.
On 3 May 1999, the Committee on Sugar Conversion/Auction issued the Bidding

Rules providing guidelines for sugar importation. Under the Bidding Rules, the
importer pays 25% of the conversion fee within three working days from receipt of
notice of the bid award and the 75% balance upon arrival of the imported sugar.
The Bidding Rules also provide that if the importer fails to make the importation or if
the imported sugar fails to arrive on or before the set arrival date, 25% of the
conversion fee is forfeited in favor of the SRA, to wit:
G. Forfeiture of Conversion Fee
G.1 In case of failure of the importer to make the importation or for the
imported sugar to arrive in the Philippines on or before the Arrival Date,
the 25% of Conversion Fee Bid already paid shall be forfeited in favor of
the SRA and the imported sugar shall not be classified as B (domestic sugar)
unless, upon application with the SRA and without objection of the Committee,
the SRA allows such conversion after payment by the importer of 100% of the
Conversion Fee applicable to the shipment.5 (Emphasis supplied)
The SRA forthwith authorized the importation of 300,000 metric tons of sugar, to be
made in three tranches, as follows:
Tranche Volume Arrival Date
1st 100,000MT 15 May-15 June 1999
2nd 100,000MT 15 June-July 15 1999
3rd 100,000MT 15 July-15 August 19996
The Committee on Sugar Conversion/Auction caused the publication of the invitation

to bid. Several sugar importers submitted sealed bid tenders. Petitioners Southeast
Asia Sugar Mill Corporation (Sugar Mill) and South Pacific Sugar Corporation
(Pacific Sugar) emerged as winning bidders for the 1st, 2nd, and 3rd tranches.
For the 3rd tranche, Sugar Mill submitted the winning bid of P286.80 per 50 kilogram
for 10,000 metric tons of sugar, while Pacific Sugar submitted the winning bid
of P285.99 per 50 kilogram for 20,000 metric tons of sugar, for a combined total
volume of 30,000 metric tons of sugar.
Pursuant to the Bidding Rules, Sugar Mill paid 25% of the conversion fee amounting
to P14,340,000.00, while Pacific Sugar paid 25% of the conversion fee amounting
to P28,599,000.00.
As it turned out, Sugar Mill and Pacific Sugar (sugar corporations) delivered only
10% of their sugar import allocation, or a total of only 3,000 metric tons of sugar.
They requested the SRA to cancel the remaining 27,000 metric tons of sugar import
allocation blaming sharp decline in sugar prices. The sugar corporations sought
immediate reimbursement of the corresponding 25% of the conversion fee amounting
to P38,637,000.00.
The SRA informed the sugar corporations that the conversion fee would be forfeited
pursuant to paragraph G.1 of the Bidding Rules. The SRA also notified the sugar
corporations that the authority to reconsider their request for reimbursement was
vested with the Committee on Sugar Conversion/Auction.
On 26 February 2002, the sugar corporations filed a complaint for breach of contract
and damages in the Regional Trial Court (Branch 77) of Quezon City, docketed as
Civil Case No. Q-02-46236.
In its notice of appearance,7 the Office of the Solicitor General (OSG) deputized Atty.
Raul Labay of the SRAs legal department to assist the OSG in this case, thus:
Please be informed that Atty. Raul M. Labay has been authorized to appear in
this case, and therefore, should also be furnished with notices of hearings,
orders, resolutions, decisions, and other processes. However, as the Solicitor
General retains supervision and control of the representation in this case and
has to approve withdrawal of the case, non-appeal, or other actions which
appear to compromise the interests of the Government, only notices of orders,
resolutions, and decisions served on him will bind the party represented.8
The Ruling of the RTC
The RTC held that paragraph G.1 of the Bidding Rules contemplated delay in the
arrival of imported sugar, not cancellation of sugar importation. It concluded that the
forfeiture provision did not apply to the sugar corporations which merely cancelled
the sugar importation. In its 19 December 2006 Decision,9 the RTC ruled, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of

the plaintiffs, ORDERING the defendant Sugar Regulatory Administration to
pay plaintiffs the amount of P38,637,000.00 as reimbursement of 25% of the
conversion fee they paid in 1999. The claim for legal interests, compensatory
damages, exemplary damages, and attorneys fees is hereby DENIED.
SO ORDERED.10
On 5 January 2007, the OSG received its copy of the RTC Decision.11 On 24 January
2007, the deputized SRA counsel, Atty. Raul Labay, received his own copy of the
Decision and filed a notice of appeal on 7 February 2007.12
The sugar corporations moved to expunge the notice of appeal on the ground that only
the OSG, as the principal counsel, can decide whether an appeal should be made. The
sugar corporations stressed that a lawyer deputized by the OSG has no authority to
decide whether an appeal should be made.
The OSG filed its opposition13 to the motion to expunge the notice of appeal. The
OSG pointed out that in its notice of appearance,14 it authorized SRA counsel
Atty. Labay to assist the OSG in this case.
In its 26 June 2007 Order, the RTC granted the motion to expunge the notice of
appeal. The OSG moved for reconsideration stressing that the OSG ratified
Atty. Labays filing of a notice of appeal. The RTC, in its 6 August 2007 Order, denied
the OSGs motion for reconsideration.
In its 31 August 2007 Order, the RTC granted the sugar corporations motion for
execution, to wit:
WHEREFORE, premises considered, the plaintiffs motion for execution is

hereby granted. Accordingly, issue a writ of execution for the enforcement of
the decision rendered in this case.
SO ORDERED.15
Accordingly, the RTC issued on 6 September 2007 a Writ of Execution and on 12

September 2007 an Amended Writ of Execution.
Aggrieved, the SRA filed in the Court of Appeals a petition for certiorari under Rule
65 seeking to set aside the RTCs 26 June 2007, 6 August 2007, and 31 August 2007
Orders as well as the 6 September 2007 Writ of Execution and the 12 September 2007
Amended Writ of Execution.
The Ruling of the Court of Appeals
The Court of Appeals held that the deputized SRA counsel had authority to file a
notice of appeal. The appellate court thus directed the RTC to give due course to the
appeal that Atty. Labay timely filed. The decretal part of its 6 November 2007
Decision reads:
WHEREFORE, premises considered, the present petition is hereby GIVEN

DUE COURSE and the writ prayed for accordingly GRANTED. The Orders
dated June 26, 2007, August 6, 2007, and August 31, 2007, as well as the Writ
of Execution dated September 6, 2007 and Amended Writ of Execution dated
September 12, 2007 issued in Civil Case No. Q-02-46236 of the Regional Trial
Court of Quezon City, Branch 77 are hereby all ANNULLED and SET ASIDE.
Said court is hereby DIRECTED to GIVE DUE COURSE to the Notice of
Appeal dated February 7, 2007 filed by Atty. Raul M. Labay in behalf of
petitioner Sugar Regulatory Administration.
No pronouncement as to costs.
SO ORDERED.16
Dissatisfied with the decision of the Court of Appeals, the sugar corporations filed in
this Court a petition for review on certiorari.
The Issues
The issues are (1) whether a deputized SRA counsel may file a notice of appeal and
(2) whether the sugar corporations are entitled to reimbursement of P38,637,000.00 in
conversion fee.
The Courts Ruling
The petition lacks merit.

The sugar corporations contend that the deputized SRA counsel, Atty. Labay, was not
authorized to file a notice of appeal; that the OSG, as the principal counsel, had the
sole authority to file a notice of appeal; that certiorari may not be interposed as a
substitute for the lost remedy of appeal; and that the subject conversion fee amounting
to P38,637,000.00 remained as private funds in view of its summary forfeiture and as
such, it could not be deemed part of public funds.
The OSG counters that assuming Atty. Labay had no authority to file the notice
of appeal, the defect was cured when the OSG subsequently filed its opposition to the
sugar corporations motion to expunge the notice of appeal. The OSG claims that if the
denial of the appeal is sustained, the SRA would no longer have a remedy to assail the
RTC decision adjudging it liable to reimburse the sugar
corporations P38,637,000.00 in conversion fee despite the admitted failure of the
sugar corporations to comply with their contractual undertaking to import sugar.
The deputized SRA counsel may file a notice of appeal.
Section 35, Chapter 12, Title III, Book IV of the Administrative Code of
198717 authorizes the OSG to represent the SRA, a government agency established
pursuant to Executive Order No. 18, Series of 1986,18 in any litigation, proceeding,
investigation, or matter requiring the services of lawyers. It provides:
SEC. 35. Powers and Functions. The Office of the Solicitor General shall
represent the Government of the Philippines, its agencies and
instrumentalities and its officials and agents in any litigation, proceeding,
investigation, or matter requiring the services of lawyers. When authorized
by the President or head of the office concerned, it shall also represent
government owned or controlled corporations. The Office of the Solicitor
General shall constitute the law office of the Government and, as such, shall
discharge duties requiring the services of lawyers. (Emphasis supplied)
The OSG is empowered to deputize legal officers of government departments,
bureaus, agencies, and offices in cases involving their respective offices. Paragraph 8
of the same section reads:
(8) Deputize legal officers of government departments, bureaus, agencies,

and offices to assist the Solicitor General and appear or represent the
Government in cases involving their respective offices, brought before the
courts and exercise supervision and control over such legal officers with
respect to such cases. (Emphasis supplied)
In National Power Corporation v. Vine Development Corporation,19 this Court ruled

that the deputization by the OSG of NAPOCOR counsels in cases involving the
NAPOCOR included the authority to file a notice of appeal. The Court explained that
the OSG could have withdrawn the appeal if it believed that the appeal would not
advance the governments cause. The Court held that even if the deputized NAPOCOR
counsel had no authority to file a notice of appeal, the defect was cured by the OSGs
subsequent manifestation that the deputized NAPOCOR counsel had authority to file
a notice of appeal.
The sugar corporations reliance on another NAPOCOR case, National Power

Corporation v. NLRC,20 is misplaced. There, service of the decision was never made
on the OSG, the principal counsel for NAPOCOR. Only the deputized NAPOCOR
counsel was served a copy of the decision. Hence, the Court held that the period to
appeal the decision did not commence to run. The Court explained that service of the
decision on the deputized NAPOCOR counsel was insufficient and not binding on the
OSG. This was why the Court stated in that case that the deputized NAPOCOR
counsel had no authority to decide whether an appeal should be made.
Noteworthy, in National Power Corporation v. Vine Development Corporation, both

the OSG and the deputized NAPOCOR counsel were served copies of the decision
subject of the appeal. In National Power Corporation v. NLRC, only the deputized
NAPOCOR counsel was furnished a copy of the appealed decision. Hence, the
differing rulings by this Court.
In the present case, records show that both the OSG and the deputized SRA counsel
were served copies of the RTC decision subject of the appeal. Thus, what applies
is National Power Corporation v. Vine Development Corporation. Applying here the
doctrine laid down in the said case, deputized SRA counsel Atty. Labay is, without a
doubt, authorized to file a notice of appeal.
Assuming Atty. Labay had no authority to file a notice of appeal, such defect was
cured when the OSG subsequently filed its opposition to the motion to expunge the
notice of appeal. As the OSG explained, its reservation21 to approve the withdrawal of
the case, the non-appeal, or other actions which appear to compromise the interest of
the government was meant to protect the interest of the government in case the
deputized SRA counsel acted in any manner prejudicial to government. Obviously,
what required the approval of the OSG was the non-appeal, not the appeal, of a
decision adverse to government.
We hold that the RTC should have given due course to the notice of appeal that
Atty. Labay timely filed. Thus, the 19 December 2006 Decision of the RTC in Civil
Case No. Q-02-46236 cannot be deemed to have attained finality.
The next logical step is to remand the case to the RTC. However, a remand would
only delay the resolution of this case and frustrate the ends of justice. As a rule,
remand is avoided in the following instances: (a) where the ends of justice would not
be served; (b) where public interest demands an early disposition of the case; or (c)
where the trial court already received all the evidence presented by both parties, and
the Supreme Court is in a position, based upon said evidence, to decide the case on its
merits.22 All three conditions are present here.
The sugar corporations are not entitled to reimbursement
of 25% of the conversion fee amounting to P38,637,000.00.

