ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
1.) Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 74457 March 20, 1987
RESTITUTO YNOT, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER,
INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE
REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO
CITY, respondents.
Ramon A. Gonzales for petitioner.
CRUZ, J.:
The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades
"Strike — but hear me first!" It is this cry that the petitioner in effect repeats here as he
challenges the constitutionality of Executive Order No. 626-A.
The said executive order reads in full as follows:
WHEREAS, the President has given orders prohibiting the interprovincial movement of
carabaos and the slaughtering of carabaos not complying with the requirements of Executive
Order No. 626 particularly with respect to age;
WHEREAS, it has been observed that despite such orders the violators still manage to
circumvent the prohibition against inter-provincial movement of carabaos by transporting
carabeef instead; and
WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and
the prohibition against interprovincial movement of carabaos, it is necessary to strengthen the
said Executive Order and provide for the disposition of the carabaos and carabeef subject of
the violation;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue
of the powers vested in me by the Constitution, do hereby promulgate the following:
SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao
regardless of age, sex, physical condition or purpose and no carabeef shall be transported
from one province to another. The carabao or carabeef transported in violation of this
Executive Order as amended shall be subject to confiscation and forfeiture by the
government, to be distributed to charitable institutions and other similar institutions as the
Chairman of the National Meat Inspection Commission may ay see fit, in the case of
carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may
see fit, in the case of carabaos.
SECTION 2. This Executive Order shall take effect immediately.
Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen
hundred and eighty.
(SGD.) FERDINAND E. MARCOS
President
Republic of the Philippines
The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January
13, 1984, when they were confiscated by the police station commander of Barotac Nuevo,
Iloilo, for violation of the above measure. 1 The petitioner sued for recovery, and the
Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of
a supersedeas bond of P12,000.00. After considering the merits of the case, the court
sustained the confiscation of the carabaos and, since they could no longer be produced,
ordered the confiscation of the bond. The court also declined to rule on the constitutionality
of the executive order, as raise by the petitioner, for lack of authority and also for its
presumed validity. 2
The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which upheld the
trial court, ** and he has now come before us in this petition for review on certiorari.
The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes
outright confiscation of the carabao or carabeef being transported across provincial
boundaries. His claim is that the penalty is invalid because it is imposed without according
the owner a right to be heard before a competent and impartial court as guaranteed by due
process. He complains that the measure should not have been presumed, and so sustained, as
constitutional. There is also a challenge to the improper exercise of the legislative power by
the former President under Amendment No. 6 of the 1973 Constitution. 4
While also involving the same executive order, the case of Pesigan v. Angeles 5 is not
applicable here. The question raised there was the necessity of the previous publication of the
measure in the Official Gazette before it could be considered enforceable. We imposed the
requirement then on the basis of due process of law. In doing so, however, this Court did not,
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A. Quasi- Legislative Powers (Sufficient standard test)
as contended by the Solicitor General, impliedly affirm the constitutionality of Executive
Order No. 626-A. That is an entirely different matter.
This Court has declared that while lower courts should observe a becoming modesty in
examining constitutional questions, they are nonetheless not prevented from resolving the
same whenever warranted, subject only to review by the highest tribunal. 6 We have
jurisdiction under the Constitution to "review, revise, reverse, modify or affirm on appeal
or certiorari, as the law or rules of court may provide," final judgments and orders of lower
courts in, among others, all cases involving the constitutionality of certain measures. 7 This
simply means that the resolution of such cases may be made in the first instance by these
lower courts.
And while it is true that laws are presumed to be constitutional, that presumption is not by
any means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their
invalidity, and of the need to declare them so, then "will be the time to make the hammer fall,
and heavily," 8 to recall Justice Laurel's trenchant warning. Stated otherwise, courts should
not follow the path of least resistance by simply presuming the constitutionality of a law
when it is questioned. On the contrary, they should probe the issue more deeply, to relieve the
abscess, paraphrasing another distinguished jurist, 9 and so heal the wound or excise the
affliction.
Judicial power authorizes this; and when the exercise is demanded, there should be no
shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other
similar inhibition unworthy of the bench, especially this Court.
The challenged measure is denominated an executive order but it is really presidential decree,
promulgating a new rule instead of merely implementing an existing law. It was issued by
President Marcos not for the purpose of taking care that the laws were faithfully executed but
in the exercise of his legislative authority under Amendment No. 6. It was provided
thereunder that whenever in his judgment there existed a grave emergency or a threat or
imminence thereof or whenever the legislature failed or was unable to act adequately on any
matter that in his judgment required immediate action, he could, in order to meet the
exigency, issue decrees, orders or letters of instruction that were to have the force and effect
of law. As there is no showing of any exigency to justify the exercise of that extraordinary
power then, the petitioner has reason, indeed, to question the validity of the executive order.
Nevertheless, since the determination of the grounds was supposed to have been made by the
President "in his judgment, " a phrase that will lead to protracted discussion not really
necessary at this time, we reserve resolution of this matter until a more appropriate occasion.
For the nonce, we confine ourselves to the more fundamental question of due process.
It is part of the art of constitution-making that the provisions of the charter be cast in precise
and unmistakable language to avoid controversies that might arise on their correct
interpretation. That is the Ideal. In the case of the due process clause, however, this rule was
deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal
to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it
was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights,
who forcefully argued against it. He was sustained by the body. 10
The due process clause was kept intentionally vague so it would remain also conveniently
resilient. This was felt necessary because due process is not, like some provisions of the
fundamental law, an "iron rule" laying down an implacable and immutable command for all
seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity
of the due process clause was meant to make it adapt easily to every situation, enlarging or
constricting its protection as the changing times and circumstances may require.
Aware of this, the courts have also hesitated to adopt their own specific description of due
process lest they confine themselves in a legal straitjacket that will deprive them of the elbow
room they may need to vary the meaning of the clause whenever indicated. Instead, they have
preferred to leave the import of the protection open-ended, as it were, to be "gradually
ascertained by the process of inclusion and exclusion in the course of the decision of cases as
they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would
go no farther than to define due process — and in so doing sums it all up — as nothing more
and nothing less than "the embodiment of the sporting Idea of fair play." 12
When the barons of England extracted from their sovereign liege the reluctant promise that
that Crown would thenceforth not proceed against the life liberty or property of any of its
subjects except by the lawful judgment of his peers or the law of the land, they thereby won
for themselves and their progeny that splendid guaranty of fairness that is now the hallmark
of the free society. The solemn vow that King John made at Runnymede in 1215 has since
then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that
every person, when confronted by the stern visage of the law, is entitled to have his say in a
fair and open hearing of his cause.
The closed mind has no place in the open society. It is part of the sporting Idea of fair play to
hear "the other side" before an opinion is formed or a decision is made by those who sit in
judgment. Obviously, one side is only one-half of the question; the other half must also be
considered if an impartial verdict is to be reached based on an informed appreciation of the
issues in contention. It is indispensable that the two sides complement each other, as unto the
bow the arrow, in leading to the correct ruling after examination of the problem not from one
or the other perspective only but in its totality. A judgment based on less that this full
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appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of
bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power.
The minimum requirements of due process are notice and hearing 13 which, generally
speaking, may not be dispensed with because they are intended as a safeguard against official
arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of
this country is rich with applications of this guaranty as proof of our fealty to the rule of law
and the ancient rudiments of fair play. We have consistently declared that every person, faced
by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster
described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the
law which hears before it condemns, which proceeds upon inquiry and renders judgment only
after trial." It has to be so if the rights of every person are to be secured beyond the reach of
officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause
into a worn and empty catchword.
This is not to say that notice and hearing are imperative in every case for, to be sure, there are
a number of admitted exceptions. The conclusive presumption, for example, bars the
admission of contrary evidence as long as such presumption is based on human experience or
there is a rational connection between the fact proved and the fact ultimately presumed
therefrom. 15 There are instances when the need for expeditions action will justify omission
of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the
loose, which may be killed on sight because of the immediate danger it poses to the safety
and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are
inherently pernicious and may be summarily destroyed. The passport of a person sought for a
criminal offense may be cancelled without hearing, to compel his return to the country he has
fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health
and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing
may be omitted without violation of due process in view of the nature of the property
involved or the urgency of the need to protect the general welfare from a clear and present
danger.
The protection of the general welfare is the particular function of the police power which both
restraints and is restrained by due process. The police power is simply defined as the power
inherent in the State to regulate liberty and property for the promotion of the general
welfare. 18 By reason of its function, it extends to all the great public needs and is described
as the most pervasive, the least limitable and the most demanding of the three inherent
powers of the State, far outpacing taxation and eminent domain. The individual, as a member
of society, is hemmed in by the police power, which affects him even before he is born and
follows him still after he is dead — from the womb to beyond the tomb — in practically
everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often
unwelcome intrusion. Even so, as long as the activity or the property has some relevance to
the public welfare, its regulation under the police power is not only proper but necessary. And
the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic
utere tuo ut alienum non laedas, which call for the subordination of individual interests to the
benefit of the greater number.
It is this power that is now invoked by the government to justify Executive Order No. 626-A,
amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos
except under certain conditions. The original measure was issued for the reason, as expressed
in one of its Whereases, that "present conditions demand that the carabaos and the buffaloes
be conserved for the benefit of the small farmers who rely on them for energy needs." We
affirm at the outset the need for such a measure. In the face of the worsening energy crisis
and the increased dependence of our farms on these traditional beasts of burden, the
government would have been remiss, indeed, if it had not taken steps to protect and preserve
them.
A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating
the registration, branding and slaughter of large cattle was claimed to be a deprivation of
property without due process of law. The defendant had been convicted thereunder for having
slaughtered his own carabao without the required permit, and he appealed to the Supreme
Court. The conviction was affirmed. The law was sustained as a valid police measure to
prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An
epidemic had stricken many of these animals and the reduction of their number had resulted
in an acute decline in agricultural output, which in turn had caused an incipient famine.
Furthermore, because of the scarcity of the animals and the consequent increase in their price,
cattle-rustling had spread alarmingly, necessitating more effective measures for the
registration and branding of these animals. The Court held that the questioned statute was a
valid exercise of the police power and declared in part as follows:
To justify the State in thus interposing its authority in behalf of the public, it must appear,
first, that the interests of the public generally, as distinguished from those of a particular
class, require such interference; and second, that the means are reasonably necessary for the
accomplishment of the purpose, and not unduly oppressive upon individuals. ...
From what has been said, we think it is clear that the enactment of the provisions of the
statute under consideration was required by "the interests of the public generally, as
distinguished from those of a particular class" and that the prohibition of the slaughter of
carabaos for human consumption, so long as these animals are fit for agricultural work or
draft purposes was a "reasonably necessary" limitation on private ownership, to protect the
community from the loss of the services of such animals by their slaughter by improvident
owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of
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animal food, even when by so doing the productive power of the community may be
measurably and dangerously affected.
In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as
the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a
lawful subject of Executive Order No. 626. The method chosen in the basic measure is also
reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon
individuals, again following the above-cited doctrine. There is no doubt that by banning the
slaughter of these animals except where they are at least seven years old if male and eleven
years old if female upon issuance of the necessary permit, the executive order will be
conserving those still fit for farm work or breeding and preventing their improvident
depletion.
But while conceding that the amendatory measure has the same lawful subject as the original
executive order, we cannot say with equal certainty that it complies with the second
requirement, viz., that there be a lawful method. We note that to strengthen the original
measure, Executive Order No. 626-A imposes an absolute ban not on the slaughter of the
carabaos but on their movement, providing that "no carabao regardless of age, sex, physical
condition or purpose (sic) and no carabeef shall be transported from one province to another."
The object of the prohibition escapes us. The reasonable connection between the means
employed and the purpose sought to be achieved by the questioned measure is missing
We do not see how the prohibition of the inter-provincial transport of carabaos can prevent
their indiscriminate slaughter, considering that they can be killed anywhere, with no less
difficulty in one province than in another. Obviously, retaining the carabaos in one province
will not prevent their slaughter there, any more than moving them to another province will
make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as
otherwise, so says executive order, it could be easily circumvented by simply killing the
animal. Perhaps so. However, if the movement of the live animals for the purpose of
preventing their slaughter cannot be prohibited, it should follow that there is no reason either
to prohibit their transfer as, not to be flippant dead meat.
Even if a reasonable relation between the means and the end were to be assumed, we would
still have to reckon with the sanction that the measure applies for violation of the prohibition.
The penalty is outright confiscation of the carabao or carabeef being transported, to be meted
out by the executive authorities, usually the police only. In the Toribio Case, the statute was
sustained because the penalty prescribed was fine and imprisonment, to be imposed by the
court after trial and conviction of the accused. Under the challenged measure, significantly,
no such trial is prescribed, and the property being transported is immediately impounded by
the police and declared, by the measure itself, as forfeited to the government.
In the instant case, the carabaos were arbitrarily confiscated by the police station commander,
were returned to the petitioner only after he had filed a complaint for recovery and given
a supersedeas bond of P12,000.00, which was ordered confiscated upon his failure to produce
the carabaos when ordered by the trial court. The executive order defined the prohibition,
convicted the petitioner and immediately imposed punishment, which was carried out
forthright. The measure struck at once and pounced upon the petitioner without giving him a
chance to be heard, thus denying him the centuries-old guaranty of elementary fair play.
It has already been remarked that there are occasions when notice and hearing may be validly
dispensed with notwithstanding the usual requirement for these minimum guarantees of due
process. It is also conceded that summary action may be validly taken in administrative
proceedings as procedural due process is not necessarily judicial only. 20 In the exceptional
cases accepted, however. there is a justification for the omission of the right to a previous
hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the
need to correct it.
In the case before us, there was no such pressure of time or action calling for the petitioner's
peremptory treatment. The properties involved were not even inimical per se as to require
their instant destruction. There certainly was no reason why the offense prohibited by the
executive order should not have been proved first in a court of justice, with the accused being
accorded all the rights safeguarded to him under the Constitution. Considering that, as we
held in Pesigan v. Angeles, 21 Executive Order No. 626-A is penal in nature, the violation
thereof should have been pronounced not by the police only but by a court of justice, which
alone would have had the authority to impose the prescribed penalty, and only after trial and
conviction of the accused.
We also mark, on top of all this, the questionable manner of the disposition of the confiscated
property as prescribed in the questioned executive order. It is there authorized that the seized
property shall "be distributed to charitable institutions and other similar institutions as the
Chairman of the National Meat Inspection Commission may see fit, in the case of carabeef,
and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in
the case of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous
and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality
and abuse, and even corruption. One searches in vain for the usual standard and the
reasonable guidelines, or better still, the limitations that the said officers must observe when
they make their distribution. There is none. Their options are apparently boundless. Who
shall be the fortunate beneficiaries of their generosity and by what criteria shall they be
chosen? Only the officers named can supply the answer, they and they alone may choose the
grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a
"roving commission," a wide and sweeping authority that is not "canalized within banks that
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keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of SO ORDERED.
legislative powers.