Section 2 of EO 87 granted the Committee on Sugar Conversion/Auction power to
promulgate rules governing sugar importation by the private sector. It provides:
SEC. 2. Committee on Sugar Conversion/Auction. There is hereby created a

Committee on Sugar Conversion/Auction which shall be headed by the DA,
with the following as members: NEDA, DTI, DOF, SRA, and a representative
each from the sugar planters group and the sugar millers group. The Committee
is hereby authorized to determine the parameters and procedures on the
importation of sugar by the private sector, and the collection and remittance
of the fee for the conversion of sugar from C (reserve sugar) to B (domestic
sugar). (Emphasis supplied)
Pursuant to this authority, the Committee issued the Bidding Rules subject of the
controversy, paragraph G.1 of which provides that if the importer fails to make
the importation, 25% of the conversion fee shall be forfeited in favor of the SRA,
thus:
G. Forfeiture of Conversion Fee
G.1 In case of failure of the importer to make the importation or for the
imported sugar to arrive in the Philippines on or before the Arrival Date, the
25% of Conversion Fee Bid already paid shall be forfeited in favor of the
SRA and the imported sugar shall not be classified as B (domestic sugar)
unless, upon application with the SRA and without objection of the Committee,
the SRA allows such conversion after payment by the importer of 100% of the
Conversion Fee applicable to the shipment.23 (Emphasis supplied)
In joining the bid for sugar importation, the sugar corporations are deemed to have
assented to the Bidding Rules, including the forfeiture provision under paragraph G.1.
The Bidding Rules bind the sugar corporations. The latter cannot rely on the lame
excuse that they are not aware of the forfeiture provision.
At the trial, Teresita Tan testified that the Bidding Rules were duly published in a
newspaper of general circulation.24 Vicente Cenzon, a sugar importer who participated
in the bidding for the 3rd tranche, testified that he attended the pre-bid conference
where the Bidding Rules were discussed and copies of the same were distributed to all
the bidders.25
On the other hand, all that the sugar corporations managed to come up with was the
self-serving testimony of its witness, Daniel Fajardo, that the sugar corporations were
not informed of the forfeiture provision in the Bidding Rules.26
The Bidding Rules passed through a consultative process actively participated by

various government agencies and their counterpart in the private sector: the
Department of Agriculture, the National Economic Development Authority, the
Department of Trade and Industry, the Department of Finance, the Sugar Regulatory
Administration, and a representative each from the sugar planters group and the sugar
millers group.27
We find nothing in the forfeiture provision of the Bidding Rules that is contrary to
law, morals, good customs, public order, or public policy. On the contrary, the
forfeiture provision fully supports government efforts to aid the countrys ailing sugar
industry. Conversion fees, including those that are forfeited under paragraph G.1 of
the Bidding Rules, are automatically remitted to the Bureau of Treasury and go
directly to the Agricultural Competitiveness Enhancement Fund.28
It is unrefuted that the sugar corporations failed in their contractual undertaking to

import the remaining 27,000 metric tons of sugar specified in their sugar import
allocation. Applying paragraph G.1 of the Bidding Rules, such failure is subject to
forfeiture of the 25% of the conversion fee the sugar corporations paid as part of their
contractual undertaking.
The RTC gravely erred in ordering the SRA to return the forfeited conversion fee to
the sugar corporations. Its strained interpretation that paragraph G.1 of the Bidding
Rules contemplates cases of delay in the arrival of imported sugar but not cases of
cancellation of sugar importation defies logic and the express provision of paragraph
G.1. If delay in the arrival of imported sugar is subject to forfeiture of 25% of the
conversion fee, with more reason is outright failure to import sugar, by cancelling the
sugar importation altogether, subject to forfeiture of the 25% of the conversion fee.
Plainly and expressly, paragraph G.1 identifies two situations which would bring
about the forfeiture of 25% of the conversion fee: (1) when the importer fails to
make the importation or (2) when the imported sugar fails to arrive in the
Philippines on or before the set arrival date. It is wrong for the RTC to interpret the
forfeiture provision in a way departing from its plain and express language.
Where the language of a rule is clear, it is the duty of the court to enforce it according
to the plain meaning of the word. There is no occasion to resort to other means of
interpretation.29
WHEREFORE, we DENY the petition. We AFFIRM the 6 November 2007

Decision of the Court of Appeals in CA-G.R. SP No. 100571, which set aside the 26
June 2007, 6 August 2007, and 31 August 2007 Orders as well as the 6 September
2007 Writ of Execution and the 12 September 2007 Amended Writ of Execution of
the Regional Trial Court (Branch 77) of Quezon City in Civil Case No. Q-02-
46236. Further, the 19 December 2006 Decision of the Regional Trial Court (Branch
77) of Quezon City in Civil Case No. Q-02-46236 is SET ASIDE.
Costs against petitioners.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-26100 February 28, 1969
CITY OF BAGUlO, REFORESTATION ADMINISTRATION,

FRANCISCO G. JOAQUIN, SR., FRANCISCO G. JOAQUIN, JR., and TERESITA J.
BUCHHOLZ petitioners,
vs.
HON. PIO R. MARCOS, Judge of the Court of First Instance of Baguio,
BELONG LUTES, and the HONORABLE COURT OF APPEALS, respondents.
1st Assistant City Fiscal Dionisio C. Claridad, Augusto Tobias and Feria, Feria, Lugtu and La'O for
petitioners.
Bernardo C. Ronquillo for respondents.
SANCHEZ, J.:
Petitioners attack the jurisdiction of the Court of First Instance of Baguio to reopen cadastral
proceedings under Republic Act 931. Private petitioner's specifically question the ruling of the Court
of Appeals that they have no personality to oppose reopening. The three-pronged contentions of all
the petitioners are: (1) the reopening petition was filed outside the 40-year period next preceding the
approval of Republic Act 931; (2) said petition was not published; and (3) private petitioners, as
lessees of the public land in question, have court standing under Republic Act 931. The facts follow:
On April 12, 1912, the cadastral proceedings sought to be reopened, Civil Reservation Case No. 1,
GLRO Record No. 211, Baguio Townsite, were instituted by the Director of Lands in the Court of
First Instance of Baguio. It is not disputed that the land here involved (described in Plan Psu-
186187) was amongst those declared public lands by final decision rendered in that case
on November 13, 1922.
On July 25, 1961, respondent Belong Lutes petitioned the cadastral court to reopen said Civil
Reservation Case No. 1 as to the parcel of land he claims. His prayer was that the land be
registered in his name upon the grounds that: (1) he and his predecessors have been in actual,
open, adverse, peaceful and continuous possession and cultivation of the land since Spanish times,
or before July 26, 1894, paying the taxes thereon; and (2) his predecessors were illiterate Igorots
without personal notice of the cadastral proceedings aforestated and were not able to file their claim
to the land in question within the statutory period.
On December 18, 1961, private petitioners Francisco G. Joaquin, Sr., Francisco G. Joaquin, Jr., and
Teresita J. Buchholz registered opposition to the reopening. Ground: They are tree farm lessees
upon agreements executed by the Bureau of Forestry in their favor for 15,395.65 square meters on
March. 16, 1959, for 12,108 square meters on July 24, 1959, and for 14,771 square meters on July
17, 1959, respectively.
On May 5, 1962, the City of Baguio likewise opposed reopening.

On May 8, 1962, upon Lutes' opposition, the cadastral court denied private petitioners' right to
intervene in the case because of a final declaratory relief judgment dated March 9, 1962 in Yaranon
vs. Castrillo [Civil Case 946, Court of First Instance of Baguio] which declared that such tree farm
leases were null and void.
On May 18, 1962, private petitioners moved to reconsider. They averred that said declaratory relief
judgment did not bind them, for they were not parties to that action.
On September 14, 1962, the cadastral court reversed its own ruling of May 8, 1962, allowed
petitioners to cross-examine the witnesses of respondent Lutes.
On October 16, 1962, Lutes replied to and moved to dismiss private petitioners' opposition to his
reopening petition. On October 25, 1962, private petitioners' rejoinder was filed.
On August 5, 1963, the cadastral court dismissed private petitioners' opposition to the reopening. A
motion to reconsider was rejected by the court on November 5, 1963.
On January 6, 1964, it was the turn of the City of Baguio to lodge a motion to dismiss the petition to
reopen. This motion was adopted as its own by the Reforestation Administration. They maintained
the position that the declaratory judgment in Civil Case 946 was not binding on those not parties
thereto. Respondent Lutes opposed on February 24, 1964. On April 6, 1964, private petitioners
reiterated their motion to dismiss on jurisdictional grounds.
On September 17, 1964, the court denied for lack of merit the City's motion as well as the April 6,
1964 motion to dismiss made by private petitioners.
On November 13, 1964, all the petitioners went to the Court of Appeals on certiorari, prohibition, and
mandamus with preliminary injunction. 1 They then questioned the cadastral court's jurisdiction over
the petition to reopen and the latter's order of August 5, 1963 dismissing private petitioners'
opposition. The appellate court issued a writ of preliminary injunction upon a P500-bond.
Then came the judgment of the Court of Appeals of September 30, 1965. The court held that
petitioners were not bound by the declaratory judgment heretofore hated. Nevertheless, the
appellate court ruled that as lessees, private petitioners had no right to oppose the reopening of the
cadastral case. Petitioners moved to reconsider. It was thwarted on May 6, 1966.
Petitioners now seek redress from this Court. On July 6, 1966, respondents moved to dismiss the
petition before us. On August 5, 1966, petitioners opposed. On August 12, 1966, we gave due
course.
1. Do private petitioners have personality to appear in the reopening proceedings?
First, to the controlling statute, Republic Act 931, effective June 20, 1953.
The title of the Act reads
AN ACT TO AUTHORIZE THE FILING IN THE PROPER COURT, UNDER CERTAIN

CONDITIONS, OF CERTAIN CLAIMS OF TITLE TO PARCELS OF LAND THAT HAVE BEEN
DECLARED PUBLIC LAND, BY VIRTUE OF JUDICIAL DECISIONS RENDERED WITHIN THE
FORTY YEARS NEXT PRECEDING THE APPROVAL OF THIS ACT.
Section 1 thereof provides
SECTION 1. All persons claiming title to parcels of land that have been the object of
cadastral proceedings, who at the time of the survey were in actual possession of the same,
but for some justifiable reason had been unable to file their claim in the proper court during
the time limit established by law, in case such parcels of land, on account of their failure to
file such claims, have been, or are about to be declared land of the public domain by virtue of
judicial proceedings instituted within the forty years next preceding the approval of this Act,
are hereby granted the right within five years 2 after the date on which this Act shall take effect, to petition for a
reopening of the judicial proceedings under the provisions of Act Numbered Twenty-two hundred and fifty-nine, as
amended, only with respect to such of said parcels of land as have not been alienated, reserved, leased, granted, or
otherwise provisionally or permanently disposed of by the Government, and the competent Court of First Instance, upon receiving
such petition, shall notify the Government through the Solicitor General, and if after hearing the parties, said court shall find that all
conditions herein established have been complied with, and that all taxes, interests and penalties thereof have been paid from the
time when land tax should have been collected until the day when the motion is presented, it shall order said judicial proceedings
reopened as if no action has been taken on such parcels. 3
We concede that in Leyva vs. Jandoc, L-16965, February 28, 1962, a land registration case where
oppositors were "foreshore lessees of public land", a principle was hammered out that although
Section 34, Land Registration Act, 4 "apparently authorizes any person claiming any kind of interest
to file an opposition to an application for registration, ... nevertheless ... the opposition must be
based on a right of dominion or some other real right independent of, and not at all subordinate to,
the rights of the Government."5 The opposition, according to the Leyva decision, "must necessarily
be predicated upon the property in question being part of the public domain." Leyva thus pronounced
that "it is incumbent upon the duly authorized representatives of the Government to represent its
interests as well as private claims intrinsically dependent upon it."
But the Leyva case concerned an ordinary land registration proceeding under the provisions of the
Land Registration Act. Normally and logically, lessees cannot there present issues of ownership.
The case at bar, however, stands on a different footing. It involves a special statute R.A. 931, which
allows a petition for reopening on lands "about to be declared" or already "declared land of the public
domain" by virtue of judicial proceedings. Such right, however, is made to
cover limited cases, i.e., "only with respect to such of said parcels of land as have not been
alienated, reserved, leased, granted, or otherwise provisionally or permanently disposed of by the
Government." 6 The lessee's right is thus impliedly recognized by R.A. 931. This statutory phrase
steers the present case clear from the impact of the precept forged by Leyva. So it is, that if the land
subject of a petition to reopen has already been leased by the government, that petition can no
longer prosper.
This was the holding in Director of Land vs. Benitez, L-21368, March 31, 1966. The reopening
petition there filed was opposed by the Director of Lands in behalf of 62 lessees of public land
holding revocable permits issued by the government. We struck down the petition in that Case
because the public land, subject-matter of the suit, had already been leased by the government to
private persons.
Of course, the Benitez ruling came about not by representations of the lessees alone, but through
the Director of Lands. But we may well scale the heights of injustice or abet violations of R.A. 931 if
we entertain the view that only the Director of Lands 7 can here properly oppose the reopening
petition. Suppose the lands office fails to do so? Will legitimate lessees be left at the mercy of
government officials? Should the cadastral court close its eyes to thefact of lease that may be
proved by the lessees themselves, and which is enough to bar the reopening petition? R.A. 931
could not have intended that this situation should happen. The point is that, with the fact of lease, no
question of ownership need be inquired into pursuant to R.A. 931. From this standpoint, lessees
have sufficient legal interest in the proceedings.
The right of private petitioners to oppose a reopening petition here becomes the more patent when
we take stock of their averment that they have introduced improvements on the land affected. It
would seem to us that lessees insofar as R.A. 931 is concerned, come within the purview of those
who, according to the Rules of Court, 8 may intervene in an action. For, they are persons who have
"legal interest in the matter in litigation, or in the success of either of the parties." 9 In the event herein
private petitioners are able to show that they are legitimate lessees, then their lease will continue.
And this because it is sufficient that it be proven that the land is leased to withdraw it from the
operation of Republic Act 931 and place it beyond the reach of a petition for reopening. 10
In line with the Court of Appeals' conclusion, not disputed by respondent Lutes herein, the cadastral
court should have ruled on the validity of private petitioners 'tree farm leases on the merits.
Because there is need for Lutes' right to reopen and petitioners' right to continue as lessees to be
threshed out in that court.
We, accordingly, hold that private petitioners, who aver that they are lessees, have the necessary
personality to intervene in and oppose respondent Lutes' petition for reopening.
2. Petitioners next contend that the reopening petition below, filed under R.A. 931, should have been
published in accordance with the Cadastral Act.
To resolve this contention, we need but refer to a very recent decision of this Court in De Castro vs.
Marcos, supra, involving exactly the same set of facts bearing upon the question. We there held,
after a discussion of law and jurisprudence, that: "In sum, the subject matter of the petition for
reopening a parcel of land claimed by respondent Akia was already embraced in the cadastral
proceedings filed by the Director of Lands. Consequently, the Baguio cadastral court already
acquired jurisdiction over the said property. The petition, therefore, need not be published." We find
no reason to break away from such conclusion.
Respondent Lutes attached to the record a certified true copy of the November 13, 1922 decision in
the Baguio Townsite Reservation case to show, amongst others, that the land here involved was
part of that case. Petitioners do not take issue with respondent Lutes on this point of fact.
We here reiterate our ruling in De Castro, supra, that the power of the cadastral court below over
petitions to reopen, as in this case, is not jurisdictionally tainted by want of publication.
3. A question of transcendental importance is this: Does the cadastral court have power to reopen
the cadastral proceedings upon the application of respondent Lutes?
The facts are: The cadastral proceedings sought to be reopened were instituted on April 12, 1912.
Final decision was rendered on November 13, 1922. Lutes filed the petition to reopen on July
25, 1961.
It will be noted that the title of R.A. 931, heretofore transcribed, authorizes "the filing in the proper
court, under certain conditions, of certain claims of title to parcels of land that have been declared
public land, by virtue of judicial decisions rendered within the forty years next preceding the approval
of this Act." The body of the statute, however, in its Section 1, speaks of parcels of land that "have
been, or are about to be declared land of the public domain, by virtue of judicial proceedings
instituted within the forty years next preceding the approval of this Act." There thus appears to be a
seeming inconsistency between title and body.
It must be stressed at this point that R.A. 931 is not under siege on constitutional grounds. No
charge has been made hero or in the courts below that the statute offends the constitutional
injunction that the subject of legislation must be expressed in the title thereof. Well-entrenched in
constitutional law is the precept that constitutional questions will not be entertained by courts unless
they are "specifically raised, insisted upon and adequately argued." 11 At any rate it cannot be
seriously disputed that the subject of R.A. 931 is expressed in its title.
This narrows our problem down to one of legal hermeneutics.
Many are the principles evolved in the interpretation of laws. It is thus not difficult to stray away from
the true path of construction, unless we constantly bear in mind the goal we seek. The office of
statutory interpretation, let us not for a moment forget, is to determine legislative intent. In the words
of a well-known authority, "[t]he true object of all interpretation is to ascertain the meaning and will of
the law-making body, to the end that it may be enforced." 12 In varying language, "the, purpose of all
rules or maxims" in interpretation "is to discover the true intention of the law." 13 They "are only
valuable when they subserve this purpose." 14 In fact, "the spirit or intention of a statute prevails over
the letter thereof." 15 A statute "should be construed according to its spirit and reason, disregarding
as far as necessary, the letter of the law." 16 By this, we do not "correct the act of the Legislature, but
rather ... carry out and give due course to" its true intent. 17
It should be certain by now that when engaged in the task of construing an obscure expression in
the law 18 or where exact or literal rendering of the words would not carry out the legislative
intent, 19 the title thereof may be resorted to in the ascertainment of congressional will. Reason
therefor is that the title of the law may properly be regarded as an index of or clue or guide to
legislative intention. 20 This is especially true in this jurisdiction. For the reason that by specific
constitutional precept, "[n]o bill which may be enacted into law shall embrace more than one
subject which shall be expressed in the title of the bill." 21 In such case, courts "are compelled by the
Constitution to consider both the body and the title in order to arrive at the legislative intention." 22
With the foregoing guideposts on hand, let us go back to the situation that confronts us. We take
another look at the title of R.A. 931, viz: "AN ACT TO AUTHORIZE THE FILING IN THE PROPER
COURT, UNDER CERTAIN CONDITIONS, OF CERTAIN CLAIMS OF TITLE TO PARCELS OF
LAND THAT HAVE BEEN DECLARED PUBLIC LAND, BY VIRTUE OF JUDICIAL DECISIONS
RENDERED WITHIN THE FORTY YEARS NEXT PRECEDING THE APPROVAL OF THIS ACT."
Readily to be noted is that the title is not merely composed of catchwords. 23 It expresses in language
clear the very substance of the law itself. From this, it is easy to see that Congress intended to give
some effect to the title of R.A. 931.
To be carefully noted is that the same imperfection in the language of R.A. 931 aforesaid from
which surfaces a seeming inconsistency between the title and the body attended Commonwealth
Act 276, the present statute's predecessor. That prior law used the very same language in the body
thereof and in its title. We attach meaning to this circumstance. Had the legislature meant to shake
off any legal effects that the title of the statute might have, it had a chance to do so in the
reenactment of the law. Congress could have altered with great facility the wording of the title of R.A.
931. The fact is that it did not.
It has been observed that "in modern practice the title is adopted by the Legislature, more thoroughly
read than the act itself, and in many states is the subject of constitutional regulation." 24 The
constitutional in jurisdiction that the subject of the statute must be expressed in the title of the bill,
breathes the spirit of command because "the Constitution does not exact of Congress the obligation
to read during its deliberations the entire text of the bill." 25Reliance, therefore, may be placed on the
title of a bill, which, while not an enacting part, no doubt "is in some sort a part of the act, although
only a formal part." 26 These considerations are all the more valid here because R.A. 931 was passed
without benefit of congressional debate in the House from which it originated as House Bill
1410, 27 and in the Senate. 28
The title now under scrutiny possesses the strength of clarity and positiveness. It recites that it
authorizes court proceedings of claims to parcels of land declared public land "by virtue of
judicial decisions rendered within the forty years next preceding the approval of this Act." That title is
written "in capital letters" by Congress itself; such kind of a title then "is not to be classed with
words or titles used by compilers of statutes" because "it is the legislature speaking." 29 Accordingly,
it is not hard to come to a deduction that the phrase last quoted from R.A. 931 "by virtue of judicial
decisions rendered" was but inadvertently omitted from the body. Parting from this premise, there
is, at bottom, no contradiction between title and body. In line with views herein stated, the title
belongs to that type of titles which; should be regarded as part of the rules or provisions expressed
in the body. 30At the very least, the words "by virtue of judicial decisions rendered" in the title of the
law stand in equal importance to the phrase in Section 1 thereof, "by virtue of judicial proceedings
instituted."
Given the fact then that there are two phrases to consider the choice of construction we must give to
the statute does not need such reflection. We lean towards a liberal view. And this, because of the
principle long accepted that remedial legislation should receive the blessings of liberal
construction. 31 And, there should be no quibbling as to the fact that R.A. 931 is a piece of remedial
legislation. In essence, it provides a mode of relief to landowners who, before the Act, had no legal
means of perfecting their titles. This is plainly evident from the explanatory note thereof, which
reads:
This bill is intended to give an opportunity to any person or claimant who has any interest in
any parcel of land which has been declared as public land in cadastral proceeding for failure
of said person or claimant to present his claim within the time prescribed by law.
There are many meritorious cases wherein claimants to certain parcels of land have not had
the opportunity to answer or appear at the hearing of cases affecting their claims in the
corresponding cadastral proceedings for lack of sufficient notice or for other reasons and
circumstances which are beyond their control. Under C.A. No. 276, said persons or
claimants have no more legal remedy as the effectivity of said Act expired in 1940.
This measure seeks to remedy the lack of any existing law within said persons or claimants
with meritorious claims or interests in parcels of land may seek justice and protection. This
bill proposes to give said persons or claimants their day in court. Approval of this bill is
earnestly requested.
In fine, we say that lingual imperfections in the drafting of a statute should never be permitted to
hamstring judicial search for legislative intent, which can otherwise be discovered. Legal
technicalities should not abort the beneficent effects intended by legislation.
The sum of all the foregoing is that, as we now view Republic Act 931, claims of title that may be
filed thereunder embrace those parcels of land that have been declared public land "by virtue
of judicial decisions rendered within the forty years next preceding the approval of this Act."
Therefore, by that statute, the July 25, 1961 petition of respondent Belong Lutes to reopen Civil
Reservation Case No. 1, GLRO Record No. 211 of the cadastral court of Baguio, the decision on
which was rendered on November 13, 1922, comes within the 40-year period. lawphi 1.nt
FOR THE REASONS GIVEN, the petition for certiorari is hereby granted; the cadastral court's
orders of August 5, 1963, November 5, 1963 and September 17, 1964 are hereby declared null and
void and the cadastral court is hereby directed to admit petitioners' oppositions and proceed
accordingly. No costs. So ordered.
SECOND DIVISION
RAFAEL H. GALVEZ and G.R. No. 187919