To sum up then, we find that the challenged measure is an invalid exercise of the police
power because the method employed to conserve the carabaos is not reasonably necessary to
the purpose of the law and, worse, is unduly oppressive. Due process is violated because the
owner of the property confiscated is denied the right to be heard in his defense and is
immediately condemned and punished. The conferment on the administrative authorities of
the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial
functions and militates against the doctrine of separation of powers. There is, finally, also an
invalid delegation of legislative powers to the officers mentioned therein who are granted
unlimited discretion in the distribution of the properties arbitrarily taken. For these reasons,
we hereby declare Executive Order No. 626-A unconstitutional.

We agree with the respondent court, however, that the police station commander who
confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order
in accordance with its mandate. The law was at that time presumptively valid, and it was his
obligation, as a member of the police, to enforce it. It would have been impertinent of him,
being a mere subordinate of the President, to declare the executive order unconstitutional and,
on his own responsibility alone, refuse to execute it. Even the trial court, in fact, and the
Court of Appeals itself did not feel they had the competence, for all their superior authority,
to question the order we now annul.

The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw
them, this case would never have reached us and the taking of his property under the
challenged measure would have become a faitaccompli despite its invalidity. We commend
him for his spirit. Without the present challenge, the matter would have ended in that pump
boat in Masbate and another violation of the Constitution, for all its obviousness, would have
been perpetrated, allowed without protest, and soon forgotten in the limbo of relinquished
rights.

The strength of democracy lies not in the rights it guarantees but in the courage of the people
to invoke them whenever they are ignored or violated. Rights are but weapons on the wall if,
like expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a
promise of protection. They become truly meaningful, and fulfill the role assigned to them in
the free society, if they are kept bright and sharp with use by those who are not afraid to
assert them.

WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as

affirmed above, the decision of the Court of Appeals is reversed. The supersedeas bond is
cancelled and the amount thereof is ordered restored to the petitioner. No costs.
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A. Quasi- Legislative Powers (Sufficient standard test)
2.) Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23825 December 24, 1965
EMMANUEL PELAEZ, petitioner,
vs.
THE AUDITOR GENERAL, respondent.
CONCEPCION, J.:
During the period from September 4 to October 29, 1964 the President of the Philippines,
purporting to act pursuant to Section 68 of the Revised Administrative Code, issued
Executive Orders Nos. 93 to 121, 124 and 126 to 129; creating thirty-three (33)
municipalities enumerated in the margin.1 Soon after the date last mentioned, or on
November 10, 1964 petitioner Emmanuel Pelaez, as Vice President of the Philippines and as
taxpayer, instituted the present special civil action, for a writ of prohibition with preliminary
injunction, against the Auditor General, to restrain him, as well as his representatives and
agents, from passing in audit any expenditure of public funds in implementation of said
executive orders and/or any disbursement by said municipalities.
Petitioner alleges that said executive orders are null and void, upon the ground that said
Section 68 has been impliedly repealed by Republic Act No. 2370 and constitutes an undue
delegation of legislative power. Respondent maintains the contrary view and avers that the
present action is premature and that not all proper parties — referring to the officials of the
new political subdivisions in question — have been impleaded. Subsequently, the mayors of
several municipalities adversely affected by the aforementioned executive orders — because
the latter have taken away from the former the barrios composing the new political
subdivisions — intervened in the case. Moreover, Attorneys Enrique M. Fernando and Emma
Quisumbing-Fernando were allowed to and did appear as amici curiae.
The third paragraph of Section 3 of Republic Act No. 2370, reads:
Barrios shall not be created or their boundaries altered nor their names changed except under
the provisions of this Act or by Act of Congress.
Pursuant to the first two (2) paragraphs of the same Section 3:
All barrios existing at the time of the passage of this Act shall come under the provisions
hereof.
Upon petition of a majority of the voters in the areas affected, a new barrio may be created or
the name of an existing one may be changed by the provincial board of the province, upon
recommendation of the council of the municipality or municipalities in which the proposed
barrio is stipulated. The recommendation of the municipal council shall be embodied in a
resolution approved by at least two-thirds of the entire membership of the said council:
Provided, however, That no new barrio may be created if its population is less than five
hundred persons.
Hence, since January 1, 1960, when Republic Act No. 2370 became effective, barrios may
"not be created or their boundaries altered nor their names changed" except by Act of
Congress or of the corresponding provincial board "upon petition of a majority of the voters
in the areas affected" and the "recommendation of the council of the municipality or
municipalities in which the proposed barrio is situated." Petitioner argues, accordingly: "If
the President, under this new law, cannot even create a barrio, can he create a municipality
which is composed of several barrios, since barrios are units of municipalities?"
Respondent answers in the affirmative, upon the theory that a new municipality can be
created without creating new barrios, such as, by placing old barrios under the jurisdiction of
the new municipality. This theory overlooks, however, the main import of the petitioner's
argument, which is that the statutory denial of the presidential authority to create a new barrio
implies a negation of the bigger power to create municipalities, each of which consists of
several barrios. The cogency and force of this argument is too obvious to be denied or even
questioned. Founded upon logic and experience, it cannot be offset except by a clear
manifestation of the intent of Congress to the contrary, and no such manifestation, subsequent
to the passage of Republic Act No. 2379, has been brought to our attention.
Moreover, section 68 of the Revised Administrative Code, upon which the disputed executive
orders are based, provides:
The (Governor-General) President of the Philippines may by executive order define the
boundary, or boundaries, of any province, subprovince, municipality, [township] municipal
district, or other political subdivision, and increase or diminish the territory comprised
therein, may divide any province into one or more subprovinces, separate any political
division other than a province, into such portions as may be required, merge any of such
subdivisions or portions with another, name any new subdivision so created, and may change
the seat of government within any subdivision to such place therein as the public welfare may
require: Provided, That the authorization of the (Philippine Legislature) Congress of the
Philippines shall first be obtained whenever the boundary of any province or subprovince is
to be defined or any province is to be divided into one or more subprovinces. When action by
the (Governor-General) President of the Philippines in accordance herewith makes necessary
a change of the territory under the jurisdiction of any administrative officer or any judicial
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officer, the (Governor-General) President of the Philippines, with the recommendation and
advice of the head of the Department having executive control of such officer, shall redistrict
the territory of the several officers affected and assign such officers to the new districts so
formed.
Upon the changing of the limits of political divisions in pursuance of the foregoing authority,
an equitable distribution of the funds and obligations of the divisions thereby affected shall be
made in such manner as may be recommended by the (Insular Auditor) Auditor General and
approved by the (Governor-General) President of the Philippines.
Respondent alleges that the power of the President to create municipalities under this section
does not amount to an undue delegation of legislative power, relying upon Municipality of
Cardona vs. Municipality of Binañgonan (36 Phil. 547), which, he claims, has settled it. Such
claim is untenable, for said case involved, not the creation of a new municipality, but a
mere transfer of territory — from an already existing municipality (Cardona) to another
municipality (Binañgonan), likewise, existing at the time of and prior to said transfer (See
Gov't of the P.I. ex rel. Municipality of Cardona vs. Municipality, of Binañgonan [34 Phil.
518, 519-5201) — in consequence of the fixing and definition, pursuant to Act No. 1748, of
the common boundaries of two municipalities.
It is obvious, however, that, whereas the power to fix such common boundary, in order to
avoid or settle conflicts of jurisdiction between adjoining municipalities, may partake of
an administrative nature — involving, as it does, the adoption of means and ways to carry
into effect the law creating said municipalities — the authority to create municipal
corporations is essentially legislative in nature. In the language of other courts, it is "strictly a
legislative function" (State ex rel. Higgins vs. Aicklen, 119 S. 425, January 2, 1959) or
"solely and exclusively the exercise of legislative power" (Udall vs. Severn, May 29, 1938, 79
P. 2d 347-349). As the Supreme Court of Washington has put it (Territory ex rel. Kelly vs.
Stewart, February 13, 1890, 23 Pac. 405, 409), "municipal corporations are purely the
creatures of statutes."
Although1a Congress may delegate to another branch of the Government the power to fill in
the details in the execution, enforcement or administration of a law, it is essential, to forestall
a violation of the principle of separation of powers, that said law: (a) be complete in itself —
it must set forth therein the policy to be executed, carried out or implemented by the
delegate2 — and (b) fix a standard — the limits of which are sufficiently determinate or
determinable — to which the delegate must conform in the performance of his
functions.2a Indeed, without a statutory declaration of policy, the delegate would in effect,
make or formulate such policy, which is the essence of every law; and, without the
aforementioned standard, there would be no means to determine, with reasonable certainty,
whether the delegate has acted within or beyond the scope of his authority.2b Hence, he could
thereby arrogate upon himself the power, not only to make the law, but, also — and this is
worse — to unmake it, by adopting measures inconsistent with the end sought to be attained
by the Act of Congress, thus nullifying the principle of separation of powers and the system
of checks and balances, and, consequently, undermining the very foundation of our
Republican system.
Section 68 of the Revised Administrative Code does not meet these well settled requirements
for a valid delegation of the power to fix the details in the enforcement of a law. It does not
enunciate any policy to be carried out or implemented by the President. Neither does it give a
standard sufficiently precise to avoid the evil effects above referred to. In this connection, we
do not overlook the fact that, under the last clause of the first sentence of Section 68, the
President:
... may change the seat of the government within any subdivision to such place therein as the
public welfare may require.
It is apparent, however, from the language of this clause, that the phrase "as the public
welfare may require" qualified, not the clauses preceding the one just quoted,
but only the place to which the seat of the government may be transferred. This fact becomes
more apparent when we consider that said Section 68 was originally Section 1 of Act No.
1748,3 which provided that, "whenever in the judgment of the Governor-General the public
welfare requires, he may, by executive order," effect the changes enumerated therein (as in
said section 68), including the change of the seat of the government "to such place ... as
the public interest requires." The opening statement of said Section 1 of Act No. 1748 —
which was not included in Section 68 of the Revised Administrative Code — governed the
time at which, or the conditions under which, the powers therein conferred could be
exercised; whereas the last part of the first sentence of said section referred exclusively to
the place to which the seat of the government was to be transferred.
At any rate, the conclusion would be the same, insofar as the case at bar is concerned, even if
we assumed that the phrase "as the public welfare may require," in said Section 68, qualifies
all other clauses thereof. It is true that in Calalang vs. Williams (70 Phil. 726) and People vs.
Rosenthal (68 Phil. 328), this Court had upheld "public welfare" and "public interest,"
respectively, as sufficient standards for a valid delegation of the authority to execute the law.
But, the doctrine laid down in these cases — as all judicial pronouncements — must be
construed in relation to the specific facts and issues involved therein, outside of which they
do not constitute precedents and have no binding effect.4 The law construed in the Calalang
case conferred upon the Director of Public Works, with the approval of the Secretary of
Public Works and Communications, the power to issue rules and regulations to promote safe
transit upon national roads and streets. Upon the other hand, the Rosenthal case referred to
the authority of the Insular Treasurer, under Act No. 2581, to issue and cancel certificates or
7
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
permits for the sale of speculative securities. Both cases involved grants
to administrative officers of powers related to the exercise of their administrative functions,
calling for the determination of questions of fact.
Such is not the nature of the powers dealt with in section 68. As above indicated, the creation
of municipalities, is not an administrative function, but one which is essentially and eminently
legislative in character. The question of whether or not "public interest" demands the exercise
of such power is not one of fact. it is "purely a legislative question "(Carolina-Virginia
Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318), or
a political question (Udall vs. Severn, 79 P. 2d. 347-349). As the Supreme Court of
Wisconsin has aptly characterized it, "the question as to whether incorporation is for the best
interest of the community in any case is emphatically a question of public policy and
statecraft" (In re Village of North Milwaukee, 67 N.W. 1033, 1035-1037).
For this reason, courts of justice have annulled, as constituting undue delegation of legislative
powers, state laws granting the judicial department, the power to determine whether certain
territories should be annexed to a particular municipality (Udall vs. Severn, supra, 258-359);
or vesting in a Commission the right to determine the plan and frame of government of
proposed villages and what functions shall be exercised by the same, although the powers and
functions of the village are specifically limited by statute (In re Municipal Charters, 86 Atl.
307-308); or conferring upon courts the authority to declare a given town or village
incorporated, and designate its metes and bounds, upon petition of a majority of the taxable
inhabitants thereof, setting forth the area desired to be included in such village (Territory ex
rel Kelly vs. Stewart, 23 Pac. 405-409); or authorizing the territory of a town, containing a
given area and population, to be incorporated as a town, on certain steps being taken by the
inhabitants thereof and on certain determination by a court and subsequent vote of the
inhabitants in favor thereof, insofar as the court is allowed to determine whether the lands
embraced in the petition "ought justly" to be included in the village, and whether the interest
of the inhabitants will be promoted by such incorporation, and to enlarge and diminish the
boundaries of the proposed village "as justice may require" (In re Villages of North
Milwaukee, 67 N.W. 1035-1037); or creating a Municipal Board of Control which shall
determine whether or not the laying out, construction or operation of a toll road is in the
"public interest" and whether the requirements of the law had been complied with, in which
case the board shall enter an order creating a municipal corporation and fixing the name of
the same (Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d.
310).
Insofar as the validity of a delegation of power by Congress to the President is concerned, the
case of Schechter Poultry Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the one at
bar. The Schechter case involved the constitutionality of Section 3 of the National Industrial
Recovery Act authorizing the President of the United States to approve "codes of fair
competition" submitted to him by one or more trade or industrial associations or corporations
which "impose no inequitable restrictions on admission to membership therein and are truly
representative," provided that such codes are not designed "to promote monopolies or to
eliminate or oppress small enterprises and will not operate to discriminate against them, and
will tend to effectuate the policy" of said Act. The Federal Supreme Court held:
To summarize and conclude upon this point: Sec. 3 of the Recovery Act is without precedent.
It supplies no standards for any trade, industry or activity. It does not undertake to prescribe
rules of conduct to be applied to particular states of fact determined by appropriate
administrative procedure. Instead of prescribing rules of conduct, it authorizes the making of
codes to prescribe them. For that legislative undertaking, Sec. 3 sets up no standards, aside
from the statement of the general aims of rehabilitation, correction and expansion described
in Sec. 1. In view of the scope of that broad declaration, and of the nature of the few
restrictions that are imposed, the discretion of the President in approving or prescribing
codes, and thus enacting laws for the government of trade and industry throughout the
country, is virtually unfettered. We think that the code making authority thus conferred is an
unconstitutional delegation of legislative power.
If the term "unfair competition" is so broad as to vest in the President a discretion that is
"virtually unfettered." and, consequently, tantamount to a delegation of legislative power, it is
obvious that "public welfare," which has even a broader connotation, leads to the same result.
In fact, if the validity of the delegation of powers made in Section 68 were upheld, there
would no longer be any legal impediment to a statutory grant of authority to the President to
do anything which, in his opinion, may be required by public welfare or public interest. Such
grant of authority would be a virtual abdication of the powers of Congress in favor of the
Executive, and would bring about a total collapse of the democratic system established by our
Constitution, which it is the special duty and privilege of this Court to uphold.
It may not be amiss to note that the executive orders in question were issued after the
legislative bills for the creation of the municipalities involved in this case had failed to pass
Congress. A better proof of the fact that the issuance of said executive orders entails the
exercise of purely legislative functions can hardly be given.
Again, Section 10 (1) of Article VII of our fundamental law ordains:
The President shall have control of all the executive departments, bureaus, or offices, exercise
general supervision over all local governments as may be provided by law, and take care that
the laws be faithfully executed.
8
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
The power of control under this provision implies the right of the President to interfere in the
exercise of such discretion as may be vested by law in the officers of the executive
departments, bureaus, or offices of the national government, as well as to act in lieu of such
officers. This power is denied by the Constitution to the Executive, insofar as local
governments are concerned. With respect to the latter, the fundamental law permits him to
wield no more authority than that of checking whether said local governments or the officers
thereof perform their duties as provided by statutory enactments. Hence, the President cannot
interfere with local governments, so long as the same or its officers act Within the scope of
their authority. He may not enact an ordinance which the municipal council has failed or
refused to pass, even if it had thereby violated a duty imposed thereto by law, although he
may see to it that the corresponding provincial officials take appropriate disciplinary action
therefor. Neither may he vote, set aside or annul an ordinance passed by said council within
the scope of its jurisdiction, no matter how patently unwise it may be. He may not even
suspend an elective official of a regular municipality or take any disciplinary action against
him, except on appeal from a decision of the corresponding provincial board.5
Upon the other hand if the President could create a municipality, he could, in effect, remove
any of its officials, by creating a new municipality and including therein the barrio in which
the official concerned resides, for his office would thereby become vacant.6 Thus, by merely
brandishing the power to create a new municipality (if he had it), without actually creating it,
he could compel local officials to submit to his dictation, thereby, in effect, exercising over
them the power of control denied to him by the Constitution.
Then, also, the power of control of the President over executive departments, bureaus or
offices implies no more than the authority to assume directly the functions thereof or to
interfere in the exercise of discretion by its officials. Manifestly, such control does not
include the authority either to abolish an executive department or bureau, or to create a new
one. As a consequence, the alleged power of the President to create municipal corporations
would necessarily connote the exercise by him of an authority even greater than that of
control which he has over the executive departments, bureaus or offices. In other words,
Section 68 of the Revised Administrative Code does not merely fail to comply with the
constitutional mandate above quoted. Instead of giving the President less power over local
governments than that vested in him over the executive departments, bureaus or offices, it
reverses the process and does the exact opposite, by conferring upon him more power over
municipal corporations than that which he has over said executive departments, bureaus or
offices.
In short, even if it did entail an undue delegation of legislative powers, as it certainly does,
said Section 68, as part of the Revised Administrative Code, approved on March 10, 1917,
must be deemed repealed by the subsequent adoption of the Constitution, in 1935, which is
utterly incompatible and inconsistent with said statutory enactment.7
There are only two (2) other points left for consideration, namely, respondent's claim (a) that
"not all the proper parties" — referring to the officers of the newly created municipalities —
"have been impleaded in this case," and (b) that "the present petition is premature."
As regards the first point, suffice it to say that the records do not show, and the parties do not
claim, that the officers of any of said municipalities have been appointed or elected and
assumed office. At any rate, the Solicitor General, who has appeared on behalf of respondent
Auditor General, is the officer authorized by law "to act and represent the Government of the
Philippines, its offices and agents, in any official investigation, proceeding or matter
requiring the services of a lawyer" (Section 1661, Revised Administrative Code), and, in
connection with the creation of the aforementioned municipalities, which involves a political,
not proprietary, function, said local officials, if any, are mere agents or representatives of the
national government. Their interest in the case at bar has, accordingly, been, in effect, duly
represented.8
With respect to the second point, respondent alleges that he has not as yet acted on any of the
executive order & in question and has not intimated how he would act in connection
therewith. It is, however, a matter of common, public knowledge, subject to judicial
cognizance, that the President has, for many years, issued executive orders creating municipal
corporations and that the same have been organized and in actual operation, thus indicating,
without peradventure of doubt, that the expenditures incidental thereto have been sanctioned,
approved or passed in audit by the General Auditing Office and its officials. There is no
reason to believe, therefore, that respondent would adopt a different policy as regards the new
municipalities involved in this case, in the absence of an allegation to such effect, and none
has been made by him.
WHEREFORE, the Executive Orders in question are hereby declared null and void ab
initio and the respondent permanently restrained from passing in audit any expenditure of
public funds in implementation of said Executive Orders or any disbursement by the
municipalities above referred to. It is so ordered.
9
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
4,) [G.R. No. 138810. September 29, 2004]
BATANGAS CATV, INC., petitioner, vs. THE COURT OF APPEALS, THE
BATANGAS CITY SANGGUNIANG PANLUNGSOD and BATANGAS CITY
MAYOR, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline in the
sale of television (tv) sets because of poor reception of signals in his community. Troubled,
he built an antenna on top of a nearby mountain. Using coaxial cable lines, he distributed the
tv signals from the antenna to the homes of his customers. Walsons innovative idea improved
his sales and at the same time gave birth to a new telecommunication system -- the
Community Antenna Television (CATV) or Cable Television.[1]
This technological breakthrough found its way in our shores and, like in its country of origin,
it spawned legal controversies, especially in the field of regulation. The case at bar is just
another occasion to clarify a shady area. Here, we are tasked to resolve the inquiry -- may a
local government unit (LGU) regulate the subscriber rates charged by CATV operators within
its territorial jurisdiction?
This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner herein)
against the Sangguniang Panlungsod and the Mayor of Batangas City (respondents herein)
assailing the Court of Appeals (1) Decision[2] dated February 12, 1999 and (2)
Resolution[3] dated May 26, 1999, in CA-G.R. CV No. 52361.[4] The Appellate Court
reversed and set aside the Judgment[5] dated October 29, 1995 of the Regional Trial Court
(RTC), Branch 7, Batangas City in Civil Case No. 4254,[6] holding that neither of the
respondents has the power to fix the subscriber rates of CATV operators, such being outside
the scope of the LGUs power.
The antecedent facts are as follows:
On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No.
210[7] granting petitioner a permit to construct, install, and operate a CATV system in
Batangas City. Section 8 of the Resolution provides that petitioner is authorized to charge its
subscribers the maximum rates specified therein, provided, however, that any increase of
rates shall be subject to the approval of the Sangguniang Panlungsod.[8]
Sometime in November 1993, petitioner increased its subscriber rates from P88.00
to P180.00 per month. As a result, respondent Mayor wrote petitioner a letter[9] threatening to
cancel its permit unless it secures the approval of respondent Sangguniang Panlungsod,
pursuant to Resolution No. 210.
Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction
docketed as Civil Case No. 4254. It alleged that respondent Sangguniang Panlungsod has no
authority to regulate the subscriber rates charged by CATV operators because under
Executive Order No. 205, the National Telecommunications Commission (NTC) has the sole
authority to regulate the CATV operation in the Philippines.
On October 29, 1995, the trial court decided in favor of petitioner, thus:
WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies or
other persons acting on their behalf or under their instructions, are hereby enjoined from
canceling plaintiffs permit to operate a Cable Antenna Television (CATV) system in the
City of Batangas or its environs or in any manner, from interfering with the authority
and power of the National Telecommunications Commission to grant franchises to
operate CATV systems to qualified applicants, and the right of plaintiff in fixing its
service rates which needs no prior approval of the Sangguniang Panlungsod of Batangas
City.
The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to costs.
IT IS SO ORDERED.[10]
The trial court held that the enactment of Resolution No. 210 by respondent violates the
States deregulation policy as set forth by then NTC Commissioner Jose Luis A. Alcuaz in his
Memorandum dated August 25, 1989. Also, it pointed out that the sole agency of the
government which can regulate CATV operation is the NTC, and that the LGUs cannot
exercise regulatory power over it without appropriate legislation.
Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as CA-G.R. CV
No. 52361.
On February 12, 1999, the Appellate Court reversed and set aside the trial courts Decision,
ratiocinating as follows:
Although the Certificate of Authority to operate a Cable Antenna Television (CATV)
System is granted by the National Telecommunications Commission pursuant to
Executive Order No. 205, this does not preclude the Sangguniang Panlungsod from
regulating the operation of the CATV in their locality under the powers vested upon it
by Batas Pambansa Bilang 337, otherwise known as the Local Government Code of
1983. Section 177 (now Section 457 paragraph 3 (ii) of Republic Act 7160) provides:
10
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
Section 177. Powers and Duties The Sangguniang Panlungsod shall:
a) Enact such ordinances as may be necessary to carry into effect and discharge the
responsibilities conferred upon it by law, and such as shall be necessary and proper to provide
for health and safety, comfort and convenience, maintain peace and order, improve the
morals, and promote the prosperity and general welfare of the community and the inhabitants
thereof, and the protection of property therein;
xxx
d) Regulate, fix the license fee for, and tax any business or profession being carried on
and exercised within the territorial jurisdiction of the city, except travel agencies,
tourist guides, tourist transports, hotels, resorts, de luxe restaurants, and tourist inns of
international standards which shall remain under the licensing and regulatory power of
the Ministry of Tourism which shall exercise such authority without infringement on
the taxing and regulatory powers of the city government;
Under cover of the General Welfare Clause as provided in this section, Local Government
Units can perform just about any power that will benefit their constituencies. Thus, local
government units can exercise powers that are: (1) expressly granted; (2) necessarily implied
from the power that is expressly granted; (3) necessary, appropriate or incidental for its
efficient and effective governance; and (4) essential to the promotion of the general welfare
of their inhabitants. (Pimentel, The Local Government Code of 1991, p. 46)
Verily, the regulation of businesses in the locality is expressly provided in the Local
Government Code. The fixing of service rates is lawful under the General Welfare
Clause.
Resolution No. 210 granting appellee a permit to construct, install and operate a community
antenna television (CATV) system in Batangas City as quoted earlier in this decision,
authorized the grantee to impose charges which cannot be increased except upon approval of
the Sangguniang Bayan. It further provided that in case of violation by the grantee of the
terms and conditions/requirements specifically provided therein, the City shall have the right
to withdraw the franchise.
Appellee increased the service rates from EIGHTY EIGHT PESOS (P88.00) to ONE
HUNDRED EIGHTY PESOS (P180.00) (Records, p. 25) without the approval of
appellant. Such act breached Resolution No. 210 which gives appellant the right to
withdraw the permit granted to appellee.[11]
Petitioner filed a motion for reconsideration but was denied. [12]
Hence, the instant petition for review on certiorari anchored on the following assignments of
error:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL
WELFARE CLAUSE OF THE LOCAL GOVERNMENT CODE AUTHORIZES
RESPONDENT SANGGUNIANG PANLUNGSOD TO EXERCISE THE
REGULATORY FUNCTION SOLELY LODGED WITH THE NATIONAL
TELECOMMUNICATIONS COMMISSION UNDER EXECUTIVE ORDER NO. 205,
INCLUDING THE AUTHORITY TO FIX AND/OR APPROVE THE SERVICE
RATES OF CATV OPERATORS; AND
II
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED
FROM AND DISMISSING PETITIONERS COMPLAINT.[13]
Petitioner contends that while Republic Act No. 7160, the Local Government Code of 1991,
extends to the LGUs the general power to perform any act that will benefit their constituents,
nonetheless, it does not authorize them to regulate the CATV operation. Pursuant to E.O. No.
205, only the NTC has the authority to regulate the CATV operation, including the fixing of
subscriber rates.
Respondents counter that the Appellate Court did not commit any reversible error in
rendering the assailed Decision. First, Resolution No. 210 was enacted pursuant to Section
177(c) and (d) of Batas Pambansa Bilang 337, the Local Government Code of 1983, which
authorizes LGUs to regulate businesses. The term businesses necessarily includes the CATV
industry. And second, Resolution No. 210 is in the nature of a contract between petitioner and
respondents, it being a grant to the former of a franchise to operate a CATV system. To hold
that E.O. No. 205 amended its terms would violate the constitutional prohibition against
impairment of contracts.[14]
The petition is impressed with merit.
Earlier, we posed the question -- may a local government unit (LGU) regulate the subscriber
rates charged by CATV operators within its territorial jurisdiction? A review of pertinent
laws and jurisprudence yields a negative answer.
President Ferdinand E. Marcos was the first one to place the CATV industry under the
regulatory power of the national government.[15] On June 11, 1978, he issued Presidential
Decree (P.D.) No. 1512[16]establishing a monopoly of the industry by granting Sining
11
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
Makulay, Inc., an exclusive franchise to operate CATV system in any place within the
Philippines. Accordingly, it terminated all franchises, permits or certificates for the
operation of CATV system previously granted by local governments or by any
instrumentality or agency of the national government.[17] Likewise, it prescribed the
subscriber rates to be charged by Sining Makulay, Inc. to its customers.[18]
On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894 vesting
upon the Chairman of the Board of Communications direct supervision over the operations
of Sining Makulay, Inc. Three days after, he issued E.O. No. 546[19] integrating the Board of
Communications[20] and the Telecommunications Control Bureau[21] to form a single entity to
be known as the National Telecommunications Commission. Two of its assigned functions
are:
a. Issue Certificate of Public Convenience for the operation of communications utilities
and services, radio communications systems, wire or wireless telephone or telegraph
systems, radio and television broadcasting system and other similar public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of public
service communications; and determine and prescribe charges or rates pertinent to the
operation of such public utility facilities and services except in cases where charges or
rates are established by international bodies or associations of which the Philippines is a
participating member or by bodies recognized by the Philippine Government as the proper
arbiter of such charges or rates;
Although Sining Makulay Inc.s exclusive franchise had a life term of 25 years, it was cut
short by the advent of the 1986 Revolution. Upon President Corazon C. Aquinos assumption
of power, she issued E.O. No. 205[22] opening the CATV industry to all citizens of the
Philippines. It mandated the NTC to grant Certificates of Authority to CATV operators
and to issue the necessary implementing rules and regulations.
On September 9, 1997, President Fidel V. Ramos issued E.O. No. 436[23] prescribing policy
guidelines to govern CATV operation in the Philippines. Cast in more definitive terms, it
restated the NTCs regulatory powers over CATV operations, thus:
SECTION 2. The regulation and supervision of the cable television industry in the
Philippines shall remain vested solely with the National Telecommunications Commission
(NTC).
SECTION 3. Only persons, associations, partnerships, corporations or cooperatives,
granted a Provisional Authority or Certificate of Authority by the Commission may
install, operate and maintain a cable television system or render cable television service
within a service area.
Clearly, it has been more than two decades now since our national government, through the
NTC, assumed regulatory power over the CATV industry. Changes in the political arena did
not alter the trend. Instead, subsequent presidential issuances further reinforced the NTCs
power. Significantly, President Marcos and President Aquino, in the exercise of their
legislative power, issued P.D. No. 1512, E.O. No. 546 and E.O. No. 205. Hence, they have
the force and effect of statutes or laws passed by Congress.[24] That the regulatory power stays
with the NTC is also clear from President Ramos E.O. No. 436 mandating that the regulation
and supervision of the CATV industry shall remain vested solely in the NTC. Blacks Law
Dictionary defines sole as without another or others.[25] The logical conclusion, therefore, is
that in light of the above laws and E.O. No. 436, the NTC exercises regulatory power
over CATV operators to the exclusion of other bodies.
But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their
general power to prescribe regulations under the general welfare clause of the Local
Government Code. It must be emphasized that when E.O. No. 436 decrees that the regulatory
power shall be vested solely in the NTC, it pertains to the regulatory power over those
matters which are peculiarly within the NTCs competence, such as, the: (1) determination of
rates, (2) issuance of certificates of authority, (3) establishment of areas of
operation, (4) examination and assessment of the legal, technical and financial qualifications
of applicant operators, (5) granting of permits for the use of frequencies, (6) regulation of
ownership and operation, (7) adjudication of issues arising from its functions, and (8) other
similar matters.[26] Within these areas, the NTC reigns supreme as it possesses the exclusive
power to regulate -- a power comprising varied acts, such as to fix, establish, or control; to
adjust by rule, method or established mode; to direct by rule or restriction; or to subject to
governing principles or laws.[27]
Coincidentally, respondents justify their exercise of regulatory power over petitioners CATV
operation under the general welfare clause of the Local Government Code of 1983. The Court
of Appeals sustained their stance.
There is no dispute that respondent Sangguniang Panlungsod, like other local legislative
bodies, has been empowered to enact ordinances and approve resolutions under the general
welfare clause of B.P. Blg. 337, the Local Government Code of 1983. That it continues to
posses such power is clear under the new law, R.A. No. 7160 (the Local Government Code of
1991). Section 16 thereof provides:
SECTION 16. General Welfare. Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
12
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among others, the preservation
and enrichment of culture, promote health and safety, enhance the right of the people to a
balanced ecology, encourage and support the development of appropriate and self-reliant,
scientific and technological capabilities, improve public morals, enhance economic prosperity
and social justice, promote full employment among their residents, maintain peace and order,
and preserve the comfort and convenience of their inhabitants.
In addition, Section 458 of the same Code specifically mandates:
SECTION 458. Powers, Duties, Functions and Compensation. (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare of the city and its inhabitants
pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of
the city as provided for under Section 22 of this Code, x x x:
The general welfare clause is the delegation in statutory form of the police power of the
State to LGUs.[28] Through this, LGUs may prescribe regulations to protect the lives, health,
and property of their constituents and maintain peace and order within their respective
territorial jurisdictions. Accordingly, we have upheld enactments providing, for instance, the
regulation of gambling,[29] the occupation of rig drivers,[30] the installation and operation of
pinball machines,[31] the maintenance and operation of cockpits,[32] the exhumation and
transfer of corpses from public burial grounds,[33] and the operation of hotels, motels, and
lodging houses[34] as valid exercises by local legislatures of the police power under the
general welfare clause.
Like any other enterprise, CATV operation maybe regulated by LGUs under the general
welfare clause. This is primarily because the CATV system commits the indiscretion of
crossing public properties. (It uses public properties in order to reach subscribers.) The
physical realities of constructing CATV system the use of public streets, rights of ways,
the founding of structures, and the parceling of large regions allow an LGU a certain
degree of regulation over CATV operators.[35] This is the same regulation that it exercises
over all private enterprises within its territory.
But, while we recognize the LGUs power under the general welfare clause, we cannot sustain
Resolution No. 210. We are convinced that respondents strayed from the well recognized
limits of its power. The flaws in Resolution No. 210 are: (1) it violates the mandate of
existing laws and (2) it violates the States deregulation policy over the CATV industry.
I.
Resolution No. 210 is an enactment of an LGU acting only as agent of the national
legislature. Necessarily, its act must reflect and conform to the will of its principal. To test its
validity, we must apply the particular requisites of a valid ordinance as laid down by the
accepted principles governing municipal corporations. [36]
Speaking for the Court in the leading case of United States vs. Abendan,[37] Justice Moreland
said: An ordinance enacted by virtue of the general welfare clause is valid, unless it
contravenes the fundamental law of the Philippine Islands, or an Act of the Philippine
Legislature, or unless it is against public policy, or is unreasonable, oppressive, partial,
discriminating, or in derogation of common right. In De la Cruz vs. Paraz,[38] we laid the
general rule that ordinances passed by virtue of the implied power found in the general
welfare clause must be reasonable, consonant with the general powers and purposes of the
corporation, and not inconsistent with the laws or policy of the State.
The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and E.O. No.
436 insofar as it permits respondent Sangguniang Panlungsod to usurp a power exclusively
vested in the NTC, i.e., the power to fix the subscriber rates charged by CATV operators. As
earlier discussed, the fixing of subscriber rates is definitely one of the matters within the
NTCs exclusive domain.
In this regard, it is appropriate to stress that where the state legislature has made provision for
the regulation of conduct, it has manifested its intention that the subject matter shall be fully
covered by the statute, and that a municipality, under its general powers, cannot regulate the
same conduct.[39] In Keller vs. State,[40] it was held that: Where there is no express power in
the charter of a municipality authorizing it to adopt ordinances regulating certain
matters which are specifically covered by a general statute, a municipal ordinance,
insofar as it attempts to regulate the subject which is completely covered by a general
statute of the legislature, may be rendered invalid. x x x Where the subject is of
statewide concern, and the legislature has appropriated the field and declared the rule,
its declaration is binding throughout the State. A reason advanced for this view is that
such ordinances are in excess of the powers granted to the municipal corporation.[41]
Since E.O. No. 205, a general law, mandates that the regulation of CATV operations shall be
exercised by the NTC, an LGU cannot enact an ordinance or approve a resolution in violation
of the said law.
It is a fundamental principle that municipal ordinances are inferior in status and subordinate
to the laws of the state. An ordinance in conflict with a state law of general character and
statewide application is universally held to be invalid.[42] The principle is frequently
expressed in the declaration that municipal authorities, under a general grant of power, cannot
adopt ordinances which infringe the spirit of a state law or repugnant to the general policy of
13
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
the state.[43] In every power to pass ordinances given to a municipality, there is an implied
restriction that the ordinances shall be consistent with the general law.[44] In the language of
Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp., Inc.,[45] ruled
that:
The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local councils
exercise only delegated legislative powers conferred on them by Congress as the national
lawmaking body. The delegate cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the local government units can undo the
acts of Congress, from which they have derived their power in the first place, and negate by
mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from
the legislature. It breathes into them the breath of life, without which they cannot exist. As it
creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is some
constitutional limitation on the right, the legislature might, by a single act, and if we can
suppose it capable of so great a folly and so great a wrong, sweep from existence all of the
municipal corporations in the State, and the corporation could not prevent it. We know of no
limitation on the right so far as to the corporation themselves are concerned. They are, so to
phrase it, the mere tenants at will of the legislature.
This basic relationship between the national legislature and the local government units has
not been enfeebled by the new provisions in the Constitution strengthening the policy of local
autonomy. Without meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly reduced degree now
than under our previous Constitutions. The power to create still includes the power to destroy.
The power to grant still includes the power to withhold or recall. True, there are certain
notable innovations in the Constitution, like the direct conferment on the local government
units of the power to tax, which cannot now be withdrawn by mere statute. By and large,
however, the national legislature is still the principal of the local government units,
which cannot defy its will or modify or violate it.
Respondents have an ingenious retort against the above disquisition. Their theory is that the
regulatory power of the LGUs is granted by R.A. No. 7160 (the Local Government Code of
1991), a handiwork of the national lawmaking authority. They contend that R.A. No. 7160
repealed E.O. No. 205 (issued by President Aquino). Respondents argument espouses a bad
precedent. To say that LGUs exercise the same regulatory power over matters which are
peculiarly within the NTCs competence is to promote a scenario of LGUs and the NTC
locked in constant clash over the appropriate regulatory measure on the same subject
matter. LGUs must recognize that technical matters concerning CATV operation are
within the exclusive regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No. 205, either
expressly or impliedly. It is noteworthy that R.A. No. 7160 repealing clause, which
painstakingly mentions the specific laws or the parts thereof which are repealed, does not
include E.O. No. 205, thus:
SECTION 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the
Local Government Code." Executive Order No. 112 (1987), and Executive Order No. 319
(1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions,
memoranda and issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund;
Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund;
Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741;
Presidential Decree No. 231 as amended; Presidential Decree No. 436 as amended by
Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752,
and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded
projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent
with the provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704;
Section 12 of Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71,
72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of Presidential
Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations
and administrative regulations, or part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly.
Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No. 7160. It
is a settled rule that implied repeals are not lightly presumed in the absence of a clear and
unmistakable showing of such intentions. In Mecano vs. Commission on Audit,[46] we ruled:
Repeal by implication proceeds on the premise that where a statute of later date clearly
reveals an intention on the part of the legislature to abrogate a prior act on the subject, that
intention must be given effect. Hence, before there can be a repeal, there must be a clear
14
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
showing on the part of the lawmaker that the intent in enacting the new law was to abrogate
the old one. The intention to repeal must be clear and manifest; otherwise, at least, as a
general rule, the later act is to be construed as a continuation of, and not a substitute for, the
first act and will continue so far as the two acts are the same from the time of the first
enactment.
As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the NTC the
power to regulate the CATV operation in this country. So also Memorandum Circular No. 8-
9-95, the Implementing Rules and Regulations of R.A. No. 7925 (the Public
Telecommunications Policy Act of the Philippines). This shows that the NTCs regulatory
power over CATV operation is continuously recognized.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an
inevitably destructive confrontation, courts must exert every effort to reconcile them,
remembering that both laws deserve a becoming respect as the handiwork of coordinate
branches of the government.[47] On the assumption of a conflict between E.O. No. 205 and
R.A. No. 7160, the proper action is not to uphold one and annul the other but to give effect to
both by harmonizing them if possible. This recourse finds application here. Thus, we hold
that the NTC, under E.O. No. 205, has exclusive jurisdiction over matters affecting CATV
operation, including specifically the fixing of subscriber rates, but nothing herein precludes
LGUs from exercising its general power, under R.A. No. 7160, to prescribe regulations to
promote the health, morals, peace, education, good order or safety and general welfare of
their constituents. In effect, both laws become equally effective and mutually complementary.
The grant of regulatory power to the NTC is easily understandable. CATV system is not a
mere local concern. The complexities that characterize this new technology demand that it be
regulated by a specialized agency. This is particularly true in the area of rate-fixing. Rate
fixing involves a series of technical operations.[48] Consequently, on the hands of the
regulatory body lies the ample discretion in the choice of such rational processes as might be
appropriate to the solution of its highly complicated and technical problems. Considering that
the CATV industry is so technical a field, we believe that the NTC, a specialized agency, is in
a better position than the LGU, to regulate it. Notably, in United States vs. Southwestern
Cable Co.,[49] the US Supreme Court affirmed the Federal Communications Commissions
(FCCs) jurisdiction over CATV operation. The Court held that the FCCs authority over cable
systems assures the preservation of the local broadcast service and an equitable distribution of
broadcast services among the various regions of the country.
II.
Resolution No. 210 violated the States deregulation policy.
Deregulation is the reduction of government regulation of business to permit freer markets
and competition.[50] Oftentimes, the State, through its regulatory agencies, carries out a policy
of deregulation to attain certain objectives or to address certain problems. In the field of
telecommunications, it is recognized that many areas in the Philippines are still unserved or
underserved. Thus, to encourage private sectors to venture in this field and be partners of the
government in stimulating the growth and development of telecommunications, the State
promoted the policy of deregulation.
In the United States, the country where CATV originated, the Congress observed, when it
adopted the Telecommunications Act of 1996, that there was a need to provide a pro-
competitive, deregulatory national policy framework designed to accelerate rapidly private
sector deployment of advanced telecommunications and information technologies and
services to all Americans by opening all telecommunications markets to competition. The
FCC has adopted regulations to implement the requirements of the 1996 Act and the intent of
the Congress.
Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436 states:
WHEREAS, professionalism and self-regulation among existing operators, through a
nationally recognized cable television operators association, have enhanced the growth of
the cable television industry and must therefore be maintained along with minimal
reasonable government regulations;
This policy reaffirms the NTCs mandate set forth in the Memorandum dated August 25, 1989
of Commissioner Jose Luis A. Alcuaz, to wit:
In line with the purpose and objective of MC 4-08-88, Cable Television System or
Community Antenna Television (CATV) is made part of the broadcast media to promote the
orderly growth of the Cable Television Industry it being in its developing stage. Being part
of the Broadcast Media, the service rates of CATV are likewise considered deregulated
in accordance with MC 06-2-81 dated 25 February 1981, the implementing guidelines
for the authorization and operation of Radio and Television Broadcasting
stations/systems.
Further, the Commission will issue Provisional Authority to existing CATV operators to
authorize their operations for a period of ninety (90) days until such time that the
Commission can issue the regular Certificate of Authority.
When the State declared a policy of deregulation, the LGUs are bound to follow. To rule
otherwise is to render the States policy ineffective. Being mere creatures of the State, LGUs
15
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)