KATHERINE L. GUY,
Petitioners,
-versus-
HON. COURT OF APPEALS

and ASIA UNITED BANK,
Respondents.
x------------------------x
ASIA UNITED BANK, G.R. No. 187979

Petitioner,
-versus-
GILBERT G. GUY, PHILIP LEUNG,

KATHERINE L. GUY, RAFAEL H.
GALVEZ and EUGENIO H.
GALVEZ, JR.,
Respondents.
x--------------------------x
GILBERT G. GUY, PHILIP LEUNG G.R. No. 188030
and EUGENIO H. GALVEZ, JR.,
Petitioners, Present:
CARPIO, J.,
Chairperson,
BRION,
-versus- PEREZ,
SERENO, and
REYES, JJ.
ASIA UNITED BANK, Promulgated:

Respondent.
April 25, 2012
x ----------------------------------------------------------------------------------------x
DECISION
PEREZ, J.:
THE FACTS
In 1999, Radio Marine Network (Smartnet) Inc. (RMSI) claiming to do
business under the name Smartnet Philippines[1] and/or Smartnet Philippines, Inc.
(SPI),[2]applied for an Omnibus Credit Line for various credit facilities with Asia
United Bank (AUB). To induce AUB to extend the Omnibus Credit Line, RMSI,
through its directors and officers, presented its Articles of Incorporation with its
400-peso million capitalization and its congressional telecom franchise. RMSI was
represented by the following officers and directors occupying the following
positions:
Gilbert Guy - Exec. V-Pres./Director

Philip Leung - Managing Director
Katherine Guy - Treasurer
Rafael Galvez - Executive Officer
Eugenio Galvez, Jr. - Chief Financial Officer/Comptroller
Satisfied with the credit worthiness of RMSI, AUB granted it a P250 million
Omnibus Credit Line, under the name of Smartnet Philippines, RMSIs Division.
On 1 February 2000, the credit line was increased to P452 million pesos after a
third-party real estate mortgage by Goodland Company, Inc.,[3] an affiliate of Guy
Group of Companies, in favor of Smartnet Philippines,[4] was offered to the
bank. Simultaneous to the increase of the Omibus Credit Line, RMSI submitted a
proof of authority to open the Omnibus Credit Line and peso and dollar accounts in
the name of Smartnet Philippines, Inc., which Gilbert Guy, et al. represented as a
division of RMSI,[5] as evidenced by the letterhead used in its formal
correspondences with the bank and the financial audit made by SGV & Co., an
independent accounting firm. Attached to this authority was the Amended Articles
of Incorporation of RMSI, doing business under the name of Smartnet Philippines,
and the Secretarys Certificate of SPI authorizing its directors, Gilbert Guy and
Philip Leung to transact with AUB.[6] Prior to this major transaction, however, and,
unknown to AUB, while RMSI was doing business under the name of Smartnet
Philippines, and that there was a division under the name Smartnet Philippines,
Gilbert Guy, et al. formed a subsidiary corporation, the SPI with a paid-up capital
of only P62,500.00.
Believing that SPI is the same as Smartnet Philippines - the division of

RMSI - AUB granted to it, among others, Irrevocable Letter of Credit No. 990361
in the total sum of $29,300.00 in favor of Rohde & Schwarz Support Centre Asia
Ptd. Ltd., which is the subject of these consolidated petitions. To cover the liability
of this Irrevocable Letter of Credit, Gilbert Guy executed Promissory Note No.
010445 in behalf of SPI in favor of AUB. This promissory note was renewed
twice, once, in the name of SPI (Promissory Note No. 011686), and last, in the
name of Smartnet Philippines under Promissory Note No. 136131, bolstering
AUBs belief that RMSIs directors and officers consistently treated this letter of
credit, among others, as obligations of RMSI.
When RMSIs obligations remained unpaid, AUB sent letters demanding

payments. RMSI denied liability contending that the transaction was incurred
solely by SPI, a corporation which belongs to the Guy Group of Companies, but
which has a separate and distinct personality from RMSI. RMSI further claimed
that while Smartnet Philippines is an RMSI division, SPI, is a subsidiary of RMSI,
and hence, is a separate entity.
Aggrieved, AUB filed a case of syndicated estafa under Article 315 (2) (a)
of the Revised Penal Code in relation to Section 1 of Presidential Decree (PD) No.
1689 against the interlocking directors of RMSI and SPI, namely, Gilbert G. Guy,
Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr.,
before the Office of the City Prosecutor of Pasig City.
AUB alleged that the directors of RMSI deceived it into believing that SPI
was a division of RMSI, only to insist on its separate juridical personality later on
to escape from its liabilities with AUB. AUB contended that had it not been for the
fraudulent scheme employed by Gilbert Guy, et al., AUB would not have parted
with its money, which, including the controversy subject of this petition, amounted
to hundreds of millions of pesos.
In a Resolution dated 3 April 2006,[7] the Prosecutor found probable cause to
indict Gilbert G. Guy, et al. for estafa but dismissed the charge of violation of PD
No. 1689 against the same for insufficiency of evidence, thus:
WHEREFORE, it is recommended that respondents be charged

for ESTAFA under Article 315, par. 2(a) of the Revised Penal Code, and
the attached information be filed with the Regional Trial Court in Pasig
City, with a recommended bail of P40,000.00 for each respondent.
It is further recommended that the charge of violation of P.D.

1689 against the said respondents be dismissed for insufficiency of
evidence.[8]
Accordingly, an Information dated 3 April 2006[9] was filed against Gilbert

Guy, et al. with the Regional Trial Court of Pasig City.
Both parties, i.e., the AUB and Gilbert Guy, et al., filed their respective
Petitions for Review with the Department of Justice (DOJ) assailing the 3 April
2006 Resolution of the Office of the City Prosecutor of Pasig City.
In a Resolution dated 15 August 2006,[10] the DOJ reversed the City
Prosecutors Resolution and ordered the dismissal of the estafa charges against
Gilbert Guy, et al. for insufficiency of evidence.
The AUBs Motion for Reconsideration was denied, constraining it to assail
the DOJ Resolution before the Court of Appeals (CA).
The CA partially granted AUBs petition in a Decision dated 27 June 2008,

thus:
WHEREFORE, the instant petition is GRANTED, finding

probable cause against private respondents for the crime
of ESTAFA under Article 315, par 2 (a) of the Revised Penal Code. The
assailed Resolution dated August 15, 2006 of the Department of Justice
is REVERSED AND SET ASIDE, subject to our ruling that the private
respondents are not liable under P.D. 1689. The April 3, 2006 Resolution
of Assistant City Prosecutor Paudac is hereby REINSTATED.[11]
Aggrieved, Gilbert Guy, Philip Leung and Eugenio H. Galvez Jr. (in G.R.
No. 188030) and separately, Rafael Galvez and Katherine Guy (in G.R. No.
187919) filed the present petitions before this Court assailing the CA Decision
which reinstated the City Prosecutors Resolution indicting them of the crime of
estafa. The AUB also filed its own petition before us, docketed as G.R. No.
187979, assailing the Court of Appeals Decision for dismissing the charge in
relation to Section 1 of PD No. 1689.
Hence, these consolidated petitions.
Gilbert Guy, et al. argue that this case is but a case for collection of sum of
money, and, hence, civil in nature and that no fraud or deceit was present at the
onset of the transaction which gave rise to this controversy, an element
indispensable for estafa to prosper.[12]
AUB, on the other, insists that this controversy is within the scope of PD
No. 1689, otherwise known as syndicated estafa. It contends that Guy, et
al., induced AUB to grant SPIs letter of credit to AUBs damage and prejudice by
misleading AUB into believing that SPI is one and the same entity as Smartnet
Philippines which AUB granted an Omnibus Credit Transaction. After receiving
and profiting from the proceeds of the aforesaid letter of credit, Gilbert Guy, et
al. denied and avoided liability therefrom by declaring that the obligation should
have been booked under SPI as RMSI never contracted, nor authorized the same. It
is on this premise that AUB accuses Gilbert Guy, et al.to have committed the
crime of estafa under Article 315 (2) (a) of the Revised Penal Code in relation to
PD No. 1689.
At issue, therefore, is whether or not there is probable cause to prosecute