cannot defeat national policies through enactments of contrary measures. Verily, in the case SO ORDERED.
at bar, petitioner may increase its subscriber rates without respondents approval.

At this juncture, it bears emphasizing that municipal corporations are bodies politic and
corporate, created not only as local units of local self-government, but as governmental
agencies of the state.[51] The legislature, by establishing a municipal corporation, does not
divest the State of any of its sovereignty; absolve itself from its right and duty to administer
the public affairs of the entire state; or divest itself of any power over the inhabitants of the
district which it possesses before the charter was granted.[52]

Respondents likewise argue that E.O. No. 205 violates the constitutional prohibition against
impairment of contracts, Resolution No. 210 of Batangas City Sangguniang
Panlungsod being a grant of franchise to petitioner.

We are not convinced.

There is no law specifically authorizing the LGUs to grant franchises to operate CATV
system. Whatever authority the LGUs had before, the same had been withdrawn when
President Marcos issued P.D. No. 1512 terminating all franchises, permits or certificates
for the operation of CATV system previously granted by local governments. Today,
pursuant to Section 3 of E.O. No. 436, only persons, associations, partnerships,
corporations or cooperatives granted a Provisional Authority or Certificate of
Authority by the NTC may install, operate and maintain a cable television system or
render cable television service within a service area. It is clear that in the absence of
constitutional or legislative authorization, municipalities have no power to grant
franchises.[53] Consequently, the protection of the constitutional provision as to impairment of
the obligation of a contract does not extend to privileges, franchises and grants given by a
municipality in excess of its powers, or ultra vires.[54]

One last word. The devolution of powers to the LGUs, pursuant to the Constitutional mandate
of ensuring their autonomy, has bred jurisdictional tension between said LGUs and the State.
LGUs must be reminded that they merely form part of the whole. Thus, when the Drafters of
the 1987 Constitution enunciated the policy of ensuring the autonomy of local
governments,[55] it was never their intention to create an imperium in imperio and install an
intra-sovereign political subdivision independent of a single sovereign state.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals
dated February 12, 1999 as well as its Resolution dated May 26, 1999 in CA-G.R. CV No.
52461, are hereby REVERSED. The RTC Decision in Civil Case No. 4254 is AFFIRMED.

No pronouncement as to costs.

16
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
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5.) [G.R. No. 131082. June 19, 2000]
ROMULO, MABANTA, BUENAVENTURA, SAYOC & DE LOS
ANGELES, petitioner, vs. HOME DEVELOPMENT MUTUAL FUND, respondent.
DECISION
DAVIDE, JR., C.J.: CODES
Once again, this Court is confronted with the issue of the validity of the Amendments to the
Rules and Regulations Implementing Republic Act No. 7742, which require the existence of a
plan providing for both provident/retirement and housing benefits for exemption from the
Pag~IBIG Fund coverage under Presidential Decree No. 1752, as amended.
Pursuant to Section 19[1] of P.D. No. 1752, as amended by R.A. No. 7742, petitioner Romulo,
Mabanta, Buenaventura, Sayoc and De Los Angeles (hereafter PETITIONER), a law firm,
was exempted for the period 1 January to 31 December 1995 from the Pag~IBIG Fund
coverage by respondent Home Development Mutual Fund (hereafter HDMF) because of a
superior retirement plan.[2]
On 1 September 1995, the HDMF Board of Trustees, pursuant to Section 5 of Republic Act
No. 7742, issued Board Resolution No. 1011, Series of 1995, amending and modifying the
Rules and Regulations Implementing R.A. No. 7742. As amended, Section 1 of Rule VII
provides that for a company to be entitled to a waiver or suspension of Fund coverage,[3] it
must have a plan providing for both provident/ retirement and housing benefits superior to
those provided under the Pag~IBIG Fund.
On 16 November 1995, PETITIONER filed with the respondent an application for Waiver or
Suspension of Fund Coverage because of its superior retirement plan.[4] In support of said
application, PETITIONER submitted to the HDMF a letter explaining that the 1995
Amendments to the Rules are invalid.[5] Jksm
In a letter dated 18 March 1996, the President and Chief Executive Officer of HDMF
disapproved PETITIONER's application on the ground that the requirement that there should
be both a provident retirement fund and a housing plan is clear in the use of the phrase
"and/or," and that the Rules Implementing R.A. No. 7742 did not amend nor repeal Section
19 of P.D. No. 1752 but merely implement the law.[6]
PETITIONER's appeal[7] with the HDMF Board of Trustees was denied for having been
rendered moot and academic by Board Resolution No. 1208, Series of 1996, removing the
availment of waiver of the mandatory coverage of the Pag~IBIG Fund, except for distressed
employers.[8]
On 31 March 1997, PETITIONER filed a petition for review[9] before the Court of Appeals.
On motion by HDMF, the Court of Appeals dismissed[10] the petition on the ground that the
coverage of employers and employees under the Home Development Mutual Fund is
mandatory in character as clearly worded in Section 4 of P.D. No. 1752, as amended by R.A.
No. 7742. There is no allegation that petitioner is a distressed employer to warrant its
exemption from the Fund coverage. As to the amendments to the Rules and Regulations
Implementing R.A. No. 7742, the same are valid. Under P.D. No. 1752 and R.A. No. 7742
the Board of Trustees of the HDMF is authorized to promulgate rules and regulations, as well
as amendments thereto, concerning the extension, waiver or suspension of coverage under the
Pag~IBIG Fund. And the publication requirement was amply met, since the questioned
amendments were published in the 21 October 1995 issue of the Philippine Star, which is a
newspaper of general circulation.
PETITIONER's motion for reconsideration[11] was denied.[12] Hence, on 6 November 1997,
PETITIONER filed a petition before this Court assailing the 1995 and the 1996 Amendments
to the Rules and Regulations Implementing Republic Act No. 7742 for being contrary to law.
In support thereof, PETITIONER contends that the subject 1995 Amendments issued by
HDMF are inconsistent with the enabling law, P.D. No. 1752, as amended by R.A. No. 7742,
which merely requires as a pre~condition for exemption from coverage the existence of either
a superior provident/ retirement plan or a superior housing plan, and not the concurrence of
both plans. Hence, considering that PETITIONER has a provident plan superior to that
offered by the HDMF, it is entitled to exemption from the coverage in accordance with
Section 19 of P.D. No. 1752. The 1996 Amendment are also void insofar as they abolished
the exemption granted by Section 19 of P.D. 1752, as amended. The repeal of such exemption
involves the exercise of legislative power, which cannot be delegated to HMDF. Kycalr
PETITIONER also cites Section 9 (1), Chapter 2, Book VII of the Administrative Code of
1987, which provides:
SEC. 9. Public Participation ~~ (1) If not otherwise required by law, an agency shall, as far
as practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.
Since the Amendments to the Rules and Regulations Implementing Republic Act No. 7742
involve an imposition of an additional burden, a public hearing should have first been
conducted to give chance to the employers, like PETITIONER, to be heard before the HDMF
adopted the said Amendments. Absent such public hearing, the amendments should be
voided.
Finally, PETITIONER contends that HDMF did not comply with Section 3, Chapter 2, Book
VII of the Administrative Code of 1987, which provides that "[e]very agency shall file with
17
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
the University of the Philippines Law Center three (3) certified copies of every rule adopted
by it."
On the other hand, the HDMF contends that in promulgating the amendments to the rules and
regulations which require the existence of a plan providing for both provident and housing
benefits for exemption from the Fund Coverage, the respondent Board was merely exercising
its rule-making power under Section 13 of P.D. No. 1752. It had the option to use "and" only
instead of "or" in the rules on waiver in order to effectively implement the Pag-IBIG Fund
Law. By choosing "and," the Board has clarified the confusion brought about by the use of
"and/or" in Section 19 of P.D. No. 1752, as amended.
As to the public hearing, HDMF maintains that as can be clearly deduced from Section 9(1),
Chapter 2, book VII of the Revised Administrative Code of 1987, public hearing is required
only when the law so provides, and if not, only if the same is practicable. It follows that
public hearing is only optional or discretionary on the part of the agency concerned, except
when the same is required by law. P.D. No. 1752 does not require that pubic hearing be first
conducted before the rules and regulations implementing it would become valid and effective.
What it requires is the publication of said rules and regulations at least once in a newspaper of
general circulation. Having published said 1995 and 1996 Amendments through the
Philippine Star on 21 October 1995[13] and 15 November 1996,[14] respectively, HDMF has
complied with the publication requirement.
Finally, HDMF claims that as early as 18 October 1996, it had already filed certified true
copies of the Amendments to the Rules and Regulations with the University of the
Philippines Law Center. This fact is evidenced by certified true copies of the Certification
from the Office of the National Administrative Register of the U.P. Law Center.[15]
We find for the PETITIONER. Calrky
The issue of the validity of the 1995 Amendments to the Rules and Regulations
Implementing R.A. No. 7742, specifically Section I, Rule VII on Waiver and Suspension, has
been squarely resolved in the relatively recent case of China Banking Corp. v. The Members
of the Board of Trustees of the HDMF.[16] We held in that case that Section 1 of Rule VII of
the Amendments to the Rules and Regulations Implementing R.A. No. 7742, and HDMF
Circular No. 124~B prescribing the Revised Guidelines and Procedure for Filing Application
for Waiver or Suspension of Fund Coverage under P.D. No. 1752, as amended by R.A. No.
7742, are null and void insofar as they require that an employer should have both a provident/
retirement plan and a housing plan superior to the benefits offered by the Fund in order to
qualify for waiver or suspension of the Fund coverage. In arriving at said conclusion, we
ruled:
The controversy lies in the legal signification of the words "and/or."
In the instant case, the legal meaning of the words "and/or" should be taken in its ordinary
signification, i.e., "either and or; e.g. butter and/or eggs means butter and eggs or butter or
eggs.
"The term and/or means that the effect shall be given to both the conjunctive "and" and the
disjunctive "or"; or that one word or the other may be taken accordingly as one or the other
will best effectuate the purpose intended by the legislature as gathered from the whole statute.
The term is used to avoid a construction which by the use of the disjunctive "or" alone will
exclude the combination of several of the alternatives or by the use of the conjunctive "and"
will exclude the efficacy of any one of the alternatives standing alone."
It is accordingly ordinarily held that the intention of the legislature in using the term "and/or"
is that the word "and" and the word "or" are to be used interchangeably.
It ... seems to us clear from the language of the enabling law that Section 19 of P.D. No.
1752 intended that an employer with a provident plan or an employee housing plan superior
to that of the fund may obtain exemption from coverage. If the law had intended that the
employee [sic] should have both a superior provident plan and a housing plan in order to
qualify for exemption, it would have used the words "and" instead of "and/or." Notably,
paragraph (a) of Section 19 requires for annual certification of waiver or suspension, that the
features of the plan or plans are superior to the fund or continue to be so. The law obviously
contemplates that the existence of either plan is considered as sufficient basis for the grant of
an exemption; needless to state, the concurrence of both plans is more than sufficient. To
require the existence of both plans would radically impose a more stringent condition for
waiver which was not clearly envisioned by the basic law. By removing the disjunctive word
"or" in the implementing rules the respondent Board has exceeded its authority. Slx
It is without doubt that the HDMF Board has rule~making power as provided in Section
5[17] of R.A. No. 7742 and Section 13[18] of P.D. No. 1752. However, it is well~settled that
rules and regulations, which are the product of a delegated power to create new and
additional legal provisions that have the effect of law, should be within the scope of the
statutory authority granted by the legislature to the administrative agency.[19] It is required
that the regulation be germane to the objects and purposes of the law, and be not in
contradiction to, but in conformity with, the standards prescribed by law.[20]
In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII
of the 1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that
employers should have both provident/retirement and housing benefits for all its employees
in order to qualify for exemption from the Fund, it effectively amended Section 19 of P.D.
18
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)

No. 1752. And when the Board subsequently abolished that exemption through the 1996
Amendments, it repealed Section 19 of P.D. No. 1752. Such amendment and subsequent
repeal of Section 19 are both invalid, as they are not within the delegated power of the Board.
The HDMF cannot, in the exercise of its rule~making power, issue a regulation not consistent
with the law it seeks to apply. Indeed, administrative issuances must not override, supplant or
modify the law, but must remain consistent with the law they intend to carry out.[21] Only
Congress can repeal or amend the law. Scslx

While it may be conceded that the requirement of having both plans to qualify for an
exemption, as well as the abolition of the exemption, would enhance the interest of the
working group and further strengthen the Home Development Mutual Fund in its pursuit of
promoting public welfare through ample social services as mandated by the Constitution, we
are of the opinion that the basic law should prevail. A department zeal may not be permitted
to outrun the authority conferred by the statute.[22]

Considering the foregoing conclusions, it is unnecessary to dwell on the other issues raised.

WHEREFORE, the petition is GRANTED. The assailed decision of 31 July 1997 of the
Court of Appeals in CA~G.R. No. SP~43668 and its Resolution of 15 October 1997 are
hereby REVERSED and SET ASIDE. The disapproval by the Home Development Mutual
Fund of the application of the petitioner for waiver or suspension of Fund coverage is SET
ASIDE, and the Home Development Mutual Fund is hereby directed to refund to petitioner
all sums of money it collected from the latter.

SO ORDERED.

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ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
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7.) Republic of the Philippines II

SUPREME COURT
Manila Sections 5(b), 6 and 9(b) of Republic Act No. 8180 do not contravene section 19, Article XII
of the Constitution; and
EN BANC
III

Sections 5(b), 6 and 9(b) of R.A. No. 8180 do not permeate the essence of the said law; hence
G.R. No. 124360 December 3, 1997 their nullity will not vitiate the other parts thereof.

FRANCISCO S. TATAD, petitioner, In their Motion for Reconsideration, the intervenors argue:
vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY 2.1.1 The total nullification of Republic Act No. 8180 restores the disproportionate advantage
OF THE DEPARTMENT OF FINANCE, respondents. of the three big oil firms — Caltex, Shell and Petron — over the small oil firms;

G.R. No. 127867 December 3, 1997
EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO
TAÑADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT
COALITION (FDC), SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES, in his capacity as the Executive Secretary, HON.
FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX Philippines,
Inc., PETRON Corporation, and PILIPINAS SHELL Corporation, respondents.
EASTERN PETROLEUM CORP., SEAOIL PETROLEUM CORP., SUBIC BAY
DISTRIBUTION, INC., TWA, INC., and DUBPHIL GAS, Movants-in-Intervention.
2.1.2 The total nullification of Republic Act No. 8180 "disarms" the new entrants and
seriously cripples their capacity to compete and grow; and
2.1.3 Ultimately the total nullification of Republic Act. No. 8180 removes substantial, albeit
imperfect, barriers to monopolistic practices and unfair competition and trade practices
harmful not only to movant-intervernors but also to the public in general.
In his Partial Motion for Reconsideration, 2 petitioner Garcia prays that only the provisions of
R.A. No. 8180 on the 4% tariff differential, predatory pricing and minimum inventory be
declared unconstitutional. He cites the "pernicious effects" of a total declaration of
unconstitutionality of R.A. No. 8180. He avers that "it is very problematic . . . if Congress can
fastrack an entirely new law."

RESOLUTION We find no merit in the motions for reconsideration and partial motion for reconsideration.