Gilbert Guy, et al. for the crime of syndicated estafa on the basis of fraudulent acts
or fraudulent means employed to deceive AUB into releasing the proceeds of
Irrevocable Letter of Credit No. 990361 in favor of SPI.
Our Ruling
This controversy could have been just a simple case for collection of sum of
money had it not been for the sophisticated fraudulent scheme which Gilbert
Guy, et al.employed in inducing AUB to part with its money.
Records show that on 17 February 1995, Radio Marine Network, Inc. (Radio
Marine) amended its corporate name to what it stands today Radio Marine
Network (Smartnet), Inc. This was a month after organizing its subsidiary
corporation the Smartnet Philippines, Inc. with a capital of only P62,500.00.[13] A
year earlier, Gilbert Guy, et al., established Smartnet Philippines as a division of
Radio Marine under which RMSI operated its business.
It was, however, only on 26 March 1998, when the Securities and Exchange
Commission approved the amended corporate name, and only in October 1999 did
RMSI register Smartnet Philippines as its business name with the Department of
Trade and Industry.[14]
It is in this milieu that RMSI transacted business with AUB under the name
Smartnet Philippines and/or SPI.
Article 315 (2) (a) of the Revised Penal Code provides:
Art. 315. Swindling (estafa) any person who shall defraud another
by any of the means mentioned herein below x x x :
xxxx
2. By means of any of the following false pretenses or fraudulent
acts executed prior to or simultaneous with the commission of the
fraud:
(a) By using a fictitious name, or falsely pretending to possess power,

influence, qualifications, property, credit, agency, business or
imaginary transactions; or by means of other similar deceits. x x x.
The elements of estafa by means of deceit are the following:
a. That there must be a false pretense, fraudulent act or fraudulent

means;
b. That such false pretense, fraudulent act or fraudulent means must be
made or executed prior to or simultaneously with the commission of
the fraud;
c. That the offended party must have relied on the false pretense,
fraudulent act, or fraudulent means, that is, he was induced to part
with his money or property because of the false pretense, fraudulent
act, or fraudulent means;
d. That as a result thereof, the offended party suffered damage.[15]
First, Gilbert Guy, Philip Leung, Katherine Guy, Rafael Galvez and Eugene
Galvez, Jr., interlocking directors of RMSI and SPI, represented to AUB in their
transactions that Smartnet Philippines and SPI were one and the same entity. While
Eugene Galvez, Jr. was not a director of SPI, he actively dealt with AUB in his
capacity as RMSIs Chief Financial Officer/Comptroller by falsely representing that
SPI and RMSI were the same entity. Gilbert Guy, Philip Leung, Katherine Guy,
Rafael Galvez, and Eugene Galvez, Jr. used the business names Smartnet
Philippines, RMSI, and SPI interchangeably and without any distinction. They
successfully did this by using the confusing similarity of RMSIs business
name, i.e., Smartnet Philippines its division, and, Smartnet Philippines, Inc. the
subsidiary corporation. Further, they were able to hide the identity of SPI, by
having almost the same directors as that of RMSI. In order to let it appear that SPI
is the same as that of Smartnet Philippines, they submitted in their application
documents of RMSI, including its Amended Articles of Incorporation,[16] third-
party real estate mortgage of Goodland Company[17] in favor of Smartnet
Philippines, and audited annual financial statement of SGV & Co.[18] Gilbert
Guy, et al. also used RMSI letterhead in their official communications with the
bank and the contents of these official communications[19] conclusively pointed to
RMSI as the one which transacted with the bank.
These circumstances are all indicia of deceit. Deceit is the false

representation of a matter of fact whether by words or conduct, by false or
misleading allegations, or by concealment of that which should have been
disclosed which deceives or is intended to deceive another so that he shall act upon
it to his legal injury.[20]
Second, the intent to deceive AUB was manifest from the start. Gilbert
Guy et al. laid down first all the necessary materials they need for this deception
before defrauding the bank by first establishing Smartnet Philippines as a division
of Radio Marine under which Radio Marine Network Inc. operated its
business.[21] Then it organized a subsidiary corporation, the SPI, with a capital of
only P62,000.00.[22] Later, it changed the corporate name of Radio Marine Network
Inc. into RMSI.[23]
Undoubtedly, deceit here was conceived in relation to Gilbert Guy, et
al.s transaction with AUB. There was a plan, documented in corporations papers,
that led to the defraudation of the bank. The circumstances of the directors and
officers acts in inserting in Radio Marine the name of Smartnet; the creation of its
division Smartnet Philippines; and its registration as business name as Smartnet
Philippines with the Department of Trade and Industry, together with the
incorporation of its subsidiary, the SPI, are indicia of a pre-conceived scheme to
create this elaborate fraud, victimizing a banking institution, which perhaps, is the
first of a kind in Philippine business.
We emphasize that fraud in its general sense, is deemed to comprise

anything calculated to deceive, including all acts, omissions, and concealment
involving a breach of legal duty or equitable duty, trust, or confidence justly
reposed, resulting in damage to another, or by which an undue and unconscientious
advantage is taken of another.[24] It is a generic term embracing all multifarious
means which human ingenuity can device and which are resorted to by one
individual to secure an advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick, cunning, dissembling and any
unfair way by which another is cheated.[25]
As early as 1903, in U.S. v. Mendezona,[26] we held that an accused may be

convicted for estafa if the deceit of false pretense is committed prior to or
simultaneous with fraud and is the efficient cause or primary consideration which
induced the offended party to part with his money or property.
Third, AUB would not have granted the Irrevocable Letter of Credit No.
990361, among others, had it known that SPI which had only P62,500.00 paid-up
capital and no assets, is a separate entity and not the division or business name of
RMSI. Gilbert Guy, et al. however, contends that the transaction subject in this
controversy is a letter of credit and not a loan, hence, SPIs capital does not
matter.[27] This was also the contention of the DOJ in reversing the Resolution of
the City Prosecutors Office of Pasig. The DOJ contended that:
It is also noted that the subject transaction, one of the several series of
transactions between complainant AUB and SPI, is not a loan
transaction. It is a letter of credit transaction intended to facilitate the
importation of goods by SPI. The allegation as to the lack of
capitalization of SPI is therefore immaterial and irrelevant since it is a
letter of credit transaction. The seller gets paid only if it delivers the
documents of title over the goods to the bank which issued the letter of
credit, while the buyer/importer acquires title to the goods once it
reimburses the issuing bank. The transaction secures the obligation of
the buyer/importer to the issuing bank. [28]
It is true that ordinarily, in a letter of credit transaction, the bank merely substitutes
its own promise to pay for the promise to pay of one of its customers, who in turn
promises to pay the bank the amount of funds mentioned in the letters of credit
plus credit or commitments fees mutually agreed upon. Once the issuing bank shall
have paid the beneficiary after the latters compliance with the terms of the letter of
credit, the issuing bank is entitled to reimbursement for the amount it paid under
the letter of credit.[29]
In the present case, however, no reimbursement was made outright, precisely

because the letter of credit was secured by a promissory note executed by SPI. The
bank would have not agreed to this transaction had it not been deceived by Gilbert
Guy, et al. into believing the RMSI and SPI were one and the same entity. Guy and
his cohorts acts in (1) securing the letter of credit guaranteed by a promissory note
in behalf of SPI; and, (2) their act of representing SPI as RMSIs Division,
were indicia of fraudulent acts because they fully well know, even before
transacting with the bank, that: (a) SPI was a separate entity from Smartnet
Philippines, the RMSIs Division, which has the Omnibus Credit Line; and (b)
despite this knowledge, they misrepresented to the bank that SPI is RMSIs
division. Had it not for this false representation, AUB would have not granted SPIs
letter of credit to be secured with a promissory note because SPI as a corporation
has no credit line with AUB and SPI by its own, has no credit standing.
Fourth, it is not in dispute that the bank suffered damage, which, including
this controversy, amounted to hundreds of millions of pesos.
It is worth emphasizing that under Section 1, Rule 112 of the Revised Rules
on Criminal Procedure, the function of a preliminary investigation is to determine
whether there is a sufficient ground to engender a well-grounded belief that a crime
x x x has been committed and that the respondent is probably guilty thereof and
should be held for trial.[30]
A finding of probable cause needs only to rest on evidence showing that

more likely than not, the accused committed the crime.[31] Preliminary
investigation is not the occasion for the full and exhaustive display of the parties'
evidence.[32] It is for the presentation of such evidence only as may engender a
well-founded belief that an offense has been committed and that the accused is
probably guilty thereof.[33] The validity and merits of a party's accusation or
defense, as well as admissibility of testimonies and evidence, are better ventilated
during the trial proper.[34]
We, therefore, sustain the findings of the CA and the City Prosecutors
Resolution finding that probable cause exists against Gilbert Guy, et al. for the
crime of estafaunder Article 315 (2)(a) of the Revised Penal Code and that Gilbert
Guy, et al. are probably guilty thereof and should be held for trial. AUBs
voluminous documents submitted to this Court overcome this difficulty and
established that there is sufficient ground to engender a well-grounded belief that a
crime has been committed and that the respondents are probably guilty thereof and
should be held for trial.
Lest it be misunderstood, we reiterate that this Courts finding of probable
cause is grounded on fraud committed through deceit which surrounded Gilbert
Guy, et al.transaction with AUB, thus, violating Article 315 (2) (a) of the Revised
Penal Code; it is neither their act of borrowing money and not paying them, nor
their denial thereof, but their very act of deceiving AUB in order for the latter to
part with its money. As early as the Penal Code of Spain, which was enforced in
the Philippines as early as 1887 until it was replaced by the Revised Penal Code in
1932, the act of fraud through false pretenses or similar deceit was already being
punished. Article 335 of the Penal Code of Spain punished a person who defrauded
another by falsely pretending to possess any power, influence, qualification,
property, credit, agency or business, or by means of similar deceit.[35]
Anent the issue as to whether or not Gilbert Guy, et al. should be charged for
syndicated estafa in relation to Section 1 of PD No. 1689, which states that:
SEC 1. Any person or persons who shall commit estafa or other

forms of swindling as defined in Article 315 and 316 of the Revised
Penal Code, as amended, shall be punished by life imprisonment to death
if the swindling (estafa) is committed by a syndicate consisting of five or
more persons formed with the intention of carrying out the unlawful or
illegal act, transaction, enterprise or scheme, and the defraudation results
in the misappropriation of moneys contributed by stockholders, or
members of rural banks, cooperatives, samahang nayon(s), or farmers
associations, or of funds solicited by corporations/ associations from the
general public.
We hold that the afore-quoted law applies to the case at bar, for the
following reasons:
Under Section 1 of PD No. 1689, the elements of syndicated estafa are:

(a) estafa or other forms of swindling as defined in Artilce 315 and 316 of the
Revised Penal Code is committed; (b) the estafa or swindling is committed by a
syndicate of five or more persons; and (c) defraudation results in the
misappropriation of moneys contributed by stockholders, or members of rural
banks, cooperatives, samahang nayon[s], or farmers associations or of funds
solicited by corporations/associations from the general public.[36]
First, as defined under Section 1 of PD No. 1689, a syndicate consists of
five or more persons formed with the intention of carrying out the unlawful or
illegal act, transaction, enterprise or scheme. Five (5) accused, namely, Gilbert G.
Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez,
Jr. were, (a) all involved in the formation of the entities used to defraud AUB; and
(b) they were the officers and directors, both of RMSI and SPI, whose conformities
paved the way for AUB to grant the letter of credit subject of this case, in AUBs
honest belief that SPI, as Gilbert Guy, et al. represented, was a mere division of
RMSI. As already discussed, although Eugenio Galvez, Jr. was not a director of
SPI, he, together with Gilbert Guy and Philip Leung, actively participated in the
scheme through their signed correspondences with the bank and their attendance in
the meetings with executives of AUB.[37] Rafael Galvez and Katherine Guy, on the
other hand, were the directors of RMSI and SPI who caused and authorized Gilbert
Guy and Philip Leung to transact with AUB.[38]
Second, while these corporations were established presumably in accordance
with law, it cannot be denied that Gilbert G. Guy, Rafael H. Galvez, Philip Leung,
Katherine L. Guy, and Eugenio H. Galvez, Jr. used these corporations to carry out
the illegal and unlawful act of misrepresenting SPI as a mere division of RMSI,
and, despite knowing SPIs separate juridical personality, applied for a letter of
credit secured by SPIs promissory note, knowing fully that SPI has no credit line
with AUB. The circumstances of the creation of these entities and their dealings
with the bank reveal this criminal intent to defraud and to deceive AUB.
Third, the fact that the defraudation of AUB resulted to misappropriation of
the money which it solicited from the general public in the form of deposits was
substantially established.[39] Section 3.1 of the General Banking Law defines banks
as entities engaged in the lending of funds obtained in the form of deposits. The
Old General Banking Act (R.A. No. 337) gave a fuller picture of the basic banking
function of obtaining funds from the public by way of deposits and the lending of
these funds as follows:
Sec 2. Only entities duly authorized by the Monetary Board of the

Central Bank may engage in the lending of funds obtained from the
public through the receipt of deposits of any kind,and all entities
regularly conducting such operations shall be considered as banking
institutions, xxxx.
Gilbert Guy et al. want this Court to believe that AUB, being a commercial
bank, is beyond the coverage of PD No. 1689. We hold, however, that a bank is a
corporation whose fund comes from the general public. P.D. No. 1689 does not
distinguish the nature of the corporation. It requires, rather, that the funds of such
corporation should come from the general public. This is bolstered by the third
whereas clause of the quoted law which states that the same also applies to other
corporations/associations operating on funds solicited from the general public. This
is precisely the very same scheme that PD No. 1689 contemplates that this species
of estafa be checked or at least be minimized by imposing capital punishment
involving funds solicited by corporations/associations from the general public
because this erodes the confidence of the public in the banking and cooperative
system, contravenes public interest and constitutes economic sabotage that
threatens the stability of the nation.[40]
Hence, for the stated reasons, we applied the law in People v. Balasa,[41] a
non-stock/non-profit corporation the Panata Foundation of the Philippines, Inc. We
held that PD No. 1689 also applies to other corporations/associations operating on
funds solicited from the general public.
In People v. Romero,[42] we also applied the law to a stock corporation

engaged in marketing, the Surigao San Andres Industrial Development
Corporation. Likewise, in People v. Menil,[43] we applied the law to another
marketing firm known as ABM Appliance and Upholstery.
In these cited cases, the accused used the legitimacy of their entities to
perpetrate their unlawful and illegal acts. We see no reason not to apply this law to
a banking institution, a corporation imbued with public interest, when a clear
reading of the PD 1689 reveals that it is within its coverage.
WHEREFORE, the Decision of the Court of Appeals dated 27 June 2008 in

CA-G.R. SP No. 97160 is hereby AFFIRMED with MODIFICATION that
Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy and Eugenio H.
Galvez, Jr. be charged for SYNDICATED ESTAFA under Article 315 (2) (a) of
the Revised Penal Code in relation to Section 1 of Presidential Decree No. 1689.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-8848 November 21, 1913
THE UNITED STATES, plaintiff-appllee,

vs.
WILLIAM C. HART, C. J. MILLER, and SERVILIANO NATIVIDAD, defendants-appellants.
Pedro Abad Santos, for appellants Hart and Natividad.

W. H. Booram, for appellant Miller.
Office of the Solicitor-General Harvey, for appellee.
TRENT, J.:
The appellants, Hart, Miller, and Natividad, were arraigned in the Court of First Instance of
Pampanga on a charge of vagrancy under the provisions of Act No. 519, found guilty, and were each
sentenced to six months' imprisonment. Hart and Miller were further sentenced to a fine of P200,
and Natividad to a fine of P100. All appealed.
The evidence of the prosecution as to the defendant Hart shows that he pleaded guilty and was
convicted on a gambling charge about two or three weeks before his arrest on the vagrancy charge;
that he had been conducting two gambling games, one in his saloon and the other in another house,
for a considerable length of time, the games running every night. The defense showed that Hart and
one Dunn operated a hotel and saloon at Angeles which did a business, according to the
bookkeeper, of P96,000 during the nineteen months preceding the trial; that Hart was also the sole
proprietor of a saloon in the barrio of Tacondo; that he raised imported hogs which he sold to the
Army garrison at Camp Stotsenberg, which business netted him during the preceding year about
P4,000; that he was authorized to sell several hundred hectares of land owned by one Carrillo in
Tacondo; that he administered, under power of attorney, the same property; and that he furnished a
building for and paid the teacher of the first public school in Tacondo, said school being under
Government supervision.
The evidence of the prosecution as to Miller was that he had the reputation of being a gambler; that
he pleaded guilty and was fined for participating in a gambling game about two weeks before his
arrest on the present charge of vagrancy; and that he was seen in houses of prostitution and in a
public dance hall in Tacondo on various occasions. The defense showed without contradiction that
Miller had been discharged from the Army about a year previously; that during his term of enlistment
he had been made a sergeant; that he received rating as "excellent" on being discharged; that since
his discharge he had been engaged in the tailoring business near Camp Stotsenberg under articles
of partnership with one Burckerd, Miller having contributed P1,000 to the partnership; that the
business netted each partner about P300 per month; that Miller attended to business in an efficient
manner every day; and that his work was first class.
The evidence of the prosecution as to Natividad was that he had gambled nearly every night for a
considerable time prior to his arrest on the charge of vagrancy, in the saloon of one Raymundo, as
well as in Hart's saloon; that Natividad sometimes acted as banker; and that he had pleaded guilty to
a charge of gambling and had been sentenced to pay a fine therefor about two weeks before his
arrest on the vagrancy charge. The defense showed that Natividad was a tailor, married, and had a
house of his own; that he made good clothes, and earned from P80 to P100 per month, which was
sufficient to support his family.
From this evidence it will be noted that each of the defendants was earning a living at a lawful trade
or business, quite sufficient to support himself in comfort, and that the evidence which the
prosecution must rely upon for a conviction consists of their having spent their evenings in regularly
licensed saloons, participating in gambling games which are expressly made unlawful by the
Gambling Act, No. 1757, and that Miller frequented a dance hall and houses of prostitution.
Section 1 of Act No. 519 is divided into seven clauses, separated by semicolons. Each clause
enumerates a certain class of persons who, within the meaning of this statute, are to be considered
as vagrants. For the purposes of this discussion, we quote this section below, and number each of
these seven clauses.
(1) Every person having no apparent means of subsistence, who has the physical ability to
work, and who neglects to apply himself or herself to some lawful calling; (2) every person
found loitering about saloons or dram shops or gambling houses, or tramping or straying
through the country without visible means of support; (3) every person known to be a
pickpocket, thief, burglar, ladrone, either by his own confession or by his having been
convicted of either of said offenses, and having no visible or lawful means of support when
found loitering about any gambling house, cockpit, or in any outlying barrio of a pueblo; (4)
every idle or dissolute person or associate of known thieves or ladrones who wanders about
the country at unusual hours of the night; (5) every idle peron who lodges in any barn, shed,
outhouse, vessel, or place other than such as is kept for lodging purposes, without the
permission of the owner or person entitled to the possession thereof; (6) every lewd or
dissolute person who lives in and about houses of ill fame; (7) every common prostitute and
common drunkard, is a vagrant.
It is insisted by the Attorney-General that as visible means of support would not be a bar to a
conviction under any one of the last four clauses of this act, it was not the intention of the Legislature
to limit the crime of vagrancy to those having no visible means of support. Relying upon the second
clause to sustain the guilt of the defendants, the Attorney-General then proceeds to argue that
"visible means of support" as used in that clause does not apply to "every person found loitering
about saloons or dram shops or gambling houses," but is confined entirely to "or tramping or straying
through the country." It is insisted that had it been intended for "without visible means of support" to
qualify the first part of the clause, either the comma after gambling houses would have been
ommitted, or else a comma after country would have been inserted.
When the meaning of a legislative enactment is in question, it is the duty of the courts to ascertain, if
possible, the true legislative intention, and adopt that construction of the statute which will give it
effect. The construction finally adopted should be based upon something more substantial than the
mere punctuation found in the printed Act. If the punctuation of the statute gives it a meaning which
is reasonable and in apparent accord with the legislative will, it may be used as an additional
argument for adopting the literal meaning of the words of the statute as thus punctuated. But an
argument based upon punctuation alone is not conclusive, and the courts will not hesitate to change
the punctuation when necessary, to give to the Act the effect intended by the Legislature,
disregarding superfluous or incorrect punctuation marks, and inserting others where necessary.
The Attorney-General has based his argument upon the proposition that neither visible means of
support nor a lawful calling is a sufficient defense under the last four paragraphs of the section;
hence, not being universally a defense to a charge of vagrancy, they should not be allowed except
where the Legislature has so provided. He then proceeds to show, by a "mere grammatical criticism"
of the second paragraph, that the Legislature did not intend to allow visible means of support or a
lawful calling to block a prosecution for vagrancy founded on the charge that the defendant was
found loitering around saloons, dram shops, and gambling houses.
A most important step in reasoning, necessary to make it sound, is to ascertain the consequences
flowing from such a construction of the law. What is loitering? The dictionaries say it is idling or
wasting one's time. The time spent in saloons, dram shops, and gambling houses is seldom anything
but that. So that under the proposed construction, practically all who frequent such places commit a
crime in so doing, for which they are liable to punishment under the Vagrancy Law. We cannot
believe that it was the intention of the Legislature to penalize what, in the case of saloons and dram
shops, is under the law's protection. If it be urged that what is true of saloons and dram shops is not
true of gambling houses in this respect, we encounter the wording of the law, which makes no
distinction whatever between loitering around saloons and dram shops, and loitering around
gambling houses.
The offense of vagrancy as defined in Act No. 519 is the Anglo-Saxon method of dealing with the
habitually idle and harmful parasites of society. While the statutes of the various States of the
American Union differ greatly as to the classification of such persons, their scope is substantially the
same. Of those statutes we have had an opportunity to examine, but two or three contain a provision
similar to the second paragraph of Act No. 519. (Mo. Ann. Stat., sec. 2228; N. D. Rev. Codes, sec.
8952; N. M. Comp. Laws 1897, sec. 1314.) That the absence of visible means of support or a lawful
calling is necessary under these statutes to a conviction for loitering around saloons, dram shops,
and gambling houses is not even negatived by the punctuation employed. In the State of
Tennessee, however, we find an exact counterpart for paragraph 2 of section 1 of our own Act
(Code of Tenn., sec. 3023), with the same punctuation: lawph!1.net
. . . or of any person to be found loitering about saloons or dram shops, gambling houses, or
houses of ill fame, or tramping or strolling through the country without any visible means of
support.
A further thought suggest itself in connection with the punctuation of the paragraph in question. The
section, as stated above, is divided into seven clauses, separated by semicolons. To say that two
classes of vagrants are defined in paragraph 2, as to one of which visible means of support or a
lawful calling is not a good defense, and as to the other of which such a defense is sufficient, would
imply a lack of logical classification on the part of the legislature of the various classes of vagrants.
This we are not inclined to do.
In the case at bar, all three of the defendants were earning a living by legitimate methods in a
degree of comfort higher that the average. Their sole offense was gambling, which the legislature
deemed advisable to make the subject of a penal law. The games in which they participated were
apparently played openly, in a licensed public saloon, where the officers of the law could have
entered as easily as did the patrons. It is believed that Act No. 1775 is adequate, if enforced, to
supress the gambling proclivities of any person making a good living at a lawful trade or business.
For these reasons, the defendants are acquitted, with the costs de oficio.
SUPREME COURT
Manila
EN BANC
G.R. No. L-7747 November 29, 1955
NIEVES TINIO, ET AL., plaintiffs-appellants,