PUNO, J.:
For resolution are: (1) the motion for reconsideration filed by the public respondents; and (2)
the partial motions for reconsideration filed by petitioner Enrique T. Garcia and the
intervenors. 1
In their Motion for Reconsideration, the public respondents contend:
I
Executive Order No. 392 is not a misapplication of Republic Act No. 8180;
We shall first resolve public respondents' motion for reconsideration. They insist that there
was no misapplication of Republic Act No. 8180 when the Executive considered the
depletion of the OPSF in advancing the date of full deregulation of the downstream oil
industry. They urge that the consideration of this factor did not violate the rule that the
exercise of delegated power must be done strictly in accord with the standard provided in the
law. They contend that the rule prohibits the Executive from subtracting but not from adding
to the standard set by Congress. This hair splitting is a sterile attempt to make a distinction
when there is no difference. The choice and crafting of the standard to guide the exercise of
delegated power is part of the lawmaking process and lies within the exclusive jurisdiction of
Congress. The standard cannot be altered in any way by the Executive for the Executive
cannot modify the will of the Legislature. To be sure, public respondents do not cite any
authority to support its strange thesis for there is none in our jurisprudence.
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The public respondents next recycle their arguments that sections 5(b), 6 and 9(b) of R.A. No.
8180 do not contravene section 19, Article XII of the Constitution. 3 They reiterate that the
4% tariff differential would encourage the construction of new refineries which will benefit
the country for they Filipino labor and goods. We have rejected this submission for a reality
check will reveal that this 4% tariff differential gives a decisive edge to the existing oil
companies even as it constitutes a substantial barrier to the entry of prospective players. We
do not agree with the public respondents that there is no empirical evidence to support this
ruling. In the recent hearing of the Senate Committee on Energy chaired by Senator Freddie
Webb, it was established that the 4% tariff differential on crude oil and refined petroleum
importation gives a 20-centavo per liter advantage to the three big oil companies over the new
players. It was also found that said tariff differential serves as a protective shield for the big
oil companies. 4 Nor do we approve public respondents' submission that the entry of new
players after deregulation is proof that the 4% tariff differential is not a heavy disincentive.
Acting as the mouthpiece of the new players, public respondents even lament that
"unfortunately, the opportunity to get the answer right from the 'horses' mouth' eluded this
Honorable Court since none of the new players supposedly adversely affected by the assailed
provisions came forward to voice their position." 5 They need not continue their lamentation.
The new players represented by Eastern Petroleum, Seasoil Petroleum Corporation, Subic
Bay Distribution, Inc., TWA Inc., and DubPhil Gas have intervened in the cases at bar and
have spoken for themselves. In their motion for intervention, they made it crystal clear that it
is not their intention ". . . to seek the reversal of the Court's nullification of the 4% differential
in section 5(b) nor of the inventory requirement of section 6, nor of the prohibition of
predatory pricing in section 9(b)." 6 They stressed that they only protest the restoration of the
10% oil tariff differential under the Tariff Code. 7 The horse's mouth therefore authoritatively
tells us that the new players themselves consider the 4% tariff differential in R.A. No. 8180 as
oppressive and should be nullified.
To give their argument a new spin, public respondents try to justify the 4% tariff differential
on the ground that there is a substantial difference between a refiner and an importer just as
there is a difference between raw material and finished product. Obviously, the effort is made
to demonstrate that the unequal tariff does not violate the unequal protection clause of the
Constitution. The effort only proves that the public respondents are still looking at the issue
of tariff differential from the wrong end of the telescope. Our Decision did not hold that the
4% tariff differential infringed the equal protection clause of the Constitution even as this was
contended by petitioner Tatad. 8 Rather, we held that said tariff differential substantially
occluded the entry point of prospective players in the downstream oil industry. We further
held that its inevitable result is to exclude fair and effective competition and to enhance the
monopolists' ability to tamper with the mechanism of a free market. This consideration is
basic in anti-trust suits and cannot be eroded by belaboring the inapplicable principle in
taxation that different things can be taxed differently.
The public respondents tenaciously defend the validity of the minimum inventory
requirement. They aver that the requirement will not prejudice new players ". . . during their
first year of operation because they do not have yet annual sales from which the required
minimum inventory may be determined. Compliance with such requirement on their second
and succeeding years of operation will not be difficult because the putting up of storage
facilities in proportion to the volume of their business becomes an ordinary and necessary
business undertaking just as the case of importers of finished products in other
industries." 9 The contention is an old one although it is purveyed with a new lipstick. The
contention cannot convince for as well articulated by petitioner Garcia, "the prohibitive cost
of the required minimum inventory will not be any less burdensome on the second, third,
fourth, etc. years of operations. Unlike most products which can be imported and stored with
facility, oil imports require ocean receiving, storage facilities. Ocean receiving terminals are
already very expensive, and to require new players to put up more than they need is to
compound and aggravate their costs, and consequently their great dis-advantage vis-a-vis the
Big 3." 10 Again, the argument on whether the minimum inventory requirement seriously
hurts the new players is best settled by hearing the new players themselves. In their motion
for intervention, they implicitly confirmed that the high cost of meeting the inventory
requirement has an inhibiting effect in their operation and hence, they support the ruling of
this Court striking it down as unconstitutional.
Public respondents still maintain that the provision on predatory pricing does not offend the
Constitution. Again, their argument is not fresh though embellished with citations of cases in
the United States sustaining the validity of sales-below-costs statutes. 11 A quick look at these
American cases will show that they are inapplicable. R.A. No. 8180 has a different cast. As
discussed, its provisions on tariff differential and minimum inventory erected high barriers to
the entry of prospective players even as they raised their new rivals' costs, thus creating the
clear danger that the deregulated market in the downstream oil industry will not operate under
an atmosphere of free and fair competition. It is certain that lack of real competition will
allow the present oil oligopolists to dictate prices, 12 and can entice them to engage in
predatory pricing to eliminate rivals. The fact that R.A. No. 8180 prohibits predatory pricing
will not dissolve this clear danger. In truth, its definition of predatory pricing is too loose to
be real deterrent. Thus, one of the law's principal authors, Congressman Dante O. Tinga filed
H.B. No. 10057 where he acknowledged in its explanatory note that "the definition of
predatory pricing . . . needs to be tightened up particularly with respect to the definitive
benchmark price and the specific anti-competitive intent. The definition in the bill at hand
which was taken from the Areeda-Turner test in the United States on predatory pricing
resolves the questions." Following the more effective Areeda-Turner test, Congressman
Tinga has proposed to redefine predatory pricing, viz.: "Predatory pricing means selling or
offering to sell any oil product at a price below the average variable cost for the purpose of
destroying competition, eliminating a competitor or discouraging a competitor from entering
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the market." 13 In light of its loose characterization in R.A. 8180 and the law's anti-
competitive provisions, we held that the provision on predatory pricing is constitutionally
infirmed for it can be wielded more successfully by the oil oligopolist. Its cumulative effect is
to add to the arsenal of power of the dominant oil companies. For as structured, it has no
more than the strength of a spider web — it can catch the weak but cannot catch the strong; it
can stop the small oil players but cannot stop the big oil players from engaging in predatory
pricing.
Public respondents insist on their thesis that the cases at bar actually assail the wisdom of
R.A. No. 8180 and that this Court should refrain from examining the wisdom of legislations.
They contend that R.A. No. 8180 involves an economic policy which this Court cannot
review for lack of power and competence. To start with, no school of scholars can claim any
infallibility. Historians with undefiled learning have chronicled 14 over the years the disgrace
of many economists and the fall of one economic dogma after another. Be that as it may, the
Court is aware that the principle of separation of powers prohibits the judiciary from
interferring with the policy setting function of the legislature. 15 For this reason we italicized
in our Decision that the Court did not review the wisdom of R.A. No. 8180 but its
compatibility with the Constitution; the Court did not annul the economic policy of
deregulation but vitiated its aspects which offended the constitutional mandate on fair
competition. It is beyond debate that the power of Congress to enact laws does not include the
right to pass unconstitutional laws. In fine, the Court did not usurp the power of the Congress
to enact laws but merely discharged its bounden duty to check the constitutionality of laws
when challenged in appropriate cases. Our Decision annulling R.A No. 8180 is justified by
the principle of check and balance.
We hold that the power and obligation of this Court to pass upon the constitutionality of laws
cannot be defeated by the fact that the challenged law carries serious economic implications.
This Court has struck down laws abridging the political and civil rights of our people even if
it has to offend the other more powerful branches of government. There is no reason why the
Court cannot strike down R.A. No. 8180 that violates the economic rights of our people even
if it has to bridle the liberty of big business within reasonable bounds. In Alalayan
vs. National Power Corporation 16 the Court, speaking thru Mr. Chief Justice Enrique M.
Fernando, held:
2. Nor is petitioner anymore successful in his plea for the nullification of the challenged
provision on the ground of his being deprived of the liberty to contract without due process of
law.
It is to be admitted of course that property rights find shelter in specific constitutional
provisions, one of which is the due process clause. It is equally certain that our fundamental
law framed at a time of "surging unrest and dissatisfaction," when there was the fear
expressed in many quarters that a constitutional democracy, in view of its commitment to the
claims of property, would not be able to cope effectively with the problems of poverty and
misery that unfortunately afflict so many of our people, is not susceptible to the indictment
that the government therein established is impotent to take the necessary remedial measures.
The framers saw to that. The welfare state concept is not alien to the philosophy of our
Constitution. It is implicit in quite a few of its provisions. It suffices to mention two.
There is the clause on the promotion of social justice to ensure the well-being and economic
security of all the people, as well as the pledge of protection to labor with the specific
authority to regulate the relations between landowners and tenants and between labor and
capital. This particularized reference to the rights of working men whether in industry and
agriculture certainly cannot preclude attention to and concern for the rights of consumers,
who are the objects of solicitude in the legislation now complained of. The police power as an
attribute to promote the common weal would be diluted considerably of its reach and
effectiveness if on the mere plea that the liberty to contract would be restricted, the statute
complained of may be characterized as a denial of due process. The right to property cannot
be pressed to such an unreasonable extreme.
It is understandable though why business enterprises, not unnaturally evincing lack of
enthusiasm for police power legislation that affect them adversely and restrict their profits
could predicate alleged violation of their rights on the due process clause, which as
interpreted by them is a bar to regulatory measures. Invariably, the response from this Court,
from the time the Constitution was enacted, has been far from sympathetic. Thus, during the
Commonwealth, we sustained legislations providing for collective bargaining, security of
tenure, minimum wages, compulsory arbitration, and tenancy regulation. Neither did the
objections as to the validity of measures regulating the issuance of securities and public
services prevail.
The Constitution gave this Court the authority to strike down all laws that violate the
Constitution. 17 It did not exempt from the reach of this authority laws with economic
dimension. A 20-20 vision will show that the grant by the Constitution to this Court of this all
important power of review is written without any fine print.
The next issue is whether the Court should only declare as unconstitutional the provisions of
R.A. No. 8180 on 4% tariff differential, minimum inventory and predatory pricing.
Positing the affirmative view, petitioner Garcia proffered the following arguments:
5. Begging the kind indulgence and benign patience of the Court, we humbly submit that the
unconstitutionality of the aforementioned provisions of R.A. No. 8180 implies that the other
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provisions are constitutional. Thus, said constitutional provisions of R.A. No. 8180 may and
can very well be spared.
5.1 With the striking down of "ultimately full deregulation," we will simply go back to the
transition period under R.A. 8180 which will continue until Congress enacts an amendatory
law for the start of full oil deregulation in due time, when free market forces are already in
place. In turn, the monthly automatic price control mechanism based on Singapore Posted
Prices (SPP) will be revived. The energy Regulatory Board (ERB), which still exist, would
re-acquire jurisdiction and would easily compute the monthly price ceiling, based on SPP, of
each and every petroleum fuel product, effective upon finality of this Court's favorable
resolution on this motion for partial reconsideration.
5.2 Best of all, the oil deregulation can continue uninterrupted without the three other
assailed provisions, namely, the 4% tariff differential, predatory pricing and minimum
inventory.
6. We further humbly submit that a favorable resolution on this motion for partial
reconsideration would be consistent with public interest.
6.1 In consequence, new players that have already come in can uninterruptedly continue their
operations more competitively and bullishly with an even playing field.
6.2 Further, an even playing field will attract many more new players to come in in a much
shorter time.
6.3 Correspondingly, Congress does not anymore have to pass a new deregulation law, thus
it can immediately concentrate on just amending R.A. No. 8180 to abolish the OPSF, on the
government's assumption that it is necessary to do so. Parenthetically, it is neither correct nor
fair for high government officials to criticize and blame the Honorable Court on the OPSF,
considering that said OPSF is not inherent in nor necessary to the transition period and may
be removed at any time.
6.4 In as much as R.A. No. 8180 would continue to be in place (sans its unconstitutional
provisions), only the Comprehensive Tax Reform Package (CTRP) would be needed for the
country to exit from IMF by December 1997.
7. The Court, in declaring the entire R.A. No. 8180 unconstitutional, was evidently expecting
that Congress "can fasttrack the writing of a new law on oil deregulation in accord with the
Constitution" (Decision p. 38) However, it is very problematic, to say the least, if Congress
can fasttrack an entirely new law.
7.1 There is already limited time for Congress to pass such a new law before it adjourns for
the 1998 elections.
7.2 At the very least, whether or not Congress will be able to fasttrack the enactment of a new
oil deregulation law consistent with the Honorable Court's ruling, would depend on many
unforseeable and uncontrollable factors. Already, several statements from legislators,
senators and congressmen alike, say that the new law can wait because of other pending
legislative matters, etc. Given the "realities" of politics, especially with the 1998 presidential
polls six months away, it is not far-fetched that the general welfare could be sacrificed to gain
political mileage, thus further unduly delaying the enactment of a new oil deregulation law.
8. Furthermore, if the entire R.A. No. 8180 remains nullified as unconstitutional, the
following pernicious effects will happen:
8.1 Until the new oil deregulation law is enacted, we would have to go back to the old law.
This means full regulation, i.e., higher tariff differential of 10%, higher petroleum product
price ceilings based on transfer prices of imported crude oil, and restrictions on the
importation of refined petroleum products that would be allowed only if there are shortages,
etc.
8.2 In consequence of the above, the existing new players, would have to totally stop their
operations.
8.3 The existing new players would find themselves in a bind on how to fulfill their
contractual obligations, especially on their delivery commitments of petroleum fuel
products. They will be in some sort of "limbo" upon the nullification of the entire
R.A. No. 8180.
8.4 The investments that existing new players have already made would become idle and
unproductive. All their planned additional investments would be put on hold.
8.5 Needless to say, all this would translate into tremendous losses for them.
8.6 And obviously, prospective new players cannot and will not come in.
8.7 On top of everything, public interest will suffer. Firstly, the oil deregulation program will
be delayed. Secondly, the prices of petroleum products will be higher because of price
ceilings based on transfer prices of imported crude.
9. When it passed R.A. No. 8180, Congress provided a safeguard against the possibility that
any of its provisions could be declared unconstitutional, thus the separability clause thereof,
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which the Court noted (Decision, p. 29). We humbly submit that this is another reason to
grant this motion for partial reconsideration.
In his Supplement to Urgent Motion for Partial Reconsideration, petitioner Garcia amplified
his contentions.
In a similar refrain, the public respondents contend that the "unmistakable intention of
Congress" is to make each and every provision of R.A. No. 8180 "independent and separable
from one another." To bolster this proposition, they cite the separability clause of the law and
the pending bills in Congress proposing to repeal said offensive provisions but not the entire
law itself. They also recite the "inevitable consequences of the declaration of
unconstitutionality of R.A. No. 8180" as follows:
1. There will be bigger price adjustments in petroleum products due to (a) the reimposition of
the higher tariff rates for imported crude oil and imported refined petroleum products [10%-
20%], (b) the uncertainty regarding R.A. 8184, or the "Oil Tariff Law," which simplified tax
administration by lowering the tax rates for socially-sensitive products such as LPG, diesel,
fuel oil and kerosene, and increasing tax rates of gasoline products which are used mostly by
consumers who belong to the upper income group, and (c) the issue of wiping out the deficit
of P2.6 billion and creating a subsidy fund in the Oil Price Stabilization Fund;
2. Importers, traders, and industrial end-users like the National Power Corporation will be
constrained to source their oil requirement only from existing oil companies because of the
higher tariff on imported refined petroleum products and restrictions on such importation that
would be allowed only if there are shortages;
3. Government control and regulation of all the activities of the oil industry will discourage
prospective investors and drive away the existing new players;
4. All expansion and investment programs of the oil companies and new players will be
shelved indefinitely;
5. Petitions for price adjustments should be filed and approved by the ERB.
Joining the chorus, the intervenors contend that:
2.1.1 The total nullification of Republic Act No. 8180 restores the disproportionate advantage
of the three big oil firms — Caltex, Shell and Petron — over the small oil firms;
2.1.2 The total nullification of Republic Act No. 8180 "disarms" the new entrants and
seriously cripples their capacity to compete and grow; and
2.1.3 Ultimately, the total nullification of Republic Act No. 8180 removes substantial, albeit
imperfect, barriers to monopolistic practices and unfair competition and trade practices
harmful not only to movant-intervenors but also to the public in general.
The intervenors further aver that under a regime of regulation, (1) the big oil firms can block
oil importation by the small oil firms; (2) the big oil firms can block the expansion and
growth of the small oil firms. They likewise submit that the provisions on tariff differential,
minimum inventory, and predatory pricing are separable from the body of R.A. No. 8180
because of its separability clause. They also allege that their separability is further shown by
the pending bills in Congress which only seek the partial repeal of R.A. No. 8180.
We shall first resolve petitioner Garcia's linchpin contention that the full deregulation decreed
by R.A. No. 8180 to start at the end of March 1997 is unconstitutional. For prescinding from
this premise, petitioner suggests that "we simply go back to the transition period under R.A.
No. 8180. Under the transition period, price control will be revived through the automatic
pricing mechanism based on Singapore Posted Prices. The Energy Regulatory Board . . .
would play a limited and ministerial role of computing the monthly price ceiling of each and
every petroleum fuel product, using the automatic pricing formula. While the OPSF would
return, this coverage would be limited to monthly price increases in excess of P0.50 per liter."
We are not impressed by petitioner Garcia's submission. Petitioner has no basis in
condemning as unconstitutional per se the date fixed by Congress for the beginning of the full
deregulation of the downstream oil industry. Our Decision merely faulted the Executive for
factoring the depletion of OPSF in advancing the date of full deregulation to February 1997.
Nonetheless, the error of the Executive is now a non-issue for the full deregulation set by
Congress itself at the end of March 1997 has already come to pass. March 1997 is not an
arbitrary date. By that date, the transition period has ended and it was expected that the
people would have adjusted to the role of market forces in shaping the prices of petroleum
and its products. The choice of March 1997 as the date of full deregulation is a judgment of
Congress and its judgment call cannot be impugned by this Court.
We come to the submission that the provisions on 4% tariff differential, minimum inventory
and predatory pricing are separable from the body of R.A. No. 8180, and hence, should alone
be declared as unconstitutional. In taking this position, the movants rely heavily on the
separability provision of R.A. No. 8180. We cannot affirm the movants for the determine
whether or not a particular provision is separable, the courts should consider the intent of the
legislature. It is true that the most of the time, such intent is expressed in a separability clause
stating that the invalidity or unconstitutionality of any provision or section of the law will not
affect the validity or constitutionality of the remainder. Nonetheless, the separability clause
only creates a presumption that the act is severable. It is merely an aid in statutory
construction. It is not an inexorable command. 18 A separability clause does not clothe the
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valid parts with immunity from the invalidating effect the law gives to the inseparable
blending of the bad with the good. The separability clause cannot also be applied if it will
produce an absurd result. 19 In sum, if the separation of the statute will defeat the intent of the
legislature, separation will not take place despite the inclusion of a separability clause in the
law. 20
In the case of the Republic Act No. 8180, the unconstitutionality of the provisions on tariff
differential, minimum inventory and predatory pricing cannot but result in the
unconstitutionality of the entire law despite its separability clause. These provisions cannot be
struck down alone for they were the ones intended to carry out the policy of the law
embodied in section 2 thereof which reads:
Sec. 2. Declaration of Policy — It shall be the policy of the State to deregulate the
downstream oil industry to foster a truly competitive market which can better achieve the
social policy objectives of fair prices and adequate, continuous supply of environmentally-
clean and high-quality petroleum products.
They actually set the stage for the regime of deregulation where government will no longer
intervene in fixing the price of oil and the operations of oil companies. It is conceded that the
success of deregulation lies in a truly competitive market and there can be no competitive
market without the easy entry and exit of competitors. No less than President Fidel
V. Ramos recognized this matrix when he declared the need is to ". . . recast our laws on trust,
monopolies, oligopolies, cartels and combinations injurious to public welfare — to restore
competition where it has disappeared and to preserve it where it still exists. In a word, we
need to perpetuate competition as a system to regulate the economy and achieve global
product quality." 21
We held in our Decision that the provisions on 4% tariff differential, minimum inventory and
predatory pricing are anti-competition, and they are the key provisions of R.A. No. 8180.
Without these provisions in place, Congress could not have deregulated the downstream oil
industry. Consider the 4% tariff differential on crude oil and refined petroleum. Before R.A.
No. 8180, 22 there was a ten-point difference between the tariff imposed on crude oil and that
on refined petroleum. Section 5(b) of R.A. No. 8180 lowered the difference to four by
imposing a 3% tariff on crude oil and a 7% tariff on refined petroleum. We ruled, however,
that this reduced tariff differential is unconstitutional for it still posed a substantial barrier to
the entry of new players and enhanced the monopolistic power of the three existing oil
companies. The ruling that the 4% differential is unconstitutional will unfortunately revive
the 10% tariff differential of the Tariff and Customs Code. The high 10% tariff differential
will certainly give a bigger edge to the three existing oil companies, will form an insuperable
barrier to prospective players, and will drive out of business the new players. Thus, there can
be no question that Congress will not allow deregulation if the tariff is 10% on crude oil and
20% on refined petroleum. To decree the partial unconstitutionality of R.A. No. 8180 will
bring about an absurdity — a fully deregulated downstream oil industry where government is
impotent to regulate run away prices, where the oil oligopolists can engage in cartelization
without competition, where prospective players cannot come in, and where new players will
close shop.
We also reject the argument that the bills pending in Congress merely seek to remedy the
partial defects of R.A No. 8180, and that this is proof that R.A. No. 8180 can be declared
unconstitutional minus its offensive provisions. We referred to the pending bills in Congress
in our Decision only to show that Congress itself is aware of the various defects of the law
and not to prove the inseparability of the offending provisions from the body of R.A. No.
8180. To be sure, movants even overlooked the fact that resolutions have been filed in both
House of Congress calling for a total review of R.A. No. 8180.
The movants warn that our Decision will throw us back to the undesirable regime of
regulation. They emphasize its pernicious consequences — the revival of the 10% tariff
differential which will wipe out the new players, the return of the OPSF which is too
burdensome to government, the unsatisfactory scheme of price regulation by the ERB, etc. To
stress again, it is not the will of the Court to return even temporarily to the regime of
regulation. If we return to the regime of regulation, it is because it is the inevitable
consequence of the enactment by Congress of an unconstitutional law, R.A. No. 8180. It is
settled jurisprudence that the declaration of a law as unconstitutional revives the laws that it
has repealed. Stated otherwise, an unconstitutional law returns us to the status quo ante and
this return is beyond the power of the Court to stay. Under our scheme of government,
however, the remedy to prevent the revival of an unwanted status quo ante or stop its
continuation by immediately enacting the necessary remedial legislation. We emphasize that
in the cases at bar, the Court did not condemn the economic policy of deregulation as
unconstitutional. It merely held that as crafted, the law runs counter to the constitutional
provision calling for fair competition. 23 Thus, there is no impediment in re-enacting R.A. No.
8180 minus its provisions which are anti-competition. The Court agrees that our return to the
regime of regulation has pernicious consequences and it specially symphatizes with the
intervenors. Be that as it may, the Court is powerless to prevent this return just as it is
powerless to repeal the 10% tariff differential of the Tariff Code. It is Congress that can give
all these remedies. 24
Petitioner Garcia, however, injects a non-legal argument in his motion for partial
reconsideration. He avers that "given the 'realities' of politics, especially with the 1998
presidential polls six months away, it is not far-fetched that the general welfare could be
sacrificed to gain political mileage, thus further unduly delaying the enactment of a new oil
deregulation law." The short answer to petitioner Garcia's argument is that when the Court
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reviews the constitutionality of a law, it does not deal with the realities of politics nor does it rights of our people, especially the poor. It is the unyielding duty of this Court to uphold the
delve into the mysticism of politics. The Court has no partisan political theology for as an supremacy of the Constitution not with a mere wishbone but with a backbone that should
institution it is at best apolitical, and at worse, politically agnostic. In any event, it should not neither bend nor break.
take a long time for Congress to enact a new oil deregulation law given its interest for the
welfare of our people. Petitioner Garcia himself has been quoted as saying that ". . . with the IN VIEW WHEREOF, the Motions for Reconsideration of the public respondents and of the
Court's decision, it would now be easy for Congress to craft new law, considering that intervenors as well as the Partial Motion for Reconsideration of petitioner Enrique Garcia are
lawmakers will be guided by the Court's points." 25 Even before our Decision, bills amending DENIED for lack of merit.
the offensive provisions of R.A. No. 8180 have already been filed in the Congress and under
consideration by its committees. Speaker Jose de Venecia has assured after a meeting of the SO ORDERED.
Legislative-Executive Advisory Council (LEDAC) that: "I suppose before Christmas, we
should be able to pass a new oil deregulation
law. 26 The Chief Executive himself has urged the immediate passage of a new and better oil
deregulation law. 27

Finally, public respondents raise the scarecrow argument that our Decision will drive away
foreign investors. In response to this official repertoire, suffice to state that our Decision
precisely levels the playing field for foreign investors as against the three dominant oil
oligopolists. No less than the influential Philippine Chamber of Commerce and Industry
whose motive is beyond question, stated thru its Acting President Jaime Ladao that ". . . this
Decision, in fact tells us that we are for honest-to-goodness competition." Our Decision
should be a confidence-booster to foreign investors for its assures them of an effective
judicial remedy against an unconstitutional law. There is need to attract foreign investment
but that policy has never been foreign investment at any cost. We cannot trade-in the
Constitution for foreign investment. It is not economic heresy to hold that trade-in is not a fair
exchange.

To recapitulate, our Decision declared R.A. No. 8180 unconstitutional for three reasons: (1) it
gave more power to an already powerful oil oligopoly; (2) it blocked the entry of effective
competitors; and (3) it will sire an even more powerful oligopoly whose unchecked power
will prejudice the interest of the consumers and compromise the general welfare.

A weak and developing country like the Philippines cannot risk a downstream oil industry
controlled by a foreign oligopoly that can run riot. Oil is our most socially sensitive
commodity and for it to be under the control of a foreign oligopoly without effective
competitors is a clear and present danger. A foreign oil oligopoly can undermine the security
of the nation; it can exploit the economy if greed becomes its creed; it will have the power to
drive the Filipino to a prayerful pose. Under a deregulated regime, the people's only hope to
check the overwhelming power of the foreign oil oligopoly lies on a market where there is
fair competition. With prescience, the Constitution mandates the regulation of monopolies
and interdicts unfair competition. Thus, the Constitution provides a shield to the economic

26
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
8.) Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-34674 October 26, 1931
MAURICIO CRUZ, petitioner-appellant,
vs.
STANTON YOUNGBERG, Director of the Bureau of Animal Industry, respondent-
appellee.
Jose Yulo for appellant.
Office of the Solicitor-General Reyes for appellee.
OSTRAND, J.:
This is a petition brought originally before the Court of First Instance of Manila for the
issuance of a writ of mandatory injunction against the respondent, Stanton Youngberg, as
Director of the Bureau of Animal Industry, requiring him to issue a permit for the landing of
ten large cattle imported by the petitioner and for the slaughter thereof. The petitioner
attacked the constitutionality of Act No. 3155, which at present prohibits the importation of
cattle from foreign countries into the Philippine Islands.
Among other things in the allegation of the petition, it is asserted that "Act No. 3155 of the
Philippine Legislature was enacted for the sole purpose of preventing the introduction of
cattle diseases into the Philippine Islands from foreign countries, as shown by an explanatory
note and text of Senate Bill No. 328 as introduced in the Philippine Legislature, ... ." The Act
in question reads as follows:
SECTION 1. After March thirty-first, nineteen hundred and twenty-five existing contracts for
the importation of cattle into this country to the contrary notwithstanding, it shall be strictly
prohibited to import, bring or introduce into the Philippine Islands any cattle from foreign
countries: Provided, however, That at any time after said date, the Governor-General, with
the concurrence of the presiding officers of both Houses, may raise such prohibition entirely
or in part if the conditions of the country make this advisable or if decease among foreign
cattle has ceased to be a menace to the agriculture and live stock of the lands.
SEC. 2. All acts or parts of acts inconsistent with this Act are hereby repealed.
SEC. 3. This Act shall take effect on its approval.
Approved, March 8, 1924.
The respondent demurred to the petition on the ground that it did not state facts sufficient to
constitute a cause of action. The demurrer was based on two reasons, namely, (1) that if Act
No. 3155 were declared unconstitutional and void, the petitioner would not be entitled to the
relief demanded because Act No. 3052 would automatically become effective and would
prohibit the respondent from giving the permit prayed for; and (2) that Act No. 3155 was
constitutional and, therefore, valid.
The court sustained the demurrer and the complaint was dismissed by reason of the failure of
the petitioner to file another complaint. From that order of dismissal, the petitioner appealed
to this court.
The appellee contends that even if Act No. 3155 be declared unconstitutional by the fact
alleged by the petitioner in his complaint, still the petitioner can not be allowed to import
cattle from Australia for the reason that, while Act No. 3155 were declared unconstitutional,
Act No. 3052 would automatically become effective. Act No. 3052 reads as follows:
SECTION 1. Section seventeen hundred and sixty-two of Act Numbered Twenty-seven
hundred and eleven, known as the Administrative Code, is hereby amended to read as
follows:
"SEC. 1762. Bringing of animals imported from foreign countries into the Philippine Islands.
— It shall be unlawful for any person or corporation to import, bring or introduce live cattle
into the Philippine Islands from any foreign country. The Director of Agriculture may, with
the approval of the head of the department first had, authorize the importation, bringing or
introduction of various classes of thoroughbred cattle from foreign countries for breeding the
same to the native cattle of these Islands, and such as may be necessary for the improvement
of the breed, not to exceed five hundred head per annum: Provided, however, That the
Director of Agriculture shall in all cases permit the importation, bringing or introduction of
draft cattle and bovine cattle for the manufacture of serum: Provided, further, That all live
cattle from foreign countries the importation, bringing or introduction of which into the
Islands is authorized by this Act, shall be submitted to regulations issued by the Director of
Agriculture, with the approval of the head of the department, prior to authorizing its transfer
to other provinces.
"At the time of the approval of this Act, the Governor-General shall issue regulations and
others to provide against a raising of the price of both fresh and refrigerated meat. The
Governor-General also may, by executive order, suspend, this prohibition for a fixed period
in case local conditions require it."
SEC. 2. This Act shall take effect six months after approval.
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ADMIN LAW
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A. Quasi- Legislative Powers (Sufficient standard test)