vs.
GREGORIO FRANCES, ET AL., defendants and appellees.
Pedro D. Maldia for appellants.

Godofredo V. Salamanca for appellees.
LABRADOR, J.:
This action was brought by the heirs of the deceased Sergio Nicolas to annul the sale of a
homestead which had been inherited by them from said decedent. Sergio Nicolas applied for a
parcel of land containing an area of 10.0709 hectares, more or less, in San Fabian, Santo Domingo,
Nueva Ecija in the year 1917. His application was approved on June 22, 1917. He filed the
corresponding final proof papers in relation to the homestead and on June 15, 1943 the said final
proof was approved by the Director of Lands, who thereupon ordered the issuance of a patent in his
favor. (Exhibit A.) At the time of the issuance of the above order, Sergio Nicolas had already died, so
the order directs the issuance of the patent to his heirs, represented by his widow. In or about the
year 1947 the heirs transferred their rights to the homestead to the defendants. The above transfers
were approved by the Secretary of Agriculture and Commerce on March 9, 1948 and thereafter the
defendants secured the issuance of a homestead patent in their favor. Original Certificate of Title
No. P-558 has been issued also in their favor, covering the said parcel of land.
The present action was commenced on April 27, 1953 to annul the conveyances executed by
plaintiffs to defendants and to recover the land, together with the fruits of the land received by the
defendants, as damages. The defendants alleged the execution of the sales in their favor. After the
issues had been joined the parties presented an agreed statement of facts, the most pertinent parts
of which have already been set forth above. The trial court held that the transfer or conveyance of
the homestead made by the heirs of the original homesteader was a mere transfer of the rights of
the original homesteader to the land authorized under the provisions of Section 20 of the Public
Land Act (A. A. 141); therefore, as it was approved by the Secretary of Agriculture and Commerce,
the conveyance was valid. It held that section 118 of the Public Land Act is not applicable; that both
Section 20 and Section 118 being apparently conflicting, they should be reconciled subh that the
prohibition contained in section 118 should be made to apply only if the patent had already been
issued, otherwise section 20 would be absolutely useless. Against this judgment the appeal was
prosecuted in this Court.The provisions which affect the conveyance sought to be annulled are as
follows:
SEC. 20. If at any time after the approval of the application and before patent is issued the
applicant shall prove to the satisfaction of the Director of Lands that he has complied with all
the requirements of the law, but cannot continue with his homestead, through no fault of his
own, and there is a bona fide purchaser for the rights and improvements of the applicant on
the land, and that the conveyance is not made for purposes of speculation, then the
applicant, with the previous approval of the Secretary of Agriculture and Commerce, may
transfer his rights to the land and improvements to any person legally qualified to apply for a
homestead, and immediately after such transfer, the purchaser shall file a homestead
application to the land so acquired and shall succeed the original homesteader in his rights
and obligations beginning with the date of the approval of said application of the purchaser.
Any person who has so transferred his rights may not agan apply for a new homestead.
Every transfer made without the previous approval of the Secretary of Agriculture and
Commerce shall be null and void and shall result in the cancellation of the entry and the
refusal of the patent. (C. A. 141).
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions,
lands acquired under free patentor homestead provisions shall not be subject to
encumbrance or alienation from the date of the approval of the application and for a term of
five years from and after the date of the issuance of the patent or grant, nor shall they
become liable to the satisfaction of any debt contracted prior to the expiration of said period,
but the improvements or crop on the land may be mortgaged or pledged to qualified persons,
associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-
five years after issuance of title shall be valid without the approval of the Secretary of
Agriculture and Commerce, which approval shall not be denied except on constitutional and
legal grounds. (Id.).
The legislative policy or intent is to conserve the land which a homesteader has acquired under the
Public Land Law, as above stated, for him and his heirs. The legislative policy is so strone and
consistent that the original period of five years from the issuance of the patent, within which period
conveyance or sale thereof by the homesteader or his heirs was prohibited (section 116 of Act No.
2874) is now extended to 25 years if no approval of the Secretary of Agriculture and Commerce is
secured. (Sec. 118, par. 2, C. a. No. 141, as amended by C. A. No. 456.) Provision has also been
inserted authorizing the repurchase of the homestead when properly sold by the homesteader within
five years from the date of the sale. (Sec. 119, C. A. No. 141.) This legislative intent and policy is
also sought to be carried out in Section 20, as may be seen from the fact that transfer of homestead
rights from a homesteader can only be justified upon proof satisfactory to the Director of Lands that
the homesteader cannot continue with his homestead through no fault of his own. This is not the
only requirement; a previous permission of the Secretary of Agriculture and Commerce should first
be obtained, as it is also expressly provided that any transfer made without such previous
approval is null and void and shall result in the cancellation of the entry and the refusal of the
patent." (C. A. 141). As the conveyances now in question are claimed to have been and were
evidently made under the provisions of section 20 of the Public Land Act, the important question to
be determined is whether said conveyances satisfy requirements of said section 20 of the Act.
The stipulation of facts on this point is as follows:
That the heirs of Sergio Nicolas executed in or about 1947 a transfer of homestead rights
over the land in question in favor of the defendants, which transfer was approved by the
Secretary of Agriculture and Commerce on March 9, 1948; that with the approval of said
transger of homestead rights, the defendants caused the issuance of a homestead patent in
their favor, the title being evidenced by Original Certificate of Title No. P-558 of the land
records of Nueva Ecija.
The above stipulation does not state expressly that the Director of Lands had, after investigation,
been satisfied that the applicant or homesteader "has complied with all the requirements of the law,
but cannot continue with the homestead through no fault of his own." Furthermore, according to the
stipulation, the transfer was made in 1947 and approved by the Secretary of Agriculture in 1948 so
that the conveyances were not made with with previous approval of the Secretary of Agriculture and
Commerce. So neither of the requirements of section 20 has been complied with.
But it is suggested that in accordance with the presumption of regularity of official acts the Director of
Lands must have recommended the approval of the transfer. Admitting arguendo that such is the
case, the conveyances still suffer from at least one fatal defect in that it does not appear that they
had to be made because the homesteader could not continue with his homestead through no fault of
his own. We may not and cannot indulge in presumptions on this necessary requirements, because
the order for the issuance of the patent states just the opposite. The order for the issuance of the
patent states expressly that the homesteader had already complied with all the requirements of the
law with respect to cultivation, possession and otherwise, thus:
(5) That an investigation for the purpose of verifying the statements contained in the final
proof papers was conducted by a representative of the Bureau of Lands, who found that the
applicant has fully complied with the residence and cultivation requirements of the law; and
xxx xxx xxx
. . ., the undersigned is of the opinion that the applicant has complied with the requirements
of law preliminary to the issuance of patent to the land applied for and already surveyed."
(Exhibit A.).
The order for the issuance of a patent as well as the statements of fact therein contained, as above-
quoted, conclusively disprove the existence of the requirement that the homesteader could not
continue with the homestead through no fault of his own.
In a legal sense, furthermore, when the Director of Lands issues the order for the issuance of a
patent, after the approval of the final proof, the right of the homesteader to the patent becomes
absolute and then it becomes the ministerial duty of the corresponding officials of the Government to
issue said patent. To all intents and purposes the order for the issuance of a patent is the same in
effect as the issuance of a patent itself (Balboa vs. Farrales, 51 Phil., 499). And if the law (section
118, C. A. No. 114) prohibits the sale or conveyance of a homestead after the issuance of a patent,
the prohibition should be extended, in view of the apparent policy of the law, to the date on which the
order for the issuance of the patent is issued, which in this case is June 13, 1943.
Resuming what we have stated above, we find that the conveyances made by the heirs of the
homesteader to the defendants heren in the year 1947 do not comply with the first requirements of
section 20 of the Public Land Act that the Director of Lands is satisfied from proofs submitted by the
homesteader that he (homesteader) could not continue with his homestead through no fault of his
own, and with the second that a conveyance must be made with the prior or previous approval of the
Secretary of Agriculture and Commerce; that from the date of an order for the issuance of a patent
for a homestead the homesteader to all intents and purposes is considered as having the patent
actually issued to himself, in so far as the prohibition contained in section 118 of the Public Land Act,
otherwise the intent and policy of the law may be avoided by the homesteader by postponing the
getting of his patent.
In accordance herewith the conveyances executed by the plaintiffs to the defendants are hereby
declared null and void, the transfer certificate of title issued in the name of the defendants (P-558 of
the Office of the Register of Deeds of Nueva Ecija) ordered cancelled, and the possession of the
land returned to the plaintiffs upon return to the defendants of the amounts received as price for the
sale. No damages or costs. So ordered.
EN BANC
[G.R. No. L-8759. May 25, 1956.]
SEVERINO UNABIA, Petitioner-Appellee, vs. THE HONORABLE CITY MAYOR, CITY TREASURER, CITY
AUDITOR and the CITY ENGINEER, Respondents-Appellants.
DECISION
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of Cebu ordering Respondents to
reinstate Petitioner as foreman (capataz), Garbage Disposal, Office of the City Engineer, Cebu City, at
P3.90 per day from the date of his removal.
The case was submitted to the court for decision on a stipulation of facts the most pertinent of which
are as follows: Petitioner was a foreman, Group Disposal, Office of the City Health Officer, Cebu City,
chanroblesvirtuallawlibrary
at P3.90 per day. On June 16, 1953, the City Mayor removed him from the service and his place was
taken by Perfecto Abellana, and latter by Pedro E. Gonzales. Before June 16, 1953, the Group Disposal
Division, including personnel, was transferred from the City Health Department to the Office of the City
Engineer. In April, 1954, Petitioner sought to be reinstated but his petition was not headed by
the Respondents.
On the basis of the above facts, the Court of First Instance of Cebu held that Petitioner is a person in the
Philippine Civil Service, pertaining to the unclassified service (section 670, Revised Administrative Code
as amended), and his removal from his position is a violation of section 694 of the Revised
Administrative Code and section 4 of Art XII of the Constitution. The court further held that the notation
at the bottom of Petitioners appointment to the effect that his appointment is temporary pending
report from the Government Service Insurance System as to the appointees physical and medical
examination did not make his appointment merely temporary.
First error assigned on this appeal is the failure to include in the complaint, the names of the persons
holding the Offices of City Mayor, City Treasurer, City Auditor and City Engineer, all of Cebu City, they
being designated only by their official positions. This is no reason for a reversal of the proceedings and
of the judgment. As said persons were sued in their official capacity, it is sufficient that they be
designated by their official positions.
It is also contended that the use of capitals in the words Civil Service in section 1 and 4 of Article XII of
the Constitution and the use of small letters for the same words, civil service, in section 670, Revised
Administrative Code, indicates that only those pertaining to the classified service are protected in the
above-mentioned sections of the Constitution. We see no validity in this argument. Capital C and S
in the words Civil Service were used in the Constitution to indicate the group. No capitals are used in
the similar provisions of the Code to indicate the system. We see no difference between the use of
capitals in the former and of small letters in the latter. There is no reason for excluding persons in the
unclassified service from the benefits extended to those belonging to the classified service. Both are
expressly declared to belong to the Civil Service; hence, the same rights and privileges should be
chan roblesvirtualawlibrary
accorded to both. Persons in the unclassified service are so designated because the nature of their work
and qualifications are not subject to classification, which is not true of those appointed to the classified
service. This cannot be a valid reason for denying privileges to the former that are granted the latter.
As the removal of Petitioner was made without investigation and without cause, said removal is null and
void and Petitioner is entitled to be reinstated to the position from which he was removed. (Lacson vs.
Romero, 84 Phil., 740, 47 Off. Gaz. [4], 1778).
There is, however, an additional objection to the reinstatement raised in the memorandum submitted
by the attorneys for the Respondents in lieu of oral argument. This is the fact that as Petitioner was
removed on June 16, 1953 and only filed his petition on July 1, 1954, or after a delay of one year and 15
days, Petitioner should no longer be allowed to claim the remedy, he being considered as having
abandoned his office.
We cannot or should not overlook this objection. If an employee is illegally dismissed, he may conform
to such illegal dismissal or acquiesce therein, or by his inaction and by sleeping on his rights he may in
law be considered as having abandoned the office to which he is entitled to be reinstated. These
defenses are valid defenses to an action for reinstatement. To that effect is our decision in the case of
Mesias vs. Jover, et al., 97 Phil., 899, decided November 22, 1955. In that case we cited with approval
Nicolas vs. United States, 66 L. Ed. 133, and the following ruling therein contained: chanroblesvirtuallawlibrary
A person illegally dismissed from office is not thereby exonerated from the obligation to take steps for
his own protection, and may not for an unreasonable length of time, acquiesce to the order of
removal and then sue to recover the salary attached to the position. In case of unreasonable delay he
cralaw
may be held to have abandoned title to the office and any right to recover its emoluments. (Mesias vs.
Jover, supra.)
Difficulty in applying the principle lies in the fact that the law has not fixed any period which may be
deemed to be considered as an abandonment of office. In the abovecited case decided by the Federal
Supreme Court of the United States, 11 months was considered an unreasonable delay amounting to
abandonment of office and of the right to recover its emoluments. However, we note that in actions of
quo warranto involving right to an office, the action must be instituted within the period of one year.
This has been the law in the island since 1901, the period having been originally fixed in section 216 of
the Code of Civil Procedure (Act No. 190). We find this provision to be an expression of policy on the
part of the State that persons claiming a right to an office of which they are illegally dispossessed should
immediately take steps to recover said office and that if they do not do so within a period of one year,
they shall be considered as having lost their right thereto by abandonment. There are weighty reasons
of public policy and convenience that demand the adoption of a similar period for persons claiming
rights to positions in the civil service. There must be stability in the service so that public business may
be unduly retarded; chandelays in the statement of the right to positions in the service must be
roblesvirtualawlibrary
discouraged. The following considerations as to public officers, by Mr. Justice Bengzon, may well be
applicable to employees in the civil service: chanroblesvirtuallawlibrary
Furthermore, constitutional rights may certainly be waived, and the inaction of the officer for one year
could be validly considered as waiver, i.e., a renunciation which no principle of justice may prevent, he
being at liberty to resign his position anytime he pleases.
And there is good justification for the limitation period; it is not proper that the title to public office
chan roblesvirtualawlibrary
should be subjected to continued uncertainly, and the peoples interest requires that such right should
be determined as speedily as practicable. (Tumulak vs. Egay, 46 Off. Gaz., [8], 3693, 3695.)
Further, the Government must be immediately informed or advised if any person claims to be entitled
to an office or a position in the civil service as against another actually holding it, so that the
Government may not be faced with the predicament of having to pay two salaries, one, for the person
actually holding the office, although illegally, and another, for one not actually rendering service
although entitled to do so. We hold that in view of the policy of the State contained in the law fixing the
period of one year within which actions for quo warranto may be instituted, any person claiming right to
a position in the civil service should also be required to file his petition for reinstatement within the
period of one year, otherwise he is thereby considered as having abandoned his office.
One other point, merely procedural, needs to be considered. This is the fact that the objection as to the
delay in filing the action is raised for the first time in this Court, not having been raised in the court
below. The above circumstance (belated objection) would bar the consideration if it were a defense
merely. However, we consider it to be essential to the Petitioners right of action that the same is filed
within a year from the illegal removal. The delay is not merely a defense which may be interposed
against it subject to waiver. It is essential to Petitioners cause of action and may be considered even at
this stage of the action.
We would go farther by holding that the period fixed in the rule is a condition precedent to the
existence of the cause of action, with the result that, if a complaint is not filed within one year, it cannot
prosper although the matter is not set up in the answer or motion to dismiss. (Abeto vs. Rodas, 46 Off.
Gaz., [3], 930, 932.)
A defense of failure to state a causes of action is not waived by failure to raise same as a defense
(section 10, Rule 9).
For all the foregoing considerations, we hold that as Petitioner was dismissed on June 16, 1953 and did
not file his petition for mandamus for his reinstatement until July 1, 1956, or after a period of one year,
he is deemed to have abandoned his right to his former position and is not entitled to reinstatement
therein by mandamus. Without costs. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Reyes, J.B.L., and
Endencia, JJ., concur.
Separate Opinions
CONCEPCION, J., dissenting: chanr oblesvirt uall awlibr ary
I dissent. Delay in bringing an action can have no more effect than that of prescription of action or
laches. It affects merely the enforcement of a right of action, not the existence thereof. The period of
one year for the commencement of the action in quo warranto proceedings is prescribed in the Rules of
Court, which would be unconstitutional if the same should seek to affect the cause of action, for then
they would impair substantive rights.