Approved, March 14, 1922. his discretion, the prohibition provided in the act constitutes an unlawful delegation of the
legislative powers." We do not think that such is the case; as Judge Ranney of the Ohio
The petitioner does not present any allegations in regard to Act No. 3052 to show its nullity Supreme Court in Cincinnati, Wilmington and Zanesville Railroad Co. vs. Commissioners of
or unconstitutionality though it appears clearly that in the absence of Act No. 3155 the former Clinton County (1 Ohio St., 77, 88) said in such case:
act would make it impossible for the Director of the Bureau of Animal Industry to grant the
petitioner a permit for the importation of the cattle without the approval of the head of the The true distinction, therefore, is between the delegation of power to make the law, which
corresponding department. necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first
An unconstitutional statute can have no effect to repeal former laws or parts of laws by cannot be done; to the latter no valid objection can be made.
implication, since, being void, it is not inconsistent with such former laws. (I Lewis
Sutherland, Statutory Construction 2nd ed., p. 458, citing McAllister vs. Hamlin, 83 Cal., Under his fourth assignment of error the appellant argues that Act No. 3155 amends section 3
361; 23 Pac., 357; Orange Country vs. Harris, 97 Cal., 600; 32 Pac., 594; Carr vs. State, 127 of the Tariff Law, but it will be noted that Act No. 3155 is not an absolute prohibition of the
Ind., 204; 11 L.R.A., 370, etc.) importation of cattle and it does not add any provision to section 3 of the Tariff Law. As
stated in the brief of the Attorney-General: "It is a complete statute in itself. It does not make
This court has several times declared that it will not pass upon the constitutionality of statutes any reference to the Tariff Law. It does not permit the importation of articles, whose
unless it is necessary to do so (McGirr vs. Hamilton and Abreu, 30 Phil., 563, 568; Walter E. importation is prohibited by the Tariff Law. It is not a tariff measure but a quarantine
Olsen & Co. vs. Aldanese and Trinidad, 43 Phil., 259) but in this case it is not necessary to measure, a statute adopted under the police power of the Philippine Government. It is at most
pass upon the validity of the statute attacked by the petitioner because even if it were declared a `supplement' or an `addition' to the Tariff Law. (See MacLeary vs. Babcock, 82 N.E., 453,
unconstitutional, the petitioner would not be entitled to relief inasmuch as Act No. 3052 is not 455; 169 Ind., 228 for distinction between `supplemental' and `amendatory' and O'Pry vs.
in issue. U.S., 249 U.S., 323; 63 Law. ed., 626, for distinction between `addition' and `amendment.')"
But aside from the provisions of Act No. 3052, we are of the opinion that Act No. 3155 is The decision appealed from is affirmed with the costs against the appellant. So ordered.
entirely valid. As shown in paragraph 8 of the amended petition, the Legislature passed Act
No. 3155 to protect the cattle industry of the country and to prevent the introduction of cattle
diseases through importation of foreign cattle. It is now generally recognized that the
promotion of industries affecting the public welfare and the development of the resources of
the country are objects within the scope of the police power (12 C.J., 927; 6 R.C.L., 203-206
and decisions cited therein; Reid vs. Colorado, 187 U.S., 137, 147, 152; Yeazel vs.
Alexander, 58 Ill., 254). In this connection it is said in the case of Punzalan vs. Ferriols and
Provincial Board of Batangas (19 Phil., 214), that the provisions of the Act of Congress of
July 1, 1902, did not have the effect of denying to the Government of the Philippine Islands
the right to the exercise of the sovereign police power in the promotion of the general welfare
and the public interest. The facts recited in paragraph 8 of the amended petition shows that at
the time the Act No. 3155 was promulgated there was reasonable necessity therefor and it
cannot be said that the Legislature exceeded its power in passing the Act. That being so, it is
not for this court to avoid or vacate the Act upon constitutional grounds nor will it assume to
determine whether the measures are wise or the best that might have been adopted. (6 R.C.L.,
243 and decisions cited therein.)1awphil.net

In his third assignment of error the petitioner claims that "The lower court erred in not
holding that the power given by Act No. 3155 to the Governor-General to suspend or not, at
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ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)

9.) CMO 27-2003 further provided for the proper procedure for protest or Valuation and
Classification Review Committee (VCRC) cases. Under this procedure, the release of the
Supreme Court articles that were the subject of protest required the importer to post a cash bond to cover the
Manila tariff differential.[6]

SECOND DIVISION A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a
Petition for Declaratory Relief[7] with the Regional Trial Court (RTC) of Las Pias City. It
COMMISSIONER OF CUSTOMS and G.R. No. 179579 anticipated the implementation of the regulation on its imported and perishable Chinese
the DISTRICT COLLECTOR OF THE milling wheat in transit from China.[8] Respondent contended that CMO 27-2003 was issued
PORT OF SUBIC, Present: without following the mandate of the Revised Administrative Code on public participation,
Petitioners, prior notice, and publication or registration with the University of the Philippines Law
CARPIO, J., Chairperson, Center.
BRION,
PEREZ, Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier
- versus - SERENO, and without the benefit of prior assessment and examination; thus, despite having imported food
REYES, JJ. grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing
them to pay 133% more than was proper.
Promulgated:
HYPERMIX FEEDS CORPORATION, Furthermore, respondent claimed that the equal protection clause of the Constitution was
Respondent. February 1, 2012 violated when the regulation treated non-flour millers differently from flour millers for no
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x reason at all.
DECISION Lastly, respondent asserted that the retroactive application of the regulation was confiscatory
in nature.
SERENO, J.:

Before us is a Petition for Review under Rule 45,[1] assailing the Decision[2] and the
Resolution[3] of the Court of Appeals (CA), which nullified the Customs Memorandum Order
(CMO) No. 27-2003[4] on the tariff classification of wheat issued by petitioner Commissioner
of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the
Memorandum, for tariff purposes, wheat was classified according to the following: (1)
importer or consignee; (2) country of origin; and (3) port of discharge.[5] The regulation
provided an exclusive list of corporations, ports of discharge, commodity descriptions and
countries of origin. Depending on these factors, wheat would be classified either as food
grade or feed grade. The corresponding tariff for food grade wheat was 3%, for feed grade,
7%.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for
twenty (20) days from notice.[9]
Petitioners thereafter filed a Motion to Dismiss.[10] They alleged that: (1) the RTC did not
have jurisdiction over the subject matter of the case, because respondent was asking for a
judicial determination of the classification of wheat; (2) an action for declaratory relief was
improper; (3) CMO 27-2003 was an internal administrative rule and not legislative in nature;
and (4) the claims of respondent were speculative and premature, because the Bureau of
Customs (BOC) had yet to examine respondents products. They likewise opposed the
application for a writ of preliminary injunction on the ground that they had not inflicted any
injury through the issuance of the regulation; and that the action would be contrary to the rule
that administrative issuances are assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the application for
preliminary injunction and the Motion to Dismiss would just be resolved together in the main

29
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
case. Thus, on 10 March 2005, the RTC rendered its Decision[11] without having to resolve
the application for preliminary injunction and the Motion to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject
Customs Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND
EFFECT. Respondents Commissioner of Customs, the District Collector of Subic or anyone
acting in their behalf are to immediately cease and desist from enforcing the said Customs
Memorandum Order 27-2003.
SO ORDERED.[12]
The RTC held that it had jurisdiction over the subject matter, given that the issue raised by
respondent concerned the quasi-legislative powers of petitioners. It likewise stated that a
petition for declaratory relief was the proper remedy, and that respondent was the proper
party to file it. The court considered that respondent was a regular importer, and that the latter
would be subjected to the application of the regulation in future transactions.
With regard to the validity of the regulation, the trial court found that petitioners had not
followed the basic requirements of hearing and publication in the issuance of CMO 27-2003.
It likewise held that petitioners had substituted the quasi-judicial determination of the
commodity by a quasi-legislative predetermination.[13] The lower court pointed out that a
classification based on importers and ports of discharge were violative of the due process
rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the
same allegations in defense of CMO 27-2003.[14] The appellate court, however, dismissed the
appeal. It held that, since the regulation affected substantial rights of petitioners and other
importers, petitioners should have observed the requirements of notice, hearing and
publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS
NOT IN ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.
II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE
TRIAL COURT HAS JURISDICTION OVER THE CASE.
The Petition has no merit.
We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance,
or any other governmental regulation may, before breach or violation thereof, bring an action
in the appropriate Regional Trial Court to determine any question of construction or validity
arising, and for a declaration of his rights or duties, thereunder.
The requirements of an action for declaratory relief are as follows: (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.[15] We find that the Petition
filed by respondent before the lower court meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by
petitioner Commissioner of Customs. In Smart Communications v. NTC,[16] we held:
The determination of whether a specific rule or set of rules issued by an administrative
agency contravenes the law or the constitution is within the jurisdiction of the regular
courts. Indeed, 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 in the courts, including the regional trial courts.
This is within the scope of judicial power, which includes the authority of the courts to
determine in an appropriate action the validity of the acts of the political
departments. Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.
(Emphasis supplied)
Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance
Secretary,[17] we said:
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ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. xxx
In addition such rule must be published. On the other hand, interpretative rules are designed
to provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make three
inquiries: (i) whether the rule is within the delegated authority of the administrative
agency; (ii) whether it is reasonable; and (iii) whether it was issued pursuant to proper
procedure. But the court is not free to substitute its judgment as to the desirability or
wisdom of the rule for the legislative body, by its delegation of administrative judgment, has
committed those questions to administrative judgments and not to judicial judgments. In the
case of an interpretative rule, the inquiry is not into the validity but into the correctness or
propriety of the rule. As a matter of power a court, when confronted with an interpretative
rule, is free to (i) give the force of law to the rule; (ii) go to the opposite extreme and
substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the
interpretative rule. (Emphasis supplied)
Second, the controversy is between two parties that have adverse interests. Petitioners are
summarily imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the implementation of
CMO 27-2003. Respondent has adequately shown that, as a regular importer of wheat, on 14
August 2003, it has actually made shipments of wheat from China to Subic. The shipment
was set to arrive in December 2003. Upon its arrival, it would be subjected to the conditions
of CMO 27-2003. The regulation calls for the imposition of different tariff rates, depending
on the factors enumerated therein. Thus, respondent alleged that it would be made to pay the
7% tariff applied to feed grade wheat, instead of the 3% tariff on food grade wheat. In
addition, respondent would have to go through the procedure under CMO 27-2003, which
would undoubtedly toll its time and resources. The lower court correctly pointed out as
follows:
xxx As noted above, the fact that petitioner is precisely into the business of importing
wheat, each and every importation will be subjected to constant disputes which will
result into (sic) delays in the delivery, setting aside of funds as cash bond required in the
CMO as well as the resulting expenses thereof. It is easy to see that business uncertainty
will be a constant occurrence for petitioner. That the sums involved are not minimal is
shown by the discussions during the hearings conducted as well as in the pleadings filed.
It may be that the petitioner can later on get a refund but such has been foreclosed because
the Collector of Customs and the Commissioner of Customs are bound by their own CMO.
Petitioner cannot get its refund with the said agency. We believe and so find that Petitioner
has presented such a stake in the outcome of this controversy as to vest it with standing to file
this petition.[18] (Emphasis supplied)
Finally, the issue raised by respondent is ripe for judicial determination, because litigation is
inevitable[19] for the simple and uncontroverted reason that respondent is not included in the
enumeration of flour millers classified as food grade wheat importers. Thus, as the trial court
stated, it would have to file a protest case each time it imports food grade wheat and be
subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the
circumstances of the case.
Considering that the questioned regulation would affect the substantive rights of respondent
as explained above, it therefore follows that petitioners should have applied the pertinent
provisions of Book VII, Chapter 2 of the Revised Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of the Philippines Law
Center three (3) certified copies of every rule adopted by it. Rules in force on the date of
effectivity of this Code which are not filed within three (3) months from that date shall not
thereafter be the bases of any sanction against any party of persons.
xxx xxx xxx
Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far
as practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall
have been published in a newspaper of general circulation at least two (2) weeks before the
first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
When an administrative rule is merely interpretative in nature, its applicability needs nothing
further than its bare issuance, for it gives no real consequence more than what the law itself
has already prescribed. When, on the other hand, the administrative rule goes beyond merely
31
ADMIN LAW
III. POWERS OF ADMINISTRATIVE AGANCY
A. Quasi- Legislative Powers (Sufficient standard test)
providing for the means that can facilitate or render least cumbersome the implementation of
the law but substantially increases the burden of those governed, it behooves the agency to
accord at least to those directly affected a chance to be heard, and thereafter to be duly
informed, before that new issuance is given the force and effect of law.[20]
Likewise, in Taada v. Tuvera,[21] we held:
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 Pambansa and for
the diligent ones, ready access to the legislative records no 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.
(Emphasis supplied)
Because petitioners failed to follow the requirements enumerated by the Revised
Administrative Code, the assailed regulation must be struck down.
Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for
being violative of the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be deprived of the
same protection of laws enjoyed by other persons or other classes in the same place in like
circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be shown that (1) it
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.[22]
Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the
quality of wheat is affected by who imports it, where it is discharged, or which country it
came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported
food grade wheat, the product would still be declared as feed grade wheat, a classification
subjecting them to 7% tariff. On the other hand, even if the importers listed under CMO 27-
2003 have imported feed grade wheat, they would only be made to pay 3% tariff, thus
depriving the state of the taxes due. The regulation, therefore, does not become
disadvantageous to respondent only, but even to the state.
It is also not clear how the regulation intends to monitor more closely wheat importations and
thus prevent their misclassification. A careful study of CMO 27-2003 shows that it not only
fails to achieve this end, but results in the opposite. The application of the regulation
forecloses the possibility that other corporations that are excluded from the list import food
grade wheat; at the same time, it creates an assumption that those who meet the criteria do not
import feed grade wheat. In the first case, importers are unnecessarily burdened to prove the
classification of their wheat imports; while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the regulation
limited the customs officers duties mandated by Section 1403 of the Tariff and Customs Law,
as amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and Appraise Imported
Articles. The customs officer tasked to examine, classify, and appraise imported articles shall
determine whether the packages designated for examination and their contents are in
accordance with the declaration in the entry, invoice and other pertinent documents and
shall make return in such a manner as to indicate whether the articles have been truly
and correctly declared in the entry as regard their quantity, measurement, weight, and
tariff classification and not imported contrary to law. He shall submit samples to the
laboratory for analysis when feasible to do so and when such analysis is necessary for the
proper classification, appraisal, and/or admission into the Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in which they are
usually bought and sold, and appraise the imported articles in accordance with Section
201 of this Code.
Failure on the part of the customs officer to comply with his duties shall subject him to the
penalties prescribed under Section 3604 of this Code.
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A. Quasi- Legislative Powers (Sufficient standard test)

The provision mandates that the customs officer must first assess and determine the
classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-
2007 has already classified the article even before the customs officer had the chance to
examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by
the Tariff and Customs Code with regard to wheat importation when it no longer required the
customs officers prior examination and assessment of the proper classification of the wheat.

It is well-settled that rules and regulations, which are the product of a delegated power to
create new and additional legal provisions that have the effect of law, should be within the
scope of the statutory authority granted by the legislature to the administrative agency. It is
required that the regulation be germane to the objects and purposes of the law; and that it be
not in contradiction to, but in conformity with, the standards prescribed by law.[23]

In summary, petitioners violated respondents right to due process in the issuance of CMO 27-
2003 when they failed to observe the requirements under the Revised Administrative Code.
Petitioners likewise violated respondents right to equal protection of laws when they provided
for an unreasonable classification in the application of the regulation. Finally, petitioner
Commissioner of Customs went beyond his powers of delegated authority when the
regulation limited the powers of the customs officer to examine and assess imported articles.

WHEREFORE, in view of the foregoing, the Petition is DENIED.

SO ORDERED.

33