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Republic of the Philippines

G.R. No. L-31057 May 29, 1981

INSULAR LUMBER COMPANY, petitioner,

G.R. No. L-31137 May 29, 1981

COMMISSIONER OF INTERNAL REVENUE, petitioner,

DE CASTRO, J.: 1wph1. t

The undesputed fats of these cases are as follows:

In his appeal, the Commissioner assigns the following errors: 1w ph1.t

THE COURT OF TAX APPEALS ERRED IN HOLDING THAT INSULAR LUMBER

THE RESPONDENT COURT ERRED IN RULING THAT THE PETITIONER IS NOT

THE RESPONDENT COURT ERRED IN HOLDING THAT PETITIONER'S CLAIM

THE RESPONDENT COURT ERRED IN ORDERING THE RESPONDENT

Appeal by the Commissioner

2. Should the producers belong to any producers' association or federation, duly

Section 5 on the other hand provides: 1w ph1.t

Appeal by the Company

[G.R. No. 128448. February 1, 2001]

SPOUSES ALEJANDRO MIRASOL and LILIA E. MIRASOL, petitioners,

1. The constitutionality and/or legality of Presidential Decrees numbered 338, 579,

After trial on the merits, the trial court decided as follows:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered in

This decision should however, be interpreted without prejudice to whatever benefits

3. Ordering the PNB to recompute in accordance with RA 7202 Mirasols indebtedness

4. Whatever the result of the recomputation of Mirasols account, the outstanding

1. Whether the Trial Court has jurisdiction to declare a statute unconstitutional

2. Whether PD 579 and subsequent issuances[7] thereof are unconstitutional.

4. Whether the Honorable Court of Appeals committed manifest error in upholding

Art. 1279. In order that compensation may be proper, it is necessary:

(3) That the two debts are due;

(4) That they be liquidated and demandable;

SECTION 7. x x x After deducting its commission of two and one-half (2-1/2%)

[G.R. No. 147387. December 10, 2003]

RODOLFO C. FARIAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO,

[G.R. No. 152161. December 10, 2003]

CONG. GERRY A. SALAPUDDIN, petitioner, vs. COMMISSION ON

Legislative History of Republic Act No. 9006

A Bicameral Conference Committee, composed of eight members of the

formed to reconcile the conflicting provisions of the House and Senate

reconciled and approved by the conferees.

In view of the proposed amendment, the House of Representatives

On February 7, 2001, during the plenary session of the House of

On the same day, the Senate likewise approved the Bicameral

The Petitioners Case

Omnibus Election Code is based on the constitutional mandate on the

Consequently, the respondents Speaker and Secretary General of the

The Respondents Arguments

The Courts Ruling

requiring a party who challenges the constitutionality of a statute to allege

However, being merely a matter of procedure, this Court, in several cases

liberal stance on standing. Thus, in Tatad v. Secretary of the Department of

Members of Congress, such as the petitioners, were likewise allowed by

Reyes, and Bagatsing v. Committee on Privatization.

accountability of public officers, has been validly repealed by Section 14 of

Every statute is presumed valid. The presumption is that the legislature

Section 14 of Rep. Act

The repealed provision, Section 67 of the Omnibus Election Code, quoted

Section 26(1), Article VI of the Constitution provides:

The purported dissimilarity of Section 67 of the Omnibus Election Code,

The deliberations of the Bicameral Conference Committee on the

The legislators considered Section 67 of the Omnibus Election Code as a

this Court to look into the wisdom or propriety of legislative

precluded from repealing Section 67 by the ruling of the Court in Dimaporo

Section 14 of Rep. Act No. 9006